Coverage Pointers - Volume XVI, No. 8

Dear Coverage Pointers Subscribers:

You have a situation?  Give us a call.  We love situations and love engaging our clients in pro-active strategic approaches to resolve them and avoid them in the future.

Kudos to Audrey Seeley, Incoming Chair of the DRI Insurance Law Committee:

We are so proud of our own Audrey Seeley who assumes the position of Chair of the DRI Insurance Law Committee at the conclusion of that organization’s annual meeting in a week or so.  Audrey has earned the respect of lawyers throughout the country as a hard-working, dedicated advocate for the insurance industry and her appointment as Chair is a testament to that regard.  Congrats!

Autumnal Visions:

This is the last issue coming to you from across the border in Canada where on Thursday evenings, your editor, gazing out at Lake Erie has penned this missive with the able assistance our out column editors.  We celebrate Canadian Thanksgiving this weekend and close up our summer home, making the long journey back to our city home (which as the car drives, since I am not a crow and cannot fly) is a whopping 10.6 miles away.  No more sand, no more beach, no more blue martinis (the blue, reflecting Lake Erie’s colour)(sic), none of that until mid-April.  So, if my cover letters seem somber, you will understand.

OK, enough of that.

Courts are back in full swing

If you missed our most issue (shame on you), you may have missed the reminders about two great programs coming soon:

DRI Insurance Coverage and Practice Symposium
New York City
December 4-5, 2014


Law School for Insurance Professionals
Sponsored by the New York State Bar Association Torts, Insurance and
Compensation Law Section

Friday, October 17, 2014
Long Island

Monday, October 20, 2014
New York City

Monday, October 27, 2014

H&F has this one covered.  Beth is speaking on this topic in Long Island and New York City and I’m speaking on it in Buffalo:

“Back to the Basics and Beyond: 
Crafting a Proper Disclaimer, the Right Independent Counsel,
Claw Back on Defense Costs and Life After K2”

Other topics in the Law School program include:

  • 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 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.


Click here for our discussion of both and for links to registration materials


Representation and Protection of Claim Reps at Non-Party Depositions:

This one’s important.  The Company and the claim representative may now be protected at non-party depositions

On September 23rd, the Governor signed into law Chapter 379 of the Laws of New York, 2014 which amends our civil practice code with respect to the conduct of depositions. Cassie reported on this Chapter in a recent issue of CP. It provides that:

[A] non-party deponent’s counsel may participate in the deposition and make objections on behalf of his or her client in the same manner as counsel for a party.

Why? We can learn the reason from the Sponsor’s memorandum in support:

In Thompson v. Mather, 70 AD3d 1436 (4th Dept. 2010), a medical malpractice action, arrangements had been made for videotaped depositions – for use at trial (22 NYCRR 202.15) - of plaintiff's treating physicians.

During the course of those depositions, the attorney for a witness objected to the form and relevance of certain questions. The Appellate Division ultimately ruled that "counsel for a nonparty witness does not have a right to object during or otherwise to participate in a pretrial deposition." The Court principally relied upon the language of CPLR 3113(c), which provides that the examination of witnesses at a deposition "shall proceed as permitted in the trial of actions in open court."

And, reasoned the Court, since a non-party's attorney has no right to interpose objections to questions asked of the witness at trial, no such right exists at deposition.

While recognizing that the Thompson Court may have correctly interpreted the literal language of the statute, our Committee believes that the law should provide otherwise. In reducing counsel for a deposition witness to a "potted plant" [Sciara v. Surgical Associates of Western New York, P.C., 32 Misc.3d 904 (Sup. Ct. Erie Co. 2011)], current law, as recognized in Thompson, leaves a non-party witness essentially unprotected during a deposition.

A lay witness may not, for example, know when to decline to answer a question because it invades a privilege, or is plainly improper and would, if answered, cause significant prejudice to any person. Moreover, a likely result of application of the Thompson ruling is that a party will be encouraged to depose a potential adverse party before joining that person as a party to the action, in order to be able to avoid the objections that a party's lawyer would be able to make at a post-joinder deposition…

We urge members of the insurance industry to consider providing legal representation for claim professionals when they are being deposed as non-parties in pending litigation. Privileges can be waived, HIPAA violations can occur, bad faith set-ups may be in the offing, and other mischief can occur if the claim rep is not protected properly.

Of course, if the insurer is a party, its counsel can protect the witness. However, whether claim professional is being deposed as a non-party, for example, in a discovery proceeding, when a claim file is subpoenaed, etc., consider carefully whether you want to have your witness be thrown to the wolves without counsel protecting the claim rep and the company.

That witness can also be prepped for the deposition without fear of that conversation being subject to disclosure.

If you find a need for that representation in any part of New York State, we can assist, of course, but whether you retain our firm or another, protect your claim rep and the company when the witness is being deposed and records are being requested.

Audrey’s Angles:

We are enjoying a beautiful fall in Western New York and the colors are brilliant!  There is an interesting case this edition regarding interpretation under Missouri law of the non-owned auto endorsement of a CGL policy for your review.

Next edition will be brought to you from the DRI Annual Meeting in San Francisco.  I hope to see you there! 

Finally, please make plans now to attend the DRI Insurance Law Committee’s Insurance Coverage and Practice Symposium (“ICP”), which will take place on December 4-5, 2014 at the New York Marriott Marquis in New York City. 

ICP features top-notch education for coverage attorneys and claims professionals, with sessions by an associate judge of the New York Court of Appeals, insurance industry leaders, and nationally renowned counsel.  This year’s cutting-edge topics include:

  • Current trends in bad faith litigation
  • Putting a human face on the insurer at trial
  • The latest developments in additional insured coverage
  • The future of the privacy offense
  • A Friday morning mini-theme on the duty to settle


ICP also offers unsurpassed opportunities for networking with the hundreds of attorneys and claims professionals who will attend, including receptions on Wednesday and Thursday nights, dine-arounds at some of New York City’s best restaurants, refreshment breaks, and the women’s networking functions.  I encourage you to register before the early registration deadline of November 14, 2014.  Be sure to reserve your hotel room soon, as the hotel block has sold out early in past years.  Registration and hotel information, and a link to the ICP brochure, is available via

Audrey A, Seeley
[email protected]


The Other Billy Martin – a One-Game Wonder - A Century Ago this Week:

Most know Alfred Manuel “Billy” Martin, the former Yankee player and Manager, who died in a car accident near Binghamton, NY back in 1989.  But he was not the only Billy Martin in the Bigs.

Shortstop William Gloyd “Billy” Martin, also known as Bill Martin, only played one game in the Major Leagues, for the Boston Braves on October 61914, going hitless in three at bats while committing an error. However, he was on the team's World Series roster that year, replacing Red Smith, out with a broken ankle, and collected a World Series winner's check, even if he was not used in the Braves' four-game sweep of the Philadelphia Athletics.

His death notice appeared on the sports pages in the Salt Lake Tribune on 18 September 1949 announcing: 

Washington, Sept. 17:   William G. (Billy) Martin, a utility infielder on the 1914 world championship Boston Braves baseball team died here Thursday.  He was 55.  Martin joined the Braves in 1914 after graduation from Georgetown University.  He starred at college baseball, football and basketball.

Even a guy who was there for one day is remembered as a major leaguer.

Beth’s Bitz:

Dear Subscribers:

It is hard to believe that summer is gone, but with the arrival of October comes the ever-popular Law School for Insurance Professionals.  The Albany and Syracuse sessions, which were held in September, received rave reviews.  We are now looking forward to the Long Island program, which will be held on October 17th.  I will be addressing the aftermath of the New York Court of Appeals’ K2 decision and moderating an exceptional group of attorneys.  Justice Mahon of the Supreme Court, Suffolk County has joined our panel and will be participating in our last session of the day, addressing negligent security cases.  I will also be speaking at the New York City venue on October 20th and I hope to see many of you at the programs.  There is still time to register and if I can be of any assistance to you with your registration, please do not hesitate to contact me.  Lastly, our own Dan Kohane will be speaking at the Buffalo program which will be held on October 27th.

This week I bring you another construction defect cases, this one from the District Court of Colorado.

Til next time,

Elizabeth A. Fitzpatrick
[email protected]

Wow – That Fast?  Speeding Ticket a Century Ago:

The Brooklyn Daily Eagle
Brooklyn, New York
October 10, 1914


Harold Somers, a clerk of 152 DeKalb Avenue, was fined $25 this morning by Magistrate Geismar in the Coney Island Court, for speeding.  He was arrested last night by Motorcycle Policeman Van Cleef, who said Somers was going twenty-eight miles an hour along Ocean Parkway.
Editor’s Note:  Using a website,, I determined that $25 in 1914 dollars is worth $594.63 in 2014 dollars.  Yikes!

