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Coverage Pointers - Volume XVII, No. 10

Volume XVII, No. 10 (No. 440)

Friday, November 6, 2015

 

A Biweekly Electronic Newsletter

 

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874

                                         

Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

 

www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2015
All rights reserved
 

As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.

 

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

 

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.

 

You will find back issues of Coverage Pointers on the firm website listed above.

 

 

Dear Coverage Pointers Subscribers:

 

Do you have a situation?  Give us a call and we’ll try to help you make sense out of it.  We pride ourselves in empowering those who call us to work through situations without the need of counsel.

 

A special welcome to those who attended Dave Adams’ Labor Law webinar this week and joined our subscription list.  Remember, our sister publication is Labor Law Pointers and just drop a note Dave at [email protected] and ask him to add you to his monthly mailing list.  Tell him that Dan the Coverage Man sent you.

 

Nice to be Recognized:

 

We are pleased to announce that Hurwitz & Fine has been prominently recognized in the 2016 U.S. News & World Report and Best Lawyers “Best Law Firms” with a top tier ranking in Insurance Law and Personal Injury – Defendants.  There were multiple other practice areas highlighted. Law firms that are included in the rankings are done so on a rigorous evaluation process that includes both client and peer reviews. To be eligible for a particular ranking, a law firm must have at least one lawyer who is included in Best Lawyers in that practice area and metro.

 

The firm was recognized in the following areas:

 

  • Banking and Finance Law
  • Civil Rights Law
  • Commercial Litigation
  • Corporate Law
  • Elder Law
  • Employment Law – Management
  • Health Care Law
  • Insurance Law
  • Litigation – Municipal
  • Mergers & Acquisitions Law
  • Personal Injury Litigation – Defendants
  • Product Liability Litigation – Defendants
  • Professional Malpractice Law – Defendants
  • Real Estate Law
  • Tax Law
  • Trusts & Estates Law

 

Cassie

 

We regret that Cassandra Kazukenus has decided to spend more time with her son and work in an Albany firm (plaintiffs, mind you) that will afford her less travel.  She is a terrific lawyer and we’ll miss her smiling face and pixels.  Watch for some new columns and columnists coming soon. Our presence in the capital district does and will surely continue.

 

DRI Insurance Conference in Hartford:

 

I was delighted to speak on “Preserving the Privilege” at the DRI Insurance program in Hartford last week.  There was an overflow crowd of 150+ in a first-of-its-kind, “take it to the industry” conference held in a regional location.  I send kudos to DRI Insurance Law Committee Chair, Audrey Seeley, for her leadership in constructing this program.

 

Thank you to the dozen or more folks who came up to me to comment on the value of this publication and Labor Law Pointers.  It is nice to know that we have so many friends out there and that our newsletters strike the right chord.

 

Public Adjusters – When Do They Earn Their Keep?:

 

Hesitant as I am to tiptoe into the first party universe and stumble over Steve Peiper’s able team, I cannot not help but claim authorship of a summary of an October 28th First Department decision in Public Adjustment Bureau v. Greater New York Mutual.  What must a public adjuster accomplish before it is entitled to compensation for its work?  How do we know when a public adjuster has performed “valuable services” entitling it to recompense.  This summary is worth reading, even for those of us who steadfastly avoid property coverage work.

 

 

Wilewicz’ Wide World of Coverage:

 

Dear Readers,

 

What a month. I hope that everyone had a lovely Halloween and that you are enjoying what is left of autumn. Since our last issue, my daughter got a part in the school play as a Munchkin in the Wizard of Oz (so proud!) and, in the meantime, we also moved into our first new home. That is, if you can call a 110 year old home “new”. Indeed, upon arrival we had to deal with a leaky fridge, a leaky washer, bowing floors, a busted furnace, missing ducts (having no heat for a week was fun), learning that there is no electricity in the detached garage, and coming to find that all of our sconces have gas lines directly behind them because the building predates electricity. Ah, the joys of homeownership.

 

This week in the Wild World of Coverage, we bring you a couple of interesting ones from here and yon. We have a Second Circuit case interpreting policy exclusions, plus a New York Court of Appeals case discussing an environmental liability issue that could arguably have coverage implications, by analogy.

 

First, in Coney Island Auto Parts v. Charter Oak, an auto parts store in Brooklyn sustained property damage when its concrete floor collapsed after underlying soil settled beneath it. As insureds do, they made a claim to their carrier for coverage. Here, the insurer declined, citing exclusions aptly named: the Earth Movement exclusion and the Collapse of Buildings exclusion. In an easy-to-understand primer on insurance coverage, the Second Circuit held that these exclusions applied since it was undisputed that the settlement of soil under the concrete contributed to its collapse. While the Court acknowledged that it is the insurer’s burden to establish the applicability of an exclusion, once one of those exclusions was triggered to bar coverage the rest were of no moment. Since the earth moved, the exclusion for earth movement applied. The end.

 

Second, in Remet Corp. v. Pyne, while not a coverage case, this Court of Appeals decision touches upon an issue that comes up with some frequency in environmental coverage litigation – whether administrative agency letters to potentially responsible parties can be viewed as effectively starting “legal” process against them. In the coverage context this comes up when analyzing whether DEC or EPA letters are sufficiently adversarial as to constitute “suits”, thus triggering defense and/or indemnity obligations. In an analogous case, Remet, the high court analyzed whether a DEC letter was sufficiently threatening so as to trigger an indemnification provision in a sales agreement for a company that had otherwise assumed a business and its real estate. The Court found that since it had sufficiently coerced the PRP to respond, it essentially “required” action. This effectively marked the beginning of a “legal” process, regardless of the potentiality of responsibility, and despite the fact that only an administrative procedure was being commenced. This is interesting because it adds high court analysis to the body of law in New York that has gone in different directions over the years on whether administrative letters are “suits”. It appears that the trend increasingly is that, yes “it depends”, but more often than not they are.

 

Good stuff. See you in a couple of weeks!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

 

Peiper’s Pitch:

 

We start this week with a public service announcement.  Repeat after us…GOL 5-322.1 applies to construction agreements.  Commercial leases have their own statute, GOL 5-321, which speaks to the enforceability of indemnity agreements.

 

Repeat after us…GOL 5-321 DOES NOT prohibit an owner from being indemnified for its own negligence.  If the arrangement is made at arm’s length, and exhibits a desire to transfer the risk of the premises to the tenant, GOL 5-321 does not automatically void the indemnity clause.  This is particularly true where the lease also contains an insurance procurement clause running in favor of the owner.

