Back to Top

Coverage Pointers - Volume XVI, No. 9

Dear Coverage Pointers Subscribers:

Do you have a situation?  Call us. We do love to help clients and friends unravel “situations” so they can proceed with confidence.

This issue comes to you from the DRI Annual Meeting in San Francisco.  We enjoyed dinner last night with the beautiful Bay Bridge as a backdrop.  A few days of relaxing in Napa and Sonoma preceded this venue.  We look forward to a return home in a few days.

I hope to see some of you on Monday at the Buffalo location for the 2014 Law School for Insurance Professionals program.

There were three very interesting Court of Appeals cases argued this week and last in Albany with decisions expected in the next 60 days or so:

  • No. 187 Nesmith v. Allstate Insurance Company, which deals with number of occurrences in the lead paint context;
  • No. 203 Strauss Painting, Inc. v. Mt. Hawley Insurance Company, involving excuses provided for late reporting and may reach some issues relating to the breadth of additional insured clauses;
  • No. 216 Sierra v. 4401 Sunset Park, LLC, which focuses on the proper way for an insurance company to disclaim when notice is given by another insurer, rather than an insured.

 

While there was some hope that the Strauss case may provide clarity on the breadth of the additional insured endorsement, but after watching the oral argument, we do not see that happening. However, perhaps we will be surprised.

Murder is an Accident:

For the second time, a New York appeals court has ruled that the victim of an automobile-caused homicide can secure uninsured motorists benefits because from the victim’s point of view, the death was accidental.  Thousands flee.  See the Second Department decision in Utica Mutual v. Burrows summarized in my column.

If murder is an accident because the deceased did not expect it, what’s next?

Long Island Office Expands:

Welcome to our newest LI associate, Robert Hewitt.  See Beth’s letter, below.

Fitz’ Bits:

Dear Subscribers:

We are delighted to welcome Robert Hewitt to our growing Melville office, servicing the New York Metropolitan area. Rob earned his law degree from Hofstra University School of Law in 2002, where he graduated as valedictorian, receiving the Maurice A. Dean award.  Rob has substantial experience in several areas, including insurance coverage, employment discrimination defense, professional liability defense, and general liability defense.  We are delighted to have Rob join our team and look forward to our continuing expansion to better serve our downstate clients.

Congratulations also to our own Audrey Seeley, who this week became the new chair of the DRI Insurance Committee.  We are extremely proud of Audrey for this wonderful accomplishment.

Thanks to all of you who came out and attended the New York State Bar Association Law School for Insurance Professionals.  I met many of you at our well-attended Long Island and New York City sessions and appreciate the enthusiastic participation of all in the program.  For those of you who could not attend, but wish you could have, we are always delighted to provide on-site training for you at your offices and for those of you who know me, you realize that I frequently travel across the country to provide specialized training for our clients.  If you wish to discuss the scheduling of such a program, please feel free to contact me at (631) 465-0700.

In this week’s column, I discuss yet another case addressing insurance coverage under commercial general liability policies for faulty workmanship.   The Eastern District of Pennsylvania in State Farm Fire & Casualty Company v. McDermott, held that the substance of the claims against State Farm’s insured was for an alleged failure to meet expectations that the insured was contractually obligated to meet in connection with the installation of window and door flashing in the construction of residential homes.  The court found this was not an occurrence within the meaning of the State Farm policies and held that State Farm had no duty to defend or indemnify.

Til next time,

Beth
Elizabeth A. Fitzpatrick
[email protected]

World War I – One Hundred Years Ago Today:

New York Herald
October 24, 1914

BICYCLES IN WAR. TACTICS OF THE CORPS

Dunkirk

Both sides are using large forces of men mounted on bicycles.

These occupy advance posts, and if attacked by cavalry the cyclists throw their machines into the middle of the road, where the spokes and wheels make a perfect obstacle to charging horses.

The cyclists shelter in the hedges and pick off the struggling horsemen.

Cassie’s Capital Connection:

Although I speak with everyone in our coverage unit on the phone regularly, as the only Hurwitz & Finer (is that what we call ourselves?) in Albany, I do not get the opportunity to see my colleagues in person very often.  Last night was one of those rare occasions when one of my Buffalo friends was in Albany, and so I forced Jen to come out to my house for dinner and to play with my exceptionally cute kid.  I may be biased.  While here, I did not even make her help me with any work or help me decide on a topic for this week’s column in light of the lack of activity in the Legislature, in part due to the looming elections.

Despite the quiet State legislature and DFS, I did write a column this week on a topic I haven’t talked about in a while – Medicare Secondary Payer.  Recently, CMS issued an alert which notified carriers that as of January 5, 2015, carriers submit the reporting information without the use of an individual’s full social security number.  As this has been a sticking point between CMS and the carriers since the implementation of MSP, I thought it was worth bringing it to your attention.

That’s all I have for now, but I hope you are enjoying a much less dreary day than I currently am. 

Cassie
Cassandra A. Kazukenus
[email protected]

Workers Compensation?  Unions say: “Bah Humbug” (A Century Ago):

Lincoln Evening Journal
(Advertisement)
Lincoln, Nebraska
24 Oct 1914

Workmen’s Compensation Law Condemned by Workmen.
All Voters Requested to Vote Against the Law At the
Referendum Election, November 3, 1914.
Labor Unions Appeal to the People for Help.

The last legislature passed an iniquitous and unfair confiscation law under the false name of a Compensation Law; but about thirty-five thousand of the fair-minded citizens of Nebraska throughout the state signed a petition to have the law suspended and referred to a vote of the people at the coming November election.  All of the petitioners and every fair-minded voter in the State SHOULD vote against this law.

The Central Labor Unions of Omaha and South Omaha have unqualifiedly condemned this law and ask you to vote against it at the November election for the following reasons:

            1.         The law was passed through the untiring efforts of the Employers’ Liability Insurance Companies’ lobby, and was not passed in the interests of the laboring people.

            2.         While the law pretends to be elective, it is in fact compulsory’ because if the employer elects to accept the law, you may be sure that he will not keep men in his employ who elect not to accept the law.

            3.         The law does away with the right to trial by jury.

            4.         The law does not provide any compensation for men who are disabled fourteen days or less, which means that it provides no compensation whatsoever for 90 per cent of all men injured. 

            5.         The law does not require any security whatsoever for the payment of the small allowances provided.

            6.         The law does not allow anything for pain or suffering, no matter how great or how long continued nor does it allow anything for mutilation or disfigurement of the body.

            7.         The law provides no greater compensation when a man is killed leaving a wife and ten children, than when he leaves a wife and one child.

            8.         The law does not do away with law suits or lawyers, which is the very thing that the upholders of this law claim that it will do, but it does cut the amount of possible recovery down to almost nothing.

            9.         The employer need not pay the weekly installments of compensation unless he sees fit to do so, but he may force his employee to sue for each and every installment as it comes due.

            10.       The law does not provide any greater compensation for the man who loses both arms and both legs and both eyes, than it provides for the man who merely loses his arms.

            11.       If a workman has his leg cut off through the unquestioned fault of his employer, he would get no greater compensation than the workman who had his leg cut off through his own carelessness. 