Hunter’s Hints on Serious Injury Threshold:

Dear Coverage Pointers Subscribers:

Fall has arrived, and with it pumpkin flavored everything and more tasty New York State serious injury threshold cases.  There are a few interesting cases this issue, including one from the First Department where defense counsel's "gap in treatment" argument was deemed unavailable since it was first pled in Defendant's reply papers.  It is incredibly important when drafting a summary judgment motion to clearly discuss any and all potential defense issues, including gaps in treatment, intervening medical issue and pre-existing conditions.  If your best argument is put forth in your initial motion papers, you will not run into the same issue defense counsel did in Mulligan v. City of New York

As always, we invite any and all questions or comments regarding New York State serious injury threshold matters.  Also, if you or your organization would like a presentation on New York State serious injury issues, please do not hesitate to contact me and discuss.  I look forward to hearing from you.

Daniel T. Hunter
[email protected]

The World Series in Full Swing – 100 Years Ago:

The Brooklyn Daily Eagle
Brooklyn, New York
October 10, 1914


James and Plank the Opposing Pitchers
in Today’s World’s Series Game.


Twenty Thousand Fans at Shibe Park
Awaiting the Call of Play.

Shibe Park, Philadelphia, October 10—The Boston Braves, National League pennant winners, victorious in the opening engagement of the World’s Series campaign of 1914, gave battle in the second game today against the Philadelphia Athletics.  Twenty thousand persons viewed the fray and cheered the American League champions in their efforts to turn the fortunes of battle in their favor and thereby place the two contenders for the season’s baseball honors on even terms. 

Today’s game was almost crucial for the Athletics.  A defeat meant that the Bostons would open their two days home stay in Fenway Park on Monday with only two more victories needed to cinch the big title in baseball, while the Athletics would be forced to struggle desperately to take four full games to capture the World’s Series.  Betting was even today on the outcome of the series. …
Editor’s Note:  Boston indeed won that game and the next two, sweeping the Series in four straight.

Jen’s Gems:

Today is an exciting day for my family.  I am happy to report that my two new nephews, Luke and Will, arrived this afternoon.  They are healthy and doing well.  When my brother told me many months ago that he and his wife were expecting twins, he had a look on his face that can best be described as fear.  Now that the big day is finally here, hopefully some of that has subsided.  But, we will see.

In terms of my column this week, I report on a trial court decision out of Rockland County, Provencal, LLC v Tower Ins. Co. of N.Y., which is worth checking out.  The decision is short, but hits on many of the routinely disputed aspects of first-party water damage claims including, the rainwater limitation.  This is the policy provision which provides, in essence, that coverage is unavailable for loss to the interior of any building, or to personal property in the building, caused by or resulting from rain or snow unless the building first sustains physical damage to its roof or walls which the rain or snow enters. 

Hope everyone has a nice Columbus Day weekend.

Until next issue…

Jennifer A. Ehman
[email protected]

Speaking of Speeders – 100 Years Ago:

New-York Tribune
New York, New York
October 10, 1914


Bronx Patrolman Drives Fugitive
Into His Own Home.

Aided and abetted by a grocery wagon, a Bronx motorcycle patrolman invented a new way of apprehending an auto speeder yesterday. To conform with the rules of the new system, the policeman must live in a house on the route taken by the speeding autoist, and so cleverly must he pursue the fleeing autoist that the latter runs into the policeman’s house and came to an enforced halt.  The rest is easy.

The difficult part lies in making the autoist run into the right house.  Dennis Lynch, the policeman, had a grocery wagon in front of his home, when John Bunting, chauffeur for Joseph C. Wilmerding, of 225 Fifth Ave., driving at forty-three miles an hour, according to Lynch, was pursued into Hull St. and guided into a wagon in front of 3157.

The auto caromed from the wagon to a fence and bumped against the house.  There it stopped, and along came Lynch.


A Century Ago – Who Would Have Thought of a Commercial Court?

New-York Tribune
New York, New York
October 10, 1914


Two Parts Designated for the
Exclusive Trials of Suits Over Paper.

The City Court, which is overcrowded with pending cases, has adopted new rules to hurry along the trials.  Acting on the recommendation of the New York County Lawyers’ Association’s committee on practice and procedure in the City Court, of which former Justice Robert L. Luce is chairman, the justices have designated Parts III and IV for the exclusive trials of suits involving commercial paper, goods sold and delivered and rent cases.  This form of litigation makes up perhaps 35 per cent of all that is brought in the City Court, and the arrangement, it is expected, will cut down the usual time for trial from six months to about two and a half weeks from the serving of the summons.

“This will make the City Court the great commercial tribunal of the city,” said Mr. Luce, “and should be of immense value to commercial interests.”

The City Court is behind about a year on its calendar, and the justices have been sitting an hour longer each day to relieve the situation.  This move has affected jurymen.  W. B. Needham, a juror in the part of the court where Justice Finelite is sitting his month, objected to the arrangement yesterday.  Mr. Needham wrote a letter, saying that he considered the long hours a hardship on the jurors.  Justice Finelite admitted it was a hardship, but said that as he and his associates were willing to work overtime the jurors should not complain, but do their duty in the same public spirit. 

Lawyers and the First Amendment a Century Ago:

New-York Tribune
New York, New York
October 10, 1914

Lawyers Want Code Amendment
Muzzling Press in Court Proceedings.

After a lively discussion the Brooklyn Bar Association last night adopted a resolution urging the amendment of the code section regarding criminal libel to forbid “any comment or false statement concerning any action or proceeding pending or about to be instituted in any court, which comment or statement may tend to prejudice the rights of any party thereto to a trial or hearing.”

The resolution was introduced by Robert H. Elder, counsel for Willett and Cassidy.  Among its other friends were Edward H. Wilson, Edward J. Byrne and Albert Tameling.  The leader of the opposition was Meier Steinbrink, attorney for William Berri in the suit brought against “The Brooklyn Standard Union” for its editorial which started the investigation into the Willett-Cassidy charges.  He was supported by A. Augustus Haviland.  The final vote was 50 to 29.

Members of the association said after the meeting that the intention of the proposed amendment was evidently not reform but intimidation, and that the action of the association could lead only to ridicule.

Edgar M. Cullen, former Chief Justice of the Court of Appeals, spoke on “The Jurisdiction of the Court of Appeals.”

Peiper’s Potables:

This edition brings you another relatively weak first party offering.  We do, however, review a very interesting common law negligence/common law indemnification decision out of the First Department.  I cannot tell you how many times this has happened, but I was in the process of completing a brief to the Second Department on that very point, and this case popped up.  It is always nice to drop the absolute latest case from the Appellate Division for a little extra oomph to the argument.  Obviously, we like preparing Coverage Pointers.  We just remind you that, at times, it can actually be resource for case law, in addition to a repository for 100 year old baseball stories and kitschy jokes.  Just don’t tell anyone else.

That’s it for now. 

One final note.  As you may have heard, the Buffalo Bills will officially remain the Buffalo Bills.  How do you celebrate new ownership Buffalo-style, you ask? You invite the lead singer of the Goo Goo Dolls (Buffalo’s own, for the uninformed) to sing the National Anthem that’s how.  Huzzah.  Go Bills!

See you in two weeks.

Steven E. Peiper
[email protected]

Parting Shot – With Thanks:

My friend James Sutterfield, a long-time subscriber from the New Orleans law firm of Sutterfield & Webb, sent me an article that appeared in JD Journal, about the plight on lawyers back in 1911.  Jim, I found a longer version of the same article on page 6 of the April 5, 1911 New York Times, and I thought I would share here:

Many Lawyers Hit by Hard Times Here

County Association Drops 680 Members for Non-Payment of $10 a Year Dues

Bare Living for Some

The Association Still Has 3,000 Members and Is In a Flourishing  Condition

Hard times have beset many lawyers in Manhattan and the Bronx, according to the report of the Membership Committee of the New York County Lawyers’ Association, which tells of dropping of 680 members for non-payment of dues.  The dues are only $10 a year but one fourth of the lawyers dropped, it is said, and frankly confessed that there unable to make more than a bare living.

