Dear Coverage Pointers Subscribers:
You have a situation? We do love situations.
Our lawyers and professional staff in Long Island face storm challenges and we wish them well, along with others fighting off water hazards.
The summer is moving along a little too quickly for me. Judicial decisions are scarce over the summer but we have a few good ones in this week’s issue. There’s a case of first impression, in the SUM world. in my column dealing with the question of whether underinsured motorist benefits are available from an employer’s commercial auto policy if the driver of the tortfeasor’s car is a co-employee and therefore not subject to being sued. Others are described below.
Upcoming Educational Programs of Interest:
Announcing the 2014 Law School for Insurance Professionals
Sponsored by the New York State Bar Association Torts, Insurance and
Compensation Law Section
PROGRAM FEES
Registration Fee - $90 | Discounted rate for CPCU and RIMS Members - $80
Group Rate (for groups of 5 or more) - $80 per person
To Register:
- Online at www.nysba.org/TICL
- Call: 1.800.582.2452 (U.S. and Canada) or 518.463.3724 in the Albany & surrounding area
- Mail to: State Bar Service Center
New York State Bar Association
One Elk Street, Albany, NY 12207
- Fax to 518.463.5993
Friday, September 19, 2014
Albany
Tuesday, September 30, 2014
Syracuse
Friday, October 17, 2014
Long Island
Monday, October 20, 2014
New York City
Monday, October 27, 2014
Buffalo
- Back to the Basics and Beyond: Crafting a proper disclaimer, the right to independent counsel, claw back on defense costs, and the after of the K2 decision.
Elizabeth A. Fitzpatrick, Esq. (Long Island & New York)
Dan D. Kohane, Esq. (Buffalo)
- Discovery Dilemmas—Give Them What? New case law affecting the discoverability of documents, counsel reports, and preservation of materials.
- Assessing the Priority of Coverage : Multiple insurers on the risk—who owes defense?, allocation of defense and indemnity, equitable subrogation, recovering from other responsible insurers
- Liens, Liens Everywhere: subrogation versus lien interests, duty to protect Medicare interest under Medicare Secondary Payer Act, Medicare replacement plan interests, extinguishment of subrogation claims under GOL 5-335, and ERISA plan rights of reimbursement.
- An Update on Auto Liability and Coverage Issues: Spousal coverage, permissive use, arising out of the use of an automobile, rental vehicles
- Interactive Presentation Involving the Use of an Expert/Mediator/Judge:
Intruder/Negligent security cases. This panel consisting of an expert and attorneys skilled in this area of the law will address general issues regarding these cases, the use of experts, investigation that may be undertaken, defenses and coverage issues.
Hunter’s Hints on Serious Injury Threshold:
Another light August caseload for the appellate courts throughout New York State serious injury threshold cases. The Fourth Department refuses to set aside a jury's finding that a Plaintiff did not sustain a serious injury under Insurance Law §5102(d); a summary judgment order in favor of Defendants is reversed by the Second Department for failure to meet the prima facie burden that Plaintiff did not sustain a serious injury; and an order for summary judgment is modified dismissing the "permanent consequential limitation" serious injury argument from Plaintiff's lawsuit.
As always, I look forward to fielding any and all questions regarding New York State serious injury threshold questions. Aside from being available by phone and email, I welcome the opportunity to come to your place of business and present and impart my knowledge on this subject to you and your coworkers. I look forward to hearing from you.
Dan
Daniel T. Hunter
[email protected]
One Hundred Years Ago Today – Don’t Think He Was “Loving Frank”:
On August 15, 1914, a male servant of American architect Frank Lloyd Wright sets fire to the living quarters of the architect’s Wisconsin home, Taliesin, murders seven people and burns the living quarters to the ground. This became the backdrop of the novel, “Loving Frank,” a Nancy Horan bestseller from 2008 and the volume selected for every book club over the next three years. Here’s the story from a local paper:
The Weekly Home News, August 20, 1914
“Murderer of Seven: Sets Fire to Country Home of Frank Lloyd Wright Near Spring Green”
While the members of the household were at dinner, last Saturday, Julian Carlton, a Negro servant, fired Frank Lloyd Wright’s bungalow, murdered seven, including Wright’s long-time mistress and her two children and seriously wounded another with a hatchet and yet another received injuries in jumping from a window.
The dead are:
Mrs. Mamah Borthwick, their son and daughter, John and Martha Cheney, aged 11 and 9 respectively; Emil Brodelle, aged 30, an architectural draftsman; Thomas Brunker, of Ridgeway, hostler; Ernest Weston, 13-year-old son of Mr. and Mrs. Wm. Weston of Spring Green; and David Lindblom, gardener.
The wounded are:
William H. Weston of Spring Green, foreman of the bungalow activities, and Herbert Fritz of Chicago. The latter escaped the Negro’s wrath but received a broken arm and glass cuts in making his escape through a window. He was also slightly burned.
Mr. Wright was in Chicago, where business had called him several days before and he escaped the murderer’s hatchet.
The Negro waiter had served dinner to the men in the small room temporarily used for that purpose and to Mrs. Borthwick and her children on the dining porch, which was located just off the guest room where the child’s room had been. While they were eating he came to the door and asked Mr. Weston for gasoline, with which to clean a rug, and was given permission to get some. Soon after, those in the dining room heard a splash against the door and in an instant the room was full of flaming gasoline, which the fiend had poured against and under the door. As they attempted to escape, some through the door and some through a window, the Negro struck them down with a hatchet.
Mr. Fritz was the first out. He says that he and Mr. Brodelle were eating at a separate table, and as the room burst into flames he sprang for the window and made his escape, getting out before the murderer was prepared.
Mr. Fritz was followed through the window which was about five feet from the ground, by Mr. Brodelle and Wm. Weston in the order named. As the two latter came through they were hatcheted. Fritz says he saw Brodelle staggering about and saw the Negro strike Weston. The other occupants of the dining room, he says, got out through the door, which was just beside the window.
Mr. Weston said that as he came through the window Carlton struck him with the hatchet and he fell. He got up and ran across the court to the studio. Carlton followed him and struck him a second time, knocking him down. Probably thinking him dead the Negro went back to the slaughter. Mr. Weston then ran out another way and found David Lindblom wounded and burning. He helped him extinguish his burning clothing and together they ran to the Rieder home half a mile away and telephoned for help.
Above are the stories of the only survivors of the tragedy...
Editor’s Note: The killer died in prison of starvation, several weeks later, despite medical attention.
Jen’s Gems:
Greetings. Hope everyone continues to have an enjoyable summer.
Sadly, we, the contributors to Coverage Pointers, are anxiously waiting for the summer to end so the courts will finally kick back into high gear and we can start reporting on more decisions. From my perspective, reporting on trial court cases, there is one decision of particular interest this week from Judge Joan Madden, Supreme Court, New York County. Tower Natl. Ins. Co. v. National Bus. Capital, Inc. addresses the availability of coverage for allegations of Telephone Consumer Protection Act violations. For those that follow this area, you likely know that the courts around the country are split on this question (likely the reason for the introduction of the Exclusion – Violation of Statues That Govern E-mails, Fax, Phone Calls or Other Methods of Sending Material or Information Endorsement) and New York courts have not ruled on the question yet.