            12.       The proposed law allows the injured man only about one-tenth of what he can now recover under the general law.

            13.       The average common laborer will not earn on an average more than $10.00 a week, and the proposed law provides for the loss of his hand only $5.00 a week for 175 weeks, or $875.00; for the loss of his arm above the elbow, $5.00 a week for 215 weeks, or $1,075.00; for the loss of his foot or leg below the knee, $5.00 a week for 150 weeks or $750.00; for the loss of his leg above the knee, $5.00 a week for 215 weeks, or $1,075.00; for the loss of his eye, $5.00 a week for 125, or $625.00.  If he has his leg cut off at the hip and his arm cut off at the shoulder, the law says he should get $10.00 a week for 215 weeks, or $2,150.00.

Can any fair-minded man read the above provisions and fail to vote against this law?

Cut this out and remember to vote against this law.  Put your [X] in the square marked NO.

The labor unions appeal to the people to help in defeating this inhuman and unjust law.

Editor’s Note:  The proposition approving workmen’s compensation in Nebraska passed by popular referendum with a vote of 92,514 – 85,777.  Nebraska joined a growing group of states that had adopted similar statutes, the first being Wisconsin in 1911.

Hunter’s Hints on the Serious Injury Threshold:

Dear Coverage Pointers Subscribers:

Amid the brisk winds and falling leaves, the appellate courts around New York State, with a glass of warm cider in hand, got to work these past two weeks, publishing a number of cases dealing with serious injury threshold cases.

As always, please contact us with any questions, comments or concerns regarding any and all things serious injury in New York State.  We are also available to present on serious injury topics.  I look forward to hearing from you.

Until next time,

Dan
Daniel T. Hunter
[email protected]

Lead from Zeppelins 100 Years Ago:

The New York Times
New York, New York
24 Oct 1914

ZEPPELINS PRACTICE DROPPING TORPEDOES

Rafts Used as Targets in Preparation for
Probable Naval Attacks

LONDON, Saturday, October 24.—The Milan correspondent of The Daily Mail sends the following:

“For the past few days Zeppelins have been practicing the firing of torpedoes from a great height, using as targets rafts floating on Lake Constance.  It is reported that the result has been so satisfactory that the German authorities are equipping a fleet of Zeppelins with tubes and torpedo apparatus which will be ready in a few months to co-operate in naval attacks in the North Sea.”

Jen’s Gems:

Greetings!  I am writing from the Capital District where I have spent the last two days in depositions.  I have to admit that the biggest benefit of this trip was that I got to visit last night with our resident Albany attorney, Cassie.  I was also treated to dinner, a visit with Ethan and a tour of her new house.  Certainly worth the trip.

In terms of my column this week, I report on a case from Bronx County, 343 LLC v. Scottsdale Ins. Co., which seems to highlight what we are seeing with additional insured claims. As you will see from the decision, the courts appear comfortable finding that the duty to defend has been triggered, but with regard to indemnity, especially with the new endorsements which shift away from "your work" or "your ongoing operations" to "acts or omissions," they are essentially leaving indemnity to the trier of the underlying action.  The practical impact of this trend is that declaratory judgment actions are frequently placed in a holding pattern while the underlying action moves forward. 

I hope everyone has a nice weekend and again congratulations to Audrey on her recent installment as Chair of DRI's Insurance Law Committee. 

Jen
Jennifer A. Ehman
[email protected]

Water Torture – 100 Years Ago:

The Brooklyn Daily Eagle
Brooklyn, New York
24 Oct 1914

WOMAN DOUSED NEIGHBOR
But No Crime in Bronx.  She Tells Riverhead Court.

Riverhead, L. I., October 24 – According to Mrs. Emma Regal of Manorville, it is not considered a crime in the Bronx, where she used to live, to assault one of your neighbors with a pail of water, but it would be considered illegal, even there, to douse one with dirty water.

This was the extenuating circumstances as she related them to Justice Hildreth here yesterday, when she was before him on a charge of assault.  Mrs. Mary Miller was the complainant.  The children of the neighbors had several squabbles.  During one of them, according to the testimony, Mrs. Regal’s children called Mrs. Miller’s children: thieves.  Mrs. Miller went down to Mrs. Regal’s to find out about it.

“She talked so fast I couldn’t get a word in edgewise,” said Mrs. Regal, as she pleaded guilty to the charge.  “I told her to get off my place.  She didn’t go.  Then I told her to shut up.  She wouldn’t, so I grabbed a pail of clean cold water and doused her with it.  Then she did both — shut up and get off the place.”

Following this Mrs. Regal explained the cold water ethics of the neighbors in the Bronx.  The explanation rather took Judge Hildreth’s fancy, and he suspended sentence during good behavior. 

Peiper’s Position:

I will start out this week by adding to the growing list of congratulations to Audrey Seeley.   While her appointment as chairperson is a nice acknowledgment, it does not tell the entire story of the enormous commitment of time and effort Audrey has given to DRI over the past several years.  A well-earned distinction indeed, and I can assure that no one is more deserving.

A quick sports quiz for you.  Did you know that there are 25 players on a post-season baseball roster?  There are. 

Do you know what the 25th player on, say, the San Francisco Giants is called?  He is a member of the San Francisco Giants. 

So too, it is in the world of Insurance Law.  While I sit no higher than fourth on the depth chart, like a little used pitcher, I get a call up on rarest of occasions.  With Dan and Audrey both traveling this week, it was with great honor that I took the reins of the Insurance Law class at the University at Buffalo Law School.  Lots was learned, and a good time was had by all. 

I must say that there is no better example of Dan’s mastery than the fact that he had managed to have a class of 25 law students legitimately interested in Insurance Law, a condition which, I hope at least, will not be lost on them as he returns.  In any event, I once sat where those students now sit, and frankly do not recall the same amount of fervor for 11 NYCRR…  Perhaps, even our own editor has learned a few motivational tricks along the way.   

Enjoy our offerings this week, and Happy Halloween. 

Steve
Steven E. Peiper
[email protected]

Highlights:

In this week’s issue, attached, you will find the following case summaries:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

  • Excess Policy Prorates with Another, Based on Policy Language
  • County Did Not Seek Approval to Pay SIR Because It Did Not Believe It Was Required To Do So
  • Hit and Run Vehicle was Fabricated, Sayeth Appellate Division
  • Title Need Not Pass for Coverage to Be Engaged Under “Newly Acquired Auto” Language
  • Release of Personal Injuries Claims, Obtained by Claims Rep, Might be Set Aside if There Were Unknown Injuries of if Fraudulently Induced
  • Murder is an Accident. Thousands Flee

 

HUNTER’S HINTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Daniel T. Hunter
[email protected]

  • Appellate Court Finds Plaintiff Raised Triable Issues of Fact Resulting in Reversal of Lower Court
  • Appellate Court Reinstates Plaintiff's 90/180 Day Claim
  • Plaintiff Cross-Claim Granted and 90/180 Argument Reinstated by Appellate Division
  • Lower Court Granting of Defendant's Cross-Motion Reversed
  • Lower Court's Granting of Summary Judgment to Defendants Reversed

 

MARGO’S MUSINGS ON NO FAULT
Margo M. Lagueras
[email protected]

Arbitration

  • Chiropractic Treatment Denied Where Not Providing Any Significant Palliative Benefits
  • EIP’s Failure to Attend Two Scheduled IMEs Did Not Bar Claim
  • Reimbursement Awarded Where IME Did Not Specifically Refute Need for MRI
  • Lumbar MRI Denied as Premature and Medically Unnecessary
  • Respondent Fails to Establish Lack of Causal Relationship

 

Litigation

  • Issue of Fact Regarding Propriety of Verification Requests Bars SJ

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

  • Request for Tax Returns Denied; Court also Advises No Need to Demonstrate Merit on a Motion to Amend
  • Where Title Defects Cured, and There was No Other Compensable Damage to Assured, Summary Judgment was Appropriate
  • Where Questions of Fact on Negligence Abound, All Motions for Indemnity Fail; Can’t Establish Failure to Procure Without Establishing the Contractual Obligation to Procure First

 

FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

  • Pennsylvania Concludes Faulty Workmanship Is Not An Occurrence

 

AUDREY’S ALL THINGS PERSONAL
Audrey A. Seeley
[email protected]

  • At DRI Annual Meeting.