Benno Lewinson, of 189 Nassau Street, Chairman of the Membership Committee admitted yesterday that most of the lawyers were financially able to pay the dues but misunderstood the obligation undertaken by them in signing their names to the call for the organization three years ago….
The Chairman went on to suggest that in “some quarters, lawyers are at present experiencing really hard times” with several thousand of the 12,130 lawyers in those two boroughs “making only the barest living” and could not spare the $10 “without sacrificing some infinitely more urgent need”. 

By 2007, there were 91,000 lawyers in the five boroughs.  I hope they are not going hungry.

Highlights of This Week’s issue, Attached:

Dan D. Kohane
[email protected]

  • Issues of Fact Exist as to Whether or Not Contractor Failed to Procure Required Coverage
  • Law Firm Fails to Dismiss Malpractice Claims Against It, Alleging Failure of Firm to Timely Tender Client’s Case to D&O Carrier


Daniel T. Hunter
[email protected]

  • Lower Court Erred in Considering New Evidence of a "Serious Injury" Fracture
  • Summary Judgment Granted to Defendants Reversed as Plaintiff Presented a Triable Issue of Fact Regarding Injuries and Plaintiff's Gap in Treatment was Improperly Considered by the Lower Court
  • Defendants' Summary Judgment Motion Papers Fail to Meet Initial Burden
  • Lower Court Order Granting Defendants' Summary Judgment Affirmed
  • Plaintiff Raised Triable Issues of Fact, Defeating Defendant’s Motion


Margo M. Lagueras
[email protected]


  • IME Performed a Year Prior to Disputed Surgery Is Insufficient to Support Denial
  • Mileage Claim Not Submitted Within 90 Days Is Late
  • Reimbursement for Cervical Fusion Denied Where Herniation Was Pre-Existing
  • Where Workers’ Compensation Was No Longer Primary, Carrier Owed Reimbursement
  • “Brief Temporary Pain Relief” Is Insufficient Under Hobby
  • MUA Reimbursement Denied as Premature
  • \Claim for Lost Wages Denied for Failure to Attend Scheduled IMEs



  • Peer Review Not Concluding Further Treatment Unnecessary Does Not Support Future Denials


Steven E. Peiper
[email protected]

First Party

  • Plaintiff is All Wet; Title Insurance Does Not Provide Coverage for Water Charges/Liens
  • Plaintiff’s Own Negligence Sinks Its Malpractice Claim Against Broker



  • Means and Methods Case under Labor Law § 200 Requires Plaintiff to Establish Active Supervision, Direction or Control by Defendant
  • Prior Written Notice Statute for Municipalities Saves NYC in Dangerous Roadway Claim


Elizabeth A. Fitzpatrick
[email protected]

  • Penalty Imposed for Failure to Timely Defend
  • Insurer Owes for Construction Defect Claims


Audrey A. Seeley
[email protected]

  • Under Missouri Law, “Dual Purpose” Doctrine Applied to Interpretation of “In the Course of Your Business” Under Non-Owned Auto Endorsement to CGL Policy.


Cassandra A. Kazukenus
[email protected]

  • DFS Has Proposed a Brand New Regulation Related To Force-Placed Insurance


Jennifer A. Ehman
[email protected] 

  • No Coverage Found for Collapsed Retaining Wall or Interior Damage to Building
  • Arbitrator’s Award Vacated to the Extent it Granted Amounts in Excess of the $50,000 No-Fault Limit
  • Court Refuses to Vacate Arbitration Award Where Respondent Failed to Properly Support its Late Notice Denial


Bad Faith

  • Florida Court Finds Question of Fact on Carrier’s Bad Faith in Relation to Underinsured Motorist Claim


Earl K. Cantwell

[email protected]

  • No CGL Coverage for Defective Construction


All for now.  We do love to hear from you.
Dan D. Kohane
Hurwitz & Fine, P.C
1300 Liberty Building
Buffalo, NY 14202    

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

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

Dan D. Kohane
[email protected]

Audrey A. Seeley
[email protected]

Jennifer A. Ehman
[email protected]

Dan D. Kohane, Team Leader
[email protected]

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

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

Steven E. Peiper, Team Leader
[email protected]

Elizabeth A. Fitzpatrick
Cassandra Kazukenus

Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel

Jody E. Briandi, Team Leader
[email protected]

 Elizabeth A. Fitzpatrick
Diane F. Bosse

Index to Special Columns

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

Dan D. Kohane
[email protected]

10/07/14       Arner v. RREEF America, L.L.C.
Appellate Division, First Department
Issues of Fact Exist as to Whether or Not Contractor Failed to Procure Required Coverage
Arner tripped and fell on a dislodged Masonite board near a service entrance to a building in which he resided. The building was undergoing extensive construction work at the time. The owners and managers, sued by Arner, brought third party claims seeking contribution and indemnification from various contractors and sued them for failing to provide insurance required under the trade contracts.

Two of the contractors, Coda and Adelphi, moved to dismiss the claims against them claiming they did not cause the defect. However, questions of fact existed because they worked and used the area where the board was dislodged.  

However, Adelphi was entitled to summary judgment dismissing the third-party claim against it alleging breach of contract for failure to procure insurance.  It provided a policy and had the owners denominated as additional insureds.

Adelphi procured insurance in the specified amounts, and the additional insured endorsement provides coverage for organizations "[a]s required by written contract signed by both parties prior to loss."   Questions of fact remain as to the validity of the coverage denial, not raised properly below.

10/04/14       Harris Beach, PLLC v. Eber Bros Wine & Liquor
Appellate Division, Fourth Department
Law Firm Fails to Dismiss Malpractice Claims Against it alleging Failure of Firm to Timely Tender Client’s Case to D&O Carrier
Harris Beach was the long-time general counsel of Eber.   It sued to recover $750,000 in costs, disbursements, legal fees, and interest thereon for services rendered to Eber in the defense of a tort and breach of contract action in which Eber had been sued (underlying action).

The underlying action was commenced on October 5, 2006, and, at that time, defendant was insured by Illinois National Insurance Company (Illinois National) pursuant to a claims-made and reported D&O policy coverage covering the period from March 31, 2006 to March 31, 2007.  There  also a D&O policy issued by National Union for the period from March 31, 2008 to March 31, 2009 (National Union policy), another AIG company.

On August 7, 2008, approximately two years after the commencement of the underlying action, plaintiff wrote to M & T Insurance Agency, from which defendant had obtained the National Union policy, and tendered the defense cy. Both Illinois National and National Union are part of the AIG group of insurers, and by letter dated September 24, 2008, a claims analyst employed by AIG, denied the claim as untimely.

Eber denied that it failed to pay bills and counterclaimed against the law for professional negligence alleging, in relevant part, that plaintiff was negligent in failing to provide defendant's insurer with timely notice of the claim that was the underlying action. The law firm claimed that had notice been given, coverage would have been denied.

The law firm moved to dismiss the malpractice claims. To succeed, they would have had to establish that if they had timely notified, AIG would not have furnished defense dollars in the underlying action.  The court finds that the law firm did not succeed.

It was unclear how Illinois National would have responded to a timely tender so Harris Beach was not entitled to summary judgment on the malpractice claims.
Editor’s Note:  Law firms take heed. Client sued?  Consider coverage!

Daniel T. Hunter
[email protected]

09/30/14       Boone v. Elizabeth Taxi, Inc.
Appellate Division, First Department
Lower Court Erred in Considering New Evidence of a "Serious Injury" Fracture
Plaintiff was a bicyclist struck by a taxi, and alleged serious injury under the permanent consequential limitation of use and the 90/180 day categories of Insurance Law §5102(d).  Defendants made a motion for summary judgment claiming Plaintiff did not sustain a serious injury under either of the alleged categories.  Defendants met their prima facie burden of demonstrating the absence of permanent consequential limitation of use injuries by submitting affirmed expert medical reports which found Plaintiff to have full range of motion to his cervical spine and wrists, and well as negative test results and no objective evidence of permanent injury in Plaintiff's cervical spine or wrists.  Defendants also submitted a radiologist's report opining that Plaintiff's claimed cervical injuries were chronic and degenerative in nature, and not causally related to the subject matter accident.  Defendants also met their prima facie burden with respect to Plaintiff's 90/180 day claim by submitting Plaintiff's own deposition testimony in which Plaintiff claimed he was only confined to his bed and home for a month after the subject matter accident.

In opposition, Plaintiff failed to offer any evidence of permanent consequential limitation of use of his cervical spine and wrist caused by the accident, or any competent medical evidence contradicting his testimony regarding the 90/180 day claim of serious injury.  Further, Plaintiff failed to address Defendants' showing that his cervical injuries were degenerative and pre-existing in nature. 