Ultimately, Judge Madden finds that this claim qualifies as “personal and advertising injury” specifically, under the enumerated offense of “[o]ral or written publication, in any nature, of material that violations a persona right of privacy.” It is an interesting read especially relating to the court’s finding that the recently decided Third Department decision in Sportsfield Specialties, Inc. v. Twin City Fire Ins. Co., a case our office handled successfully for the umbrella carrier, is distinguishable.
Until next issue…
Jen
Jennifer A. Ehman
[email protected]
A Century Ago, Today, the Great War Marches On:
The First Russian Army, led by Pavel Rennenkampf, enters Eastern Prussia.
Peiper’s Particulars:
After a relatively slow July, things have started to pick back up. Take a moment to review the First Department's discussion of what constitutes "entrustment" for purposes of property coverage. In addition, we'd also invite you to review the Second Department's review of out-of-state affidavits. Apparently, challenges to the sufficiency of affidavits from foreign jurisdictions are becoming more and more common. To combat confusion, the Court provides a detailed review of what a practitioner needs to do to avoid having a motion denied due to a simple oversight.
We also take a moment to acknowledge that our friends on Long Island have been struck with another weather event. Not even two years after Superstorm Sandy devastated Coastal Long Island, parts of those same communities were inundated with up to 13 inches of rain yesterday. With weather like that, of course, comes damage. With damage, of course, come claims. The insurance industry will be asked, as it was after Sandy, to perform yeoman's work in very short time periods. Just as with Sandy, we'd expect that the industry will meet, and exceed, the challenges coming its way. That said, if any of us can be of any assistance, please do not hesitate to pick up the phone to call us.
Until next time, stay dry and stay safe.
Steve
Steven E. Peiper
[email protected]
A Century Ago – the Panama Canal Opens to Traffic:
The Panama Canal opens to traffic with the transit of the cargo ship SS Ancon.
SS Ancon was an American steamship that became the first ship to officially transit the Panama Canal on August 15, 1914. The steamer began life as the SS Shawmut, built for the Boston Steamship Line in 1902. About 1910 she was purchased by the Panama Railroad Company to provide shipping required for the construction of Canal. The name was changed to Ancon after Ancon Hill and Ancon Township, in Panama, the home to the head of the Canal Commission.
Ancon and her sister ship Cristobal played a crucial role in building the canal, bringing workers and supplies, notably massive amounts of cement, from New York to Panama for the construction project.
Ancon was acquired by the United States Navy after the end of WW I and fitted out as the USS Ancon, a troop transport used to return Americans home.
Audrey’s Angles:
Summer is winding down and this will be my last column until the end of September. Over the course of the next two editions I will be traveling around Alaska. I can’t wait to hike in Wrangell, explore Denali, see lots of glaciers, and maybe the Northern Lights!
The column in this edition focuses on a resident relative case and insured status under an automobile policy in Minnesota. An interesting read for those with children just out of college or entering employment as well as establishing themselves yet still receiving some financial support from their parents.
Also, if you have not registered yet, consider attending DRI’s Annual Meeting in San Francisco from October 22 to October 26th. National speakers include David Drummond, The Honorable Michael Chertoff, Vernice “FlyGirl” Armour, and Mika Brzezinski. On October 23, the Insurance Law Committee, in conjunction with the Fidelity & Surety and Life, Health, and Disability Committees is presenting Everything Old Is New Again: Applying Established Ethics Principles in the Age of Technology. James S. Christie Jr., Bradley Arant Boult Cummings LLP will take an in-depth look at how the legal profession is adapting its ethical principles in an environment where technology develops faster than the rules can be made. If you have any questions about Annual Meeting please do not hesitate to email me at [email protected].
See you upon my return from Alaska!
Audrey
Audrey A. Seeley
[email protected]
Editor’s Note: Nice life. I’ll be traveling to Bronx Supreme, Westchester and the rural hinterlands of New York State while Audrey Cha Chas with polar bears.
Two Hundred Years Ago Today – the Battle of Fort Erie:
The War of 1812 dragged on to 1814 and there were many fronts where battles occurred. One significant battleground was the Niagara Peninsula as the Americans and the British traded attacks on Buffalo and Fort Erie, Ontario (where I reside in the summers). A very important battle started 200 years ago today.
This fort was unfinished when the United States declared war on June 18, 1812. The garrison of Fort Erie fought at the Battle of Frenchman's Creek against American attacks in November 1812. In 1813, the fort was held for a period by U.S. forces after being partially dismantled by the small garrison of British troops and Canadian militia as they withdrew from the fort. British reoccupation followed the American withdrawal from the area in December 1813 and attempts to rebuild the fort were begun.
On July 3, 1814 another American force landed nearby and captured Fort Erie again. The U.S. Army used the fort as a supply base and expanded its size. At the end of July, after the Battles of Chippawa and Lundy's Lane, the American army withdrew to Fort Erie.
In the early hours of August 15, 1814 the British launched a four pronged attack against the fortifications. A well-prepared American defense and an explosion in the North East Bastion destroyed the British chance for success with the loss over 1,000 men. A full scale siege set in and it was broken on September 17 when American troops sortied out of the fort to capture and wreck the British siege batteries.
Shortly after the American sortie, the British lifted the siege lines and retired to positions to the north at Chippawa. After unsuccessful attacks at Cook's Mills, west of Chippawa, news reached the American forces that the eastern seaboard of the U.S. was under attack. On the 5th of November 1814, with winter approaching, the Americans destroyed the fort and withdrew to Buffalo, leaving Fort Erie the bloodiest battlefield in the history of Canada. The Treaty of Ghent was signed December 24, 1814, ending the War of 1812-1814.
Cassie’s Capital Connections:
On Wednesday, my commute to Kings County from Albany was actually done in less time than one of the other respondents in my case who was commuting from Long Island. In fact, three and a half hours after he left his home, he was still not in Brooklyn. The flooding that occurred in Long Island between Tuesday night and Wednesday because of the almost 13 inches of rain which fell between midnight Tuesday and 7 a.m. Wednesday morning resulting in flash flooding.
Governor Cuomo deployed DFS’ Mobile Command Center to Long Island to provide insurance assistance to homeowners, renters, and business affected by the flooding. Specifically, Governor Cuomo stated that “trained staff will be available to answer questions and provide advice to New Yorkers with insurance issues.”
What does this all mean? Only time will tell I guess. However, I cannot help wondering if there will be an implementation of the post-Sandy regulations speeding up the required response time for insurers and requiring insurers to inform insureds of their right to mediation. With this all in mind, this week I am reviewing Circular Letter 8 (2013) which sets forth post-disaster and natural catastrophe regulatory guidance. Toodles for now (clearly I was watching cartoons with my son when I wrote this).
Cassie
Cassandra Kazukenus
[email protected]
Lots of interesting cases in the issue attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Insufficient Proof Offered to Establish that Elevator Company was Successor–In-Interest to Party Promised Additional Insured Status
- Allegations in Complaint Broad Enough to Trigger Duty to Defend
- Where Insured Cannot Bring Lawsuit Against Driver of Other Vehicle Because of Workers Compensation Bar, She Cannot Seek Underinsured Benefits Either. Case of First Impression.