 

Yet again, an Appellate Court was led astray from the language of the GOL.  Presumably, its departure is linked directly to legal briefs that misunderstand the differences between GOL 5-322.1 and GOL 5-321.  There is a difference, and the nuances should be noted in any briefing on these issues.

 

Stepping down from my soapbox now.  On a training front, I am honored to be presenting at the Eastern Regional Conference for PLRB in Atlanta next week.  I will be stepping in for Beth Fitzpatrick, and will do my very best to be as engaging as she.  If you’re attending, please stop by and say hi.  The topic is on Reservation of Rights/Disclaimers.   

 

Finally, we sadly bid adieu to a favorite columnist this week.  Ms. Kazukenus has accepted a new challenge in her career, and will no longer be exclusively sharing her wit, insight, and considerable policy acumen with us.  We will miss her terribly on both a personal and professional basis.  Nonetheless, with stiff upper lip, I thank her for all of her excellent legal work over the past several years.  It has been a true joy to have worked with her.  Best wishes.

 

Steve

Steven E. Peiper

[email protected]

 

Coverage/Risk Transfer Mediation:

 

Just a reminder:  if you are looking for someone to mediate a coverage dispute (or conduct a universal mediation on a tort/risk transfer/ coverage claim), give a call.  We serve both as a mediator or an advocate and may be able to help you resolve complex claims involving bodily injury/property damage claims with coverage and contractual indemnify overlays. 

 

Fitz’ Bits:

 

Dear Subscribers:

 

It was great to attend the Federation of Defense and Corporate Counsel Insurance Industry Institute in New York City where, as usual, excellent speakers addressed a variety of interesting topics.  I was particularly interested in the panels addressing cyber risks and how the insurance industry is addressing those risks and the claims that have arisen as a result of cyber hacking. According to a recent Experian survey, while companies are more worried about data breaches that product liability claims, most lack confidence in their cyber response plans and a fair number of the companies who responded don’t even have a plan in place. While many more companies are purchasing insurance to cover anticipated costs associated with a breach, having a plan in place and investing in preventative measures, will be necessary to obtain the coverage. Keeping those measures up to date may affect the availability of coverage depending on the language of the policy.

 

This week I report on a case involving an insurer’s effort to obtain contribution from another insurer following settlement of a construction defect action.  The case was brought in the Fourth District of California. 

 

                                                                                   Til next time,

 

                                                                                    Beth

                                                                                    Elizabeth A. Fitzpatrick

                                                                                    [email protected]


 

 

Wedding on the Rocks, a Century Ago:

 

Dunkirk Evening Observer

Dunkirk, New York

6 Nov 1915

 

ELOPED WITH ANOTHER

ON EVE OF HER WEDDING

 

Beacon, N.Y., Nov. 6.—The daintily embossed cards announcing the engagement of Miss Ruth Parkinson, Beacon's prettiest and wealthiest daughter to Daniel LeRoy Dresser, scion of a New York family, were not sent out today, as planned.  At last accounts, they were being joyfully carried toward the ash can by Frank Van Houten.

 

Frank met Daniel and Ruth late last night as they came home from trousseau-buying.  He congratulated them—until Daniel was gone.  Then his manner changed—abruptly.

 

"Into my auto," he said, "I want to talk to you."

 

Protesting, Ruth allowed herself to be shoved into the car.  They stopped at Poughquag, a sleepy town clerk, a minister in a bathrobe early today, and they were married.

 

They were receiving the parental blessing at the Parkinson home today.  Daniel hasn't been heard from.

Editor’s Note:  We found a story telling about an attempt to annul that marriage but could not find out whether the try or the marriage was successful.  However, we did find an later engagement announcement for Mr. Dresser to one Betty Peale a few years later

 

Jen’s Gems (aka the “Ella” Column”)

 

Greetings.  Hope everyone had a safe and spooky Halloween.  This year was the first time we took Ella trick-or-treating in our neighborhood.  In typical Ella fashion, she met a group of children and decided it was more fun trick-or-treating with them than I was.  She then raced down the street with them, hitting every house on the right side before coming to the realization (when he were about half a mile from our house) that she had collected enough candy and was exhausted.  This then required me to carry her and her bag of treats the half mile back to our house.  Every time I tell this story to the more seasoned parent, I am always told, “That is why you bring the wagon.”  Lesson learned.

 

In terms of my column this week, I report on a decision arising out of a Superstorm Sandy loss.  The trial court in New York County held that based on the language of the insurer’s policy, its water exclusion unambiguously removed coverage for damage suffered by a restaurant due to an offside power outage caused by flood water.  Nothing within the policy limited the exclusion to onsite outages only.

 

Further, as we roll through the fall, I wanted to remind everyone that the DRI Insurance Law Committee is putting on its annual Insurance Coverage & Practice Symposium in New York City on December 3rd and 4th and the advanced registration cutoff date is today (11/5) (saves $100).  It should be a great program!

 

Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

Edison Understood – A Century Ago

 

The New York Times

New York, New York

6 Nov 1915

 

EDISON DESPAIRS OF PEACE

 

And Says War Will Be More

Destructive Every Year

 

Special to the New York Times.

 

DENVER, Nov. 5.—"The day of universal peace is a long, long way off," declared Thomas A. Edison, en route East here last night.  "There's got to be a great deal more war, and it's going to be more destructive every year.

 

"Science is going to make war a terrible thing—too terrible to contemplate.  Pretty soon we can be mowing men down by the thousands—or even millions—almost by pressing a button.  The slaughter will be so terrible that the machinery itself will virtually have to do the fighting.

 

"I don't look for electricity to play such an important part in this new slaughter.  It's going to be a struggle of explosives.  That will be the all-important element.

 

"As to the question of America's preparedness for war, no man can say when war will be forced upon us.  So we must be prepared—just the same as a man insures his home against fire.

 

"Ammunition is our one great need.

 

HEWITT’S HIGHLIGHTS:

 

Dear Subscribers:

 

It seems like every year the Thanksgiving period shrinks further and further. Halloween has grown with even adults dressing up and having parties, and more decorations then when I was a child. The December Holidays continue to grow, with lights and decorations on sale right after Labor Day in some stores. So Thanksgiving seems to have shrunk, with neither candy nor gifts as the emphasis. Well, I at least enjoy this period of fall with leaves falling, windy and rainy days, culminating in that big feast near the end of the month. I will not rush Christmas.