However, Plaintiff did, for the first time, submit a radiologist's report which opined that Plaintiff suffered a non-displaced fracture of the scaphoid of his left wrist.  The First Department notes the lower court was in error to consider the new serious injury claims since Plaintiff failed to plead a fracture injury in his bill of particulars.  As such, Defendants' motion for summary judgment was unanimously affirmed and recalled to the lower court.

09/30/14       Mulligan v. City of New York
Appellate Division, First Department
Summary Judgment Granted to Defendants Reversed as Plaintiff Presented a Triable Issue of Fact Regarding Injuries and Plaintiff's Gap in Treatment was Improperly Considered by the Lower Court
Plaintiff brought a personal injury lawsuit based on injuries allegedly suffered as a result of a motor vehicle accident under the "permanent consequential" and "significant limitation of use" categories of Insurance Law §5102(d).  Plaintiff claimed injuries to his cervical and lumbar spine as well as his right knee.

Defendants made a prima facie showing that Plaintiff did not sustain a permanent consequential or significant limitation to the allegedly injured body parts by submitting an affirmed medical report showing no limitations in range of motion and pre-existing conditions, and concluding that none of Plaintiff's injuries were causally related to the motor vehicle accident.

Plaintiff failed to present any evidence to rebut Defendants' showing regarding his alleged right knee injury; however, the First Department found Plaintiff raised a triable issue of fact with respect to his alleged cervical and lumbar spine injuries.  Plaintiff's chiropractor set forth range of motion limitations measured shortly after the accident, averred that these limitations continued throughout Plaintiff's course of treatment, and again showed limitations two and one-half (2 1/2) years following the accident.  Both Plaintiff's chiropractor and orthopedic surgeon opined that Plaintiff's spinal injuries were causally related to the accident.  Defendants did raise an argument that Plaintiff had not explained a gap in his treatment, yet the First Department notes that since this argument were raised for the first time in Defendants' reply affirmation in support of their summary judgment motion, such argument should not have been considered in determining the outcome of the summary judgment motion.

The First Department concludes by stating that if Plaintiff demonstrates that his spinal injuries are serious within the meaning of New York State Insurance Law, he can recover for all injuries proximately caused by the accident, including his knee injury (citing the First Department case from 2010 Ruben v. SMS Taxi Corp., 71 A.D.3d 548).

10/01/14       Sicca v. VCSF Trust
Appellate Division, Second Department
Defendants' Summary Judgment Motion Papers Fail to Meet Initial Burden
Defendants made a motion for summary judgment claiming Plaintiff did not sustain a serious injury within Insurance Law §5102(d) as a result of a motor vehicle accident.  However, the papers submitted by Defendants failed to adequately address Plaintiff's claim as set forth in Plaintiff's bill of particulars, specifically Defendants' papers failed to mention Plaintiff's claim of a serious injury under the 90/180 day category of New York State Insurance Law.

The Second Department notes that, since Defendants failed to meet their initial prima facie burden, it is unnecessary to determine whether Plaintiff's motion paper submitted in opposition were sufficient to raise a triable issue of fact.

10/01/14       Reyes v. Reid
Appellate Division, Second Department
Lower Court Order Granting Defendants' Summary Judgment Affirmed
Plaintiff brought an action for personal injuries in Orange County Supreme Court claiming she sustained a serious injury within the meaning of Insurance Law §5102(d) as a result of a motor vehicle accident.  Defendants made a motion for summary judgment claiming that Plaintiff's alleged injuries did not evince a "serious injury" within the meaning of New York State Insurance Law.  Defendants submitted competent medical evidence establishing that Plaintiff's alleged injury to the lumbar region of his spine did not constitute a serious injury under either the permanent consequential limitation of use category or the significant limitation of use category of the law.  Plaintiff filed to raise a triable issue of fact in opposition, and, as such, the Second Department found the lower court properly granted Defendants' motion for summary judgment dismissing the complaint.

10/01/14       Datikashvili v. Vijungco
Appellate Division, Second Department
Plaintiff Raised Triable Issues of Fact, Defeating Defendant’s Motion
Defendants made a motion for summary judgment claiming Plaintiff did not sustain a serious injury, and met their prima facie burden by submitting competent medical evidence demonstrating the alleged injuries to Plaintiff's spine and right shoulder did not constitute serious injuries under either the permanent consequential limitation of use category or the significant limitation of use category of Insurance Law §5102(d).

However, Plaintiff raised triable issues of fact regarding whether the injuries to her cervical spine and her right shoulder qualify as "serious injuries" under the law.  As such, the Second Department affirmed the lower court denial of Defendant's motion for summary judgment.


Margo M. Lagueras
[email protected]


09/23/14       Kaleida Health v National Grange Mut. Ins. Co.
Erie County, Arbitrator Gillian Brown
IME Performed a Year Prior to Disputed Surgery Is Insufficient to Support Denial
The 70 year-old EIP was involved in a motor vehicle accident August 2011, and sustained injuries to his neck and back.  In September 2012, an IME was performed and it was concluded that the EIP had a resolved cervical strain and that no further treatment was necessary as related to the mva.  The examining doctor apparently did, however, note that the EIP complained that he felt his lumbar spine was worsening but then stated that there was no objective evidence to support that complaint.  In September 2013, the EIP underwent lumbar surgery for which reimbursement was denied based on the IME. 

The Arbitrator found that the IME performed an entire year prior to the disputed surgery was insufficient to support the denial and that Respondent should have ordered a new IME or peer review.  Given that an entire year had passed, the Arbitrator concluded that the IME did not constitute a meaningful medical assessment.

09/23/14       Applicant v Allstate Ins. Co.
Erie County, Arbitrator Gillian Brown
Mileage Claim Not Submitted Within 90 Days Is Late
The EIP’s claim for travel reimbursement from October 15, 2010 to January 19, 2011, was denied.  The AR-1 claimed it was mailed “timely” but there was no evidence of when it was mailed, or if it was mailed at all.  The denial was dated May 18, 2011 and in essence stated that pursuant to Regulation 68, written proof of claim for other expenses shall be submitted as soon as reasonably practicable but in no event later than 90 days after the date services were rendered.  It further stated that denial of a late claim would be reconsidered if the EIP submitted proof providing a reasonable justification for failure to comply with the time limitation. 

The Arbitrator found that there was no evidence in the record as to why the mileage claim was submitted within the 90 days as required and Applicant’s submission, although very lengthy, contained little of any relevance as to this claim.  As such, the claim was denied as not submitted within the 90 days as required by the Regulation.
Note:  Respondent’s denial contained the mandatory language in 11 NYCRR 65-3.3(e), thus preserving the denial based on late notice and without which a carrier waives the defense.

09/18/14       Buffalo Neurosurgery Group v MVAIC
Erie County, Arbitrator Mona Bargnesi
Reimbursement for Cervical Fusion Denied Where Herniation Was Pre-Existing
The claim was for reimbursement for a cervical fusion performed in October 2013 by Dr. Lewis.  The EIP was injured in a mva in November 2012.  She had had a previous lumbar fusion performed by Dr. Lewis in October 2012, and during a follow up visit in December 2012 she made no mention either of the recent accident or of any neck pain.  In January 2013, she again saw Dr. Lewis and made him aware of the recent accident.  He noted that her complaints were distinct from her preoperative symptoms and that her chief complaints were of upper extremity radicular symptoms and thoracic pain.  An MRI was performed and in February 2013, Dr. Lewis noted a degenerative disc at C5-6 but did not feel any further cervical or thoracic surgery was warranted.  However, in July 2013 he stated that the EIP had a herniated disc at C5-6 with severe range of motion on extension.  He recommended an anterior cervical microdiscectomy and fusion.  A peer review was performed by Dr. Kumar in October 2013.  He noted no cervical complaints at the time of the accident and concluded that the surgery was to remove a pre-existing osteophyte.  Dr. Lewis submitted a rebuttal letter and Respondent submitted an addendum by Dr. Kumar.

The Arbitrator found Dr. Kumar’s report persuasive and that the operative report itself referenced the removal of posterior osteophytes.  In addition, Dr. Lewis himself specifically noted that the MRI revealed a degenerative disc at C5-6, thus supporting Dr. Kumar’s opinion that the herniation was pre-existing.  Furthermore, the Arbitrator noted Dr. Kumar’s statement that, contrary to Dr. Lewis’ assertions, the surgery did not relieve the EIP’s pain (also supported by Dr. Bansal who treated the EIP after the surgery), and this point goes to the credibility of Dr. Lewis.