- Agreement Only to Insure Premises is Not an Agreement Requiring Additional Insured Status
- Property Damage Claimants Have Standing to Sue Liability Carrier for Deceptive Trade Practices (GBL §349) and Quantum Meruit Even Without Judgment Against Insured
- Underinsured (SUM) Coverage Triggered When Insured Has $300,000 Single Limit Liability Policy and Tortfeasor has $100,000/$300,000 Split Limit Policy
HUNTER’S HINTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Daniel T. Hunter
[email protected]
- Defendants Fail to Meet Initial Burden in Serious Injury Summary Judgment Motion Resulting in Reversal of Trail Court Order
- Trial Court Order Modified Finding Permanent Consequential Category Should Have Been Dismissed
- Jury Verdict Finding Plaintiff did not Sustain a Serious Injury Upheld Since it was not "Palpably Irrational"
MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras
[email protected]
Arbitration
- Did Applicant Comply With the 30-Day Written Notice Requirement?
- IME Indicating Positive Findings Conflicts with Negative IME and Results in Award for Applicant
- Carrier Requested Verification from Wrong Party
- Where EIP Is a Minor, Can Arbitration Proceed Without a Court Order?
- Does the Medicaid DME Fee Schedule Cover the “Ancillary Kits” Necessary to Operate the DME?
Litigation
- Submission on UB-04 Was “Defective” Claim
- Under PA Law, Rescission Appropriate Where Assignor Complicit in Fraud
- Claim for Amount in Excess of Fee Schedule Denied
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
- Unless Limited in the Contract/Lease, Entrustment Applies to the “Entirety of the Premises” for Criminal/Dishonest Acts Exclusion
- Wagering Rules Affirmed, Again
Potpourri
- Lack of a Certificate Conformity Can Result in an Affidavit Executed Out of State being Stricken
FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]
- Rained out this week.
AUDREY’S ALL THINGS PERSONAL
Audrey A. Seeley
[email protected]
- Twenty Year Old with Established Residence and Full Time Employment with Only Some Financial Dependence Upon Parents Is Not A Resident Relative.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
- Post-Disaster and Natural Catastrophe Regulatory Guidance (Emergency Disaster Protocol)
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
- Trial Court Considers Scope of “Right to Privacy” With Respect to TCPA Claims
- Court Upholds Waiver of Subrogation
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- Bad Faith Claim Dismissed Due to Questionable Underlying Claim
That’s all for now. Enjoy these wonderful August days.
Call if you have any questions on any of these cases or on anything else that tickles your fancy.
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]
08/12/14 Tingling v. C.I.N.H.R.
Appellate Division, Second Department
Insufficient Proof Offered to Establish that Elevator Company was Successor–In-Interest to Party Promised Additional Insured Status
Elevator company brought motion seeking to establish that another party failed to procure insurance naming it as an additional insured. However, elevator company failed to prove that it was the successor-in-interest to the company with whom C.I.N.H.R. (the “nursing home”) had a contract.
08/13/14 Salt Construction Corp. v. Farm Family Insurance Company
Appellate Division, Second Department
Allegations in Complaint Broad Enough to Trigger Duty to Defend
Salt Construction (“Salt”) sought an order declaring that Farm Family was obligated to defend and indemnify it in an action commenced by Giacoia.
An insurer's duty to defend is broader than the duty to indemnify and arises whenever the allegations of the complaint against the insured, liberally construed, potentially fall within the scope of the risks undertaken by the insurer
Salt established that the allegations in the complaint potentially gave rise to a claim covered by the policy. Accordingly, a defense was owed, the court never having reached the issue of indemnity.
08/08/14 Hauber-Malota v. Philadelphia Insurance Companies
Appellate Division, Fourth Department
Where Insured Cannot Bring Lawsuit Against Driver of Other Vehicle Because of Workers Compensation Bar, She Cannot Seek Underinsured Benefits Either. Case of First Impression.
On May 4, 2006, plaintiff was a passenger in a vehicle operated by her co-employee, Wilcox, and owned by their common employer, JMFSC, when the vehicle was rear-ended by the Haggerty car. Coincidentally, the Haggerty driver was also employed by JMFSC and all were in the course of their employment at the time of the accident.
Plaintiff commenced a personal injury action against Haggertys, but that action was dismissed on the ground that plaintiff’s remedy against her co-employee was limited to the recovery of workers compensation. Likewise, plaintiff could not sue the owner of the car because his liability was derivative under Vehicle & Traffic Law
Plaintiff subsequently commenced this action seeking supplementary
uninsured/underinsured motorist (SUM) benefits from defendants as insurers of the vehicle owned by her employer, JMFSC. Defendants moved for summary judgment seeking dismissal of the complaint on the ground, hat plaintiff’s exclusive remedy was the recovery of workers compensation benefits.
In a case of first impression, the court finds that an individual who is barred from suing a co-employee because of exclusivity of workers compensation is similarly barred from recovering SUM benefits under her employer’s automobile liability insurance policy.
The court noted that neither the Workers Compensation Law nor the Insurance Law bars the application categorically.
Defendants-contractual liability to provide SUM benefits is premised in part upon the contingency of a third party’s tort liability. Plaintiff may receive SUM benefits under the policy only if she is legally entitled to recover damages from the owner or operator of another car.
Here, the plaintiff cannot so she cannot pursue a claim for SUM benefits.
08/08/14 General Motors, LLC v. B.J. Muirhead, Co.
Appellate Division, Fourth Department
Agreement Only to Insure Premises is Not an Agreement Requiring Additional Insured Status
GM and Muirhead entered in an agreement, set forth in a purchase order, whereby Muirhead would provide certain maintenance services at a GM plant owned and operated by plaintiff. The agreement provided that defendant "shall maintain insurance coverage with carriers acceptable to [plaintiff] and in the amounts set forth in the Special Terms” and it required that Muirhead obtain insurance for "liability arising from premises." Muirhead obtained such a policy but did not name GM as an additional insured.
A personal injury lawsuit followed involving Muirhead’s work and Muirhead’s insurer refused to recognize GM as an additional insured.
Since the purchase order did not require it to obtain insurance coverage on behalf of GM, GM need not be an additional insured on the policy.
A provision in a construction contract cannot be interpreted as requiring the procurement of additional insured coverage unless such a requirement is expressly and specifically stated. In addition, contract language that, as here merely requires the purchase of insurance will not be read as also requiring that a contracting party be named as an additional insured.
Editor’s Note: Clearly the right decision. If a party wants to be protected as an AI, the underlying contract should insist upon it.
08/08/14 Nick’s Garage, Inc. v. Liberty Mutual Fire Insurance Company
Jeffrey’s Autobody Inc. v Liberty Mutual Fire Insurance Co.
Property Damage Claimants Have Standing to Sue Liability Carrier for Deceptive Trade Practices (GBL §349) and Quantum Meruit Even Without Judgment Against Insured
In both cases, the plaintiffs are auto repair shops and they sue to recover for payments performed on behalf of various assignors, including individuals who were involved in accidents with Liberty insureds.
The claims are for quantum meruit and violation of It General Business Law § 349, which prohibits deceptive business practices.
Liberty moved to dismiss those claims on the grounds that the plaintiffs lacked standing under Insurance Law § 3420 because their assignors were strangers to the underlying insurance policies.
Section 3420 creates a direct action for strangers to insurance policies, after they secure a judgment against a liability insurer’s insured. In that case, after sending the judgment to the insurer and insured, and awaiting the passage of 30 days, that judgment creditor can sue the insurer for any amounts available under the liability policy.
Here, the causes of action for quantum meruit and deceptive business practices do not seek relief "under the terms of the [insurance] policy or contract." Rather, those causes of action raise distinct legal theories that are independent of the policy terms.