 

On to the serious injury cases. The courts were relatively quiet on that front these last two weeks. However, we address several cases in this edition. In one, the Court gives a reminder that you cannot argue, solely, as a defense to hitting someone from behind that they stopped short. We are all supposed to drive with enough distance between cars to account for a sudden stop. You cannot argue alone that someone stopped short but there must have been some negligence in them doing so the way that they did.  In another case, a plaintiff, who failed to submit their expert’s report affirming under penalties of perjury that what was stated was true, was allowed to fix that error on the motion to reargue by re-submitting the report with that language as part of it. In the last case, the injured plaintiff had demonstrated no range of motion limitations after the accident on several occasions. That was enough for a prima facie case of summary judgment, even though later, there was some limitations shown. The Plaintiff’s expert was required to explain why the earlier tests showed no limitations, in order to demonstrate an issue of fact, or else they would credit the defendant’s expert’s opinion that on the later tests, plaintiff was showing evidence of degeneration, or just faking it.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

How Kind to Blink at Anti-Semitism:

 

The New York Times

New York, New York

6 Nov 1915

 

JEWS MAY BE OFFICERS

 

In Bavarian Reserve Regiments, the

War Minister Says

 

From a Staff Correspondent

 

Special Cable to the New York Times

 

BERLIN, Nov. 5.—A Munich dispatch to the Vossische Zeitung says that the regulation against Jews becoming officers in the Bavarian Army has been modified.  The Bavarian War Minister, Baron Kress von Kressenstein, in a statement before the Finance Committee, said that Jews had not been behind members of other religious faiths in discharging their duty in the war, and that the Jews had thus obtained full opportunity to become reserve officers.

 

Many Jews have been promoted to commissions in the course of the war.

 

 

Highlights of This Week’s Issue (attached):

                                              

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

 

  • “Named Insured” Means Named Insured
  • When Does a Public Adjuster Earn Its Fee?  Will the Floodgates Open?
  • Landlord Successful in Establishing Tenant Failed to Procure Policy But Damages Limited to Out of Pocket Losses; Contractual Indemnity Claim Fails



HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW

Robert E.B. Hewitt III

[email protected]

 

  • Plaintiff was Allowed on Motion to Renew To CorrectaA Deficient Physician Affirmation that Has Not Been Affirmed Under Penalties of Perjury When Submitted with the Original Motion
  • Defendant Could Not Establish Its Entitlement to Summary Judgment As Plaintiff Was Able to Show an Issue of Fact As To Whether There Was a Serious Injury to his Left Knee and Shoulder
  • Defendant Established that the Alleged Injury to Plaintiff’s Right Knee Did Not Constitute a Serious Injury Under the Permanent Consequential or Significant Limitation of Use Categories of Insurance Law
  • Party Alleging that the Other Driver Made a Sudden Stop Must Anticipate Sudden Stop and Maintain A Safe Distance and Cannot Prevail on Liability Unless They Show The Driver That Stopped Suddenly Acted Negligently
  • Defendant Failed to Address Properly Plaintiff’s Claims of a 90/180-Day Serious Injury
  • Plaintiff’s Expert Failed to Explain Several Examinations Which Indicated No Range of Motion Deficiencies And Therefore Could Not Establish Any Current Range of Motion Was Due to the Accident as Opposed to Degeneration

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Untimely Service of Complaint Forgiven Where Application for Enlargement was Timely Made and Defendant was Not Prejudiced by the Delay
  • Indemnity Clause Requiring Negligence Requires the Movant to Actually Establish Negligence
  • Head Scratcher:   Court Rules that GOL 5-322.1 Prohibits Landlord from Indemnity for its Own Negligence; Question of Fact as to Landlord’s Actual Negligence
  • Convenience of Non-Parties Is Key to Change of Venue Motion

 

 

FITZ’S BITS

Elizabeth A. Fitzpatrick

[email protected]

 

  • Equitable Contribution Permitted

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

Federal Courts: Coverage Law:

 

  • Second Circuit Finds No Ambiguity In “Earth Movement” Exclusion, Where Settlement Of Soil Contributed To Floor Collapse

 

State Environmental Law:

 

  • In Environmental Contamination Case, Court Of Appeals Holds That Letter From DEC Notifying Company Of Status As A Potentially Responsible Party And Threatening “Legal” Action Was Sufficiently Coercive To Trigger Indemnification

 

 

CASSIE’S CAPITAL CONNECTION

Cassandra A. Kazukenus

[email protected]

 

  • A00453/S0145                     Signed Into Law By Governor Cuomo

 

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • No Coverage Found for Damage Due to Offsite Power Outage Caused by Flood Water

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

 

 

  • Contractor as Additional Insured

 

That’s it – all the best.

Dan

Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202   

Office: 716.849.8942

Cell:     716.445.2258
Fax:      716.855.0874

E-Mail:                        [email protected]
H&F Website:           www.hurwitzfine.com

LinkedIn:                   www.linkedin.com/in/kohane

Twitter                        @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

Cassandra Kazukenus

Jennifer A. Ehman

Taylor F. Gabryel

Agnieszka A. Wilewicz

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]

 

Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

 Elizabeth A. Fitzpatrick

Diane F. Bosse

 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury
Peiper on Property and Potpourri

Fitz’ Bits

Wilewicz’s Wide World of Coverage

Cassie’s Capital Connection

Keeping the Faith with Jen’s Gems
Earl’s Pearls

 

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

 

11/04/15       Endurance American Ins. Co. v. Century Insurance Company

Second Circuit Court of Appeals

“Named Insured” Means Named Insured

This one was ours.  It took six days from oral argument for the Second Circuit to reverse the lower court and do the right thing.

 

Century provided a policy of insurance to a subcontractor named Pinnacle, pursuant to an insurance procurement provision.  The policy contained a blanked additional insured (“AI”) endorsement which provided coverage to Hayden, the general contractor.  An employee of Pinnacle was injured on the job.

 

The Century policy contained an “Action Over Exclusion” that excluded claims for injuries sustained by an employee of the “Named Insured”.  Again, the named insured, as listed on the Declarations Page, was Pinnacle.

 

Hayden, and its insurer, claimed that the term “Named Insured” was undefined and could include, because of a claimed ambiguity, other insureds (including “additional insureds”) within the umbrella of the term “named insured”.  Because of the “separation of insured” provisions, it argued, coverage was available because Hayden was a “named insured” since the term was ambiguous.