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

  • CMS Alert Implementing Reporting Without The Use Of A Complete Social Security Number

 

KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected] 

  • Court Unpersuaded by Insured’s Self-Serving and Carefully Crafted Statement Concerning an Incident in which He Drove Away with the Underlying Plaintiff on the Hood of his Car
  • Defense Triggered for Additional Insured; Determination on Indemnity Deemed Premature
  • Where Insured Failed to Commence Suit within One Year from Date of Loss, Action Dismissed

 

Bad Faith

  • Pennsylvania Court Dismisses Bad Faith with Leave to Amend; Declines to Dismiss Unfair Trade Practices and Consumer Protection Law Claim

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • Construction Defect Not Covered Due To Material Misrepresentations on Policy Application

 

All for now.  Best wishes from the west coast.
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]

10/23/14       Central Park Studios, Inc., v. Federal Insurance Company
Appellate Division, First Department
Excess Policy Prorates with Another, Based on Policy Language
The lower court properly found that INSCO and Delos must provide excess coverage at the same excess level and share costs equally The language utilized in the Delos policy, which provides excess coverage solely to the Delos primary policy noted on its declarations page, does not negate the possibility of contribution from other insurers. More importantly, the policy does not contain an "other insurance" clause distinguishing this case from those in which we have found that the excess policy was intended to provide coverage only after all other coverage was exhausted, including other excess policies. Notably, the Delos excess policy fails to indicate its premium, another indicium of its intent to provide the insured with final tier coverage at a reduced premium.

10/22/14       TIG Insurance Company v. County of Suffolk
Appellate Division, Second Department
County Did Not Seek Approval to Pay SIR Because It Did Not Believe It Was Required To Do So
Suffolk County had a policy with the predecessor of TIG (“TIG”) with policy limits of $36,500,000 per occurrence, and a self-insured retention of $750,000. After TIG settled a claim against the County that constituted an occurrence covered by the policy for an amount in excess of the self-insured retention of $750,000, it commenced this action to recover the self-insured retention amount alleging that the County was in breach of the policy for failure to contribute that sum to the settlement of the claim.

It was undisputed that the County needed the approval of the County Legislature in order to release $750,000 to fund the settlement. The County claimed that it never asked for legislative approval to release those funds because it never approved the settlement.

TIG requested jury instructions stating, inter alia, that "[a] party to a contract cannot prevail when its action or inaction frustrated or prevented performance of the contract," and since the County never sought legislative approval for the settlement, the jury could "not find against TIG based on the absence of such approval." The trial court declined to give the requested instructions. On appeal, TIG claims that refusal to give such instructions constituted reversible error warranting a new trial.

Here, the County did not contend that the lack of approval of the settlement by the County Legislature justified or excused its failure to pay the self-insured retention to TIG. Rather, the County argued that it was not required to contribute the self-insured retention toward the settlement because TIG unilaterally settled the claim. The County did not seek approval of payment of the self-insured retention to TIG because, in its view, it did not owe TIG the self-insured retention. Under these circumstances, the instructions requested were not warranted.

10/22/14       Nationwide Mutual Insurance Company Joseph-Sanders
Appellate Division, Second Department
Hit and Run Vehicle was Fabricated, Sayeth Appellate Division
On January 4, 2012, Joseph-Sanders allegedly sustained injuries when her vehicle was struck in the rear by a hit-and-run vehicle. Her car was propelled into the rear of a car operated by Yalcin, and the Yalcin car was propelled into a car operated by Vega.

When a claim was made by Joseph-Sanders, her insurer, Nationwide, claimed that the hit-and-run car was operated by Hammer and insured by AutoOne Insurance Co.  After a framed issue hearing, the referee agreed with Nationwide that in fact the hit-and-run car was operated by Hammer and insured by Auto-One, so it stayed arbitration.

The Second Department reversed finding that there was no credible evidence to support the referee’s finding. Two witnesses – Yalcin and Joseph-Sanders -- testified that right after the collision, the driver of the offending vehicle got out of his green Ford Taurus and apologized to Joseph-Sanders, and that the driver was still present at the accident scene when ambulances arrived.

However, the original police accident report, which was stipulated into evidence, did not indicate the presence of a hit-and-run vehicle that caused a chain collision, but instead implicated Joseph-Sanders as the cause of the accident. As such, there was no evidence recovered from the scene of the accident linking Hammer's vehicle to the accident. Neither Yalcin nor Joseph-Sanders offered any explanation for not taking any steps to ascertain the identity of the driver of the offending vehicle, or license plate number of that vehicle, at the scene of the accident.

The physical evidence did not support a finding of a rear-end collision by a hit-and-run either.

10/16/14       Nationwide Insurance Company v. Porter
Appellate Division, Third Department
Title Need Not Pass for Coverage to Be Engaged Under “Newly Acquired Auto” Language
Porter’s 1994 Chevy was insured by Nationwide in 2008.  While the policy was in effect, he sold the truck to a junkyard, and then traded his ATV to his employer for a 1987 Dodge Aries.  He took possession of that Dodge, put his old license plates on it, all before receiving title documents.

Shortly after taking possession of the Dodge and before notifying Nationwide, Porter was in an accident with another car driven by Parks and Parks sued him.

Nationwide denied coverage and brought a declaratory judgment action seeking a ruling that it had no obligation to defend or indemnify Porter.

The Nationwide policy covered temporary substitute vehicles, newly acquired cars and non-owned cars that were not regularly provided for an insured’s use. 

The term "newly acquired" is not defined in the policy and, importantly, it is not limited by the policy to completed transactions that were done in full compliance with the Certificate of Title Act. Ownership of a motor vehicle generally passes "when the parties intend that it pass.”

Here, it is undisputed that during the month before the accident Porter had disposed of his 1994 Chevrolet truck and, shortly thereafter, replaced it by trading his ATV. At the time of the transaction, Elmore took possession of the ATV and likewise Porter took absolute possession and control of the Dodge, including all of the keys. According to Porter, the trade was final and permanent. Under the circumstances and considering the pertinent policy language in light of "the reasonable expectations of the average insured", the 1987 Dodge fell within the meaning of replacement auto newly acquired by Porter at the time of the accident and, accordingly, was covered under plaintiff's policy
 
10/16/14       Ford v. Phillips
Appellate Division, Third Department
Release of Personal Injuries Claims, Obtained by Claims Rep, Might be Set Aside if There Were Unknown Injuries or if Fraudulently Induced
In June 2012, Ford was driving in a car which collided with another car owned by Paula Phillips and driven by her son Ryan and insured with Travelers. Shortly after the accident, Ford met with a representative of Travelers and executed a general release of all claims in favor of all defendants and Travelers in exchange for $750.  Six months later, plaintiff commenced this negligence action against defendants seeking damages for serious injuries allegedly caused by the accident. Defendants moved to dismiss the complaint based upon the release and the lower court granted the dismissal.