Thus, while these actions cannot be commenced under Insurance Law § 3420, the plaintiffs' causes of action for quantum meruit and deceptive business practices can proceed independently of that statute.
Editor’s Note: Mixed feelings about this one and we will draw a distinction only a coverage purist may be able to appreciate. We can understand allowing a GBL claim outside of the Direct Action statute as that is a statutory claim and doesn’t need §3420 to create standing. We think the court was wrong in allowing a quantum meruit claim to proceed. That claim seeks a determination that amount paid on behalf of the insured was incorrect, which necessarily requires a determination of the amount that should be paid in tort. That determination should require a judgment against the insured and following that, processing under Insurance Law §3420.
08/06/14 Matter of GEICO v. Lee
Appellate Division, Second Department
Underinsured (SUM) Coverage Triggered When Insured Has $300,000 Single Limit Liability Policy and Tortfeasor has $100,00/$300 Split Limit Policy
Lee was a passenger in the Park vehicle which was involved in collision with a car driven by Song. GEICO issued a policy to Park and Song was insured by Allstate.
The GEICO policy had bodily injury liability limits in the amount of $300,000 per person and $300,000 per accident and a SUM (supplementary uninsured/underinsured coverage with of $300,000/$300,000.
Lee received $100,000 under the Allstate policy, representing the maximum permissible sum recoverable under the per-person liability limit of that policy. Lee then made a demand for arbitration under the SUM provision of Park's GEICO policy, arguing that the per-person liability coverage afforded under the alleged tortfeasor's Allstate policy was less than the per-person liability coverage afforded under the GEICO policy. GEICO thereafter commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration, contending that the SUM provision of the GEICO policy was not triggered because both the GEICO policy and the Allstate policy provided for aggregate liability limits of $300,000 per accident and that, accordingly, the alleged tortfeasor Song was not an underinsured motorist within the meaning of the applicable statute.
Insurance Law § 3420(f)(2) was enacted to allow an insured to obtain the same level of protection for himself [or herself] and his [or her] passengers which he [or she] purchased to protect himself [or herself] against liability to others.
Here, a comparison of the two policies at issue, in light of the particular circumstances of this case, demonstrates that an individual such as Lee would be afforded greater per-person bodily liability injury coverage under the GEICO policy than under the Allstate policy. Under the Allstate policy, Lee was limited by the "per person" bodily injury liability limit to the recovery, in tort, of $100,000. The GEICO policy—a single limit policy—provided $300,000 of liability coverage for bodily injury to any one injured person. Since the per-person bodily injury liability insurance limits of coverage provided by the Allstate policy are in a lesser amount than the per-person bodily injury liability insurance limits of coverage provided by the GEICO policy, the SUM provision of the GEICO policy was triggered.
HUNTER’S HINTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Daniel T. Hunter
[email protected]
08/06/14 Werthner v. Lewis
Appellate Division, Second Department
Defendants Fail to Meet Initial Burden in Serious Injury Summary Judgment Motion Resulting in Reversal of Trail Court Order
Defendants moved for summary judgment alleging 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. The trial court granted the motion and Plaintiff appealed. The Second Department found that Defendants failed to meet their prima facie burden of showing that Plaintiff did not sustain a serious injury since the report of Defendants' expert orthopedic surgeon submitted in support of the motion attributed Plaintiff's surgery to increased post-accident symptomology, which is inconsistent with his other findings that Plaintiff's injuries were attributable to pre-existing degenerative changes. This clearly raises an issue of fact, and therefore Plaintiff's appeal was successful.
08/08/14 Gates v. Longden
Appellate Division, Fourth Department
Trial Court Order Modified Finding Permanent Consequential Category Should Have Been Dismissed
Plaintiff claims to have suffered "serious injuries" as a result of a rear end motor vehicle accident, naming the following categories of "serious injury" in her bill of particulars: Significant disfigurements; permanent consequential limitation of use; and significant limitation of use. Defendants moved for summary judgment to dismiss Plaintiff's complaint on the grounds that any injury sustained by Plaintiff was not causally related, and in any event, Plaintiff did not sustain a serious injury as a result of the rear end motor vehicle accident. Plaintiff cross-moved for summary judgment on the issue of liability. The trial court denied Defendants' motion and granted Plaintiff's cross motion for partial summary judgment on the issue of negligence. Defendants appealed from that order.
The Fourth Department found that the trial court erred in denying Defendants' motion for summary judgment with respect to the permanent consequential limitation of use category of serious injury. The Fourth Department noted that Defendants met their initial burden by submitting evidence that Plaintiff had worked full time since the motor vehicle accident, other than six weeks in which she was recovering from spinal surgery. Defendants also established that as of the date of Plaintiff's deposition, Plaintiff had no further medical restrictions and had been able to fish, hunt and camp almost every weekend. Plaintiff failed to submit any relevant evidence to raise an issue of fact in opposition showing any degree of permanency of Plaintiff's injuries.
With respect to the significant disfigurement category of serious injury, the Court noted that an issue exists whether a reasonable person viewing the Plaintiff's spinal surgery scar would regard the condition as unattractive, objectionable, or as the subject of pity or scorn. The significant limitation of use of a body function or member category of serious injury also survives summary judgment since any assessment of the significance of a bodily limitation necessarily requires consideration not only of the extent or degree of limitation, but of its duration as well. Defendants only submitted evidence of duration and failed to do so with respect to the extent or degree of limitation.
08/08/14 Sanchez v. Dawson
Appellate Division, Fourth Department
Jury Verdict Finding Plaintiff did not Sustain a Serious Injury Upheld Since it was not "Palpably Irrational"
Following trial, a jury determined that Plaintiff did not sustain a serious injury under any claimed categories of Insurance Law §5102(d). Plaintiff moved to set aside the verdict, and the Fourth Department denied said motion.
The Fourth Department notes that the standard for determining whether a verdict should be set aside is whether the evidence so preponderated in favor of the Plaintiff that the verdict could not have been reached on any fair interpretation of the evidence. As such, a verdict should not be set aside unless it is "palpably irrational". To conclude as a matter of law that a jury verdict is not supported by sufficient evidence, there must be no valid line of reasoning and permissible inferences which could possibly lead rational persons to the conclusion reached by the jury on the basis of the evidence presented at trial. The Fourth Department notes that a fair interpretation of the evidence supports the jury's determination, and, as such, denied Plaintiff's motion to set aside the verdict.
MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras
[email protected]
Arbitration
08/06/14 Elite Medical Supply of NY, Inc. v Allstate Prop. & Cas. Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Did Applicant Comply With the 30-Day Written Notice Requirement?
The accident occurred on October 10, 2011, but the NF-2 was not completed by the EIP until January 17, 2012, and was not accompanied by any type of explanation as to why it was not timely submitted. Interestingly, this Arbitrator rendered a decision in a case involving the same EIP in which she found that the EIP had not presented “clear and reasonable justification” for the failure to give timely written notice of the accident. That decision was not appealed. The Arbitrator noted that while collateral estoppel would not apply to this case because Applicant was not the same, both the Respondent and Applicant’s counsel were identical. The Arbitrator further noted that, unlike the previous case where the EIP’s affidavit was submitted, here it was not, raising the logical inference that it was not because it was not favorable.