 

While Endurance convinced the Magistrate Judge below, the Second Circuit read the policy as written.  The “Named Insured” was identified on the Declaration Page and there simply wasn’t any other.  The Action Over Exclusion was enforced as written, coverage was denied to Hayden and doves were released as a symbol of peace and harmony.

 

10/29/15       Public Adjustment Bureau, Inc. v. Greater NY Mutual
Appellate Division, First Department

When Does a Public Adjuster Earn Its Fee?  Will the Floodgates Open?

There was a garage collapse in 1999 and the property owner, Seward Park Housing (“Seward”) made a claim for rebuilding costs against Greater NY Mutual (“GNY”) and utilized the services of a public adjuster, , Public Adjustment Bureau, Inc. (”PAB”).  The agreement provided that PAB would be paid seven percent of the amount of loss and salvage and would “perform valuable services” to secure that compensation.

 

PAB's efforts to settle the claim were unsuccessful, and the matter proceeded to trial without any further direct involvement on its part. Ultimately, after a jury verdict in Seward Park's favor and against Greater New York Mutual was vacated in part and the matter remanded for another trial and then eventually settled in 2010.

 

PAB sued for its seven percent.  The jury awarded it that sum but the judge set aside the verdict finding that PAB was not entitled to compensation. The trial judge reasoned PAB's services were limited to a futile initial attempt to settle with Greater New York Mutual and that none of its work was used in the trial against the insurer or to obtain the ultimate settlement. The court expressed the view that "valuable services" "must consist of continuous input that contributed to the settlement or adjustment of the claim," and concluded that PAB made no such continuous input.

 

The appellate court disagreed and reinstated the verdict in favor of PAB.  In an interesting decision, it reviewed the history of public adjusting dating back to the 19th century.  It noted that though the public adjustment agreement is regulatory, there is no clear definition of "valuable services," or what portion of the ultimate settlement must be attributable to the services of the public adjuster for its services to be deemed "valuable".

 

The evidence demonstrated that PAB assisted Seward in filing a notice of claim, in satisfaction of the notice requirement in the policy, cooperated and assisted with document requests from Greater New York Mutual, filed a written request, a $100,000 advance, with supporting documentation on Seward Park's behalf, submitted proofs of loss, met with lawyers and engineers and commented on claim documents.

 

Viewing the foregoing evidence in the light most favorable to plaintiff, the court concluded that there are valid lines of reasoning that could lead rational jurors to find that although PAB was not directly involved in the trial against the insurance company, it had provided "valuable services" in connection with the ultimate settlement of Seward Park's insurance claim.

 

Seward argued that PAB failed to establish that but for PAB's conduct; Seward Park would not have recovered against its insurer. However, neither the Insurance Law nor the retainer agreement requires a "direct and proximate link," or the actual procurement of a settlement. Each requires merely that the public adjuster provide "valuable services" in connection with a settlement.

Editor’s Note: How much, or how little work, make services valuable?

 

10/28/15       Bleich v. Metropolitan Management, LLC

Appellate Division, Second Department

Landlord Successful in Establishing Tenant Failed to Procure Policy But Damages Limited to Out of Pocket Losses; Contractual Indemnity Claim Fails

The injured plaintiff sued, claiming that he slipped and fell on ice covering the sidewalk adjacent to a building in Brooklyn. The building was owned by the Metropolitan and the ground floor was leased to Valley National Bank (“Bank”). Pursuant to the lease agreement between Metropolitan and Bank, Bank assumed responsibility for snow and ice removal "from the sidewalks adjacent to the Demised Premises."

 

The Court found that the lease agreement was not clear whether contractual indemnity was required. Moreover, contractual indemnity could be secured for the owners own negligence.

 

Metropolitan did establish its entitlement to judgment on its cross claim against Valley alleging breach of contract for failure to procure insurance naming it as an additional insured but damages are limited to out-of-pocket damages caused by the breach.



HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW

Robert E.B. Hewitt III

[email protected]

 

11/04/15                 Green v. Canada Dry Bottling, Inc.

Appellate Division, Second Department

Plaintiff Was Allowed On Motion to Renew To Correct a Deficient Physician Affirmation That Has Not Been Affirmed Under Penalties of Perjury When Submitted With the Original Motion

The Appellate Court reversed the lower court’s grant of summary judgment to the defendant and reinstated the action.  The Appellate Court found that contrary to the plaintiff's contention, the defendants established, prima facie, that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.  In opposition, the plaintiff initially submitted an expert affirmation from her treating orthopedist, which the Supreme Court found deficient under CPLR 2106 as it was not affirmed under penalties of perjury. In support of that branch of her motion which was for leave to renew, however, the plaintiff offered a supplemental affirmation by the doctor which complied with CPLR 2106. Under the circumstances presented, the Appellate Court found the trial court improvidently exercised its discretion in denying that branch of the plaintiff's motion which was for leave to renew. Contrary to the defendants' contention, the Appellate Court found the supplemental affirmation of the doctor raised triable issues of fact as to whether the alleged injuries to the plaintiff's right shoulder constituted a serious injury under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d)), and whether such injuries were causally related to the subject accident.

 

11/04/15                Batista v. Leveridge

Appellate Division, Second Department

Defendant Could Not Establish Its Entitlement to Summary Judgment as Plaintiff Was Able to Show an Issue of Fact as To Whether There Was a Serious Injury to his Left Knee and Shoulder

The Appellate Court upheld the denial of defendant’s summary judgment motion, finding an issue of fact as to whether  the plaintiff sustained serious injuries to his left knee and right shoulder within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The Appellate Court noted that the defendant established, prima facie, that the plaintiff did not sustain a serious injury to his left knee and right shoulder without specifying how. In opposition, however, the Appellate Court again without noting how found the plaintiff raised a triable issue of fact.

 

11/04/15                Preciado v. Garfield

Appellate Division, Second Department

Defendant Established That The Alleged Injury to Plaintiff’s Right Knee Did Not Constitute a Serious Injury Under the Permanent Consequential Or Significant Limitation of Use Categories Of Insurance Law

The Appellate Court Affirmed the Trial Court’s grant of summary judgment to defendant. The Appellate Court noted the defendants met their prima facie burden of showing that the plaintiff Jesus Preciado, Jr. did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the injured plaintiff's right knee did not constitute a serious injury under the permanent consequential limitation of use or the significant limitation of use categories of Insurance Law. In opposition, the plaintiffs failed to raise a triable issue of fact. The case does not set forth any details.