09/18/14       Mark Stenclik MD v Excelsior Insurance Co.
Erie County, Arbitrator Douglas D. Coppola
Where Workers’ Compensation Was No Longer Primary, Carrier Owed Reimbursement
The EIP was injured in September 2011 and Respondent, citing to 11 NYCRR 653.16(a)(9), took the position that it was not obligated to pay medical benefits as Workers’ Compensation (WC) was primary.  However, here there was a settlement in the case that was approved by the WC Board in the amount of $250,000, of which the EIP netted $116,929.88.  There was also a payment of $46,745.12 in full satisfaction of the State Insurance lien after reducing $50,000 of first party benefits.  As a result, the State Insurance Fund had a credit for any other medical benefits rendered up to and until the EIP’s net amount of $116,000.00 was exhausted and WC was no longer primary until exhaustion of the credit. 

The Arbitrator noted that there is no requirement that, in such a case, the medical provider is required to first bill the WC carrier to obtain a denial before billing the no-fault carrier.  As there was no showing that an additional $160,000 in medical bills had been paid by the EIP so as to justify submission to the State Insurance Fund, the no-fault carrier was obligated to reimburse under APIP.

09/17/14       Frank S Tang v Phoenix Ins. Co.
Erie County, Arbitrator Mona Bargnesi
“Brief Temporary Pain Relief” Is Insufficient Under Hobby
The 60 year-old EIP was a pedestrian injured in November 2012.  He alleged injuries to his neck, back, right leg and right shoulder.  He began receiving chiropractic treatment in December 2012, as well as acupuncture treatment with Applicant starting in March 2013.  The acupuncture treatment, although generally illegible, contained the notations “tenderness palpation” and “spasm” circled, and pain levels 2, 3, and 4, for each date of service.  An second acupuncture IME was performed in August 2013, and the examining acupuncturist found that the EIP was not getting better, was still in a lot of pain, and that range of motion had not improved.  He concluded that further acupuncture was unlikely to help improve the EIP’s condition. 

The Arbitrator noted that, while it is improper to deny No-Fault benefits based on an EIP’s having reached maximum medical improvement, under Hobby the EIP or medical provider must show that the treatment continues to provide either curative or significant quantifiable palliative benefits.  Given that the range of motion and pain levels were worse at the time of the second IME than they had been before, it was clear that the treatment was not curative, nor even palliative.  The Arbitrator found the treatment notes supported that the EIP’s condition remained the same throughout the course of treatment and that that the EIP’s subjective statement that the acupuncture and chiropractic treatment gave him “brief temporary pain relief” was self-serving and was not sufficient evidence that such treatment was providing “significant quantifiable” benefits.

09/16/14       Lindsay House Surgery Center LLC v Allstate Prop. & Cas. Ins. Co.
Erie County, Arbitrator Douglas S. Coppola
MUA Reimbursement Denied as Premature
Some nine weeks after the mva, MUA was recommended, following which Respondent arranged for a peer review.  The reviewing chiropractor reviewed the EIP’s history which included a previous mva, as well as lumbar and cervical MRIs which were unremarkable, a neurosurgical evaluation recommending continued chiropractic treatment, and a recommendation for occipital nerve blocks although none appeared to have been performed.  It was also noted that there were no significant records of conservative care and that hip and shoulder joints were out of the chiropractic scope of practice in NYS. 

The Arbitrator found the peer review was sufficient and unrebutted.  It appeared that the MUAs were performed without consideration of the MRIs of the hips and shoulders and also prematurely before other conservative treatment was tried.  Therefore, reimbursement for the facility charges, as well as for the three linked cases involving the chiropractic charges, was denied.

09/15/14       Applicant v A. Central Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Claim for Lost Wages Denied for Failure to Attend Scheduled IMEs
The 39 year old EIP was involved in an accident in January 2011, and alleged neck injuries.  She made a claim for lost wages which was denied based on her failure to attend two scheduled acupuncture IMEs.  In support of its denial, Respondent submitted the correspondence from ExamWorks scheduling the IMEs and advising that failure to attend could result in a loss of benefits.  The correspondence was addressed to the EIP at her address of record with copies to her attorneys.  Respondent also submitted an Affidavit from the examining acupuncturist stating that the EIP failed to appear, an Affidavit from a manager at ExamWorks with regarding to the scheduling and mailing of the letters, and an Affidavit of an employee of ExamWorks stating that she personally contacted the EIPs attorney to confirm the EIPs attendance, that no requests for rescheduling were made and that there was no evidence that the EIP did not receive the notices. 

The Arbitrator found no evidence that the EIP did not receive the scheduling letters and, in fact, there was a return receipt signed by the EIP.  In addition, Applicant’s argument that someone from counsel’s office requested the exam be rescheduled within Erie County rather than in Niagara County was contradicted by the Affidavit of ExamWorks’ employee and Applicant’s counsel had no personal knowledge of any such alleged conversation.  The Arbitrator also noted that Niagara County is adjacent to Erie County and is readily accessible by car or public transportation.  Therefore, scheduling in Niagara County was not “unduly burdensome” and, in addition, no detailed reasons were presented by Applicant as to why she could not attend.


09/22/14       Shirom Acupuncture PC v Kemper Independence Ins. Co.
Appellate Term, First Department
Peer Review Not Concluding Further Treatment Unnecessary Does Not Support Future Denials
The peer review used to deny the bills at issue had been used to deny claims for a previous period and had been based upon the perceived vagueness of the initial acupuncture report and treatment notes.  It did not, however, conclude that further treatment would not be necessary.  In that form, the peer review was insufficient to support the denial of future treatment and the trial court properly denied defendant’s summary judgment motion to dismiss the claim.

Steven E. Peiper

[email protected]

First Party

10/09/14       TIMAC Realty v G&E Tremont, LLC
Appellate Division, First Department
Plaintiff is All Wet; Title Insurance does not Provide Coverage for Water Charges/Liens
Plaintiff commenced the instant action against, in part, Commonwealth Land Title Insurance Company.  Plaintiff’s cause of action was premised upon charges it received for a water meter that was not disclosed on the title search.  The claim was quickly disposed, and Commonwealth dismissed from the suit, where the policy at issue excluded coverage for losses from “water rates…which are not shown as existing liens” on public record.  In support of its motion, Commonwealth established that the water charges did not appear until after the insurance policy was issued and plaintiff closed on the property.

Plaintiff’s attempts to save its case by arguing that Commonwealth negligently prepared a title survey were refuted by introduction of the title report which nullified the report and survey upon the issuance of the subject policy.  Further, the title report was not meant to be, and is not, a warning device to every risk factor possible when purchasing a property. They are limited to identifying defects in title. 

09/30/14       Sea Trade Maritime Corporation v Marsh USA, Inc., et al.
Appellate Division, First Department
Plaintiff’s Own Negligence Sinks Its Malpractice Claim Against Broker
Plaintiff’s vessel sustained serious damage in a terrorist bombing while in port in Sri Lanka.  Unfortunately for plaintiff, because they did not advise their carrier that the ship had entered an “additional premium area” (APA) the coverage was reduced by several million dollars. 

Plaintiffs commenced the instant case as, essentially, a broker malpractice claim. 

The lawsuit was stayed while contractually-mandated arbitration was completed.  The arbitrator concluded that plaintiff, through its agent, knew or should have known that Sri Lanka was an APA destination.  The Trial Court affirmed the arbitration statement, and the Appellate Division also affirmed.  In reaching its conclusion, the Court noted that plaintiff renewed, under the same terms, for several policy periods.  Moreover, the arbitrator found that notice of the APA was not provided to plaintiff’s insurer out of inadvertence, and not due to the fact that they were unaware of their obligations under the policy. 


10/02/14       Francis v Plaza Construction Corp.
Appellate Division, First Department
Means and Methods Case under Labor Law § 200 Requires Plaintiff to Establish Active Supervision, Direction or Control by Defendant
Plaintiff was employed by an unnamed contractor when he sustained injury at a jobsite involving Plaza.  Plaza, after being named in plaintiff’s bodily injury action, commenced a third-party action against the electrical contractor, Sage, on the basis that the incident arose out of their work.