Applicant argued that there is no absolute requirement or timeframe in which to file an NF-2 and that a carrier cannot deny a claim based on the failure to submit a specific NF-2 form if comparable written notice is timely submitted. The Arbitrator stated that this argument was not raised by Applicant’s counsel in the prior case and that it was evident that he was attempting to get a second bite at the apple. However, the Arbitrator pointed out that it was not demonstrated in either case that other “comparable written notice” was timely submitted, nor was there any written justification for the failure to comply with the time limitation. As such, Respondent’s denial was upheld making moot the issue of medical necessity.
08/05/14 RES Physical Medicine & Rehab. Services v Allstate Ins. Co.
Erie County, Arbitrator Douglas S. Coppola
IME Indicating Positive Findings Conflicts With Negative IME and Results in Award for Applicant
At issue were pain management services rendered by Applicant on two dates. The July 5, 2013 date of service was denied based on an IME performed by Dr. Grammar, an anesthesiologist, on January 21, 2013. The date of service August 29, 2012 [sic](2013?), was denied based on an IME performed by Dr. McGlowan on December 6, 2012. Dr. Grammar reported a “normal” examination and claimed that the results of the MRIs were inconsistent with the EIP’s current symptoms. Dr. Grammar opined that no further treatment was medically necessary. The Arbitrator found the report unpersuasive, in part because, as he has stated in other decisions, Dr. Grammar is an anesthesiologist, not a pain management specialist. Dr. McGlowan, on the other hand, reported some range of motion restrictions in his report and recommended a continuation of physical therapy. He performed a subsequent IME in March 2013 at which time he again noted neck and back discomfort and again recommended continued physical therapy and home exercises.
The Arbitrator noted that both of Dr. McGlowan’s IME reports revealed positive findings in contrast to that of Dr. Grammar and he ultimately held that the two reports upon which the denials were based were “snapshots of the EIP’s condition” on the dates the IMEs were performed. The Arbitrator further determined that the evidence seemed to indicate that the treatment was benefiting the EIP as his symptoms apparently diminished considerably. As such, the IMEs were insufficient to deny treatment which occurred months later.
Note: We must keep in mind that here there were conflicting IME reports, one of which did not find the injuries to be resolved. Therefore, the “snapshot” language should not mislead us into thinking this is reminiscent of the Amato decision which was struck down on appeal. Here, according to Dr. McGlowan, there were positive findings in December, and again in March, so the issue is not that the IMEs were far removed in time from the dates of service, but rather that the EIP continued to show symptoms at the time of the IME. Had the IMEs been negative and the opinions had been of injuries resolved, then the “snapshot” concept that the trial court in Amato had attempted to impose might have been an issue here as well (Amato v State Farm Ins. Co., 975 NYS2d 364 [App Term 2013]).
08/05/14 Elite Medical Supply of NY, Inc. v Liberty Mutual Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Carrier Requested Verification from Wrong Party
Some ten months after the accident, a multi-mode stimulator was prescribed for the 16 year-old EIP. The carrier requested verification from Applicant in the form of an “updated medical report.” In response, Applicant sent the prescription and letter of medical necessity and the carrier ultimately denied the claim for failure to respond to the verification request.
The Arbitrator noted that the verification request should have been sent to the treating chiropractor as the provider of the DME would not have such a report in its possession. As such, the claim was deemed to be overdue and an award in favor of Applicant was rendered.
08/01/14 Elite Medical Supply of NY, Inc. v Allstate Insurance Co.
Erie County, Arbitrator Mona Bargnesi
Where EIP Is a Minor, Can Arbitration Proceed Without a Court Order?
CPLR 1209 was designed to protect the interests of minors and, given that a decision in an arbitration could have collateral estoppel effects, it is to the minor’s benefit to have a court decide whether arbitration is in its best interests. Therefore, CPLR 1209 requires a court order in order for an arbitration involving a minor to proceed. An exception exists for an arbitration brought on behalf of a minor pursuant to Insurance Law Section 3420(f) [claims brought under MVAIC and SUM]. The amendment providing for the exception was enacted years after the creation of No-Fault, so the irrefutable inference is that while such claims can be brought without first obtaining a court order, no-fault claims were intentionally omitted from the exception.
Adopting the reasoning of Arbitrator Maslow, Arbitrator Bargnesi further determined that the court order requirement only applies were the infant is a party, but not where the infant is the applicant’s assignor. However, given that an assignee ‘stands in the shoes’ of its assignor and has no greater rights than the assignor would have had, if the infant EIP could not submit the dispute to arbitration, similarly either can the assignee. Moreover, the proper assignment of benefits in this case was unclear as there was no evidence that the initials on the line for the patient’s signature were the initials of the minor’s parent and, in any event, the Arbitrator noted that she is not aware of any provision which allows a parent to assign benefits under the No-Fault Law.
At the end of this second hearing, Arbitrator Bargnesi dismissed the matter without prejudice as Applicant failed to produce a court order as it was directed to do during the first hearing. Without such court order, the Arbitrator held that Applicant could not proceed in arbitration.
07/25/14 Amherst Medical Supply, LLC v Allstate Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Does the Medicaid DME Fee Schedule Cover the “Ancillary Kits” Necessary to Operate the DME?
The issue was whether the six-month supply of “ancillary kits” necessary for the operation of an interferential stimulator device was properly denied. The device was prescribed in July with instructions to use it three times per day for six months. The “kits” were billed through January. While not specifically stated, we assume the “kits” consisted of the electrodes and wires that accompany these stimulator devices.
The Arbitrator found that Allstate’s denial based upon its interpretation of the Medicaid DME Fee Schedule was misplaced “as the guidelines do not specifically cover materials recommended to operate DME.” The Arbitrator further stated that “[t]he fact that under different circumstances a lesser amount would be paid if this was a ‘Medicaid claim’ does not establish the proper reimbursement for the supplies in question” [as a no-fault claim, we again assume]. As such, the Arbitrator awarded $294.24, which would appear to be $49.04 for each month’s “ancillary kit.”
Note: The Medicaid DME Fee Schedule controls reimbursement of DME under No-Fault. It provides that electrodes and wires cannot be separately billed with the initial device as they are included with the price of said device. However, for each subsequent month, a maximum of two units can be billed at the price set forth in the Fee Schedule.
Litigation
08/13/14 Mount Sinai Hosp. v New York Central Mut. Fire Ins. Co.
Appellate Division, Second Department
Submission on UB-04 Was “Defective” Claim
The EIP was treated at plaintiff’s facility and a few days later, plaintiff’s third-party biller, Outsource, sent a UB-04 and a letter requesting payment. Defendant requested verification and a week after that received more than 100 pages of documents. No further verification was requested and defendant issued an NF-10 within 30 days. Two months later, plaintiff, now represented by a different third-party biller, again requested payment. This time the request was on an NF-5. Defendant ignored this request, leading to this action. The trial court granted defendant’s cross-motion for summary judgment but on appeal the decision was reversed.
Plaintiff contended that the UB-04 did not commence the 30-day period to pay or deny or request verification. Under the regulations, a UB-04 must be accompanied by an NF-5. Therefore, the 30-day period did not commence until plaintiff submitted its billing request on an NF-5. Defendant’s denial two months earlier did not deny anything.
In contrast, defendant asserted that the 30-day period commenced when it received the UB-04, which it timely denied, and plaintiff did not commence the 30-day clock anew by submitting the same claim several months later.