The release was provided to the court, and the plaintiff admitted he signed it.  The plaintiff argued fraud and mutual mistake.

He claims that the Travelers rep assured him that he only suffered soft tissue injuries that would heal over time, and that Travelers would “take care” of him if it turned out that it was more serious. Plaintiff asserts that the representative stated that Travelers was an "up-and-up company" that "doesn't play games," that New York law required the company to take care of "any permanent injury," and that Travelers had recently paid $20,000 to another injured party who had undergone surgery after signing a release. Finally, plaintiff claims that the representative told him that the $750 payment represented interim reimbursement for time and fuel expenses related to medical appointments, rather than a final settlement.

He claimed that he read the release but did not understand its significance because he had never been involved in a personal injury automobile accident before, and that he relied upon the representative's alleged statements in executing the release. He further asserts that he suffered herniated disks as a result of the accident, and is now advised that surgical correction is required.

Travelers denied all of that.

A release must be "'fairly and knowingly made'" and thus, like any other contract, may be set aside on the basis of fraud or mutual mistake  In the context of mistakes pertaining to personal injuries, a sharp distinction is drawn between unknown injuries and mistakes as to the consequences of known injuries; a release may be invalidated if the parties mistakenly believed that an injury did not exist when the release was executed, but will not be set aside for a mistake pertaining to the "future course[] or sequelae of a known injury’  Treating plaintiff's claims as true and allowing him the benefit of every favorable inference, this record does not establish as a matter of law that either party knew of plaintiff's cervical injury or alleged herniated disks when he signed the release. It is quite unclear whether there was a mutual mistake as to the true nature of plaintiff's injuries at the time of the execution of the release, and what injuries the release was to cover; resolution of this issue as a matter of law and dismissal of the complaint was thus premature.

As to the fraudulent inducement claim, plaintiff’s claims — which, as previously noted, are treated as true for the purpose of this motion — are sufficiently detailed and specific to allege the elements of fraud (see Centro Empresarial Cempresa S.A. v America Movil, S.A.B. de C.V., 17 NY3d at 276). As they support a possible finding that the release was obtained "under circumstances which indicate unfairness," the complaint should not have been dismissed at this juncture

10/15/14       Utica Mutual Insurance Company v. Burrows
Appellate Division, Second Department
Murder is an Accident. Thousands Flee
The decedent, Alice P. Ross, died as a result of injuries she sustained when the vehicle she was operating was struck by a vehicle operated by Demoliere. Alice was insured by Utica, Demoliere by State Farm.

State Farm denied coverage claiming that the collision was intentionally caused by Demoliere and not the result of an accident.  Burous, the administrator of the decedent's estate, demanded arbitration with Utica for uninsured motorist coverage. Utica commenced this proceeding to permanently stay arbitration on the ground that an intentional vehicular assault did not constitute an "accident" for which coverage was available under the uninsured motorist endorsement of the decedent's policy.

Following a framed-issue hearing, the Supreme Court determined that where, as here, an automobile collision was the result of an intentional act, it was not considered an accident within the meaning of the automobile insurance policy, and, therefore, no coverage was available under the uninsured motorist endorsement.

The court, relying on State Farm v. Langan, held that, for the purposes of an uninsured motorist endorsement, when an occurrence is "unexpected, unusual and unforeseen," from the insured's perspective, it qualifies as an "accident". Here, from the decedent's perspective, her collision with Demoliere's vehicle was unexpected, unusual, and unforeseen. Therefore, the occurrence constituted an "accident" within the meaning of the uninsured motorist endorsement of the decedent's policy.
Editor’s note:  When we reported on the Langan decision in our April 1, 2011 edition,  I added this note:

The Court went through great pains to emphasize that the holding is not intended to transform an intentional act by an insured into an accident from the perspective of the victim (even though it may be unintended).  The Court of Appeals emphasized that its ruling was based on the particular goal of UM benefits, that is, to compensate policyholders, because of the premium paid, for the acts of uninsured motorists.  Interesting, the Court distinguished one of its previously holdings that held to the contrary in a case involving the MVAIC endorsement, on the ground that the “UM coverage, although required by statute, is part of the insured's own policy — a policy that the insured selected and for which he pays premiums. Benefits received through coverage under the UM endorsement do not come out of a State fund. Second, the insured is the victim in this case, not the tortfeasor, and the public policy against providing coverage for an insured's criminal acts is not implicated.”

Sorry, I still don’t buy it.

HUNTER’S HINTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Daniel T. Hunter
[email protected]

10/15/14       Tamao v.  Sanchez
Appellate Division, Second Department
Appellate Court Finds Plaintiff Raised Triable Issues of Fact Resulting in Reversal of Lower Court
Defendants brought a motion for summary judgment to dismiss Plaintiff's complaint on the ground that Plaintiff did not sustain a serious injury within the meaning of Insurance Law §5102(d).  The Appellate Division, Second Department found that Defendants met their prima facie burden of showing that Plaintiff did not sustain a serious injury by submitting competent medical evidence establishing that the alleged injuries to Plaintiff's cervical and lumbar spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law §5120(d).  However, the Appellate Division found that Plaintiff did raise triable issues of fact as to whether he sustained serious injuries to the cervical and lumbar regions of the spine that were caused by the subject matter motor vehicle accident, and therefore, reversed the lower court's finding of summary judgment.

10/16/14       Shelley v. McCutcheon
Appellate Division, Third Department
Appellate Court Reinstates Plaintiff's 90/180 Day Claim
Defendant moved for summary judgment to dismiss Plaintiff's complaint arguing that Plaintiff did not sustain a serious injury as defined in Insurance Law §5102(s).  Defendant met his initial burden of establishing that the left knee, shoulder and back injuries claimed by Plaintiff were pre-existing or not causally related to the accident, and as such, the lower court granted Defendant's summary judgment motion.  The Appellate Division, Third Department agreed with the lower court that Plaintiff did not proffer evidence rebutting Defendant's proof that Plaintiff's injuries were pre-existing, however they reached a different conclusion regarding Plaintiff's 90/180 day claim.  The Appellate Division states that Plaintiff claims to have sustained a neck injury and persistent headaches which prevented her from performing substantially all of the material acts which constitute her usual and customary daily activities for not less than ninety (90) days during the one hundred eighty (180) days immediately following the occurrence of the injury.  Plaintiff proffered evidence some sixteen (16) months after the motor vehicle accident which raised triable issues of fact as to whether or not she did meet the requirements of a 90/180 days category injury.  The Appellate Division noted that Defendant failed to sustain the initial burden as to any cervical injury to Plaintiff under the 90/180 day category, and therefore, without regard to the sufficiency of Plaintiff's opposition papers, was not entitled to summary judgment dismissing that part of the complaint.  As such, the Appellate Division reinstated Plaintiff's 90/180 day category claim.

10/16/14       Poole v. State of New York
Appellate Division, Third Department
Plaintiff Cross-Claim Granted and 90/180 Argument Reinstated by Appellate Division
Plaintiff brought a lawsuit claiming to have sustained serious injuries as a result of a motor vehicle accident under the permanent consequential limitation of use, significant limitation of use and 90/180 day categories of Insurance Law §5102(d).  Defendant moved for summary judgment dismissing the claim on the grounds that plaintiff did not suffer a serious injury, which the Court of Claims granted, also denying Plaintiff's cross-motion for liability moot.