Plaza eventually moved for summary judgment dismissing the Labor Law § 200 claim against it.  At that time, Plaza also moved for summary judgment on the contractual indemnification claim and common law indemnification claim against Sage.  Plaza’s motion for summary judgment dismissing the Section 200/common law negligence claim was granted where it was able to establish that the incident involving plaintiff was caused due to the “manner in which” Sage performed its obligations.  The incident did not arise, however, out of any defective condition at the jobsite.  Because Plaza established it had only general authority to supervise the work at the jobsite, the Court ruled that plaintiff’s Section 200 claim was unsupported.  In so holding, the Court again noted that the general authority to supervise is not enough for the imposition of liability.  Rather, one must exercise actual supervision, direction or control over the injured party’s work.

Plaza’s motion for summary judgment was granted because it was clear that the incident was connected to/with Sage’s work.  As such, the broad indemnity clause at issue was triggered.  The court noted that the fact the indemnity clause contained a provision exempting Plaza from recovery for its “own negligence if not permitted by law” qualified as “savings language,” thus satisfying GOL § 5-322.1.  Here, however, because Plaza was not negligent, the Section 5-322.1 was irrelevant. 

Finally, the Court stated that a question of fact remained as to Plaza’s potential liability under Labor Law § 241(6).  As Plaza’s lack of active negligence was clear, but its potential statutory liability still at issue, the Court ruled that its claim for common law indemnification was premature. 
Peiper’s Point - Recall that for a common law indemnity claim to exist there must be a finding of statutory liability.  Owners/GC’s can lose by winning if they establish Labor Law § 240 and/or 241(6) does not apply.  Where there is no imposition of liability, there is no basis for common law indemnity.  Expenditures of attorneys’ fees alone will not trigger indemnity. 

10/01/14       Pallotta v City of New York, et al
Appellate Division, Second Department
Prior Written Notice Statute for Municipalities Saves NYC in dangerous roadway claim
Plaintiff’s decedent was injured when he lost control of his motorcycle because of an alleged area of broken pavement in Staten Island.  The instant action was commenced against NYC, NYC Department of Transportation and Cofire Paving who had been hired to perform milling work in the area near where plaintiff fell.  Verizon and V.N.A Contracting were later added as defendants when it was revealed that Verizon had obtained permits to run telephone wires under the roadway in that very same area. 

Verizon and V.N.A.’s motion for summary judgment was denied on a question of fact.  However, NYC’s motion was granted where they were able to establish that no written notice of any defect at that area had been reported for the two years prior to the date of loss.  The Prior Written Notice statute covering NYC applied to effectively destroy any basis for a constructive notice claim.  Finally, plaintiff was unable to establish that NYC created the defect, or that the area fell within a special use exception.  Either of which, had they been applicable, would have voided the protections of the Prior Written Notice statute.


Elizabeth A. Fitzpatrick
[email protected]

09/22/14         D.R. Horton Inc.-Denver d/b/a Trimark Communities v. Mountain States Mutual Casualty Company, et al., 2014 WL 4695805
United States District Court, Eastern District of Colorado
Penalty Imposed for Failure to Timely Defend
The court in D.R. Horton considered the issue of whether Mountain States unreasonably delayed or denied payment of plaintiff’s costs of defending an underlying construction defect lawsuit and, if so, what penalty should be imposed pursuant to the Colorado statute governing same.

Between 2002 and 2008, Trimark was a developer and general contractor for the construction of a residential community in Colorado known as Windemere.  Trimark performed none of the construction work itself, but rather engaged approximately 28 subcontractors.  Each subcontractor signed an independent contractor agreement that included an agreement to defend and indemnify Trimark against claims arising from the subcontractor’s work and obligated to obtain commercial general liability policies identifying Trimark as an additional insured.

On June 4, 2008, the Windemere Town Home Association served Trimark with a notice of claim of construction defects, which is a prerequisite the filing of such an action pursuant to Colorado statute.  A wide variety of complaints, including problems with roofs, windows, doors, tiles, drywall, kitchen cabinets, etc. were alleged.  The claim was sent to the subcontractors by Trimark’s counsel, asking that their subcontractors notify their insurers and demanding a defense and indemnity.  An action was subsequently commenced by the Association identifying Trimark and several subcontractors.  Trimark brought a third-party action against the subcontractors identified by the defendants, thereafter adding several other subcontractors not previously named.

The court noted the enactment of a May 21, 2010 statute clarifying insurers’ duty to defend in construction defect cases.  In the statute was including the following provision:  An insurer shall defend a construction professional who has received a notice of claim made pursuant to §13-20-803.5 regardless of whether another insurer may also owe the insured a duty to defend….

Mountain States notified Trimark that it would provide a defense subject to a reservation and setting forth its right to seek reimbursement of defense costs paid.  Recommendations were made as to allocation of defense costs through other insurers insuring the various subcontractors, but none of the other insurers ever accepted the proposed allocation formula.  There was an issue as to the submission of unredacted invoices, as Trimark’s counsel was concerned that such could be disclosed to Mountain States other insureds and this could detrimentally affect their defense strategy in the action.

In the lengthy decision, the court discussed the joint and several duties to defend and ultimately determined that Mountain States knew or should have known in the event of construction defect litigation, Trimark might seek indemnification or contribution from the subcontractors and that their defense obligation should include this expense.

The court also addressed the issue of whether Mountain States unreasonably delayed or denied its obligation to provide the covered benefit and concluded that the clear answer was yes.  They found that Trimark was left to defend itself while Mountain States and the other insurers stalled, apparently hoping to minimize their respective contributions.  According to the court, Mountain States neither defended in a timely manner nor based its reservation of rights on proper contingencies.  No contribution to Trimark’s defense costs was made by Mountain States for more than five months and then only a very small fraction of what was being billed.  The court imposed a statutory penalty pursuant to statute of two times the covered benefit and also awarded Trimark its reasonable attorney’s fees and court costs.

09/26/14         Evanston Insurance Co. v. Western Community Insurance Co., 2014 WL 4798536
United States District Court, District of Nevada
Insurer Owes for Construction Defect Claims
Applying Nevada law, the District Court rejected each of Western’s arguments as to why coverage was not owed for the defense of their insured, KOA Development Inc. in connection with claims of faulty workmanship arising from the construction of an apartment complex. In 2005, problems with the construction were first discovered by PCA. Later, in 2011, a consultant determined that “portions of the complex [were] unsuitable for tenant occupation. 

Plaintiff Evanston issued a commercial general liability policy to KOA, covering the period of March 22, 2002 to March 22, 2003. Pursuant to that policy, Evanston was defending KOA in the underlying state court construction defect action. Western also issued a “commercial general liability policy, to KOA for the policy period of March 22, 2003 to March 22, 2007. 

Based on the Western Policy, Evanston commenced the action seeking: (1) a declaratory judgment from the Court that Western has a duty to defend KOA in the underlying action, is obligated to reimburse Evanston for a portion of the defense fees and costs incurred, and is obligated to immediately join in and contribute to the defense of KOA in the underlying action; and (2) equitable contribution for the defense fees and costs Evanston has incurred and will incur in the defense of the underlying action. Specifically, Evanston contends that some of the damage to the Nevada Property occurred during Western's policy period, yet Western denied coverage to KOA.

Western contended that the damages were not caused by a covered “occurrence”, that the damages did not constitute “property damage” and that five separate exclusions applied, included the contractual liability, “your work”, expected or intended, impaired property and recall of products exclusions.  They also contended the damages were not caused by an occurrence during the Western policy period.  

The court rejected each of Western’s arguments, noting that the results from the alleged faulty workmanship could have been unexpected, and thus, there could have been an occurrence as defined by the Western Policy, that certain of the damages were allegedly caused by an occurrence alleged during the Western policy period, and determining that none of the exclusions applied to preclude all possible coverage.

The Court found, thus, that Western had a duty to defend KOA in the underlying action, was obligated to reimburse Evanston for a portion of the defense fees and costs incurred, and was obligated to immediately join in and contribute to the defense of KOA in the underlying action.  The apportionment and amount of contribution by Western remained to be determined.


Audrey A. Seeley
[email protected]

10/07/14       Hudson Specialty Ins. Co. v. Brash Tyger, LLC 
United States Crt. of Appeals, Eighth Cir.
Under Missouri Law, “Dual Purpose” Doctrine Applied to Interpretation of “In the Course of Your Business” Under Non-Owned Auto Endorsement to CGL Policy.
Hudson Specialty Insurance Company (“Hudson”) issued a Commercial Lines Master Policy, which afforded among other items, a commercial general liability coverage, to Sonic Insurance Advisory Trust.  The commercial general liability portion of the policy contained a Hired and Nonowned Auto Liability endorsement which is at issue in this litigation.