                                

11/04/15                Singh v. City Limousine Trans. Corp.

Appellate Division, Second Department

Party Alleging That the Other Driver Made a Sudden Stop Must Anticipate Sudden Stop and Maintain a Safe Distance and Cannot Prevail On Liability Unless They Show the Driver That Stopped Suddenly Acted Negligently

The Appellate Court found defendants failed to meet their prima facie burden of showing that the plaintiff Rashree Singh and the plaintiff Kamla Narsingh each did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the Malan defendants failed to adequately address Singh's and Narsingh's respective claims, set forth in their bills of particulars, that each of them sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d).Since the defendants did not sustain their prima facie burden, it was deemed unnecessary by the Appellate Court to determine whether the papers submitted by the plaintiffs in opposition were sufficient to raise a triable issue of fact.

 

However, defendants did meet their prima facie burden of showing that the plaintiff Majaina Ibrahim-Singh did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of Ibrahim-Singh's spine and to her left shoulder did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) and that the alleged injuries to the cervical region of Ibrahim-Singh's spine and to her left shoulder were not caused by the accident, in any event. The defendants further submitted evidence demonstrating, prima facie, that Ibrahim-Singh did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d). No details of how are given by the Court.  Ibrahim-Singh failed to raise a triable issue of fact in opposition.

 

Finally, the Appellate Court reversed the trial courts in effect, denying Singh's cross motion for summary judgment dismissing the Malan defendants' counterclaim against her. In support of the cross motion, Singh demonstrated that she was not negligent in the happening of the accident by submitting evidence that her vehicle was at a complete stop when the vehicle driven by Luis Malan struck her vehicle from behind. In opposition, the Malan defendants claimed that Singh's vehicle came to a sudden stop. However, the Appellate Court noted that vehicle stops are foreseeable under prevailing traffic conditions and must be anticipated by the driver that follows, since she is under a duty to maintain a safe distance between his or her car and the car ahead. The defendants failed to submit evidence sufficient to raise a triable issue of fact whether Singh was negligent under the circumstances in making the alleged sudden stop.

 

11/04/2015   Tekhnyeyev v. Joseph

Appellate Division, Second Department

Defendant Failed to Address Properly Plaintiff’s Claims of a 90/180-Day Serious Injury

The Appellate Court reversed the trial court’s grant of summary judgment to defendant. The Appellate Court found that the defendant did not even meet her prima facie burden of demonstrating that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant's motion papers failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that he sustained a medically determined injury or impairment of a nonpermanent nature which prevented him from performing substantially all of the material acts which constituted his usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident. In light of the defendant's failure to meet her prima facie burden, the Appellate Court held it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.

 

10/29/2015   St. Clair v. Giroux

Appellate Division, Third Department

Plaintiff’s Expert Failed to Explain Several Examinations Which Indicated No Range of Motion Deficiencies And Therefore Could Not Establish Any Current Range of Motion Was Due to The Accident As Opposed To Degeneration

In this case, in December 2010, plaintiff Steven St. Clair was refueling his vehicle when it was struck by a vehicle driven by decedent.  At the time of the accident, plaintiff Norman St. Clair was seated in the passenger seat of the vehicle that was struck. Subsequently, Steven St. Clair and his spouse — derivatively — brought an action against decedent alleging that Steven St. Clair sustained a serious injury as a result of the accident. Norman St. Clair also commenced an action against decedent which was consolidated with the first action. The parties stipulated that the decedent was liable for the accident. Defendant thereafter moved for summary judgment dismissing the consolidated complaints, arguing that neither Norman St. Clair nor Steven St. Clair had suffered a serious injury pursuant to Insurance Law § 5102 (d) as a result of the accident.

 

As to Steven St. Clair, the Appellate Court found that defendant met his prima facie burden regarding the alleged serious injury to the lumbar spine and cervical spine. The orthopedic surgeon noted that Steven St. Clair had a history of chronic lower back pain and arthritis dating back to 2007 and had been prescribed narcotics related to such conditions prior to the accident. The orthopedist noted that an X ray of Steven St. Clair's lumbosacral spine from the date of the accident indicated lower lumbar spinal stenosis, which he averred provided conclusive evidence of a relatively severe preexisting condition that was not caused by the accident and which explained any permanent injury to the lumbar spine. As to the injuries to Steven St. Clair's cervical spine, although Steven St. Clair had not complained of pain or injury to his neck prior to the accident, Saunders indicated that an MRI taken in December 2012 revealed an arthritic condition in the cervical spine that predated the accident. Saunders opined that the only injury to Steven St. Clair's cervical spine from the accident was a mild sprain "superimposed on significant pre-existing arthritic conditions of the neck." Notably, Saunders relied on a February 2011 physical exam of Steven St. Clair that affirmatively noted that he did not have any restrictions in range of motion. Based on the result of more limited ranges of motion at his later examination of Steven St. Clair, Saunders concluded that any present loss of range of motion that he observed was either subjective in nature or caused by arthritic changes. The Appellate Court found that the evidence was sufficient to establish defendant's prima facie burden that any persisting injuries related to Steven St. Clair's lumbar spine and cervical spine were not caused by the accident.

 

In order to raise a triable issue of fact, the Appellate Court noted that Steven St. Clair was required to submit evidence demonstrating a serious injury and, given defendant's proof that any current injuries were related to preexisting conditions, he was also required to provide additional evidence addressing defendant's argument of lack of causation. However, Plaintiffs' expert did not address the fact that Steven St. Clair was found to have complete range of motion — in both his lumbar spine and his cervical spines — during physical examinations after the accident. Accordingly, the Appellate Division held that Steven St. Clair did not raise a material issue of fact as to whether any current loss of range of motion was causally related to the accident, rather than being causally related to progressive degenerative conditions that preexisted the accident.

 

As for the other Plaintiff, Norman St. Clair, the Appellate Court found the Supreme Court also properly granted summary judgment dismissing Norman St. Clair's claim of serious injury to his cervical spine. The Defendant’s Orthopedist Saunders observed Norman St. Clair's range of motion in his neck both prior to and after their appointment and, on the basis of those observations of a normal range of motion, opined that any limited range of motion exhibited during the exam was subjective and the result of exam magnification. Further, medical records establish that Norman St. Clair was found to have full range of motion in his neck for driving in September 2011. An orthopedic surgeon's report from shortly thereafter concluded that Norman St. Clair did not suffer any disability from his cervical spine. Plaintiffs' experts' attribution of current limitations of cervical spine range of motion to the accident was insufficient to raise a material issue of fact to rebut defendant's prima facie case, given that the expert failed to address the previous finding that, approximately a year after the accident, Norman St. Clair had full range of motion in his neck.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

11/04/15          Kuwano v Linares

Appellate Division, Second Department

Untimely Service of Complaint Forgiven Where Application for Enlargement was Timely Made and Defendant was Not Prejudiced by the Delay

Plaintiff timely, and appropriately, commenced a lawsuit against defendant.  However, for some reason, service was not timely perfected and defendant objected.  Plaintiff moved to compel acceptance of the Summons and Complaint and the trial court affirmed.

 

In affirming the trial court, the Appellate Division noted that the action was timely commenced, and the motion to compel acceptance of the Summons and Complaint was also made prior to the expiration of the statute of limitations.  Moreover, the Court held there was no prejudice to defendant in permitting the late service.  This is because the plaintiff’s counsel sent correspondence to defendant within 50 days of the initial accident advising therein that defendant’s carrier should be put on notice of the potential lawsuit.

 

10/28/15          Valente v Dave & Busters of NY, Inc.

Appellate Division, Second Department

Indemnity Clause Requiring Negligence Requires the Movant to Actually Establish Negligence

In this personal injury action, the landlord, Simon, cross-claimed for contractual indemnification against Dave & Busters.  Dave & Busters was the tenant at the location where plaintiff sustained injury.  In denying Simon’s claims, the Court noted that the landlord failed to establish the loss was occasioned due to the negligence of Dave & Busters.  Thus, given the limited language of the agreement, Simon’s claims failed.

 

In so holding, the Court also noted that an indemnity clause (unlike an insurance policy) does not create a broader duty to defend.  Rather, the entirety of a signatory’s obligations is driven by whether the indemnity clause, as written, is triggered.  We also note that Simon argued that the SIR found within Dave & Buster’s policy created a duty to defend as the SIR, in effect, made Dave & Busters an insurance company.  That claim, as interesting as it might be, was unfortunately not raised until Simon’s reply papers, and thus was discarded by the Court as not properly at issue.

 

10/28/15          Bleich v Metropolitan Mgt., LLC

Appellate Division, Second Department

Head Scratcher:   Court Rules that GOL 5-322.1 Prohibits Landlord from Indemnity for its Own Negligence; Question of Fact as to Landlord’s Actual Negligence

Plaintiff sustained injury when he slipped and fell on ice outside of a building owned by Metro.  Pursuant to a commercial lease, Metro then sought indemnity against from its tenant, Valley.  At the completion of discovery, Metro moved for summary judgment against Valley.

 

The Court denied Metro’s claim for contractual indemnity.  In support of its position, the Court cited 5-322.1 as support for the proposition that a party cannot be indemnified for its own negligence.  Here, where Metro did not establish itself free from negligence, a question of fact precluded dispositive relief.

 

However, the Court noted that Metro had established the lease required Valley to procure insurance for Metro, and that Valley breached that obligation.  Damages, however, are limited to Metro’s own “out-of-pocket” expenses as a result of the breach.

 

Finally, the Court addressed Valley’s claims that it was not responsible for the condition of the sidewalk, notwithstanding the provision of the lease which clearly makes its Valley’s responsibility to clear the area.  Where, as here, there is no statutory code obligation to clear adjacent sidewalks, liability will not attach.  The only way liability will attach to the condition of a sidewalk (absent a statutory obligation to maintain it) is where the tenant/owner undertook maintenance efforts.  Because here Valley did not address whether it attempted to remediate the condition of the sidewalk, a question of fact precluded its motion for summary judgment.

 

Peiper’s Point – We are disheartened by this decision.  First of all, 5-322.1 only applies to construction contracts. This is a lease, and therefore falls within the province of GOL § 5-321.  Moreover, the case law interpreting GOL § 5-321 will permit an owner to be indemnified for its own negligence; particularly, like here, where there is an insurance procurement clause indicating the parties’ intent to transfer the risk to the tenant.

 

10/22/15          Healthcare Professionals Ins. Co. v Parentis

Appellate Division, Third Department

Convenience of Non-Parties Is Key to Change of Venue Motion

This matter arises out of a medical malpractice trial that concluded in Erie County.  After an excess verdict, plaintiff commenced the instant action in Albany County seeking a Declaratory Order which would provide that plaintiff acted in good faith throughout the negotiation phase of the trial.  Defendants all moved for a change of venue from Albany County to Erie County.  Defendants cited their respective practices were located in Erie County, as were their attorneys.

 

Nonetheless, the Court ruled that the question is not where the parties are located.  Rather, the question is whether a change in venue would make the litigation more convenient for non-parties.  Here, the dispute centers over the negotiations during the trial.  There is likely no third-party involvement.  Moreover, no defendant addressed the issue of non-party inconvenience, and, on balance, the Court was reluctant to overrule the plaintiff’s otherwise proper choice of venue.

 

 

FITZ’S BITS

Elizabeth A. Fitzpatrick

[email protected]

 

10/23/15       Underwriters of Interest Subscribing to Policy No. A15274001 v. Probuilders Specialty Insurance Co.

Fourth District, Division 1, CA

Equitable Contribution Permitted

The coverage action arose following the settlement of an underlying construction defect claim in which it was alleged that Pacific Trades Construction and Development, Inc. was liable for damages to multiple separate single family homes caused by construction defects.  Underwriters had issued a commercial general liability policy insuring Pacific Trades and, in addition, Pacific Trades was insured under policies issued by Probuilders, which provided indemnification for many of the same risks encompassed by Underwriters’ policy.

 

After Pacific Trades was identified in a lawsuit, it notified both Underwriters and Probuilders of the suit.  Underwriters undertook its defense and thereafter upon tendering the matter to Probuilders, they denied any obligation to afford defense, pointing to language within their policy that obligated them to afford defense “provided that no other insurance affording a defense against such a suit is available to you.”

 

The case settled with Probuilders contributing $270,000 to the approximate $1 million settlement.  Thereafter, Underwriters filed suit against Probuilders seeking equitable contribution for some of the defense costs paid by Underwriters in connection with the defense of the underlying action.

 

In addition to arguing that the action was untimely, Probuilders also claimed that Underwriters refused to supply Probuilders with billings from the attorneys that formed the basis of the monetary amounts it sought.  Underwriters cross-moved for summary judgment claiming that the “escape” clause in its policy which it relied upon in refusing to contribute to the defense is routinely disregarded by California courts.  It also argued that the action was timely because it was brought less than two years after it made its final payment toward the attorney fees that formed the basis for its equitable contribution action.

 

After discussing the concept of equitable contribution, which permits reimbursement to the insurer that paid on the loss for the excess it paid over its proportionate share of the obligation, the court noted the California court’s disregard of such escape clauses, explaining “other insurance clauses that attempt to shift the burden away from one primary insurer wholly or largely to other insurers have been the object of judicial distrust.  Public policy disfavors escape clauses whereby coverage purports to evaporate in the presence of other insurance.  Partly for this reason, the modern trend is to require equitable contributions on a pro rata basis from all primary insurers regardless of the type of other insurance clause in their policies.  (Citations omitted)  The court, thus, found that the trial court erred in giving effect to the escape clause and found Probuilders responsible for its equitable share of the defense costs achieved, rejecting the other arguments raised by Probuilders in its effort to avoid contribution.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

Federal Coverage Law:

 

10/19/15       Coney Island Auto Parts Unlimited v. Charter Oak Fire Ins. Co.

United States Court of Appeals, Second Circuit

Second Circuit Finds No Ambiguity in “Earth Movement” Exclusion, Where Settlement of Soil Contributed To Floor Collapse

Here, Coney Island Auto Parts purchased a policy from Charter Oak in relation to its commercial property in Brooklyn. In December 2011, a portion of its poured concrete floor collapsed. Charter Oak denied the claim on the basis of its exclusions for “Earth Movement” and for losses related to “Collapse of Buildings”. Then, as the Second Circuit rather ominously put it – “This litigation ensued.”

 

In analyzing the policy terms, the Second Circuit began with a couple standard precepts of New York coverage law. First, the insurer has the burden of establishing the applicability of an exclusion. Next, notwithstanding this rule, policy exclusions are read seriatim, not cumulatively, so that if one applies to bar coverage the analysis ends there. Then, starting with the “Earth Movement” exclusion, the Court found just that. The exclusion precluded coverage for losses resulting from “earth sinking, rising or shifting” and this plain language was unambiguous. Applying it to the facts of the case, the Court found that since there was no dispute that the fill beneath the concrete slab contained soil and that its settlement contributed to the floor’s collapse, the exclusion applied. Further, the policy’s “anti-concurrent clause”, to which all exclusions were subject, stated that the insurer would “not pay for loss or damage caused directly or indirectly” by any of the exclusions. As such, there was no coverage under this policy for Coney Island’s claim.

 

Notably, the Court rejected the insured’s argument that an exception to a different exclusion created an ambiguity in the policy that thus created coverage. That is, Coney Island asserted that an ambiguity existed in the exception to the “Collapse of Buildings” exclusion for losses caused in specified circumstances by “defective material or methods in construction, remodeling or renovation”. The Second Circuit flatly disagreed. They wrote that this “inclusionary language applies only if the collapse is ‘caused only by one or more of the [specified causes].’ Because the collapse here was caused in part by ‘earth shaking, rising or shifting,’ which is not an excepted cause; the exception to the “Collapse of Buildings” exclusion is inapplicable. The ‘Earth Movement’ exclusion and the anti-concurrent clause plainly bar coverage, as the loss or damage here was caused at least in part by earth movement.” The Second Circuit therefore affirmed the Eastern District’s prior ruling.

 

State Environmental Law:

 

10/20/15       Remet Corporation v. The Estate of James Pyne, et al.

New York State Court of Appeals

In Environmental Contamination Case, Court Of Appeals Holds That Letter From DEC Notifying Company of Status as a Potentially Responsible Party and Threatening “Legal” Action Was Sufficiently Coercive To Trigger Indemnification

James Pyne was the founder and sole stockholder of Remet Corporation, a company that manufactured products for use in the investment casting industry. He later sold the company to Burmah Castro, along with all of associated real property. As part of that agreement, Pyne agreed to indemnity, defend, and hold the buyer harmless for any environmental losses that might arise from environmental losses arising from remediation, investigation, or monitoring, “provided that Losses under this Section … shall only be indemnified by Seller is such Losses arise out of or result from actions by any Indemnified Party that such Indemnified Party is required to take under or in connection with any Environmental Law” (emphasis added by Court).

 

In 2002, Remet received a letter from the Department of Environmental Conservation (“DEC”) labeled “NOTICE LETTER URGENT LEGAL MATTER – PROMPT REPLY NECESSARY”. The letter advised that the DEC had found and documented releases of hazardous substances adjacent to Remet’s property, and noted that Remet was a potentially responsible party (“PRP”) liable for money spent by the State to remediate the site. The letter requested that Remet implement and finance a remediation plan, to be set forth in a consent order. The letter also advised that if no response was received within 30 days, the DEC would undertake the remediation itself and seek recovery for any monies expended, with interest accruing from date of the letter.

 

In response, Remet did not sign the consent order, but did start to investigate and gave Pyne notice of the claim and requested indemnification pursuant to the clause in the sales agreement. Pyne did not assume the defense, but his attorneys coordinated with the DEC and Remet until his death in 2003. None of the PRPs undertook any remediation, thus the DEC adopted a $12.5 million decontamination plan. Remet later filed a claim against Pyne’s estate. By then, they had expended over $500,000 in connection with the site. The estate objected to the release of any funds, and then this litigation ensued.

 

Following discovery, Remet moved for summary judgment on the ground that the indemnification provision mandated reimbursement of funds spent and they also sought a declaration that all future costs would be covered thereunder as well. At the trial level, Remet won. The Court ruled that the DEC’s letter did entitle Remet to the declaration. However, at the Appellate Division this was reversed. The Court there concluded that the DEC letter was merely informational, notifying Remet of its potential liability, and not requiring the company to actually take any action. The Court of Appeals in turn permitted the matter to be heard further.

 

In its decision, the high court agreed with the trial court’s initial analysis. It found that the language of the PRP letter demonstrated that Remet was entitled to indemnification because it was “required” to act in response, as per the terms of the sales agreement. The Court wrote: “Regardless of whether Remet was designated a potentially responsible party or a responsible party, the letter demanded either a consent order or payment, and any language indicating that Remet’s response was voluntary must be read in terms of those demands. In other words, the PRP letter – by its terms – effectively marked the beginning of the “legal” process against Remet pursuant to the ECL, in which DEC expressly sought recovery from Remet for any amounts expended in remediating the [site]”. That is, the Court found the letter was sufficiently adversarial and coercive as to “require” action, given that it threatened litigation and imminent adverse legal and financial consequences. Accordingly, Remet was entitled to indemnification under the terms of its agreement for past and future environmental losses.

 

 

CASSIE’S CAPITAL CONNECTION

Cassandra A. Kazukenus

[email protected]

 

A00453/S0145 Signed Into Law by Governor Cuomo

This bill requires the acting director of DFS to examine and make recommendations regarding concurrent causation provisions in insurance policies in relation to sewer backup coverage.  The purpose is to give the Legislature information regarding the potential impacting of prohibiting anti-concurrent causation clauses in insurance policies.  This may be something to follow closely in light of Governor Cuomo’s press release which stated the following in explaining why this is necessary:

 

Following Superstorm Sandy, many homeowners’ sewer backup claims were denied by their insurance companies using anti-concurrent causation clauses. In those cases, even when sewer backup occurred when systems were shut off before the storm’s arrival, insurance companies claimed that by the time adjusters could inspect the loss or damage, flooding had also occurred. Therefore, insurance companies denied the claims, asserting that loss or damage caused by sewer backup could not be distinguished from loss or damage caused by flooding.

 

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

10/14/15       La Casa Di Arturo, Inc. v Tower Group, Inc.

Supreme Court, New York County

No Coverage Found for Damage Due to Offsite Power Outage Caused by Flood Water

This decision arises out of a Superstorm Sandy claim.  Plaintiff alleges that as a result of the storm its restaurant remained for various times without electrical power, refrigeration, and freezer use.  Accordingly, it suffered loss of business income, a loss of stored food and it was required to pay its usual business expenses during the time it was closed.  Plaintiff made a claim under its commercial and property insurance policy issued by Tower.

 

Tower retained an independent adjustment company who found that the damage was caused by an off premises power outage as a result of the storm, and that the outage was caused by flooding.  This finding was supported by the investigation conducted by Con Edison.  Based on this finding, Tower denied coverage pursuant to the policy language excluding “water” as a covered cause of loss.  This exclusion specifically stated that “[w]e will not pay for loss or damage caused directly or indirectly by any of the following.  Such loss is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss…g.  Water…(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not…”

 

In response, plaintiff commenced this action alleging causes of action for breach of contract, bad faith and violation of GBL § 349.  In granting Tower summary judgment, dismissing plaintiff’s complaint in its entirety, the court found that the water exclusion unambiguously excluded any loss caused by flood.

 

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

 

 

06/10/15       Capital City Real Estate LLC v. Certain Underwriters at Lloyd’s London

Contractor as Additional Insured

The Fourth Circuit in this case ruled that a general contractor was entitled to a defense as an additional insured on a subcontractor’s insurance policy even though the subcontractor was not a party to the underlying lawsuit.  The cause of the litigation was a wall shared by buildings in Washington, D.C. Capital City was the general contractor on the project, and it subcontracted foundation work to Marquez Brick Work.  The subcontractor agreed to obtain general liability insurance listing Capital City as an additional insured, and the Lloyd’s policy was obtained with an endorsement naming Capital City as an additional insured.  The wall collapsed in June 2009 during the work.  Capital City notified Lloyd’s of the loss, and tendered all claims brought because of the wall collapse.

 

The insurance company for the property owner, Standard Fire Insurance, paid for the repairs and then brought a subrogation action against Capital City seeking to recover the $600,000.00 cost.  This complaint did not name Marquez as a party.  In response, Capital City filed a Third Party Complaint against Marquez for defense and indemnity.  Lloyd’s notified Capital City that it was denying coverage for the Third Party Action against Marquez.  Capital City then sued Lloyd’s in United States District Court, for a declaration that Lloyd’s had a duty to defend the Standard Fire Insurance action under the Lloyd’s-Marquez policy.

 

The trial court granted summary judgment to Lloyd’s on the basis that the Standard Fire underlying complaint did not allege that Capital City was vicariously liable for Marquez’s negligence.  On appeal, the Fourth Circuit reversed and granted judgment in favor of Capital City.

 

The Appellate Court held that the Lloyd’s policy provided coverage to Capital City as an additional insured for property damage caused in whole or in part by the named insured Marquez.  The issue next turned to the question of whether the allegations in the underlying Standard Fire action created the “potential for coverage” and a duty of defense on the part of Lloyd’s.

 

The Federal Court noted that, while Maryland does not allow an insurer to rely on extrinsic evidence to contest coverage, insureds may do so to show that underlying complaint allegations create the potential for coverage.  In this case, Capital City’s evidence that the subcontractor’s work caused the wall collapse created the necessary linkage and potential for coverage for the loss event.  The Fourth Circuit reversed the judgment in favor of Lloyd’s and sent the case back to the District Court with instructions to enter judgment for Capital City.

 

The first lesson of this case is that all sides took the procedurally correct steps to place the case on a platform for the ultimate issues to be decided.  The contractor Capital City brought a third party complaint against the subcontractor Marquez, triggering the possibility of coverage by Lloyd’s.  The contractor then brought an appropriate declaratory judgment action against Lloyd’s to assert the additional insured coverage.

 

The second lesson of this case is that, while the pleadings remain important and perhaps determinative in reviewing coverage issues, some states allow “extrinsic evidence” to expand upon the factual allegations in a complaint which might lead to coverage.  Such extrinsic evidence might include expert reports, appraisals, repair invoices, etc. providing further and perhaps more detailed information concerning a loss, potential causes of the loss, and the types of damages incurred.  In this case, while the Standard Fire complaint contained no allegations against the subcontractor, Capital City was able to establish that the nature and cause of the loss nonetheless potentially arose from the subcontractor’s work thereby triggering potential coverage.  It was undoubtedly assisted in this case due to the fact that the wall collapse most certainly implicated work of the foundation subcontractor.

 

The third lesson of this case is that federal district courts generally are tasked with applying state law to the best of their ability, and whether there is controlling state law on a subject and how to apply it can often be difficult to determine.  Federal trial courts may be reluctant to overly extend state substantive law, preferring to defer to the state courts and refrain from establishing what might become controlling authority on a certain issue.  In this case, the Fourth Circuit determined that Maryland law would allow the contractor to present “extrinsic evidence” indicating possible coverage even if the underlying pleadings were silent or did not clearly trend in that direction.

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