The Third Department notes that Defendant met its initial prima facie burden that Plaintiff did not sustain a serious injury under the permanent consequential limitation of use and significant limitation of use categories, however Defendant failed to meet its burden under the 90/180 day category as the evidence proffered by Defendant failed to address with any specificity the 180 days following the accident.  As such, the Appellate Division reinstated Plaintiff's 90/189 day category claim.

The Appellate Division also granted Plaintiff's cross-motion for liability since the evidence proffered by Plaintiff demonstrates that Plaintiff was travelling with the right-of-way and within the speed limit when suddenly struck by Defendant.

10/22/14       Livson v. Pazer and Moone v. Vuolo
Appellate Division, Second Department
Both Matters Affirmed as Appellate Court Found Summary Judgment was Properly Granted to Defendants
In both case, Defendants moved for summary judgment on the grounds that the respective Plaintiffs did not sustain a serious injury within the meaning of Insurance Law §5102(d).  Both lower courts found that Defendants' proffered evidence required summary judgment dismissing the respective Plaintiff's complaint for serious injury.

The Appellate Division, Second Department, noted that in both matters, Defendants met their prima facie burden by submitting competent medical evidence stating the Plaintiff did not sustain a "serious injury".  Since the respective Plaintiffs in both matters failed to raise a triable issue of fact regarding "serious injury", the Appellate Division, Second Department concluded both lower court decisions dismissing Plaintiffs' complaints were proper and therefore both orders were affirmed.

10/22/14       Kacperski v. Dandrea
Appellate Division, Second Department
Lower Court Granting of Defendant's Cross-Motion Reversed
The lower court granted the Defendant's cross-motion for summary judgment dismissing the complaint on the ground that Plaintiff did not sustain a serious injury within the meaning of Insurance Law §5102(d).  However, the Appellate Division reversed the lower court decision noting that Defendant failed to meet the prima facie burden of showing that Plaintiff did not sustain a serious injury, as Defendant's papers failed to adequately address Plaintiff's claim as set forth in the bill of particulars, that Plaintiff sustained a serious injury under the 90/180 day category of Insurance Law §5102(d).  Since Defendant did not sustain the prima facie burden the Court notes it unnecessary to determine whether the papers submitted by Plaintiff in opposition were sufficient to raise a triable issue of fact.

10/22/14       Waxman v. Village of Lake Success
Appellate Division, Second Department
Lower Court's Granting of Summary Judgment to Defendants Reversed
The Appellate Division, Second Department concluded that Defendants' papers in support of their motion for summary judgment to dismiss Plaintiff's complaint on the basis that Plaintiff did not sustain a "serious injury" were insufficient and failed to meet the prima facie burden.  Specifically, the papers submitted by Defendants failed to adequately address Plaintiff's claim, as set forth in his bill of particulars, that he sustained a serious injury under the 90/180 day category of Insurance Law §5102(d).  The Court notes that since the Defendants did not meet their initial burden, it was unnecessary to determine whether the papers submitted by Plaintiff in opposition were sufficient to raise a triable issue of fact.

 

MARGO’S MUSINGS ON NO FAULT

Margo M. Lagueras
[email protected]

Arbitration

10/08/14       South Buffalo Chiropractic v Nationwide Mut. Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Chiropractic Treatment Denied Where Not Providing Any Significant Palliative Benefits
The claim was for reimbursement for chiropractic treatment received between May 2013 and February 2014.  The 55 year-old EIP was injured in September 2010.  The treating chiropractor’s notes from December 2012, March 2013 and September 2013, all indicated positive distraction, foraminal compression and various positive test results. 

A chiropractic IME was performed in June 2012.  At that time, the EIP had normal function throughout the cervical, thoracic and lumbar regions.  It was noted that the EIP continued to work full time and also noted was a pre-existing work-related injury to the lower back dating from 2009.  The diagnosis was of a cervical and thoracic sprain/strain resulting in cervical intersegmental dysfunction and pre-existing work-related lower back injury.  The examining chiropractor concluded that there was no medical necessity for further chiropractic treatment.

The Arbitrator reiterated that, under Hobby, the burden shifts to the applicant to demonstrate that post-IME treatment continues to be medically necessary by showing that the treatment is providing either curative benefits or significant quantifiable palliative benefits.  In this case, the only notes in the file for the disputed period were the September 2013 notes where the EIP’s cervical range of motion was reportedly normal although there continued to be complaints of intermittent numbness and tingling, foraminal compression, cervical distraction and positive Valsalva’s tests.  Comparing these notes with the earlier ones, the Arbitrator noted that the EIP’s condition appeared nearly identical with that reported in 2012.  Even though the treating chiropractor asserted that the EIP continued to improve, the objective evidence in the records did not support that assertion and the treatment did not appear to be having any measurable effect.  Therefore, and given that the IME was performed some nine months prior to the treating chiropractor’s March 2013 evaluation, the Arbitrator determined that the treatment beginning in May 2013 was not providing any significant palliative benefits and Respondent’s denial was appropriate.

10/08/14       Anesthesia Consultant Assocs. v Allstate Insurance Co.
Erie County, Arbitrator Douglas D. Coppola
EIP’s Failure to Attend Two Scheduled IMEs Did Not Bar Claim
The accident occurred in 2003.  As is customary, the insurance carrier arranged with a service to schedule an IME, which was first scheduled for September 2010.  The EIP failed to attend, so a second notice was sent, this time scheduling the IME for September 2010.  Again, the EIP failed to attend and Respondent issued a denial based on that failure.

The Arbitrator determined that the failure did not bar the claim in this case because Respondent failed to prove 1) that the notices were timely mailed, and 2) that the EIP failed to attend.  The submissions did not contain any proof of mailing by the service, nor was there an affidavit by the doctor as to the non-attendance. 

The Arbitrator also cited an opinion letter from the NYS Insurance Department from February 2005, regarding 11 NYCRR 65-3.6(b).  Based on that opinion letter, the Arbitrator also stated that the insurance carrier was “required to contact the person in order to afford the person a second reasonable opportunity to attend an IME.”  He went on to state that “[w]hereas here there does not appear to [be] any reason why the carrier chose not to call the EIP to make inquiry as to whether or not she received the notices and if there was any problem with scheduling by the actual carrier representative.  There is no proof in the file that there was any appropriate follow up by the carrier in this case.”
Note:  We agree that an insurer must provide proof that the IME scheduling letters were timely and properly mailed, and that there must be an affidavit or similar evidence, by someone with personal knowledge, such as the doctor that was to perform the examination or a staff member of his.  However, we were not aware of the additional burden on the insurer to telephone the EIP after the first instance of non-attendance to inquire if everything was ‘copasetic’. 

10/08/14       Excelsior Orthopaedics, LLP v A. Central Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Reimbursement Awarded Where IME Did Not Specifically Refute Need for MRI
The 58 year-old EIP was involved in an accident in September 2012, and sustained injuries to his neck, right shoulder, right arm and right hand.  In January 2013, he began treating with Applicant with complaints of pain to the right shoulder and entire right extremity.  The pain was reported as an 8 out of 10, with instability, numbness, popping, snapping, spasms, stiffness and weakness.  An MRI of the right shoulder was performed four days later to evaluate for rotator cuff tear.  At the next visit some ten days later, it was reported that the shoulder was “OK” but that the right middle finger continued to “lock.”  In April, Applicant performed a release of the A-1 pulley of the right middle finger and in May there was an initial occupational therapy evaluation.