In the underlying action, Lloyd and Nancy Miller commenced a bodily injury action against Tyler Rousch, Brash Trygr, Rousch’s parents, and others, arising out of an August 3, 2009, motor vehicle accident.  The Millers alleged negligence against Rousch and vicarious liability against the remaining defendants on the basis that Rousch was acting on Sonic’s behalf at the time of the accident.  Rousch was operating a vehicle jointly owned with his mother, Sharon.  Roush at the time of the accident was the Managing Member of Brash Tygr, LLC which owned and operated a Sonic Drive-In Restaurant in Missouri.  As a Sonic franchise, Brash Tygr was enrolled as a trust member under the policy.

At the time of the accident, Rousch’s mother asked him to deposit her paycheck into her personal bank account and deliver personal mail to the post office.  Rousch went to the bank for his mother as requested and while there a bank employee handed Rousch bank deposit bags that Sonic used to make cash deposits.  Rousch did not work at Sonic and did not intend to pick up the deposit bags.  Rousch, while he did not work at Sonic, did have a five percent ownership interest in Brash Tygr.  Rousch placed the deposit bags in the car with the intent to take them to his parents’ home so that one of his parents could take the deposit bags to Sonic.    After leaving the bank, Rousch drove toward the post office, which was also in the direction of his parents’ home, when this accident occurred. 

Hudson accepted Brash Tygr’s defense but reserved its rights on indemnification.  While a dispositive motion on the issue of Brash Tygr’s vicarious liability was pending, the parties submitted to mediation.  After Hudson rejected the Miller’s settlement demand Brash Tygr rejected Hudson’s defense and withdrew the summary judgment motion.  A week later, the Millers reached a settlement with Brash Tygr and Rousch admitting each of the Miller’s 36 Requests for Admission that Rousch, in picking up the deposit bags at the bank was conducting Brash Tygr’s business.  The next day the court entered detailed findings of fact and conclusions of law regarding the agency relationship between Brash Tygr and Rousch.  Then a Judgment was entered against Rousch and Brash Tygr for $500,000 in punitive damages and against Brash Tygr for $5.3 million in compensatory damages.

The instant declaratory judgment action was commenced by Hudson when the defense was rejected and dispositive motion withdrawn.  The defendants’ summary judgment motion was granted and this appeal ensued.

The insurance coverage issue presented was whether, under Missouri law, Rousch was an agent of Sonic and in the course of its business when he accepted the bank deposit bags while also performing nonbusiness related errands at the time of the accident.  The Hired and NonOwned Auto endorsement of the policy provided:


We will pay on behalf of the insured all sums that the insured shall become legally obligated to pay as damages because of “bodily injury” or “property damage” arising out of the use of a “non-owned auto” by any person other than you in the course of your business.

Under Missouri law, the policy’s interpretation and specifically whether Brash Tygr is afforded insurance coverage for the underlying action as Rousch was acting in the course of Sonic’s business is a question of law for the court.  There is no Missouri decision interpreting the phrase “in the course of your business.”  The Court then looked at the purpose behind the non-owned auto coverage in a commercial general liability policy and concluded the purpose was to “protect the named insured under the doctrine of respondeat superior when automobiles not owned by it [are] used in its business.”  Missouri does apply a “dual purpose” doctrine in determining vicarious liability and applied it here.

The “dual purpose” doctrine simply stated is “that if the work of the employee creates the necessity for the travel, he is in the course of his employment, even though he at the same time is serving some purpose of his own.”

Here, the Court held that there was no evidence that a Sonic employee or a Brash Tygr agent would have make a special trip to the bank for the deposit bags if Rousch had not brought them to his parents’ home.  Further, the deposit bags are not required to make a deposit at that bank.  The evidence before the Court established that Rousch’s acceptance of the deposit bags, which he never solicited, was merely a “causal and incidental” of what was a purely personal trip for Rousch.  Thus, Rousch was not Sonic’s agent and acting in the course of Sonic (Brash Tygr’s) business and Hudson was entitled to a declaratory that it was not obligated to indemnify Rousch or Brash Tygr under the policy.

Cassandra A. Kazukenus
[email protected]

DFS Has Proposed a Brand New Regulation Related To Force-Placed Insurance

The purpose of the regulation is to provide rules for the rates and placement of force-placed insurance and to prohibit certain practices that are related to force-placed insurance in an effort to protect homeowners and investors from excessive rates, questionable business practices and relationship and inadequate notice of force-placed insurance.  This stems from an investigation by DFS which allegedly revealed that the rates for force-placed insurance bear little relationship to the actual loss experience.

The regulation begins with some key definitions, including the definition of force-placed insurance.  The regulation defines it as “hazard insurance obtained by a servicer on behalf of the owner or assignee of a mortgage loan that insures the residential real property securing such loan.”  The term does NOT include hazard insurance to protect against flood loss, hazard insurance obtained by a borrower but renewed by the borrower’s servicer, or hazard insurance obtained by the borrower but renewed by the borrower’s servicer at its discretion as long as the borrower agrees.  Additionally, hazard insurance is defined as “insurance on residential real property securing a mortgage loan that protects residential real property against losses caused by fire, wind, flood, earthquake, theft, falling objects, freezing, and other similar hazards for which the owner or assignee of such loan requires insurance. 

The proposed regulation would also require insurers and producers that mail or deliver to a borrower on behalf of a servicer notices relating to force placed insurance, a notice which complies several provisions of a Federal Regulation (12 CFR 1024).  The same is true when the force-placed insurance is being renewed. 

The proposed regulation also seeks to limit the amount of coverage provided by precluding an insurer from issuing force-placed insurance in excess of the borrower’s last known amount of hazard insurance.  However, if that prior amount did not comply with the mortgage loan requirements, then the insurer cannot issue force-placed insurance in excess of the replacement cost of the improvements on the mortgaged property.

Further, if an insurer receives correspondence related to force-placed insurance from a borrower on behalf of a servicer, then the insurer must accept any reasonable form of written confirmation from the borrower of existing hazard insurance that complies with the mortgage loan contract’s requirements.  The insurer may require a copy of the borrower’s hazard insurance policy’s declarations page, certificate of insurance, the policy itself or other similar written confirmation.  Within 15 days of receiving this evidence of hazard insurance, an insurer shall remove force-placed insurance from the borrower’s property and refund the premiums paid for any period of overlapping coverage.

The proposed prohibited practices include:

  • No insurer may issue force-placed insurance on mortgaged property serviced by a servicer affiliated with the insurer.
  • No insurer, producer or affiliate shall compensate a servicer or a person or entity affiliated with a servicer with respect to force-placed insurance on residential real property being serviced by the servicer.
  • No insurer shall compensate an insurance agent or an independent adjuster that acts in the adjustment of a loss for force-placed insurance based on underwriting profitability or loss ratio.
  • No insurer shall share force-placed insurance premiums or force-placed insurance risk with the servicer that obtained the force-placed insurance or a person or entity affiliated with the servicer that obtained the force-placed insurance.
  • No insurer, producer or affiliate shall make any payments, including but not limited to the payment of expenses, to a servicer or a person or entity affiliated with a servicer in connection with securing force-placed insurance business.
  • No insurer, producer or affiliate shall provide insurance tracking to a servicer or a person or entity affiliated with a servicer for a reduced fee or not separately identifiable charge.



Jennifer A. Ehman
[email protected] 

09/18/14       Provencal, LLC v Tower Ins. Co. of N.Y.
Supreme Court, Rockland County
No Coverage Found for Collapsed Retaining Wall or Interior Damage to Building
Plaintiff commenced this action seeking insurance coverage from defendant for the collapse of a retaining wall in its parking lot and water damage to the interior of its building as a result of a rainstorm.  Defendant disclaimed. 

The parties agreed that the facts were not in dispute and that the court would decide the legal issues involved after submission of trial briefs. The facts were as follows.  The subject premises suffered interior water damage and the retaining wall across from the building collapsed.  There was also interior water damage which was caused when water entered the building through the roof drain air vents within the roof drain system.  The building’s roof and/or wall did not sustain any damage that allowed water to enter.  Water also flowed into the building over the curb and underneath the door saddle. 

In considering these facts, the court held that there was no coverage for the collapse of the retaining wall since it was not the direct result of the collapse of an insured building.  Furthermore, the storm runoff that caused the collapse was excluded since the policy excludes loss caused directly or indirectly by flood and/or surface water regardless of any other cause or event that contributes concurrently or in any sequence. 