The Second Department agreed with plaintiff. The submission of the UB-04 was a “defective” claim and did not start the 30-day period running. Therefore, defendant’s denial had no effect. The clock did not start until the claim on the NF-5 was submitted, and defendant failed to timely deny. Given that plaintiff’s complaint was based solely on defendant’s failure to pay or deny the valid claim within 30 days, and defendant failed to establish that it paid or denied that claim within 30 days after receipt, summary judgment should have been granted to plaintiff.
Note: Clearly, by time the second claim was submitted - this time correctly on an NF-5 - the claim was well beyond the 45-day period after the services are rendered to submit the bill. Of course, by not issuing an NF-10 for the second submission, defendant waived that defense so the only issue became its failure to pay or deny.
08/11/14 Optimal Well-Being Chiropractic, PC v Infinity Ins. Co.
Appellate Term, Second Department
Under PA Law, Rescission Appropriate Where Assignor Complicit in Fraud
Defendant argues that a conflict-of-law analysis required the application of Pennsylvania law because the policy was issued in Pennsylvania, the insured purportedly resided in Pennsylvania and the vehicle was purportedly garaged in Pennsylvania. The only connection with New York was the accident location. The ruling of the trial court denying defendant’s motion to dismiss was reversed on appeal.
The court noted that while Pennsylvania law allowed an insurer to rescind a policy, the Pennsylvania Supreme Court held that an auto policy cannot be rescinded with respect to innocent third parties. Here, however, during his deposition the assignor testified that his mother, the insured, never had lived in Pennsylvania but that he would drive her there for the purpose of renewing her insurance as it was cheaper than in New York. The court found that the assignor was not an innocent third party but rather complicit in the fraudulent acts of his mother, so rescission of the policy was also effective with respect to him and summary judgment dismissing the claim for lack of coverage was granted to defendant.
08/11/14 Okslen Acupuncture PC v Travco Insurance Co.
Appellate Term, First Department
Claim for Amount in Excess of Fee Schedule Denied
Plaintiff, a physician licensed to perform acupuncture, sought reimbursement in excess of the fee schedule applicable to physicians who render acupuncture services. Defendant established that it timely and properly denied the claims for the excess amounts. In opposition, plaintiff did not raise any triable issue with respect to defendant’s mailing but submitted an attorney affirmation regarding the fee calculation. The court granted defendant’s motion and dismissed the claim holding that the affirmation did not address the nature of the services rendered, much less demonstrate that they were not similar to acupuncture services generally provided by physicians such that these services should be exempt from the physicians’ fee schedule.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
08/14/14 Lexington Park Rlty, LLC v Nat. Union Fire Ins. Co. of Pitts., PA
Appellate Division, First Department
Unless Limited in the Contract/Lease, Entrustment Applies to the “Entirety of the Premises” for Criminal/Dishonest Acts Exclusion
Plaintiff rented the insured property a third-party who, in turn, repurposed the parcel into a youth hostel. In doing so, the tenant removed the cabinets and other kitchen related appliances. At the conclusion of the lease, the tenant did not return the property to its original condition.
Plaintiff commenced the instant action after National Union denied the claim for coverage based upon the exclusion for dishonest or criminal acts committed by someone to whom the property was entrusted. Initially, plaintiff argued that the term “entrustment” only applied to chattel, and did not encompass fixtures in property. The Court rejected this argument by holding, unequivocally, that “entrustment” applies to the “entirety of the premises unless otherwise specified.”
The Court also held that plaintiff’s verified interrogatory response confirming that the tenant caused the loss was binding. As such, plaintiff could not argue later that the loss was caused by someone other than the tenant, and thus outside of the scope of the entrustment exclusion.
Finally, the Appellate Division rejected plaintiff’s argument that National Union had waived its right to assert coverage defenses. In citing the landmark Schiff v Flack decision, the Court noted that the doctrine of waiver does not apply disputes over the existence, or non-existence, of coverage.
08/13/14 Phoenix Life Ins. Co. v Jacob P ILIT A
Appellate Division, First Department
Wagering Rules Affirmed, Again
Just before the expiration of the contestability period, Phoenix commenced the instant action seeking to void three life insurance policies based upon alleged material misrepresentations of criminal histories and finances of two insureds. Phoenix also argued that the policy was voided because neither of the insureds, both of whom sold their life insurance policies to outside investors, had an insurable interest.
The Court denied the motions for summary judgment on the criminal history and finances grounds based upon questions of fact. It did, however, dismiss the insurable interest Cause of Action due to the Court of Appeals’ pronouncement in Kramer v Phoenix Life Ins. Co. As we reported in November of 2010, the Kramer decision provided:
11/17/10 Kramer v. Phoenix Life Insurance Co.
New York State Court of Appeals
Immediate Assignment of Life Insurance Policy to Stranger Does Not Violate Life Insurance “Wagering” Rules
The Second Circuit Court of Appeals certified the following question for New York State highest court’s consideration:
"Does New York Insurance Law §§ 3205 (b) (1) and (b) (2) prohibit an insured from procuring a policy on his own life and immediately transferring the policy to a person without an insurable interest in the insured's life, if the insured did not ever intend to provide insurance protection for a person with an insurable interest in the insured's life?"
The Court held answered the question in the negative holding that New York law permits a person to procure an insurance policy on his or her own life and immediately transfer it to one without an insurable interest in that life, even where the policy was obtained for just such a purpose.
New York's insurable interest requirement is codified in Insurance Law § 3205 (b). Section 3205 (b) (1) addresses individuals obtaining life insurance on their own lives:
"Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation. Nothing herein shall be deemed to prohibit the immediate transfer or assignment of a contract so procured or effectuated" (Insurance Law § 3205 [b] [1]).
Section 3205 (b) (2) addresses a person's ability to obtain insurance on another's life and requires, in that circumstance, that the policy beneficiary be either the insured himself or someone with an insurable interest in his life:
"No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured" (Insurance Law § 3205 [b] [2]).
A compelling two-judge dissent argued that “stranger-oriented life insurance” has always been condemned by courts and allowing the immediate assignment of a policy purchased by the policy owner is another form of life-gambling.
Editor’s Note: We’re with the dissent on this one. If a person cannot insure the life of a stranger, one for whom he or she has not insurable interest, allowing the immediate assignment of a policy purchased by the person whose life is being measured encourages what is no more than wagering.
Potpourri
08/13/14 Midfirst Bank v Agho
Appellate Division, Second Department
Lack of a Certificate Conformity can result in an Affidavit Executed Out of State being Stricken
In the context of a mortgage foreclosure action, the Second Department reviews the rules ensuring affidavits that are executed out-of-state are in admissible form before New York courts. In this case, the Court heard a challenge to an affidavit that plaintiff submitted in support of its motion for summary judgment. That document, prepared by a “foreclosure specialist”, was executed in Oklahoma, by an Oklahoma notary public.
The Appellate Division instructs that out-of-state affidavits need to be conformed to New York law pursuant to CPLR 2309 which requires that the document, itself, be authenticated by the attachment of a certificate of conformity.
In addition, in certain real property transactions, the out-of-state affidavit must also be accompanied by a certificate of authentication (addressing the appropriateness of the witness/notary to administer oaths). Notably, however, the Real Property Law 299 identifies parties outside of New York who may attest to the veracity of a sworn document. Those individuals include judges, mayors, chief civil officers, notary publics of foreign states, commissioners of deed and other parties authorized to acknowledge proofs of deed in foreign states. Thereafter, at Section 311(5) of the Real Property Law, the need for a certificate of authentication is waived where the document was observed by one of the parties identified in Real Property Law 299.
In the instant matter, the certificate of conformity was sufficient to satisfy the requirements of the CPLR and Real Property Law. Thus, the affidavit was proffered in admissible form. However, even if there was an issue with the certificate of conformity, the trial court is authorized, via CPLR 2001, to conform the certificate of conformity nunc pro tunc.
08/12/14 Tingling v. C.I.N.H.R.
Appellate Division, Second Department
Insufficient Proof Offered to Establish that Elevator Maintenance Agreement Qualified as a Construction Contract for Purposes of GOL 5-322.1
This case was reviewed earlier in Dan Kohane’s column. In addition to the failure to procure insurance claim, CINHR opposed an argument that it owed contractual indemnification under the elevator maintenance agreement.
The Court noted that a party may be indemnified for its own negligence under New York law. As an exception to the general rule, the Court referenced General Obligations Law 5-322.1 which, of course, prohibits a party from passing its own negligence under a construction contract. In the instant matter, CINHR failed to establish that the maintenance agreement fell within the scope of the GOL. Thus, it was unable to void the agreement as a matter of law. Because there were questions of fact relative to each party’s respective negligence, all motions were denied on a question of fact.
FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]
Rained out this week.
Audrey A. Seeley
[email protected]
08/11/14 North Star Mut. Ins. Co. v. State Farm Mut. Auto Ins. Co.
Court of Appeals, Minnesota
Twenty Year Old with Established Residence and Full Time Employment with Only Some Financial Dependence Upon Parents Is Not A Resident Relative.
On October 1, 2001, Quernemoen, a twenty year old male, was involved in an automobile accident sustaining bodily injury. The vehicle Quernemoen was a passenger in was operated by his friend, Mr. Jordan Henrichs. Quernemoen sought no-fault benefits from North Star, Henrichs’ vehicle insurer, and State Farm, Quernemoen’s vehicle insurer, which was not involved in the accident. The State Farm policy under which Quernemoen sought no- fault benefits was issued to his parents.
State Farm denied Quernemoen’s claim on the ground that Quernemoen was not an insured under the policy as he was not a resident relative. North Star tendered Quernemoen’s claim to State Farm on the ground that State Farm had a higher priority obligation to pay the claim. Ultimately, North Star paid Quernemoen’s claim and commenced an action against State Farm seeking a money judgment for the amount that was paid out in no-fault benefits as well as a declaration that State Farm’s policy had a higher priority obligation to pay the benefits. Ultimately, the issue before the Court was whether Quernemoen was a resident of his parents’ household at the time of the accident and thus an insured under the State Farm policy.
The facts surrounding Quernemoen’s history of his residency with his parents required review. In the spring 2007, Quernemoen, a fifteen year old, lived with his parents. Quernemoen was having difficulties at school and with his parents’ approval, moved to his Aunt’s and Uncle’s home in a different city to attend high school. Quernemoen’s sister moved into his bedroom at their parents’ home. Quernemoen would visit his parents’ home on the weekends and school breaks.
In March 2009, when Quernemoen turned eighteen years old, his grandfather bought him a car. Quernemoen’s parents obtained insurance coverage for that vehicle under their own automobile insurance policy with State Farm. State Farm’s records reflected that Quernemoen was a driver and not an insured, thus the policy was appropriately rated.
Quernemoen graduated high school in spring 2010, and stayed at his parents’ home for a while and then returned to his Aunt’s and Uncle’s home. In September 2012, he began a job as well as attending college part time. He continued to live with his Aunt and Uncle until December 2010, and thereafter rented an apartment. Quernemoen moved most of his belongings out of his parents’ home when he moved into his apartment. He also assumed responsibility for paying his insurance premiums on his car. Quernemoen’s parents paid his rent for approximately four or five months, but that ended when Quernemoen dropped out of college in or around February 2011.
In spring 2011, Quernemoen began working full time. His parents did not expect him to return to their home despite being unsure as Quernemoen had a seasonal nature job. During the summer and fall of 2011, Quernemoen’s parents provided him with some financial assistance in the form of helping him pay for automobile insurance, medical insurance, and other living expenses.
The Court initially started its analysis of whether Quernemoen is a resident relative and thus an insured under the State Farm policy by reviewing the State Farm insurance policy at issue. The State Farm automobile insurance policy defined insured as
1. You [i.e., a named insured];
2. Resident relative;
3. Any other person when:
a. occupying your car, a newly acquired car, or a temporary substitute car, or
b. not a driver or occupant of another motor vehicle, if the bodily injury occurs in Minnesota and results from the maintenance or use of your car, a newly acquired car, or a temporary substitute car.”
The State Farm policy further defined resident relative to be “a person other than you who is … related to you by blood, marriage or adoption who resides with you.” The State Farm policy also defined resident to be “a person who resides in the same household with you if that person’s home is usually in the same family unit, even though temporarily living elsewhere.” The definition of resident conformed to the statutory definition of resident relative.
The Court after reviewing a body of case law regarding minor or young adults being a resident relative of a policyholder’s household as well as looking at those cases that were decided after the enactment of the statutory definition of resident relative concluded that Quernemoen was not a resident relative of his parents’ home. Thus, he was not an insured under the State Farm policy. It is noted that in the cases decided after the statutory definition of resident relative was enacted, took into consideration multiple factors like (1) age of the injured person, (2) whether the person had established a separate residence, (3) whether the person was self-sufficient, (4) the frequency and duration of the person’s presence at the policyholder’s home, and (5) whether the person intended to return to the family home.
The Court determined that Quernemoen was twenty years old at the time of the accident and an emancipated adult. The evidence also demonstrated that Quernemoen moved out of his parents’ home approximately four years prior to the accident and had established his own residence around ten months pre-accident. Quernemoen had stopped his education and obtained full time employment and was mostly independent financially. Also, Quernemoen had only short visits to his parents’ home except for one period after high school graduation which was more than one year pre-accident. Finally, the evidence established that Quernemoen had no intention of living in his parents’ home again in the future. Due to these undisputed facts, which appeared to demonstrate a young adult with an established residence, employment, and mostly financially independent from his parents, the Court concluded that Quernemoen was not a resident of his parents’ household at the time of the accident. Accordingly, State Farm had no obligation under the automobile insurance policy to afford no- fault benefits as Quernemoen was not an insured.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
Circular Letter No. 8 (2013)
Post-Disaster and Natural Catastrophe Regulatory Guidance (Emergency Disaster Protocol)
A year post Storm Sandy, DFS issued this Circular Letter to all insurers authorized to write property/casualty insurance in NY to “apprise” insurers of post-disaster regulatory measures “they should anticipate in the event the President of the United States or the Governor of New York State declares a State Disaster Emergency in all or some New York State counties in the wake of a disaster or catastrophe.” Most of these are similar, if not identical, to those implemented after Sandy.
The Superintendent may declare a moratorium precluding policy termination which could be up to six months. The expectation would be that insurers would work with any policyholders by making reasonable accommodations to assist in making premium payments so that insurance coverage could continue. Reasonable accommodations could include allowing reasonable repayment and payment extensions.
With regard to the processing of claims, the Superintendent expects insurers will take the following actions upon notice of a claim:
- Promptly establish contact with the claimant;
- Promptly survey and assess the claimant’s damage;
- Promptly comply with any Department directive relating to the activation of the Insurance Emergency Operations Center;
- Promptly respond to Department inquires, including inquires made relating to consumer complaints filed with the Department;
- Promptly inform claimants of any documents that must be submitted to complete a claim;
- Provide prompt and accurate responses to claimants;
- Provide prompt payment for additional living expenses and for temporary repairs after the assessment of the insured’s damage; and
- Promptly set appointments with the claimant for examination and resolution of all claim matters.
The Superintendent may implement an expedited process for issuing temporary independent and public adjuster licenses for adjusters in good standing from other states. Additionally, the Superintendent may require claims data reporting during this time frame to develop “report cards” assessing the performance of insurers.
The last measure discussed is the establishment of a mediation program similar to that required in 11 NYCRR 216.13 which requires insurers to inform insureds that they may mediate the denial of benefits or dispute regarding the value of the damages.
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
07/28/14 Tower Natl. Ins. Co. v National Bus. Capital, Inc.
Supreme Court, New York County
Trial Court Considers Scope of “Right to Privacy” With Respect to TCPA Claims
This decision is a lot to digest so bear with me. Tower issued a businessowners policy to National Business Capital, LLC (“NBC”). An action was later brought against NBC by 3081 Main Street, LLC d/b/a New England Wine and Spirits, on behalf of itself and those similarly situated, seeking damages for NBC’s alleged faxing of unsolicited advertisements in violation of 47 U.S.C. §277 (i.e., the Telephone Consumer Protection Act or TCPA) and Connecticut’s version of the TCPA. NBC was alleged to have faxed more than 10,000 unsolicited advertisements without an opt-out notice as required.
The question of the insurability of these types of claims has been litigated in many jurisdictions; however, New York appellate courts have not yet been presented with a case on this topic. This was the starting point of the decision along with the comment that courts outside of New York are split on whether such claims are covered under the “right of privacy” clause of the “personal and advertising injury” coverage part and the accidental “property damage” coverage part.
The court started its opinion by considering whether the underlying action was covered under the property damage provision which applies when “property damage” is caused by an “occurrence.” Here, the court found, adopting reasoning from the Fourth and Seventh Circuit, that the loss of ink, time and paper resulting from receipt of unwanted faxes constitutes “property damage” for purposes of the policy. However, the court still found no coverage under this section as it reasoned that no “occurrence” was present. Under New York law, the requirement of a fortuitous loss is a necessary element of insurance policies based on either an “accident” or “occurrence.” The court found that it could not be said that NBC did not know that it was sending 10,000 unsolicited faxes such that this act was fortuitous or unexpected.
Next, the court considered whether the claims in the underlying action were covered as “personal and advertising injury,” which includes “injury…arising out of…oral or written material that violates a person’s right of privacy.” The court began by reasoning that because neither publication nor privacy was defined, they should be given their plain and ordinary meaning. The term publication is ordinarily defined as a “communication to the public” or a public announcement. In turn, it found that the transmission of 10,000 faxes, as alleged in the underlying action, did constitute publication as that word is ordinarily understood. The more difficult question was respect to the “right of privacy.” Tower argued that this phrase should be interpreted to mean “the right to secrecy” as opposed to a “right of seclusion.” The court reasoned that the term privacy is ordinarily understood to mean “seclusion or isolation from the view of, or contract of others.” Here, given that the phrase “right to privacy” is susceptible to at least two reasonable interpretations, the court found that the phrase was ambiguous and must be construed in favor of coverage. Thus, the court found coverage for the underlying claim.
In reaching this decision, the court rejected a number of context arguments made by Tower. It rejected the argument that because the other clauses in the definition referred to specific torts, the “right of privacy” needed to be a specific tort as well. It also rejected the argument that the use of the word “person” in the clause limited it to injuries sustained by natural persons. While Tower raised the recent Third Department decision Sportsfield Specialties, Inc. v. Twin City Fire Ins. Co., in support of its position, the court opined that the basis of that decision was the nature of the claims asserted against plaintiff, and not a broad finding that the term “person” in this context, did not mean a corporation. It also sought to distinguish the Tower policy from the Twin City policy considered in that matter.
Next, the court made the finding that it would be premature to determine whether the statutory damages would be covered under the policy. While Tower argued that penalty was punitive and therefore permitting indemnity would be against public policy, it held that as no damages had been awarded it could not determine whether they were punitive or compensatory in nature.
Lastly, the court dismissed NBC’s counter claim against Tower for breach of the covenant of good faith and fair dealing noting that given the conflicting state of the law as to coverage relating to fax blasting claims, like the ones at issue in the underlying action, Tower could not be held liable for breach of any covenant of good faith and fair dealing.
07/24/14 Admiral Indem. Co. v. 505 Columbus LLC
Supreme Court, New York
Court Upholds Waiver of Subrogation
Plaintiff’s subrogor, Kefi LLC, was a commercial tenant in a building owned by defendant. The lease provided that each party should look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible, and to the extent permitted by law, owner and tenant agreed to release and waive all rights to recover against each other. The provision went on to note that this release and waiver would only be in force if both releasors’ insurance policies contained a clause providing that such a release or waiver would not invalidate the insurance.
After execution of this agreement, a pipe at the premises allegedly discharged water causing significant damage to Kefi, LLC’s property. Plaintiff paid the loss and commenced this action. On this motion to dismiss, the court found that as the parties agreed to waive their subrogation rights if both of their insurance policies contained clauses providing that the waiver would not invalidate the insurance, and as both obtained insurance that permitted them to do so, plaintiff was barred from recovering in this action.
EARL’S PEARLS
Earl K. Cantwell
[email protected]
02/18/14 Powell v. American Service Insurance Co.
2014 WL 641938 (Ill. App.)
Bad Faith Claim Dismissed Due to Questionable Underlying Claim
Powell was injured in an automobile accident involving an American Service insured with policy limits of $20,000. Powell sought to recover the policy limits, but the offer was rejected. Ultimately, a jury awarded Powell a net verdict of $48,000 and the tortfeasor assigned rights to sue American Service to Powell who then sued the insurer for bad faith.
The Trial Court dismissed the action for bad faith failure to settle finding there was insufficient pleading to maintain a cause of action for bad faith. This decision was affirmed on appeal.
Powell alleged that American Service was on notice of his claim, and that his damages exceeded the $20,000 policy limits. He alleged that the insurance company had a reasonable opportunity to settle within the policy limits. Other alleged acts of bad faith included refusing to participate in settlement negotiations, refusing settlement offers that fell within the policy limits, failing to advise the defendant tortfeasor of settlement offers, and failing to make the insured’s interests “equal to its own.” Nonetheless, the appeals court affirmed dismissal, holding that Powell failed to plead facts showing a reasonable probability of liability in the underlying action. Powell apparently admitted to making a U-turn in front of the tort easer’s vehicle, and the pleading was unclear or deficient in showing a reasonable probability, let alone certainty, of liability and recovery. In addition, the mere fact that the insurance company was unsuccessful in the trial of the underlying case did not equate to a finding of bad faith.
This case represents an example of a “bad faith claim” being rejected because of the failure on the part of the insured to plead or prove a strong claim on the merits of the underlying lawsuit. What is somewhat remarkable in this case is that the decisions were apparently made on the basis of the pleadings alone based on the failure of the insured to plead and show facts establishing a “reasonable probability of liability” in the underlying lawsuit.