An IME was performed in November 2012, at which time the examining doctor concluded that the cervical and right shoulder sprains had resolved, that the elbow was normal, and that no further orthopedic treatment or diagnostic testing was necessary. 

The Arbitrator noted that the examining doctor did not include any findings concerning the right hand and middle finger.  In addition, she noted that she had already determined in a prior decision that Applicant was entitled to reimbursement for the surgical release performed on the right middle finger as she had determined that the IME was insufficient to support a denial with respect to the hand and finger.  Given that this claim was denied based on the same IME, Applicant was entitled to reimbursement for the dates of service relating to that surgery.  Therefore, only the shoulder MRI remained in dispute.  While the examining doctor concluded that the right shoulder sprain had resolved, the treating doctor’s report, dated four days before the MRI was performed, documented positive impingement tests and range of motion.  This report sufficiently rebutted the IME and no further rebuttal was submitted by Respondent so Applicant was entitled to reimbursement.

10/08/14       WNY MRI v Allstate Prop. & Cas. Ins. Co.
Erie County, Arbitrator Douglas S. Coppola
Lumbar MRI Denied as Premature and Medically Unnecessary
On August 15, 2013, the EIP, a bicyclist, was hit by a motor vehicle and sustained injuries to his left wrist, elbow, knee and back.  He was diagnosed with abrasions and contusions at the ER.  On August 20, 2013, during the first visit to the prescribing doctor, the EIP reported that his pain was relieved by taking over the counter ibuprofen.  Nevertheless, he was sent for the lumbar MRI at issue which was performed on August 28th.  A peer review was conducted on September 25, 2013.  The peer reviewer concluded there was no medical necessity for the MRI so soon after the accident as there were no progressive neurological deficits, no indication for surgery, and no significant abnormalities seen during that first visit. Moreover, the EIP indicated that his pain was relieved with over the counter medication.  The Arbitrator agreed that the history provided by the EIP to the prescribing doctor was sufficient to support the lack of medical necessity in the first instance and, given that there was no rebuttal in the ECF to justify the medical necessity for the MRI, the claim was denied.

10/06/14       Surgical Assocs. WNY, PC v Geico Ins. Co.
Erie County, Arbitrator Gillian Brown
Respondent Fails to Establish Lack of Causal Relationship
The accident in dispute occurred in January 2012.  However, the EIP had previously been involved in an accident in October 2011.  Following the first accident, the EIP underwent physical therapy, had several MRI studies of the cervical and lumbar spine and left knee, and received lumbar epidural injections.  At the hearing, the EIP testified that after the second accident, she called Respondent and spoke to the same claim examiner with whom she had been speaking since the first accident.  She stated that she was told to continue using the October claim number for her treatment.  She further testified that, following the second accident, the pain she felt was completely different and that it was the second accident that caused her to have lumbar issues.  She underwent injections to numb the nerve causing shooting pain down her leg but when they stopped providing relief, her doctor recommended surgery.

A “causality” peer review was performed in January 2013.  The peer reviewer concluded that the second accident did not exacerbate the injuries from the first accident.  The peer reviewer noted that there were no notes indicating any change to the cervical or lumbar spine, or knee.  In addition, the peer reviewer noted that almost all the records reviewed indicated the date of the accident as October 2011, not January 2012. 

The Arbitrator found that the EIP’s testimony was unrebutted by any documentary or other evidence and that it was clear that the EIP continued to use the claim number from the first accident at the specific direction of Respondent’s employee.  In addition, the second accident clearly exacerbated the injuries caused by the first, as well as producing additional injuries.  The Arbitrator further found that the peer reviewer did not review all the necessary, relevant treatment notes and, as such, awarded in favor of the Applicant.

Litigation

10/15/14       Mount Sinai Hospital v Auto One Ins. Co.
Appellate Division, Second Department
Issue of Fact Regarding Propriety of Verification Requests Bars SJ
The EIP was a passenger injured in an automobile accident in September 2012.  More than three months later, he was admitted to one of Applicant’s facilities.  An NF-5 was received by defendant around February 4, 2013.  On February 14, 2013, defendant requested additional verification in the form of color photographs of surgery, cervical MRI films from November 15, 2012 and December 13, 2012, and complete prior medical records from a physician concerning a prior 2011 accident, including prior MRI films and any surgery records. 

On March 6, 2013, plaintiff advised that it was not in possession of any prior medical records or photos of surgery and that it was not authorized to release the actual spine films.  The letter also indicated that the complete medical records maintained by the hospital had been mailed to defendant on March 5, 2013.  Defendant sent a second request for verification on March 19, 2013, and plaintiff, in effect, replied that it had already complied.

In April, plaintiff commenced this action and defendant cross moved for summary judgment asserting that there were outstanding requests for verification.  The trial court denied defendant’s cross motion and, on appeal, the Appellate Division affirmed holding that the hospital replied to the requests with respect to the records in its possession that it was authorized to release.  Furthermore, the Court held that there were issues of fact as to the propriety of defendant’s requests, including whether the items requested existed or were in plaintiff’s or the EIP’s possession.  As such, defendant’s motion was premature.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

10/22/14       Katz v Castlepoint Ins. Co.
Appellate Division, Second Department
Request for Tax Returns Denied; Court also Advises No Need to Demonstrate Merit on a Motion to Amend
Plaintiff commenced the instant action as a result of a dispute over the payment following a storm damage loss.  As part of discovery in this case, defendants moved to compel production of plaintiff’s income tax records.  When plaintiff objected, defendants made a motion to compel to the trial court which was denied. 

At the conclusion of discovery, defendant moved to amend its answer to assert additional affirmative defenses.  That motion, too, was denied by the trial court.  As a result, plaintiff initiated the instant appeal seeking a reversal of both opinions of the trial court.

With regard to the motion to compel, the Court ruled that tax returns are not available in discovery absent a “strong showing” that the information is indispensable.  Here, Castlepoint could not meet its burden and its motion to compel was properly denied by the trial court. 

With regard to the motion to amend, the Court noted that amendments are appropriate where there is no prejudice to the non-movant and the proposed amendments are not palpably devoid of merit.  Here, plaintiffs made no effort to establish prejudice.  Moreover, plaintiff likewise did not meet his burden of establishing that the proposed amendments to the Answer were insufficient.  In so holding, the court stated that a determination as to the “merits” of the requested relief was not a factor in determining a party’s ability to amend a pleading.  As such, the trial counsel was reversed, and Castlepoint’s Amended Answer accepted.    

10/15/14       E.C.I. Financial Corp. v First Am. Title Ins. Co. of NY
Appellate Division, Second Department
Where Title Defects Cured and There was No Other Compensable Damage to Assured, Summary Judgment was Appropriate
Plaintiff commenced the instant action after it was allegedly sued for a defective title.  First American moved for summary judgment on the basis that it defended E.C.I. in the underlying action, and successfully resolved the claim and title defect as part of that action.  Moreover, First American moved for summary judgment on E.C.I.’s remaining causes of action that it failed to timely record the mortgage in question.

In affirming the trial court’s grant of First American’s motion for summary judgment, the Second Department noted that the Record established that all irregularities regarding the title had been cured, that E.C.I. did not sustain any other loss, and that the policy did not provide for an award of attorneys’ fees to E.C.I.  Accordingly, the matter was appropriately dismissed by the trial court.