Concerning the interior water damage, there was no coverage since the premises did not suffer any damage from the storm to its roof or walls through which the rainwater entered.  Since it was undisputed that the interior damage was caused by rainwater and that the rainwater did not enter the premises through damage to its roof or walls, there was no coverage pursuant to the policy’s rainwater limitation.  Lastly, since the rainwater entered the premises through air vents within the roof drainage system, this damage was further excluded from the policy pursuant to the faulty design exclusion.

09/16/14       Matter of DTG Operations, Inc. v Autoone Ins. Co.
Supreme Court, New York County
Arbitrator’s Award Vacated to the Extent it Granted Amounts in Excess of the $50,000 No-Fault Limit
Petitioner commenced this proceeding seeking to vacate four arbitration awards.  On April 20, 2010, a vehicle insured by petitioner struck the rear end of a vehicle insured by respondent.  Four occupants of respondent’s vehicle received no-fault insurance benefits.  Respondent then sought loss transfer subrogation pursuant to Insurance Law §5105(a).  At arbitration, the arbitrator found that respondent proved 100% liability and that based on the submitted EUO testimony, respondent’s vehicle was being used as a livery.  The arbitrator awarded a total of $127, 493 with the reimbursement for one individual totaling $60,155.31.

Petitioner then sought to vacate the award submitting that the arbitrator exceeded his authority by awarding more than the statutory no-fault limit of $50,000 in connection with one claim.  Also, petitioner submitted that respondent had not established that its vehicle was register or used “principally” as a livery for hire and that the medical bills for the occupants were not causally related to the motor vehicle accident. 

In considering these challenges, the court held that there was sufficient evidentiary support for the arbitrator’s determination that respondent’s vehicle was being used “principally for the transportation of people or property for hire” within the meaning of the statute.  Specifically, it relied on EUOs of the injured persons in which they stated that on the day of the accident they had paid for a ride in respondent’s vehicle.  In addition, the vehicle has been registered as a livery for the five years prior.  Contrary to petitioner’s contentions, Insurance Law §5105(a) does not require that the vehicle and its driver be officially licensed by the New York City Taxi and Limousine Commission on the date of loss. 

With regard to petitioner’s objections as to the lack of evidentiary support for the amount of damages, the court found that by indicating at the arbitration that it was not disputing damages, it waived its right to object to damages in both that proceeding and this one. 

However, the court did find merit in the final objection.  It found that the arbitrator exceeded his authority in awarding damages in the amount of $60,155.31 for one injured person.  An arbitrator’s award directing payment in excess of the statutory no-fault limit of $50,000 exceeded its authority and constituted grounds for vacatur.  Thus, in line with these findings, the court granted the petition only to the extent of reducing the approximately $60,000 award to $50,000. 

08/25/14       Matter of GEICO Indem. Co. v Global Liberty Ins. Co. of N.Y.
Supreme Court, Queens County
Court Refuses to Vacate Arbitration Award Where Respondent Failed to Properly Support its Late Notice Denial
GEICO’s insured, a pedestrian, was injured when he was struck by a vehicle insured by Global Liberty.  The driver of the vehicle fled the scene.  Global Liberty eventually denied coverage relying on the provisions in the policy for late notice and non-cooperation.  As a result, GEICO paid its insured under the policy’s uninsured motorist provision and then brought this action pursuant to Insurance Law §5105 seeking reimbursement. 

At the arbitration hearing, Global Liberty raised the affirmative defense of “no coverage” based upon its disclaimer of coverage.  However, the arbitrator found in favor of GEICO noting that Global Liberty had failed to provide evidence to show when the loss was reported to it or how many attempts were made to contact its insured or the insured’s driver.  Instead, all it submitted was its disclaimer letter.

When GEICO moved to confirm the award, Global Liberty opposed and sought to vacate the award.  In New York, the standard to vacate an arbitration award is extremely high.  The party seeking to vacate needs to show that the award lacked any rational basis or evidentiary basis, was inherently unfair and the arbitrator’s decision was against the weight of the evidence.

The court declined to vacate the award finding that Global Liberty failed to submit any evidence to demonstrate that the decision was irrational. 

Bad Faith

10/06/14       Cadle v GEICO General Insurance Co.
United States District Court, M.D. Florida, Orlando Division
Florida Court Finds Question of Fact on Carrier’s Bad Faith in Relation to Underinsured Motorist Claim
On July 27, 2007, Catherine Cadle was involved in an automobile accident.  Immediately following the accident, she was transported to the hospital with complaints of neck and back pain.  Thereafter, over the next twenty-eight months, she was treated by various physicians and was subject to several medical procedures including surgery. 

On June 3, 2008, GEICO offered to settle her underinsured motorist claim for $500.00.  The following week, Cadle sent a formal demand for the full $75,000 of UM benefits.  Cadle submits that at this point, GEICO had been given all of her medical records and was aware she was considering surgical intervention. 

A month later GEICO increased its offer to $1,000.  Unable to reach an agreement, Cadle filed a civil remedy notice advising that her medical bills exceeded $50,000 and were continuing.  With no response from GEICO, Cadle filed suit on March 19, 2009.  On February 2, 2010, GEICO learned of Cadle’s surgery and authorized the full payment of the UM benefits.  At this point, the offer was rejected and the case proceeded to trial where Cadle was awarded $900,000. 

In considering Cadle’s motion for summary judgment the court held that the question of an insurer’s bad faith is generally a question for the jury, and that was the case here.  Although Cadle underwent a series of medical treatments, including surgery, GEICO had reason to believe that Cadle had not suffered a permanent injury.  Also, since Cadle had received $35,000 in insurance payments from Allstate and GEICO, GEICO’s offer of $500.00 and later offer of $1,000.00 was not patently unreasonable. 

The court denied plaintiff’s motion. 

Earl K. Cantwell
[email protected]

5/16/14         Regional Steel Corp. v. Liberty Surplus Insurance Corp.,
California Court of Appeals, Second  District
No CGL Coverage for Defective Construction
Another Court has weighed in on the ongoing question of when and whether defective construction can constitute an underlying claim requiring defense and indemnity under a contractor’s CGL policy.

Regional Steel supplied the reinforcing steel for an apartment complex.  Both 90-degree and 135-degree seismic hooks were initially installed, but the building inspector eventually required only 135-degree hooks.  Therefore, several garage levels at the apartment building had defective tie hooks installed that required repair.  The owner withheld $545,000 in payment from Regional to fix the problem.  Regional sued to collect its money, and the owner cross sued claiming it was forced to repair the garage because Regional installed 90-degree hooks.  Regional sought defense from the cross claim from Liberty Surplus Insurance.  Liberty declined on the basis that opening up the concrete to correct the tie hook problem was not covered “property damage” within the meaning of the policy.
The dispute between the owner and Regional was settled, and thereafter Regional filed a breach of contract suit against Liberty Surplus.  Liberty filed a motion for summary judgment asserting it had no duty to defend or indemnify Regional which was granted by the trial court and affirmed on appeal.
The appeals court initially ruled that the alleged damage was outside of the policy period noting that the hook problem was discovered in January 2005 and the policy in question took place in August later that year.

The appeals court then said that installing a defective component into a larger property is not “property damage” unless the installation causes separate physical damage or injury.  Regional tried to assert a claim that the tie hooks caused an uneven floor and the development of cracks in the garage.  This claim was rejected with the court noting that there was no proof to support the assertion that the tie hooks caused the uneven floor and cracks.  The claims against Regional were that it failed to install the proper tie hooks and failure to do so required demolition and repair of affected areas.

The Court also cited a policy exclusion barring coverage for property damage arising from a deficiency in “your work”.  The underlying claim arose from deficiencies in Regional’s performance of its work, was not covered by the policy, and was also barred by the exclusion. 

This case represents another instance where a construction defect was held not to be covered under contractor’s CGL policy.  In this case, it was held that the claim did not constitute defined “property damage”, and was also excluded under the “your work” exclusion.  These are two relatively common reasons cited for denying liability insurance coverage.  Other frequently cited problems are that construction defect claims typically do not constitute an accidental “occurrence” as defined in the policy, and exclusions or limitations for contractually-incurred work and obligations. 

One of the keys to this ruling is the argument that without actual physical injury, a construction defect does not give rise to property damage as defined in the policy.  Moreover, if the defect is really limited to damage unto itself, an exclusion of coverage for claims associated with “your work” or “the work” may also be invoked.

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