Dear Coverage Pointers Subscribers:
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Almost Heaven:
I bring you greetings from the FDCC Annual Meeting at the Greenbrier in White Sulphur Springs, West Virginia, a place of beauty and elegance. It is also a place where a Grey Goose Martini and a glass of house Chardonnay cost $49.17.
The courts are quiet in the summer, so there’s not a great deal to review in today’s issue, but you’ll find a few good ones for your reviewing and dancing pleasure. I will take this opportunity to focus on a very important trend that is developing in New York State (and nationally), the erosion of the attorney-client privilege, particularly in the universe of coverage advice. I urge you to review and consider the lessons discussed.
Attorney-Client Privilege – Dangers Lurk – This Stuff is Really Important!:
Is the coverage opinion provided by coverage counsel discoverable? Read carefully.
One of the many excellent programs offered during this week’s continuing legal education opportunities was one on the erosion of the attorney-client privilege, particularly in the relationships between coverage counsel and insurers. Let me take this opportunity to remind you of a recent -- and terrifying -- decision in New York, reviewed in our February 28, 2014 issue. That decision was slightly modified by the First Department on Thursday, July 31. The K2 decision was also reported in that publication, so this opinion may have been overlooked. Let me start with our earlier summary:
02/25/14 National Union Fire Ins. Co. v. TransCanada Energy USA, Inc.
Appellate Division, First Department
Danger, Danger: Courts Continue to Invade Attorney Client Privilege. Thousands Flee.
This is yet another of a series of recent decisions where the courts have been opening up insurance company files to discovery, this one allowing disclosure of communications between insurer and coverage counsel.
The insurance companies retained counsel to provide a coverage opinion, i.e. an opinion as to whether the insurance companies should pay or deny the claims. The lower court found that the majority of the documents sought to be withheld are not protected by the attorney-client privilege or the work product doctrine or as materials prepared in anticipation of litigation.
The court found that documents prepared in the ordinary course of an insurer's investigation of whether to pay or deny a claim are not privileged, and do not become so "merely because [the] investigation was conducted by an attorney'" citing to a 2005 decision of the First Department, Brooklyn Union Gas Co. v American Home Assur. Co., 23 AD3d 190.
The insurers' argument that they actually denied TransCanada's claims before the date identified in the motion court's order had not been raised below so they were not considered by the appellate court.
Nine years earlier, in Volume VII, No. 9 of Coverage Pointers, we reported on that Brooklyn Union Gas decision with an ominous warning:
11/03/05 Brooklyn Union Gas Company v. American Home Assurance Company
Appellate Division, First Department
Coverage Counsel Beware – Your Files – and Your Client’s -- May Be Discovered
Documents prepared in the ordinary course of an insurance company's investigation to determine whether to accept or reject coverage and to evaluate the extent of a claimant's loss are not privileged, and, therefore, discoverable. In addition, such documents do not become privileged "merely because an investigation was conducted by an attorney." A review of the documents in question reveals that carrier’s attorneys were acting as claims investigators, not attorneys, and were investigating the issue of whether coverage should be provided and the costs of such coverage.
Contrary to appellants' conclusory assertions, there is no legal advice, no legal recommendations or attorney thought processes revealed in these documents, nor do they appear to have been "solely" prepared for settlement purposes, as insurer assert, inasmuch as no litigation had been commenced. Nor can insurer rely on their anticipation of litigation, since they had not yet made a coverage decision. Thus, these documents were prepared in the ordinary course of the insurance companies' business of evaluating claims, and the fact that the investigation was performed by attorneys will not shield them from discovery.
Here is the language from the Court’s decision in the February 2014 National Union case:
The motion court properly found that the majority of the documents sought to be withheld are not protected by the attorney-client privilege or the work product doctrine or as materials prepared in anticipation of litigation. The record shows that the insurance companies retained counsel to provide a coverage opinion, i.e. an opinion as to whether the insurance companies should pay or deny the claims. Documents prepared in the ordinary course of an insurer's investigation of whether to pay or deny a claim are not privileged, and do not become so "merely because [the] investigation was conducted by an attorney”.
Bolding added for emphasis.
Court Recalls and Replaces Decision:
On Thursday, July 31, the court recalled and amended the decision and improved, just a bit, on their original position but there are still significant concerns in what remains. The changes are bolded:
The motion court properly found that the majority of the documents sought to be withheld are not protected by the attorney-client privilege or the work product doctrine or as materials prepared in anticipation of litigation. Following an in camera review, the court determined that certain documents were privileged because they contained legal advice.
As for the remaining documents, the court found that the insurance companies had not met their burden of demonstrating privilege. The record shows that the insurance companies retained counsel to provide a coverage opinion, i.e. an opinion as to whether the insurance companies should pay or deny the claims. Further, the record shows that counsel were primarily engaged in claims handling — an ordinary business activity for an insurance company. Documents prepared in the ordinary course of an insurer's investigation of whether to pay or deny a claim are not privileged, and do not become so " merely because [the] investigation was conducted by an attorney'" (see Brooklyn Union Gas Co. v American Home Assur. Co., 23 AD3d 190, 191 [1st Dept 2005]).
The difference? The court recognized that “legal advice” was still privileged but apparently not investigation conducted by the attorney (OK, we “get” that) and NOT an opinion on whether or not to pay or deny claims (we SURELY do not “get” that – isn’t that legal advice?):
So, what are the lessons:
- Documents containing legal advice are protected, but …
- Recommendations regarding whether to pay or deny a claim are not.
How will we – how will the courts -- distinguish those on a going forward basis? Time will tell but care must be taken.
Counseling Point: At least at first blush, the strategy would be to separate those communications that contain investigation material secured by the lawyer from those in which coverage advice with legal analysis is given. It’s a fine line, but an important one.
Fitz’ Bitz:
Dear Subscribers:
Hello from the Greenbrier in West Virginia where I am attending the Federation of Defense & Corporate Counsel meeting. Our very own Dan Kohane was honored for his commitment to the organization as evidenced by his attendance at 50 consecutive meetings! Congratulations Dan.
This week, I report on a decision of the Connecticut Supreme Court, decided Monday, where the court held that Travelers could seek recovery from its insured’s other insurer for defense costs incurred in connection with its defense of Lombardo resulting from claims of faulty workmanship in connection with the leak-prone library at the University of Connecticut Law School. I also report on a decision where the court found that Liberty had no duty to defend its insured in a claim alleging faulty workmanship.
Til next time,
Beth
Elizabeth A. Fitzpatrick
[email protected]
The Great War – One Hundred Years Ago Today – The German War Declaration:
Presented by the German Ambassador to St. Petersburg:
The Imperial German Government has used every effort since the beginning of the crisis to bring about a peaceful settlement. In compliance with a wish expressed to him by His Majesty the Emperor of Russia, the German Emperor had undertaken, in concert with Great Britain, the part of mediator between the Cabinets of Vienna and St. Petersburg; but Russia, without waiting for any result, proceeded to a general mobilization of her forces both on land and sea.
In consequence of this threatening step, which was not justified by any military proceedings on the part of Germany, the German Empire was faced by a grave and imminent danger. If the German Government had failed to guard against this peril, they would have compromised the safety and the very existence of Germany.
The German Government were, therefore, obliged to make representations to the Government of His Majesty the Emperor of All the Russias and to insist upon a cessation of the aforesaid military acts. Russia having refused to comply with this demand, and having shown by this refusal that her action was directed against Germany, I have the honour, on the instructions of my Government, to inform your Excellency as follows:
His Majesty the Emperor, my august Sovereign, in the name of the German Empire, accepts the challenge, and considers himself at war with Russia.
Four days after Austria – Hungary declared war on Serbia, Germany and Russia declared war against each other, France ordered a general mobilization and the first German army units cross into Luxembourg in preparation for the German invasion of France. The Great War had started, eventually leading to the death of some 20,000,000 soldiers and civilians.
The New York Stock Exchange closed as the war commenced, its last trading day being July 31, as foreign investors sold their holdings to raise money for war. It did not open again until December, the longest closure in its history.
Hunter’s Hints on Serious Injury:
Another light summer caseload for the New York State appellate courts this issue. Only the Appellate Division, Second Department published an opinion regarding "serious injury" under New York State Insurance Law §5102(d). As always, if any of our dear readers have any questions regarding any and all things "serious injury" under New York State Insurance Law, please feel free to contact me at your convenience. I look forward to hearing from you.
Dan
Daniel T. Hunter
[email protected]
Murder She Wrote – A Century Ago:
The New York Times
New York, New York
August 1, 1914
MRS. WAKEFIELD SENTENCED
Life Term Imposed, In Accordance
with Jury’s Verdict
NEW HAVEN, Conn., July 31—Mrs. Bessie J. Wakefield of Middlebury, convicted by a jury last night of murder, in the second degree in participating in the killing of her husband, William O. Wakefield, at Cheshire, On June 23. 1913, she was sentenced to State Prison for life by Judge Joel H. Reed of the Superior Court today. The sentence was in conformity to the law.
This was the woman’s second trial. At her first trial, as indicated, she was convicted of murder in the first degree and sentenced to be hanged, as was her co-partner in the crime, James Plew. The latter was, in fact, hanged for the crime.
On a summer day in 1913, the corpse of a man named William Wakefield was found in the woods near Bristol, Connecticut with a noose from his bootlaces around his neck. While it looked like a suicide, the knife wounds to the heart and the gunshot wounds to the back of the head suggested otherwise.
Bessie Wakefield, the deceased’s wife and her lover, James Plew were charged with murder.
Plew admitted his crime, Bessie fought the charges. She claimed that she was a victim of both her husband and her lover. She was convicted by a jury of 12 men and sentenced to hang. Her cause, however, became a national one, and as reported, Bessie was transformed from an illiterate wife who got caught fooling around to a national cause celebre.
The women's suffrage movement was in full swing. There were suffragists who claimed that she should be treated as a man would, and that meant that hanging was appropriate. Others, including Kit Hepburn, Katherine Hepburn’s mother, took the position that a man-made law and an all-male jury could not have fairly considered the evidence. According to a New York Daily News article from 2012, looking back on the crime:
"The verdict is rendered by a jury of men," added Alva Vanderbilt Belmont, a wealthy New York suffragist. "The judge is a man, the lawyers are men. The laws are man-made. ...Can you imagine any man standing in a law court being judged by laws made and enacted by woman - facing a woman judge, a jury of women, his case handled by women lawyers?"
Belmont griped that adulterous men, ruled by "sexual instincts," can simply walk away from marriage. Women, she said, are bound by powerful maternal "impulses" that male jurors cannot understand.
In response to the national outcry over "Poor Little Bessie," the Connecticut Governor received 25,000 letters begging a pardon for Bessie, most based on the belief that women simply should not be executed. The court set aside her verdict on evidentiary questions, Plew was executed and Bessie was retried. She was convicted of Second Degree Murder and sentenced to life in prison.
Bessie appealed annually to the State Board of Pardons and was freed, after her 17th appeal, in 1933. The suffragists were successful because by then because women could vote but she could not, as Bessie was a convicted felon.
Peiper’s Particularities:
With the calendar striking August, Summer is officially “on the clock.” Of course, with passage of summer means the return of more decisions from Appellate Division Departments around the State. As for this issue, however, reading material remains sparse.
We’d invite you take a look at two interesting cases reviewed in the Potpourri Section below addressing post-trial motions. This confirms that despite rumors of its demise, the jury trial still exists in some capacity. It also confirms that despite everyone’s best efforts, the jury verdict rarely resolves a case. Indeed, post-trial motion ensure that the fun continues for months, if not years, after the jury “has its say.” The Trial Court is vested with limited, although still significant, authority to review jury decisions, and the Taveras case reviewed below addresses the scope and purpose of that authority.
That’s it for now. See you in two weeks.
Steve
Steven E. Peiper
[email protected]
Catching Them on the Fly: One Hundred Years Ago This Week:
New York Yankee catcher Les Nunamaker, in a game against the Detroit Tigers, entered the record books in the bottom of the seventh inning. He caught Hugh High straying off second base, and then threw out down a pair of Tigers base-stealers, fellow Nebraskan “Wahoo Sam” Crawford and Bobby Veach. The three assists in an inning marked the first by a big-league catcher since 1887 and would not be matched for another seven years, when Ray Schalk executed the trick for the Chicago White Sox. Les didn’t get to revel in his accomplishment for long. Two weeks later a fan, from in the upper deck of the Polo Grounds, fired a foul ball back onto the field and knocked Nunamaker cold.
This Week’s Headlines in the Attached Issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Accident on Loading Dock Used by Named Insured Arises Out of Leased Premises for Purpose of AI Coverage
- Where Unapproved Settlement with Other Carrier Would Impair Subrogation Rights, Fact that Release Was Not Yet Issued Does Not Forgive Breach
- Insurer Liable to Pay Policy Limits Plus Post Judgment Interest for Untimely Disclaimer Based on Cooperation
HUNTER’S HINTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Daniel T. Hunter
[email protected]
- Failing to Address Plaintiff's 90/180 Claims Causes Modification of Trial Court's Determination
MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras
[email protected]
Arbitration
- Gap in Billing of Over Three Years Supports Dismissal of Claim
- Following a Denial, Proof of Disability Rests Solely on the Applicant
- Denial of MUA Upheld Where Undertaken Without Consideration of Unremarkable Imaging Studies
- Attorney’s Fees Paid in This Case But Denied in Companion Case
Litigation
- Court May Take Judicial Notice of Fee Schedule
- Plaintiff’s Claim Dismissed for Failure to Specifically Deny Assignor’s Nonappearance for IME
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Repeated Violations of Scheduling Orders Results in Pleading Struck
- Default Judgment Motion Disallowed Where Facts Not Submitted by Person with Personal Knowledge
- Directed Verdict Permissible Where, as Here, Plaintiff Cannot Establish Contractor “Launched an Instrument of Harm”
- Court is Vested with Limited Discretion to Correct Jury Awards
FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]
- Travelers Entitled to Reimbursement of Defense Costs
- No Duty to Defend Against Faulty Workmanship Claims
AUDREY’S ALL THINGS PERSONAL
Audrey A. Seeley
[email protected]
- Homeowner’s Policy Affords Coverage to Sole Business Owner as Bodily Injury Action Never Named or Asserted Claim Against Corporation.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
- Amendment to Regulation 68 (No-Fault) – Limitations on Attorney’s Fees
- LYFT Update
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
- Aggregate Limit for Pollution Liability Coverage Bars Claim By Second Property Owner
EARL’S PEARLS
Earl K. Cantwell
[email protected]
THE EUO TO THE RESCUE ONCE AGAIN
That’s all folks – enjoy the last full month of summer – I will certainly do my best to do so.
Dan
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]
Website: www.hurwitzfine.com
LinkedIn: www.linkedin.com/in/kohane
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]
ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]
Michael F. Perley
Elizabeth A. Fitzpatrick
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Taylor F. Gabryel
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Elizabeth A. Fitzpatrick
Cassandra Kazukenus
NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Taylor F. Gabryel
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Elizabeth A. Fitzpatrick
Diane F. Bosse
Index to Special Columns
Kohane’s Coverage Corner
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
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
07/30/14 Mack-Cali Realty Corporation v. NGM Insurance Company
Appellate Division, Second Department
Accident on Loading Dock Used by Named Insured Arises Out of Leased Premises for Purpose of AI Coverage
Westchester County Electric, Inc. (“WCE”), as tenant, and the predecessor-in-interest to Mack-Cali, as owner, entered into a business lease. Among other things, under the terms of the lease, WCE was to obtain comprehensive general liability insurance and agreed to hold Mack-Cali harmless for any claims or injuries caused as a result of WCE's occupancy of the premises.
WCE obtained business owner's liability insurance through NGM Insurance Company (hereinafter NGM) and named Mack-Cali as an additional insured. Mack-Cali’s own policy was with Lexington. A UPS worker, who allegedly fell while climbing onto the loading dock of the premises to deliver packages to WCE, sued them both. When Mack-Cali tendered its defense to NGM, NGM declined to defend,
It is undisputed that Mack-Cali is entitled to additional insured coverage only if liability arose out of the ownership, maintenance, or use of the leased premises. The phrase "arising out of" has been interpreted to mean "originating from, incident to, or having connection with" and requires "only that there be some causal relationship between the injury and the risk for which coverage is provided". Here, there is a causal relationship between the UPS worker's injury and the risk for which coverage was provided, namely, bodily injury sustained by third parties during an activity relevant to the operation of WCE's business.
Since the UPS worker was delivering packages to the subject premises that were intended for WCE, the accident occurred in the course of an activity necessarily incidental to the operation of the space leased. In addition, the loading dock where the accident occurred was necessarily used for loading and unloading deliveries intended for WCE. Thus, by implication, it was part of the premises that WCE was licensed to use under the lease. The use of the loading dock was incidental to the covered premises as a means of delivering packages to WCE in the operation of its business. The fact that the UPS worker may be found to have been negligent by attempting to use the loading dock to access the office on the interior of the building instead of using the stairs adjacent to the loading dock is irrelevant.
Under a comparison of other insurance clauses, NGM coverage is primary, Lexington is excess.
07/30/14 Progressive Northeastern Insurance Company, v. Cipolla
Appellate Division, Second Department
Where Unapproved Settlement with Other Carrier Would Impair Subrogation Rights, Fact that Release Was Not Yet Issued Does Not Forgive Breach
Cipolla was hurt in a car accident and insured under a Progressive policy that insured her for Supplementary Uninsured/Underinsured Motorists (“SUM”) benefits. He was required, under Condition 10 of the policy, to give notice of any settlement to Progressive so that Progressive could "advance such settlement amounts to the insured in return for the cooperation of the insured" in a subrogation action. The appellant was not otherwise permitted to settle his claim against the tortfeasor "such that [Progressive's] rights would be impaired"
In fact, he settled his claim for the full amount of the tortfeasor's policy, and he did not give Progressive timely notice of the settlement. After settling the action, the appellant made a claim for SUM benefits under the policy. Progressive denied the claim based on his unauthorized settlement. Progressive then commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration of the appellant's SUM claim.
Cipolla contends that his unauthorized settlement did not impair Progressive's subrogation rights because he has not provided a release to the tortfeasor. He does not dispute, however, that he discontinued his action against the tortfeasor without Progressive's consent and that, under the terms of the settlement, the discontinuance was to be "with prejudice." He also does not dispute that he is required to provide the tortfeasor with a release. Under these circumstances, he failed to demonstrate that he did not impair Progressive's subrogation rights.
07/23/14 Ferreira v. Global Liberty Insurance Company of New York
Appellate Division, Second Department
Insurer Liable to Pay Policy Limits Plus Post Judgment Interest for Untimely Disclaimer Based on Cooperation
This was a direct action pursuant to Insurance Law Section 3420(a). The plaintiff had secured a judgment against Global Liberty’s insured for some amount in excess of $100,000. Global had denied coverage based on the failure of its insured to cooperate. The plaintiff established that the disclaimer was invalid because it was untimely served and did not deny coverage on the basis of the plaintiff's failure to inform the defendant of the lawsuit.
An insurance company has an affirmative obligation to provide written notice of a disclaimer of coverage as soon as is reasonably possible, even where the policyholder's own notice of the claim to the insurer is untimely. Here, the insurer waited three months before denying coverage after knowing the grounds for the disclaimer. The court found that the disclaimer was untimely and Global had to pay an amount equal to its policy limits of $100,000 plus post-judgment interest.
HUNTER’S HINTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Daniel T. Hunter
[email protected]
07/23/14 Dowling v. Valeus
Appellate Division, Second Department
Failing to Address Plaintiff's 90/180 Claims Causes Modification of Trial Court's Determination
Defendants made a motion for summary judgment to dismiss Plaintiff's complaint on the grounds that Plaintiff did not sustain a serious injury within the meaning of Insurance Law §5102(d) as a result of the subject matter motor vehicle accident. Plaintiff cross-moved claiming she did sustain a "serious injury" as a result of the accident.
The Supreme Court, Suffolk County determined that Plaintiff did not sustain a serious injury and granted Defendants' motion for summary judgment, dismissing Plaintiff's complaint in its entirety. The Appellate Division, Second Department found the papers submitted by Defendant failed to adequately address Plaintiff's claim, as set forth in her bill of particulars, that she sustained a medically determined injury or impairment of a non-permanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than ninety (90) days during the one hundred eight (180) days immediately following the motor vehicle accident. As such, the Second Department remitted the matter to the trial court for determination on the merits of Plaintiff's cross motion.
MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras
[email protected]
Arbitration
07/16/14 Cameron B. Huckell, MD v USAA Insurance Co.
Erie County, Arbitrator Gillian Brown
Gap in Billing of Over Three Years Supports Dismissal of Claim
The EIP was injured in an accident in September 2009, sustaining, among other things, a fractured left clavicle. In February 2010, she underwent an IME and was found to not yet be at pre-accident status. Apparently, another IME was performed by a different doctor but it was not entered into evidence and therefore was not considered. On the oldest medical note found in the ECF, dated October 3, 2013, it was noted that no-fault benefits had been denied based on an IME that found no further orthopedic care to be necessary, but that the EIP had continued treating under her health care.
Thus, apparently there was a period of approximately two years during which it appears that Respondent was not billed for any treatment. In denying the claim, the Arbitrator noted that it was unknown whether there was an arbitration or whether there were any denials during that period. In addition, the Arbitrator found no proof of continued treatment and the fact that the EIP was treating under her regular health insurance supported Respondent’s defense that an insurer cannot be deemed responsible for medical care for an indefinite period of time absent “serial reports documenting treatment without significant breaks in therapy.”
07/15/14 Applicant v National Liability & Fire Insurance Co.
Erie County, Arbitrator Mona Bargnesi
Following a Denial, Proof of Disability Rests Solely on the Applicant
At issue was the EIP’s claim for wage loss as the result of an accident that occurred in November 2011. The EIP, a Congolese native, testified through a Swahili interpreter at the hearing, that she has looked for work since June but remained home taking care of her children and grandchildren for two years. She further stated that Dr. Croce told her to stay out of work until she lost her public assistance.
Respondent’s denial is based on a chiropractic IME performed in March 2012. Since then, Applicant has brought another arbitration against Respondent for chiropractic treatment and lost wages from April 2012 through July 2013, contesting the same IME. In the previous arbitration, Arbitrator Coppola ruled in Applicant’s favor with respect to the lost wage claim finding the IME insufficient.
Arbitrator Bargnesi considered the collateral estoppel effect of Arbitrator Coppola’s award and found that the elements of collateral estoppels were met as the parties were identical as was the IME relied upon. However, the Arbitrator denied Applicant’s claim because Applicant failed to prove ongoing disability during the disputed time period. She noted that although Respondent could not rely on the IME to deny the current period of lost wages at issue, Applicant still had the burden of demonstrating disability during that period. Although Applicant testified as to her condition, no medical records for the disputed period were submitted. Moreover, an Erie County Chiropractic treatment plan dated July 2012 reflected a pain level of 0 out of 10 and indicated “discharged”. The lost wage claim was therefore denied.
07/14/14 Anil Pisharoty, MD, PC v Allstate Property & Cas. Ins. Co.
Erie County, Arbitrator Douglas S. Coppola
Denial of MUA Upheld Where Undertaken Without Consideration of Unremarkable Imaging Studies
The 33 year old EIP was involved in an accident in August 2013. A cervical MRI was initially performed but later a lumbar was also performed. Apparently the MRIs were unremarkable. He underwent neurosurgical evaluations with Dr. Tracy and approximately nine weeks after the accident and following some conservative care, Dr. Tracy recommended that he undergo MUA (manipulation under anesthesia) which took place on November 8th, 9th, and 10th. Upon receipt of the bills, Respondent arranged for a peer review. The peer reviewer noted that the MUA was performed without any discussion of the unremarkable MRIs. There were no significant records indicating conservative care and, notably, MUA was also performed on the pelvis which is out of the scope of practice of a chiropractor. The Arbitrator agreed that it appeared the MUAs were performed prematurely and the claim was denied.
Note: In AAA Case # 412014051868, involving the same Applicant and decided on the same date by Arbitrator Coppola, the award was in Applicant’s favor. The difference in that case is that almost an entire year had elapsed since the happening of the accident. Perhaps more importantly, however, the peer reviewer’s New York license expired in 2013 and apparently instead he has offices in New Jersey and California. In addition, while his credentials seem impressive, he is not a chiropractor and his CV does not indicate that he is familiar with or qualified to evaluate the generally accepted standards of care in the field of chiropractic.
07/11/14 Zair Fiskin, MD v Geico Insurance Co.
Erie County, Arbitrator Gillian Brown
Attorney’s Fees Paid in This Case But Denied in Companion Case
The EIP was injured in a motor vehicle accident in February 2013, after which he underwent various pain management treatments and chiropractic care. In May he appeared for an IME and his symptoms were reportedly resolved. However, by mid-June his symptoms were worsening and he was experiencing numbness and tingling pain radiating from his neck down to his right hand. A cervical discectomy was performed by Applicant and that procedure, together with several office visits, were denied by Respondent.
The Arbitrator found the IME to be insufficient as it did not explain the significant differences between assessments or why further treatment would not be necessary. Although the Arbitrator found in Applicant’s favor, he declined to award attorney’s fees on both this matter and the companion case. The Arbitrator reasoned that both submissions were virtually identical and no additional expertise or even effort was required to prepare the second arbitration. Reasoning that attorney’s fees are calculated based upon the aggregate amount required to be reimbursed, and not on each claim, the Arbitrator awarded attorney’s fees on this matter but not on the companion case, AAA # 412014019580.
Litigation
07/24/14 Healthy Way Acupuncture, PC v Metropolitan Prop. & Cas. Ins. Co.
Appellate Term, First Department
Court May Take Judicial Notice of Fee Schedule
At issue were the fees charged for acupuncture services. In support of its motion for summary judgment, defendant submitted an affidavit of its claims representative and excerpts of the fee schedule. On appeal, the Appellate Term held that it could take judicial notice of the fee schedule and that defendant’s submissions were sufficient to establish defendant’s proper calculation of the fees reimbursable under the schedule. As such, plaintiff’s claim seeking the difference between the payments made by defendant pursuant to the fee schedule, and the amounts charged by plaintiff, should have been dismissed and defendant’s motion granted.
07/16/14 Sunrise Acupuncture, PC v Encompass Auto & Home Ins. Co.
Appellate Term, First Department
Plaintiff’s Claim Dismissed for Failure to Specifically Deny Assignor’s Nonappearance for IME
On appeal, the trial court is reversed. Plaintiff’s assignor failed to appear for scheduled IMEs. Defendant met its burden by establishing that it properly mailed the notices to the assignor and his counsel, and by submitting sworn affidavits of the scheduled examining physician and an employee of the third-party biller attesting to office procedures. Plaintiff did not specifically deny the assignor’s nonappearance or raise a triable issue of fact with respect to the mailing or reasonableness of the notices and, as such, plaintiff’s complaint should have been dismissed.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
07/30/14 Stone v Zinoukhova
Appellate Division, Second Department
Repeated Violations of Scheduling Orders Results in Pleading Struck
Almost three years after the commencement of the suit, defendant had still not appeared at a deposition. This was despite multiple Court Orders requiring the appearance. As such, the Court ruled that “willful and contumacious” behavior could be implied from the conduct of defendant which resulted in the Answer being struck and judgment granted in favor of plaintiff.
07/30/14 Williams v North Shore LIJ Health System
Appellate Division, Second Department
Default Judgment Motion Disallowed Where Facts Not Submitted by Person with Personal Knowledge
Any motion for dispositive relief must be supported by competent evidence. This includes, usually, an affidavit submitting relevant facts. The affidavit must be submitted by someone with personal knowledge of those facts alleged.
Here, plaintiff did not do so and their motion was procedurally defective.
07/30/14 Cioffi v Klein
Appellate Division, Second Department
Directed Verdict Permissible Where, as Here, Plaintiff Cannot Establish Contractor “Launched an Instrument of Harm”
Plaintiff sustained injury when he fell over a lip at the end of defendant’s driveway. He was injured, apparently, during the course of a delivery to the defendant’s home. Plaintiff commenced the instant action, and therein named defendant, as well as a contractor that defendant had hired to construct the driveway (and lip) approximately five months before the act.
At the conclusion of testimony, the Trial Court granted the contractor’s motion for a directed verdict. The resulting jury verdict placed the defendant 50% responsible for the incident, with plaintiff being assigned 50% comparative fault. Immediately after trial, defendant moved for a new trial on the basis that the Trial Court improperly dismissed the contractor from the lawsuit. In Reply papers submitted in further support of their motion to set aside the verdict, defendant’s also argued for the first time that the Trial Court erred in denying its own motion for a directed verdict.
The Trial Court affirmed its Order, and refused to address defendant’s arguments as its own motion because they were not raised until Reply. On appeal, the Appellate Division affirmed. Initially, the Court ruled that the contractor had met its burden for judgment dismissing it from the suit because as a contractor its only duty to the plaintiff was created if it “launched an instrument of harm.” Here it did not, and plaintiff’s direct claims were precluded. Moreover, because defendant could not come forward with any evidence that the work performed by the contractor was defective, it followed that defendant did not present a viable cross-claim for contribution/indemnity.
Finally, the Appellate Division affirmed the Trial Court’s decision to ignore defendant’s arguments as to its own motion for a directed verdict. Arguments cannot be raised, for the first time, in Reply papers.
07/23/14 Taveras v Vega
Appellate Division, Second Department
Court is Vested with Limited Discretion to Correct Jury Awards
At the conclusion of trial, the jury awarded plaintiff with an award of $20,000 for past pain and suffering, along with an award of $30,000 for future pain and suffering. Apparently, the award was insufficient in the eyes of the Trial Court who, in turn, granted plaintiff’s motion to set aside the verdict. In so holding, the Trial Court ruled that defendants could (a) agree to an award which provided $125,000 in each past and future pain and suffering or (b) retry the case.
Defendant, however, chose option (c) which was to proceed with an appeal. On appeal, the Court noted that it is vested with the limited right to correct jury verdicts that “materially deviate” from reasonable compensation. In the current instance, the Court determined that both the jury verdict, as well as the Trial Court’s correction, was material deviations. As such, the Second Department modified the Trial Court’s Order to provide that plaintiff was entitled to an award of $60,000 in past pain and suffering, and $90,000 in future pain and suffering.
Elizabeth A. Fitzpatrick
[email protected]
07/28/14 Travelers Casualty and Surety Company of America, et al. v. The Netherlands Insurance Company
Connecticut Supreme Court
Travelers Entitled to Reimbursement of Defense Costs
In a decision to be released on August 5, 2014, the Connecticut Supreme Court agreed with Travelers, finding that Travelers was entitled to the Netherlands' pro rata share of defense costs for their mutual insured, Lombardo, in an action arising from claims arising from Lombardo's role in the construction of the leak prone law library at the University of Connecticut School of Law. In doing so, it found that Travelers had standing to maintain the suit, found the claims constituted an "occurrence" and rejected Netherlands' "known loss" defense.
In 1994, the state of Connecticut contracted with Lombardo to perform masonry work at the library which was completed in 1996. The underlying complaint alleged that in the months and years following the construction, the state experienced problems with water intrusion in the library. In 2008, the state commenced suit after retaining forensic engineers to investigate the cause of the problem. They sought 18 million dollars from Lombardo and others that it alleged was necessary to repair defects in the library.
From 1994-1998, Travelers insured Lombardo under CGL policies, from 1998-2000 Lumbermens, from 2000-2006 Netherlands and Peerless provided umbrella coverage. After notifying its insurers, Travelers agreed to defend, Lumbermens and Netherlands refused and Travelers incurred over $482,855 in defending the suit. In 2009, Travelers commenced the declaratory action alleging equitable subrogation against the insurers and seeking Lombardo's share of costs for any uninsured periods. Netherlands answered, denying any obligation under the CGL policies.
The court initially found that Travelers had standing and after reviewing general principles of contract interpretation, found that the claims alleged property damage that triggered Netherlands' duty to defend since the claims of water damage occurred in the months and years following the state's occupancy in 2006. The court found the policies did not require that the "occurrence" take place during the policy period, but that resulting injury or property damage take place within the policy period. The court also rejected Netherlands' contention that the exclusion for "known injury or damage" precluded coverage, based upon the allegations of the complaint which did not compel that conclusion. Applying the continuous trigger theory, the court found the appropriate allocation period was 144 months.
07/23/14 Precision Walls, Inc. v. Liberty Mutual Fire Insurance Co.
South Carolina Court of Appeals
No Duty to Defend Against Faulty Workmanship Claims
In Precision Walls, Liberty secured a victory from the appellate court, who affirmed the trial court's determination that no coverage was owed for claims resulting from a construction project where the Liberty insured, Precision, pursuant to a subcontract with the general contractor, was obligated to correct its work when the general contractor found they had failed to properly seal the joints of the blue board insulation of a building. Liberty had issued a commercial general liability policy which contained the standard definition of "property damage" and the standard "your work" exclusion meaning work or operations performed by you or on your behalf and materials, parts or equipment furnished in connection with such work or operations.
The trial court found the only loss claimed was the liability Precision incurred when the general contractor tore down and reconstructed the otherwise undamaged brick veneer wall for purposes of bringing Precision's work in compliance with its contract. This was not "property damage” and even if it were, the costs of faulty workmanship and repairing defective work were not an occurrence. Finally, even if the losses were within the ambit of the policy, the "your work" exclusion would preclude coverage.
Audrey A. Seeley
[email protected]
07/21/14 Harleysville Ins. Co. of NJ v. Burnett
Superior Court, Appellate Division, New Jersey
Homeowner’s Policy Affords Coverage to Sole Business Owner as Bodily Injury Action Never Named or Asserted Claim Against Corporation.
On June 24, 2009, Jeffery Casey, an employee of WR Burnett, suffered bodily injury while taking a cigarette break when a tree fell on him. Casey, William Burnett, the sole owner of WR Burnett, and another non-WR Burnett employee were cutting down dead trees on William and Anita Burnett’s residential property to permit additional space to store WR Burnett’s trucks. WR Burnett and Mr. and Mrs. Burnett entered into a lease agreement that did not take effect until after this accident whereby WR Burnett could use a portion of the Burnetts’ residential property. Thereafter, Casey and his wife commenced a bodily injury action only against the Burnetts alleging negligence. Casey also filed a workers’ compensation claim with WR Burnett.
Harleysville Insurance Company of New Jersey issued a homeowners policy to the Burnetts. Rochdale Insurance Company issued an employer’s liability policy to WR Burnett. Penn National Mutual Casualty Insurance Company, while not expressly described in the decision, appears to have issued a CGL policy to WR Burnett.
Harleysville provided the Burnetts with a defense in the bodily injury action while reserving its right to disclaim coverage under the homeowner’s policy based upon the business pursuits exclusion.
Rochdale in response to the workers’ compensation petition agreed that there was a compensable accident but denied permanent disability.
In the bodily injury action, the Burnetts, being defended by Harleysville, filed a summary judgment motion, which was denied, on the workers’ compensation exclusivity ground. The trial judge held an issue of fact regarding whether William Burnett removed the trees in his capacity as a business owner or landowner. The bodily injury action was settled without this issue being resolved. The settlement agreement did not preclude Casey from pursuing his workers’ compensation petition nor did it preclude Harleysville from pursuing a declaratory judgment action. Also, the Burnetts assigned all their rights to Harleysville.
Harleysville commenced a declaratory judgment action against Rochdale and Penn. Thereafter, Harleysville filed a summary judgment motion against both defendants. The motion’s basis was that Casey’s injuries arose out of the course of his employment with WR Burnett thus the Rochdale employer’s liability policy afforded coverage and also Casey’s claim was subject to resolution through workers’ compensation. Harleysville also argued that the Rochdale policy contained a provision affording coverage for claims made in a capacity other than as employer. In the bodily injury action the claim was against the Burnetts in their capacity as landowner and not as employers therefore the Rochdale policy afforded insurance coverage for the bodily injury action.
Rochdale and Penn filed cross-motions for summary judgment. Rochdale asserted that the Burnetts were not insureds under the employer’s liability policy as they were sued in their individual capacity. Penn asserted that its policy exclusion for bodily injuries sustained during the course of employment applied as the bodily injury action alleged Casey was acting in the scope of his employment when injured.
The trial court denied Harleysville’s motion and granted both cross-motions. The trial court reasoned that the issue of whether William Burnett was acting in his capacity as a landowner or business owner would not result in Harleysville prevailing in either instance. This is because if Burnett were determined to be a landowner the Harleysville policy responded to the claim. Also, if Burnett were determined to be a business owner then Rochdale had a complete defense of workers’ compensation exclusivity. Likewise, the trial court determined that Penn had no obligation to the Burnetts under the CGL policy as there was no indemnification agreement in place at the time of the accident requiring WR Burnett to indemnify the Burnetts.
After reconsideration and minor modification of the trial court’s decision, Harleysville on appeal argued that Casey’s injuries arose out of his employment for WR Burnett thus the Rochdale policy afforded coverage for the bodily injury action. In addition, WR Burnett owed contractual indemnification to the Burnetts thus the Penn policy afforded coverage for the bodily injury action. Both contentions were rejected by the Court.
In regard to the Rochdale policy, the Court held that WR Burnett was the only named insured and the Burnetts were not an insured under that policy. William Burnett, while the sole owner of WR Burnett, is a separate legal entity from WR Burnett. The bodily injury action did not name WR Burnett and alleged individual liability against Burnett. The Court held that where a corporation is a named insured under a policy it is not implicit that the corporation’s owners are insureds.
In regard to the Penn policy, the Court held that there was no enforceable indemnity agreement at the time of the accident between WR Burnett and the Burnetts. While a lease agreement existed, it was undated and unsigned, indicating the lease was not effective until January 1, 2010. Therefore, the Penn policy did not afford insurance coverage to the Burnetts in the bodily injury action.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
Amendment to Regulation 68 (No-Fault) – Limitations On Attorney’s Fees
The proposed amendments discussed here are to the No-Fault regulation, 11 NYCRR 65-4.6, which sets forth limitations on attorney’s fees. Initially, attorney’s fees will not be granted if, at the time arbitration was initiated, the claim or a portion was not denied and overdue. This differs in that the regulation previously would not allow attorney’s in either instance, and now the claim must be denied and overdue before attorney’s fees are barred.
The amendment has also amended the amount of attorney’s fees payable to be 20 percent of the total amount of the first-party benefits and any additional first-party benefits, plus interest rather than a minimum of $60 where the parties have agreed and resolved the dispute. The maximum fee in that instance is $1360. Additionally, the regulation clarifies that the attorney’s fees where the proceedings go forward apply to those incurred in arbitration or court proceedings and are limited to a fee up to $70 per hour and subject to a maximum fee of $1400.
LYFT Update
In the last issue of coverage pointers, I wrote about a temporary restraining order filed by the Department and Attorney General against LYFT. On the 25th, DFS announced that an agreement has been reached with LYFT. As of August 1, 2014, LYFT will cease its services in Rochester and Buffalo until it is in full compliance with the law.
Additionally, LYFT agreed that it will not offer, sell or provide NY drivers with any insurance policy, including excess liability insurance, unless the coverage complies with NY Insurance Laws. Further, per the press release issued by DFS, LYFT “will launch in New York City with commercial drivers only and will operate in a manner that is consistent with existing laws and regulations.”
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
07/23/14 Bliss v Farm Family Cas. Ins. Co.
Supreme Court, Wyoming County
Aggregate Limit For Pollution Liability Coverage Bars Claim By Second Property Owner
Plaintiff operated a farm on land leased from two brothers, Donald and Robert Keicher. Runoff from a heavy rainstorm allegedly caused manure that the plaintiffs had spread on their fields to contaminate several ponds on adjoining land. Donald and Robert Keicher also own the land where the ponds were located.
At the time of the alleged contamination, the plaintiffs had an insurance policy in place with Farm Family. The policy included coverage for property damage caused by farm pollutants with an aggregate limit of $50,000. Following the storm, Robert Keicher notified plaintiffs of the damage, a notice which was then forwarded to Farm Family. Farm Family inspected the damage to the pond concluding that the damage was in excess of the aggregate limit, it paid the limit and obtained a release executed by Robert Keicher. His brother was a witness to the release.
Thereafter, Donald Keicher made his own claim for the damage to the ponds. Farm Family disclaimed on the grounds that it had already fulfilled its obligations under the policy.
In considering the submissions set forth by Farm Family, the court held that pursuant to its contractual obligations, Farm Family promptly settled an apparent valid claim for damage. Thereafter, it disclaimed because the policy limits had been exhausted. Thus, Farm Family sufficiently established that it did not breach its obligations. Further, it established that Farm Family did not breach it duty of good faith and fair dealing. While plaintiff questioned Farm Family’s conclusion that the damage was in excess of $50,000, and that the investigation was negligently done, this did not raise to the level of “knowing indifference” or a “gross disregard.”
EARL’S PEARLS
Earl K. Cantwell
[email protected]
THE EUO TO THE RESCUE ONCE AGAIN
Another new case provides testimony to the benefit of noticing and conducting an Examination Under Oath (“EUO”) with respect to a questionable claim. Lester v. Allstate Property & Casualty Insurance Co., 2014 WL 687188 (6th Cir. February 24, 2014). In this case, Allstate requested the insured to submit to an EUO, as to which the insured responded they would do so if Allstate showed them its claim investigation file. Eventually, Allstate gave the insured 10 days to schedule an EUO and warned that failure to submit to the exam would result in claim denial. The insured then sued Allstate for payment of the claim which was a fire loss.
The federal District Court in Tennessee granted Allstate’s motion for summary judgment which was affirmed on appeal. The courts noted that the policy required insureds to submit to such exams at the insurer’s request. The insurance company may deny a claim when the policyholder refuses to participate in an examination under oath. State law presumed that failure to participate in the examination constitutes prejudice to the insurance company in connection with the claim.
This case is a reminder that the EUO is a valuable and useful claims handling tool. As a creature of contract, the insurance company has a relatively plenary authorization to request the examination and ask questions, and indeed there is debate and question whether state civil procedure provisions relating to depositions even apply in an EUO context. In the event of a contested or investigated claim, the insured’s resistance to the EUO may itself provide a basis to deny the claim. In cases of truly questionable and fraudulent claims, false statements made during an EUO can not only result in claim denial, but possible referral for prosecution for perjury and fraud charges.
This case is also notable for protecting the carrier’s claims investigation file from disclosure.