10/15/14       Ginter v Flushing Terrace, LLC
Appellate Division, Second Department
Where Questions of Fact on Negligence Abound, All Motions for Indemnity Fail; Can’t Establish Failure to Procure Without Establishing the Contractual Obligation to Procure First
Plaintiff sustained injury while in the course of his employment with S&J when an object fell several floors above him.  Plaintiff commenced the instant lawsuit against Flushing (as the owner), Criterion (as the general contractor) and M&V (a concrete subcontractor).  Flushing/Criterion commenced a third-party against S&J as plaintiff’s employer, and also asserted a claim against Teddy Bosko Contracting (the masonry contractor).   At the conclusion of discovery, all parties moved for summary judgment.

With respect to the Labor Law portions of this claim, the court denied motions to dismiss plaintiff’s Section 240(1) claim on a question of fact as to whether the object which fell was being hoisted or secured at the time.  With respect to the Section 241(6) claim, the Court again found a question of fact on some of the alleged violations of the New York State Industrial Code. 

With respect to the contractual claims, the Appellate Court ruled that neither S&J, nor M&V, met their burden of establishing they had procured insurance for Flushing.  Not to be outdone, the Court also denied Flushing’s motion for summary judgment against S&J and M&V where, as here, it failed to establish a contractual obligation for either party to procure insurance.  

Finally, all motions for common law and/or contractual indemnification were denied where, as here, there remained questions of fact as the negligence of all implicated defendants and third-party defendants.  This included a finding that a question of fact existed as to whether plaintiff’s failure to wear his hard hat could have been imputed to S&J, as his employer.

FITZ’ BITS

Elizabeth A. Fitzpatrick
[email protected]

10/15/14       State Farm Fire & Casualty Co. v. McDermott
United States District Court, Eastern District of Pennsylvania
Pennsylvania Concludes Faulty Workmanship Is Not An Occurrence
The coverage action derived from an underlying action brought by the PulteGroup against defendant, Patrick McDermott, doing business as Patrick McDermott Plastering, who was insured under five comprehensive business liability policies issued by State Farm.

McDermott entered into a contract with PulteGroup to plaster/stucco and install window and door flashing and install paper for some 299 homes in a residential community in Pennsylvania.  The work was performed from approximately May 1, 2002 through September 1, 2005.  According to PulteGroup, from on or about October 23, 2008, the PulteGroup, with the help of a water intrusion specialist, became aware that McDermott had failed to properly install the window and door flashing, resulting in water intrusion becoming an ongoing and recurring issue for the approximately 299 homes in new residential communities.

State Farm filed a motion for summary judgment asking for a determination that it had no obligation to defend or indemnify McDermott in the PulteGroup action based upon certain provisions and exclusions in the policies.

Discussing the guidelines for policy interpretation, the court initially examined the definition of an occurrence, defined as an accident.  While noting that accident was an undefined term in the policy, the court noted in the State Farm policy that Pennsylvania courts have defined an accident as an unexpected and undesired event, or something that occurs unexpectedly or unintentionally.  State Farm’s contention was that the action alleged, in essence, a claim for faulty workmanship, despite the inclusion of a negligence cause of action.  They also discussed the written warranty guaranteeing that all work and/or materials provided would meet all applicable laws, regulations and codes.

The court noted that while the action alleged both negligence and breach of contract causes of action, Pennsylvania law does not recognize the applicability of a general liability policy for breach of contract and breach of warranty claims.  Referring to Pennsylvania law, which holds that courts must focus on the substance of the complaint rather than the particular language, the court noted that Pennsylvania courts have counseled that faulty workmanship does not constitute an occurrence even, if as found here, it is cast as a negligence claim.  The court concluded that the insured’s potential liability stemmed from his alleged failure to meet his contractual expectations, which did not constitute an occurrence within the meaning of the State Farm policies.  State Farm was, thus, not required to defend or indemnify its insured.  As you know, this issue is being litigated across the country with different jurisdictions reaching different results.  We will continue to report on these cases.

 

AUDREY’S ALL THINGS PERSONAL

Audrey A. Seeley
[email protected]

At DRI Annual Meeting.

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]rwitzfine.com

CMS Alert Implementing Reporting Without The Use Of A Complete Social Security Number
In 2013, President Obama signed into law the Strengthening Medicare and Repaying Taxpayers (SMART) Act.  This law was passed to enact several changes to the Medicare program, including changes which are meant to ensure greater reliability and efficiency of Medicare reimbursements.  Some of the changes are also meant to provide additional guidance and safe harbors for carriers in the reporting of Medicare beneficiaries of liability settlements and no-fault benefits as well as streamlining the repayment of Medicare liens in the settlement of liability claims. For example, the SMART Act set a clear state of limitations on MSP claims which is three years from the time the claim is reported to CMS, and the provision of a safe harbor for carriers who exert a good faith effort to comply with the MSP.

In July Senator Portman and Senator Burr sent a letter to CMS encouraging it to timely implement the regulations the SMART Act directed.  This letter specifically addressed the SMART Act provision requiring CMS to adopt an “expedited portal” that would allow a Medicare beneficiary settling a claim to obtain a final conditional payment during the settlement process itself rather than waiting until months after the settlement to obtain the final conditional payment amount.  However, CMS has not yet implemented such a regulation, and instead there remains only an interim final rule that announced the portal would become operational in 2016.  Currently, there is only a temporary website that CMS has created in lieu of the portal. 

Additionally, the SMART Act gave CMS until July 10, 2014 to eliminate the use of full SSNs. About a month ago, CMS issued an alert stating that “CMS highly recommends, but does not require, [insurers] submit the HICN or full SSN as part of their reports, as it significantly increases CMS’ ability to accurately identify an individual as a Medicare beneficiary.”  The alert further states that as of January 5, 2015, when the full SSN cannot be obtained, an insurer may report the claimant’s last five digits of their SSN, first initial, surname, date of birth and gender.  Further, if an insurer is unable to obtain any of the data elements, the insurer must document their attempts to obtain the same.  CMS further states that a subsequent alert will be published prior to the January 5, 2015 implementation which will include instructions for entry of a partial SSN. 

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

10/07/14       Fiduciary Ins. Co. of Am. v Dok Chu Yi
Supreme Court, Queens County
Court Unpersuaded by Insured’s Self-Serving and Carefully Crafted Statement Concerning an Incident in which He Drove Away with the Underlying Plaintiff on the Hood of his Car
Plaintiff bought this action.  When defendants failed to appear, plaintiff moved for a default judgment along with a declaration of no coverage.   Defendants opposed the motion. 

The action arose out of an incident in which Dok Chu Yi, a livery cab driver, picked up the claimant Jung Im Kim and her friends.  At some point, an altercation ensued between the parties.  The altercation ended with Kim and her friend filing a criminal complaint against Yi.  Kim also filed a personal injury action.  Fiduciary, Yi’s automobile insurer, denied coverage based on the expected or intentional acts exclusion. 

In opposition to this motion, Yi submitted an affidavit in which he attested that he entered his vehicle with Kim still lying on the hood of the car.  He then proceeded to operate the vehicle in a matter that would prevent her from being harmed.  He put the vehicle in reverse and proceeded to move backward at a low rate of speed to allow Kim to slide off the hood. 

The court found this carefully crafted statement that he did not intend to cause any harm to Kim to be unreasonable and meritless. The fact that she fell from the hood of his vehicle was an intended result of Yi's admittedly driving in reverse with her on the hood in order to "get her off the hood". The injuries sustained by Kim were the expected and inevitable consequence of his driving his vehicle in reverse while she was lying on the hood to throw her off the hood, so he could then leave the scene.  Also, the court declined to place any import on the self-serving statements of Kim submitted in opposition to the motion which directly contradicted statements given to police and the DA’s office.  In turn, plaintiff had established a meritorious action. 

The court also noted that neither defendant and provided a sufficient reason for the failure to answer.  Accordingly, the motion was granted. 

09/02/14       343 LLC v. Scottsdale Ins. Co.
Supreme Court, Bronx County
Defense Triggered for Additional Insured; Determination on Indemnity Deemed Premature
343 owned a property located on Fourth Avenue in Brooklyn.  It retained Alisa Construction Co. to act as its general contractor in the construction of a building at this location.  Alisa then retained Ebenezer to perform steel erection and pre-cast plank installation at the site.  On September 29, 2005, an employee of Ebenezer’s, Wilfredo Lorenzo, was assisting another subcontractor unloading steel beams.  As this subcontractor’s crane operator was lifting secured I-beams 25-30 feet in the air above where Lorenzo was standing, the strap broke and Lorenzo was struck by the beams.

When Lorenzo brought suit against 343 and Alisa, they tendered to Scottsdale, Ebenezer’s CGL carrier pursuant to the terms of a contract entered into between Alisa and Ebenezer.  In response Scottsdale accepted the tender under a reservation of rights asserting that while they were additional insureds pursuant to a blanket additional insured endorsement, there was no obligation to indemnify for any bodily injury that was not caused in whole or in part by either the acts or omissions off Ebenezer or those acting on its behalf, nor an obligation to indemnify them for bodily injury caused by the sole liability of either Alisa or 343. 

The court held that the underlying complaint contained allegations of Labor Law violations against 343 and Alisa, as well as allegations of negligence.  However, it could not be concluded at this juncture which allegations would be proven and which would fail.  Thus, while Scottsdale’s obligation to defend remained as long as these entities were in the underlying action, with respect to indemnification, unresolved at the time of this motion were the issues of whether Lorenzo’s claim for bodily injury was caused, in whole or in part by either the acts or omissions of Ebenezer or those acting on its behalf (i.e., Eliou) or caused by the sole liability of 343 or Alisa.

Take Away:  One wonders how this incident could have been caused by the sole liability of 343 and Alisa.

08/12/14       Babarovich v. Tower Group, Inc.
Supreme Court, Kings County
Where Insured Failed to Commence Suit within One Year from Date of Loss, Action Dismissed
Defendant issued a homeowners policy to plaintiffs.  On March 13, 2010, plaintiffs’ premises sustained wind and rain damage.  Approximately, three months later defendant denied coverage for the claim.  The plaintiffs did not commence this action until November 26, 2012. 

Defendant moved to dismiss the action based on a provision which provided that “no action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss.”  The words “date of loss” in an insurance policy have consistently been held to refer to the date of the catastrophe insured against, and not to the accrual date of the plaintiff’s claim for failure to pay. 

In opposition, the plaintiffs did not dispute that the policy expressly limited the statute of limitations to one year.  Rather, plaintiffs argued that the provision of the standard fire policy should apply to non-fire claims covered by the policy.  By way of reference, Insurance Law 3404(e) provides that the standard fire insurance policy shall contain a provision that “no suit or action on this policy for recovery of any claim shall be sustainable…unless commenced within twenty-four months after inception of the loss.” 

The court held that as the policy expressly limited suits to one year, the provision applied.  Also, even assuming for sake of argument that it did not apply, and the policy was instead governed by 3404(e), the matter would still be time barred.  Two years passed from date of loss and the court noted that the case law is clear that only when a fire policy does not contain a statute of limitations, will it be governed by a six year statute of limitations. 

Thus, plaintiffs’ complaint was dismissed. 

Bad Faith

10/16/14       Stephens v. State Farm and Casualty Company
United States District Court, Middle District Pennsylvania
Pennsylvania Court Dismisses Bad Faith with Leave to Amend; Declines to Dismiss Unfair Trade Practices and Consumer Protection Law Claim
This case involves a dispute relating to a homeowners’ policy.  Plaintiffs submitted claims related to theft for vandalism and water damage.  While State Farm paid a portion of the claims, they denied the remainder.

As a result, plaintiffs brought this action alleging breach of contract, unjust enrichment and cancellation of insurance under false pretenses.  After the district court granted defendant’s motion to dismiss the unjust enrichment claim, plaintiffs then moved to amend their complaint to add two additional causes of action for bad faith and a violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.  Defendant’s opposed the motion to amend arguing that the amendment was untimely and that the new claims were futile.

The court began by discussing a claim for bad faith in Pennsylvania.  To articulate such a claim, the law provides that bad faith is a frivolous or unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with the insured.  When considering whether a proposed statutory bad faith claims fails as a matter of law, the courts much consider whether plaintiffs have pled sufficient facts to make out a plausible claim for relief against the defendant.  Here, plaintiffs alleged in a conclusory fashion that the partial payment of their claim was a breach of contract and that defendant engaged in bad faith.  The court found that this was insufficient as a matter of law; however, the court only dismissed the claim without prejudice and granted leave to further amend this claim if plaintiffs could articulate a further factual basis for it.

With regard to the Unfair Trade Practices and Consumer Protection Law claim, the court declined to dismiss it.  As a basis for this claim, plaintiffs alleged that Mr. Stephens’, a quadriplegic, sought and obtained assurances from a State Farm agent that he could leave his home and rent the residence while he sought medical care without losing his insurance.  After receiving these assurances, State Farm allegedly cancelled the policy.  The court held that in order to establish a UTPCPL claim a plaintiff much present evidence showing a deceptive act likely to deceive a consumer acting reasonably, justifiable reliance and ascertainable loss.  The court viewed the amended complaint as sufficient to allege such a claim. 

Accordingly, the court granted the motion in part and denied it in part.  

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

6/12/14Carvale Construction Inc. et al. v. Probuilders Specialty Insurance Company,
California Court of Appeal Fourth District
Construction Defect Not Covered Due To Material Misrepresentations on Policy Application
A recent California case emphasizes that in cases of a disputed or troubled claim, resort and review to the policy application can turn up useful information to investigate or deny a claim.

A customer hired Carvale to do a remodeling job on their home in California and terminated the contract before the remodeling was complete.  The customer filed a claim for defective construction against Carvale.  Carvale submitted the claim to Pro-builders Specialty which was denied on several grounds, including that there was no occurrence under the policy, and the claim was based on poor workmanship and not a covered event.  Carvale sued Probuilders Specialty for breach of contract.  Probuilders prevailed in the trial court and the decision was affirmed on appeal.

One of the bases for the ruling was that Carvale made material misrepresentations in the policy application, and understated the gross receipts from its projects, presumably in the hope of lowering the premiums.  In fact, the policy application gave the same answers to two different questions, being the three largest projects that would be completed during the policy period, and the three largest projects completed in the last three years.  The plaintiff argued that the questions on the application were ambiguous and they answered the questions “as best they could”, but the courts ruled that the answers were not accurate or truthful and affirmed the judgment for Probuilders.  The decision was based on material misrepresentations in the insurance policy application, which translated into an argument that Carvale had not completed the application in good faith and had “unclean hands”.

This case is an example of where the policy application should be closely scrutinized in the case of a contested or disputed claim to provide either background information for a denial, or an independent basis and reason for a claim denial if there are material omissions and misrepresentations in the information provided by the insured.

Newsletter Sign-up

Fill in the form to register to receive any of our free electronic newsletters: