Volume XVII, No. 11 (No. 441)

Friday, November 20, 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?  We love situations.

 

Pardon only the briefest of notes this week; I’m just back from two days in Michigan, Steve is on trial (we know that others might use the term “in trial”) in Kings County, Beth is on the road, Jen was doing in-house training

 

We are proud to announce our newly designed website, www.hurwitzfine.com.  Come visit.  I even talk about situations on the Home Page, if you watch long enough.

 

Why a new website?

 

We wanted to demonstrate that we look like who were are, a firm that understands its clients want the best possible outcome in the shortest amount of time, a firm that is deep in experience and practical and economical in application, a firm that recognizes problems and solves them efficiently.   That is who we are and we wanted our website to show that side of us.

 

We report on some very interesting cases in my column, including one of our victories in the Fourth Department that will be a game changer for some.  It upholds a lower court decision permitting a SUM (underinsured motorists) insurer to reduce a SUM award by not only the amount received from the other motor vehicle carrier’s policy but also the amounts received from other defendants.  In this case, the plaintiff recovered settlement monies from a dram shop defendant and that amount was found to be duplicative of the underinsured motorist claim.

 

In Steve’s column, you will find a plaintiff’s lawyer who was spanked by the Second Department for having his paralegal surreptitiously videotape an independent medical examination and then spring it on the defense counsel in the middle of the trial.  The trial judge has threatened the doc with criminal prosecution but the Second Department found that there was no evidence that the doctor lied on the stand.  The appellate court imposed heavy sanctions on the plaintiff’s counsel for that conduct.

 

 

Wilewicz’ Wide World of Coverage

 

Dear Readers,

 

I write to you from a crowded Terminal 4 of JFK International airport, following a long argument on a motion for summary judgment that was filed against our carrier client in New York County. Decision reserved, and now lots of flight delays. Here's hoping on both counts. In other news, it has otherwise been a busy but somber week. My heart goes out to all of my dear French friends.

 

This week, the Wide World brings you a couple of Federal trial court cases from New York that reiterates some common precepts of coverage. In Garcia v. NCIC, the Eastern District dismissed an injured contractor’s action against a general contractor’s insurer, for failure to first obtain a judgment that went unfulfilled. Garcia tried to “federalize” his action by asserting rather novel federal question arguments under the DJ, but the Court rejected them all. In the end, a claimant must get that unfulfilled judgment before he can proceed on a direct claim against an insurer.

 

Next, in Atlantic Casualty v. Torres Custom Framing, another Eastern District case, an insurer issued a policy with an Employee Exclusion. Unsurprisingly, an employee of the insured was injured and everyone went looking for coverage. The carrier started a DJ (good idea) and achieved a great result (even better). Though their summary judgment motion was submitted unopposed, the Court went through the merits of the disposition nevertheless. The Judge found that not only was the standard language clear, valid, unambiguous, and thus enforceable, but it was also an “unmistakable” bar to coverage. The Court further ruled that since the claimant’s wife’s derivative claims related to that employment, any argument she had needed to be dismissed too. 

Both decisions are good, quick reads. Enjoy. 

Have a great Thanksgiving! See you in December,

 

Agnes 
Agnes A. Wilewicz
[email protected]

 

Editor’s Note:  I sure hope we see Agnes again.  Perhaps she’ll realize that JetBlue flies out of Terminal 5, not Terminal 4.  Oh, as I was preparing this, I heard from Steve that Agnes’ flights were canceled and she is driving back from NY with Dave “Labor Law Pointers” Adams and Todd “Jury Trial in Queens” Bushway.  Godspeed.

The Dangers of Sex – 100 Years Ago

 

The Brooklyn Daily Eagle

Brooklyn, New York

20 Nov 1915

 

PRIESTS CONDEMN "MOVIE"

 

Warn Children to Stay Away and to

Urge Parents to Do So.

 

The Redemptorist Fathers, in charge of the Church of Our Lady of Perpetual Help, Fifth avenue and Fifty-ninth Street, have condemned the movie production "Damaged Goods."  This film has been shown for some time at a local theater, and has drawn immense crowds.

 

The priests have warned children in the parochial school to stay away from this picture, and to ask their parents to do the same.

 

Damaged Goods (1914) was an American silent short film directed by Tom Ricketts and Richard Bennet and starring Mr. Bennett.  It was based on Eugene Brieux’s play Les Avariés (1901) about a young couple who contract syphilis.  No print of the film is known to exist, and Damaged Goods is considered a lost film. It is believed to have begun the sex hygiene/venereal disease film craze of the 1910s.

 

The play was adapted into a British silent film in 1919. A sound film based on the Brieux play, also titled Damaged Goods (1937) was directed by Phil Goldstone, released by Grand National Pictures and was closer to an exploitation film about premarital sex without mentioning venereal disease.

 

Bennett was the father of three daughters all of whom became actresses. One of them, Barbara Bennett, who was the first wife of singer Morton Downey and the mother of Morton Downey, Jr.  Barbara committed suicide in 1958, on her fifth attempt.

 

HEWITT’S HIGHLIGHTS:

 

Dear Subscribers:

 

There were a number of serious injury cases this time around. In several cases, defendants were able to win summary judgment by detailed medical reports, which attributed the injuries to pre-existing degenerative conditions or subsequent injuries. Plaintiffs submitted brief affirmations in which their doctors failed to address the issue of degeneration raised in the moving papers, and thus failed to raise an issue of fact. In another case, defendants created their own issue of fact by submitting two reports from two different doctors who differed on causation/degeneration and thus the plaintiff did not even need to raise an issue of fact as defendants did it themselves. In a final case, an issue of fact was found as to whether the injuries were degenerative, with the court noting that the plaintiff was young and had never had any injuries before, making it less likely.

 

I wish you all a Happy and healthy Thanksgiving and will talk to you again in December. The year is proceeding rapidly. The Holidays are approaching and I still remember summer being just the other day.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

Ahh, Those Excellent Women Driver/Mechanics, a Century Ago

 

Poughkeepsie Eagle-News

Poughkeepsie, New York

20 Nov 1915

 

WOMEN ADEPT WITH MOTOR CAR

 

Mrs. Arthur DeMelville First Member of Fair Sex Here to

Operate Care for Purpose of Making Livelihood

 

A BORN MECHANIC

 

Mrs. Arthur DeMelville of 12 College View Avenue, Arlington, has attained the signal distinction of being the first member of the fair sex to operate a motor car in Poughkeepsie for the purpose of making a livelihood.  Friday she inserted a neat little adv. in an evening paper telling that she has a new seven-passenger car and was prepared to hire out the car with herself as driver by the hour or trip.  She added that she gave special attention to invalids and that safe driving was assured.

 

And it is with the utmost unconcern that Mrs. DeMelville has launched her new business of chauffeuretting.  She's a natural born mechanic and is proprietor of a bicycle repair shop in the rear of her home, which is a rendezvous for Vassar students, whose bicycles have broken down.  Mrs. DeMelville does every bit of the work herself too—or at least she does until there is so much work she can't do it.  Then she employs a man and works with him repairing scores of wheels a day.  She probably knows as much about broken coaster brakes, brass plugs and leaky tires as any man in the town.

 

Peiper’s Pleadings:

 

I bring you greetings from Dan’s hometown, Brooklyn, New York, where I am in the midst of a property insurance trial.

 

I draw your attention to a Second Department decision that Dan mentioned above where a plaintiff lawyer’s paralegal, escorting the client into an independent medical examiner’s office, used a cell-phone camera to tape part of an IME.  Permission had not been requested or received and the tape was not turned over until the paralegal’s redirect examination during the damages-only trial.  Chaos ensued with threats by the judge of criminal prosecution for perjury on the part of the doc.

 

“Nonsense,” said the appellate court and instead sanctioned the plaintiff’s lawyer for sneaking in the camera, not seeking permission and springing it on the defense in the middle of the trial.  It’s a good read and a lesson (hopefully to be) learned by counsel.

 

Have a great Thanksgiving.

 

Steve

Steven E. Peiper

[email protected]

 

How Valuable Was Love a Hundred Years Ago?

The Evening World

New York, New York

20 Nov 1915

 

SUES MOTHER-IN-LAW

FOR WIFE'S DEAD LOVE

 

Dr. Myers Asks $100,000 in

Supreme Court for Alienation of Affection

 

 

Blaming his mother-in-law, Mrs. Sally Kahn, for the estrangement that has occurred between himself and wife, Dr. Edward E. Myers of No. 823 West End Avenue and a member of the faculty of Columbia University, today brought suit against Mrs. Kahn for $100,000 damages for alienation of affections.  Mrs. Myers is the daughter of Mrs. Kahn.  The wedding took place in June of last year.

 

It appears from the papers in the case that Mrs. Myers has left for Dallas, Tex., where her father lives.

 

Until Mrs. Kahn came to New York, the physician alleges, his married life was happy.

 

"I was called a pauper and a beggar," Dr. Myers asserts.  "My wife was implored to leave me go to Texas and obtain a divorce.  Mrs. Kahn told my wife that she wanted her to wed the man she knew before I courted her."

 

Dr. Myers alleges his mother-in-law hired detectives to keep him under constant surveillance. 

 

Editor’s note:  I really wanted to find out what happened.  On December 8, 1915, page 16, the New York Times reported that the case settled.  Sadly, no other details were provided.

 

Clip, Print and Have Signed:

 

My thanks to Sara Kendall from Mercury and Bill Wilson and Tim Dodge from IIABNY and the Center for Consumer Freedom who first published this in 2003:

 

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Thanksgiving Guest Liability and Indemnification Agreement

____________________ (hereinafter referred to as “Guest”) has been given permission to eat at the table of _____________________ (hereinafter referred to as “Host”).

Guest acknowledges and understands that no warranty, either expressed or implied, is made by the Host as to the nutritional content of the meal. This document is offered in order to duly warn Guest that dangerous conditions, risks, and hazards may lurk in the turkey, stuffing, vegetables, cranberry sauce, fixings, drinks, desserts, appetizers, and any other comestibles that may be served.

Guest is hereby informed that Host’s food may contain any of the following: calories, carbohydrates, sodium (salt), fat, saturated fat, trans fat, polyunsaturated fat, monounsaturated fat, peanuts, sugar, alcohol, tryptophan, caffeine, and good cheer.

Guest acknowledges that eating may incur risks including, but not limited to, satiation, indigestion, heart burn, dizziness, laziness, heart disease, holiday spirit, “food coma,” and “that bloated feeling.” Host’s meal includes all items served, including those brought by other Guests (including “Grandma”).

If Guest has brought minors to Host’s Thanksgiving table, Guest assumes the responsibility for monitoring said minors’ eating habits and guarding against hazards at all times.

As consideration for being allowed by host to enjoy a Thanksgiving meal, Guest hereby indemnifies Host from all liability for personal injury suffered by Guest-which may be caused, in whole or in part, by any element of Host’s meal. Guest agrees that neither he/she, nor his/her heirs or personal representatives will sue Host or his/her associates for any injury that Guest suffers, in whole or in part, from consuming food on Host’s premises. This indemnification includes an agreement not to haul Host into court on the basis of:

  1. Failure to provide nutritional information;
  2. Failure to warn of potential for overeating because food tastes too good and is provided at no cost;
  3. Failure to offer “healthier alternatives” or vegetarian “tofurkey”;
  4. Failure to provide information about other venues serving alternative, “healthier” Thanksgiving meals;
  5. Failure to warn that dark meat contains more fat than white meat; and
  6. Failure to warn that eating may lead to obesity.

GUEST INDEMNIFIES AND RELEASES OWNER FROM ALL LIABILITY.

GUEST HAS READ THIS DOCUMENT AND UNDERSTANDS IT. HE/SHE IS SIGNING IT FREELY AND VOLUNTARILY, …

GUEST: ___________________________ DATE:______________________

HOST: _____________________________

WITNESS: _______________________________________________________

WITNESS: _______________________________________________________

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 

This Week’s Headlines:

 

 

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

 

  • Payments for Stock Options Not “Losses” Under EPLI Policy
  • Six Year Statute of Limitations Governs Uninsured Motorists Benefits
  • Another Win for the Good Guys – Settlement from Dram Shop Action Reduces Recovery Under SUM Policy under Condition 11
  • How Does One Know Who Owns a Car?
  • Intra-family Exclusion Applied to Deny Coverage Under Auto Policy


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

Robert E.B. Hewitt III

[email protected]

 

  • Plaintiff’s Motion Denied Where He Relied Upon The Report of Defendant’s Independent Medical Examination Doctor Which Found His Injuries to Be The Result of Congenital Factors and Degenerative Disease
  • Summary Judgment Granted to Defendants Where Their Expert’s Detailed Report Demonstrated That Plaintiff’s Injuries Were Related to Pre and Post Accident Incidences And Plaintiff’s Expert Failed to Address Those Incidences In His Brief Affirmation
  • Failure of Plaintiff’s Expert to Address Defendant’s Expert’s Findings of Degeneration Resulted in Dismissal of That Portion of the Case But Issue of Fact As to Cervical Spine Injury Due to Disagreement Between Two of Plaintiff’s Experts on Whether It Was Degenerative
  • By Ascribing Plaintiff's Injuries To Different Yet Equally Plausible Cause As Defendant’s Expert a Plaintiff’s Experts’ Affirmations Raise An Issue of Fact
  • Defendant Failed To Address the Bill of Particulars Claims of a 90/180-Day Category of Injury
  • Plaintiff Raised Issue of Fact As to Whether She Suffered A Serious Injury to Her Cervical Spine
  • Defendant’s Motion Need Not Address Whether Plaintiff Sustained A Significant Disfigurement As a Result of the Accident As It Was Never Raised in Plaintiff’s Bill of Particulars
  • Defendant’s Motion Submitted Medical Evidence That Plaintiff Did Not Suffer a Serious Injury

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Plaintiff’s Counsel Sanction for Surreptitiously Videotaping Independent Medical Examination and Failing to Disclose It Until Trial

 

FITZ’S BITS

Elizabeth A. Fitzpatrick

[email protected]

 

  • On vacation.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • The Eastern District Reiterates – An Underlying Claimant Cannot Maintain Direct Action Against Insurer Before Obtaining Judgment Against The Tortfeasor – And Rejects His Novel Attempts At “Federalizing” The Claims
  • An Employee Exclusion That Precludes Coverage For Injuries Arising From Employment An Insured Is Unambiguous, Valid, And Enforceable, Eastern District Holds

 

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Nothing to report…

 

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

 

  • CGL Coverage for Construction Defects, Redux

 

 

We mourn the losses in Paris, Israel and the too-many-other places rocked by terrorism.  Blessing to all of you and yours as we approach Thanksgiving.  Every day is a gift..  Every day.

 

  •  

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

Jennifer A. Ehman

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
 

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]

 

Jennifer A. Ehman

 

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

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

 

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

 

11/19/15       Women's Integrated Network, Inc. v. Anderson Kill P.C.

Appellate Division, First Department

Payments for Stock Options Not “Losses” Under EPLI Policy

Women's Integrated Network, Inc. (WIN) is a small provider of medical services to women seeking treatment for infertility.  Knuppel, MD, a physician specializing in obstetrics and gynecology, was one of WIN'S cofounders. From February 1, 2006 until July 23, 2007, Knuppel was the Chief Medical Officer of WIN.

 

For approximately 10 years, Knuppel worked for WIN in various capacities, first receiving no salary at all and later receiving a salary well below market value for the services he provided to WIN. In exchange, Knuppel was granted stock options to purchase 26,000 shares of WlN's stock.

 

In 2008, Knuppel commenced an action against WIN, alleging, inter alia, that WIN terminated his employment in order to prevent him from exercising his stock options. At the time, WIN maintained comprehensive employment practices liability insurance (EPLI coverage) with its primary carrier, U.S. Specialty. The insurance carrier refused to defend WIN in the underlying stock option action, upon which WIN commenced a declaratory judgment action against its carrier, seeking a declaration that its carrier had a duty to defend and indemnify WIN in the underlying stock option action. The action was removed to federal court.  In 2009, Knuppel and WIN settled the stock option action. Subsequently, the district court granted the carrier's motion for a judgment on the pleadings in the declaratory judgment action, upon a finding that the settlement and defense costs were not insurable losses under the policy.

 

Rather than appealing the district court's determination, counsel for WIN, defendants herein, moved for reconsideration of the dismissal motion. When the district court denied the reconsideration motion, WIN procured new counsel, which filed an appeal to the Second Circuit, which dismissed the appeal as untimely made. I

 

In 2013, WIN commenced this legal malpractice action against defendant Anderson Kill, P.C. and two of its attorneys.

 

 

While the delay in filing the Notice of Appeal was problematic, WIN was unable to prove “the case within the case”, that is, that the appeal would have been successful.   WIN failed to establish that its insurance contract covered the loss for which plaintiff sought coverage in the federal court declaratory judgment action.

 

As the district court and the motion court found, plaintiff's settlement of its former employee's stock option action, which gave rise to the declaratory judgment action, is not a "Loss" as defined by the policy; the policy states in plain language that "Loss" does not include "payments for stock option or stock appreciation rights."

 

11/17/15       In re American Transit Insurance Company v. Rosario

Appellate Division, First Department
Six Year Statute of Limitations Governs Uninsured Motorists Benefits
Rosario was involved in an auto accident with a fellow named Carela.  American Transit insured Rosario and Carela was insured by American Independent Insurance Company (“AIIC”).  AIIC does no business in New York and is not subject to jurisdiction in New York.  AIIC moved to dismiss the lawsuit based on lack of personal jurisdiction and that motion was granted.

 

Rosario then filed a claim with American Transit for uninsured motorist benefits alleging that the dismissal of the direct action rendered Carela uninsured.  American Transit moved to permanently stay arbitration arguing that the applicable six year statute of limitations expired.

 

A claim for UIM benefits is governed by the six-year statute of limitations applicable to contract actions. The claim accrues either when the accident occurs or when subsequent events render the offending vehicle uninsured. Since there is more than a six-year lapse between the accident and the demand for arbitration, respondent must show that a later accrual date than the accident date is applicable, and that due diligence was used to determine whether the offending vehicle was insured on the date of the accident.

 

Supreme Court's ruling that there was no personal jurisdiction over American Independent in New York was not an event that rendered the offending vehicle uninsured within the meaning of Insurance Law § 3420(f)(1) (see American Tr. Ins. v Barger, 13 Misc 3d 386, 389 [Sup Ct, NY County 2006]). Rather, it was simply a ruling that respondent could not pursue its action against American Independent in a New York court.

 

 

11/13/15       Redeye v. Progressive Insurance Company

Appellate Division, Fourth Department

Another Win for the Good Guys – Settlement from Dram Shop Action Reduces Recovery under SUM Policy under Condition 11

I argued two appeals this month and both already decided favorably.  We reported on the Second Circuit’s decision in the Endurance v. Century case in the most recent issue.  This one was in state court.

Redeye brought a lawsuit to recover supplementary uninsured/underinsured motorist (SUM) benefits from defendant, his auto insurer. While a pedestrian, he was injured when a drunk driver struck a car that was propelled into him.  Redeye sued the drunk driver as well as a fire company that allegedly served the driver alcoholic beverages prior to the accident, and he received a settlement from both. Progressive denied Redeye’s claim for SUM benefits, stating that coverage was exhausted by the recovery from both the driver and the fire company, prompting him to commence this action.

 

Redeye conceded that the SUM coverage is properly reduced by the amount he recovered from the driver's insurer. He contended, however, that it was improper to reduce the SUM coverage from the amount he received from the fire company under its general liability insurance policy. The Fourth Department rejected that contention.

 

Condition 11 (e) of the SUM endorsement under defendant's policy provided that SUM coverage

 

shall not duplicate . . . any amounts recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds.

 

Here, the payment plaintiff received from the fire company's insurer was for bodily injury damages, and thus the amount of SUM benefits available to plaintiff was properly reduced by that amount.  The policy is not ambiguous and condition 11 does not conflict with condition 6 of the SUM endorsement.  Condition 6 provides that the maximum payment under the SUM endorsement is the difference between the SUM limit and any payments received from a motor vehicle bodily injury liability policy.

 

It does not state that the difference is "the" SUM payment that is to be given to plaintiff, but rather it states that the difference is the "maximum" payment, which the average insured would understand to mean that it could be further reduced.  Condition 6 and condition 11 together resulted in a reduction in the SUM benefits available by the total settlement received by plaintiff in his prior action.

 

 

11/13/15       Martin v. Lancer Insurance Company

Appellate Division, Fourth Department

How Does One Know Who Owns a Car?

Martin commenced an action to recover no fault benefits under a policy issued by Lancer to D&M Collision (“D&M”).  It is claimed that D&M, an auto dealership, owned the vehicle in which Martin was injured when it was struck from behind by another vehicle.

 

Lancer argued that the vehicle was not owned by D&M and thus not insured under the Lancer policy.

 

Martin had a business relationship with D&M's owner under which Martin would use whereby plaintiff would use D&M's dealer credentials to buy used vehicles at auction. On June 14, 2012, Martin, using D&M's credentials, purchased a 2001 Chrysler 300 at auction for $600. Although he plaintiff used his own money to purchase the vehicle, the Retail Certificate of Sale form (form MV-50) issued in conjunction with the sale identifies D&M as the buyer.

 

In mid-August, Martin agreed to sell the vehicle to Hardy. The title to the vehicle could not be transferred to Hardy, until the vehicle passed inspection, and the vehicle could not pass inspection until its computer codes had been cleared and that required that the vehicle be driven some distance.

 

On August 31, 2012, the vehicle was involved in an accident while Hardy was driving and Martin was a passenger. Title had not been transferred to Hardy because the codes had not yet been cleared, and the vehicle therefore had not yet passed inspection. In the accident, Martin sustained injuries for which he received medical treatment, and he thereafter sought payment of his medical expenses by defendant under the policy it issued to D & M.

 

Who owned the car?  D&M?  Martin?  Hardy?

 

Why was it important?

 

The no-fault coverage defendant provided to D & M covered all vehicles "owned" by D & M. Vehicle and Traffic Law § 128 defines an "owner" as "[a] person, other than a lien holder, having the property in or title to a vehicle." Generally, "ownership is in the registered owner of the vehicle or one holding the documents of title, but a party may rebut the inference that arises from these circumstances" Fulater v Palmer's Granite Garage, 90 AD2d 685, 85, appeal  dismissed 58 NY2d 826.

 

Where there is conflicting evidence of ownership, the issue must be resolved by a trier of fact.

 

Here, the evidence submitted by defendant in support of its motion failed to eliminate all issues of fact whether D & M owned the subject vehicle at the time of the accident. Notably, the vehicle was purchased with D & M's dealer credentials and, at the time of the accident, D & M had title to the vehicle, and its dealer plates were on the vehicle. Although defendant presented additional evidence seeking to rebut the presumption of D & M's ownership arising from those circumstances, the court properly concluded that it failed to do so.

Editor’s note: The citation to Fulater was left there on purpose.  I won the Fulater appeal back in 1982, as a two-year lawyer.  It is nice to see that the case is still cited for the same proposition.  The Fourth Department, in Fulater, made it clear that the parties’ intentions are a significant factor in determining ownership.

 

11/12/15       Harrell v. State Farm Insurance Company

Appellate Division, Third Department

Intra-family Exclusion Applied to Deny Coverage under Auto Policy

Harrell was operating a vehicle which belonged to his father, Birdwell, when he was involved in a collision with a second vehicle. Harrell's wife, Trina, who was then pregnant with the couple's child (“the child”), was a passenger in Harrell's vehicle at the time. Trina commenced a personal injury action, individually and on behalf of the child, against the driver of the other car.  Ultimately the plaintiffs were also joined as defendants in that action.

 

State Farm disclaimed coverage and the Harrell’s commenced this action seeking a declaratory judgment that defendant is required to defend and indemnify them in the personal injury action under the terms of an automobile liability policy, as well as a personal liability umbrella policy maintained by Birdwell.

 

As relevant here, the automobile policy states under the heading "Exclusions" that "there is no coverage for an insured: . . . 2. [f]or bodily injury to: . . . c. any other person who both resides primarily with an insured and who: (1) is related to that insured by blood, marriage or adoption." At the time of the accident, the child resided primarily with Harrell, who is her father. Thus, as the child both resided primarily with an insured and is related to that insured, there is no coverage for her injuries for either plaintiff.  This determination necessarily defeats the related claim under the umbrella policy.

Editor’s Note:  An enforceable intra-family exclusion under an auto policy?  Hmm. 

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

Robert E.B. Hewitt III

[email protected]

 

11/13/15                 Aughtmon v. Ward

Appellate Division, Fourth Department

Plaintiff’s Motion Denied Where He Relied Upon The Report of Defendant’s Independent Medical Examination Doctor Which Found His Injuries to Be The Result of Congenital Factors and Degenerative Disease

The Appellate Division found that the Supreme Court properly denied the motion. Contrary to plaintiff's contention, the Appellate Court found he failed to meet his initial burden with respect to the 90/180-day category inasmuch as he failed to submit evidence establishing as a matter of law that he sustained "a medically determined injury or impairment of a non-permanent nature" that was causally related to the subject accident. Although in support of his motion, plaintiff submitted, inter alia, the affirmed report of a physician who examined plaintiff on behalf of defendant, the physician concluded, based on all of plaintiff's medical reports, as well as the imaging studies conducted since the date of the accident that plaintiff had "extensive congenital variation and degenerative disease of the lumbar spine that was not caused by the accident of record" and that plaintiff's injuries were caused by those preexisting "anatomical elements." Thus the Appellate Division found that he did not show the accident was the causal factor for his injuries.

 

11/12/15                 Murray v. Helderberg Ambulance Squad, Inc.

Appellate Division, Third Department

Summary Judgment Granted to Defendants Where Their Expert’s Detailed Report Demonstrated That Plaintiff’s Injuries Were Related to Pre and Post Accident Incidences And Plaintiff’s Expert Failed to Address Those Incidences In His Brief Affirmation

Plaintiff commenced this action alleging that she sustained a serious injury within the meaning of Insurance Law § 5102 (d) when an ambulance owned by defendant, which was operating under a nonemergency situation, ran into the rear of her vehicle at a low speed as she attempted to enter a traffic circle in November 2009. She contended that she suffered, among other things, pain in her left shoulder and neck, which was eventually diagnosed as thoracic outlet syndrome. Following discovery, defendant moved for summary judgment dismissing the complaint and plaintiff cross-moved for summary judgment on the issue of liability. The Supreme Court granted defendant's motion and denied plaintiff's cross motion. The court noted, among other things, that plaintiff did not seek treatment for her purported injuries for more than 11 months and her expert failed to discuss or distinguish her relevant preaccident and postaccident incidents and injuries. The Appellate Court agreed that Defendant met its initial burden of establishing with competent medical evidence that plaintiff did not suffer a serious injury as a result of the accident through plaintiff's deposition testimony, many of her medical records and the affirmation of Daniel Silverman, a neurologist who examined plaintiff and reviewed her medical history.

 

 According to the neurologist, Plaintiff had sought treatment about a year before the accident for soreness in her left shoulder. Following the accident, she continued her normal active lifestyle for about a year until November 2010, when she visited a doctor with complaints of pain in her left shoulder, and such visit occurred shortly after a separate incident in October 2010 where she injured her left arm attempting to move a 25-pound box. A second postaccident incident occurred in March 2011, when a snowboarder collided with her causing her to fall on her left side and sustain shoulder pain and numbness. In a detailed report, Silverman opined that there was no objective medical evidence indicating that the November 2009 accident caused plaintiff to develop thoracic outlet syndrome. He explained that the timing of the October 2010 incident with the accompanying onset of complaints of pain by November 2010, together with the exacerbating incident of March 2011, revealed that such incidents caused the onset of plaintiff's condition. He further stated that his opinion regarding a lack of causation was supported by the fact that there was nearly a one-year delay from the accident to plaintiff seeking treatment for her subjective complaints of pain.

 

Plaintiff failed to establish an issue of fact. In opposition to defendant's motion, plaintiff's proof included a brief affirmation from a general and vascular surgeon who began treating her two years after the accident and who diagnosed thoracic outlet syndrome for which he later performed two surgeries. The surgeon opined that plaintiff's thoracic outlet syndrome resulted from the November 2009 motor vehicle accident. However, he did not address plaintiff's preaccident left shoulder problems or the impact of the two postaccident incidents in which she injured her left shoulder and/or neck. The November 2009 accident was not distinguished from or put in medical context with the other relevant injuries, and the surgeon’s opinion regarding causation rested upon plaintiff's subjective complaints. Therefore, the Appellate Division agreed with the Supreme Court that plaintiff failed to establish a triable issue of fact regarding a serious injury caused by the motor vehicle accident.Top of Form

 

 

 

 

 

11/12/15                 Green v. Jones

Appellate Division, First Department

Failure of Plaintiff’s Expert to Address Defendant’s Expert’s Findings of Degeneration Resulted in Dismissal of That Portion of the Case But Issue of Fact As to Cervical Spine Injury Due to Disagreement Between Two of Plaintiff’s Experts on Whether It Was Degenerative

The Appellate Division modified, on the law, to grant the motion for summary judgment as to plaintiff's claimed left shoulder and lumbar spine injuries, and otherwise affirmed the denial of the motion. The Appellate Division noted that Defendant established prima facie that plaintiff did not suffer any serious injury to her left shoulder or lumbar spine as a result of the motor vehicle accident at issue by submitting the affirmed report of a radiologist who opined that the MRI of the left shoulder revealed only degenerative conditions unrelated to any acute trauma, and that the MRI of the lumbar spine revealed degenerative disc disease and osteophyte formation — none of which could have occurred in the time between the accident and the relevant MRIs. Defendant also submitted plaintiff's own medical records, including radiography reports prepared at the hospital after the accident, which included findings of degeneration and no findings of traumatic injury. In opposition, the Appellate Division found plaintiff failed to raise a triable issue of fact as to whether her left shoulder and lumbar spine conditions were causally related to the accident because none of her medical experts addressed or explained the finding of preexisting degeneration present in plaintiff's own medical records. They failed to demonstrate why degeneration was not the cause of the injuries to plaintiff's left shoulder and lumbar spine.

 

As to plaintiff's alleged cervical spine injury, however, the Appellate Division found that defendant failed to satisfy her prima facie burden. Defendant's orthopedist did not demonstrate prima facie that plaintiff did not suffer significant or permanent limitations in use of her cervical spine by comparing his measurements to standards for normal range of motion. Defendant's radiologist acknowledged that the MRI films showed herniated and bulging discs, so that there was objective evidence of injury, but opined that these conditions were degenerative in origin and preexisted the accident, so that there was no causal relation between plaintiff's cervical condition and the accident. However, defendant's orthopedic expert opined to a reasonable degree of medical certainty, following examination of plaintiff and review of various medical records, including an MRI report making a new finding of myelomalacia, that plaintiff experienced or may have experienced exacerbation or aggravation of her preexisting cervical spine condition as a result of the accident. The Appellate Division found dispute between defendant's experts itself raises issues of fact as to whether plaintiff suffered a cervical spine injury caused by the accident, and, thus, the burden of proof never shifted to plaintiff with respect to that alleged injury.

 

11/12/15                 Jallow v. Siri

Appellate Division, First Department

By Ascribing Plaintiff's Injuries To Different Yet Equally Plausible Cause As Defendant’s Expert a Plaintiff’s Experts’ Affirmations Raise An Issue of Fact

The Appellate Division reversed the trial court’s grant of defendant’s motion for summary judgment. The Appellate Division found dTop of Form

 

 

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efendants made a prima facie showing of a lack of a "permanent consequential" or "significant" limitation of use of plaintiff's left knee and lumbar spine by submitting their orthopedist's report finding full range of motion in those body and by submitting the affirmed report of their radiologist who opined that the MRIs of those parts showed only degenerative conditions.

 

However, Plaintiff in turn raised a triable issue of fact as to whether he sustained serious injuries of the left knee and lumbar spine sufficient to defeat the motion. Plaintiff, a 24-year-old male, had no history of injury to the knee or back prior to the accident on May 2, 2012. A July 25, 2012 MRI of plaintiff's spine revealed a herniation at the level of L5-S1. A July 2, 2012 MRI of plaintiff's knee revealed a "tear of the undersurface of the posterior horn of the medial meniscus," a "high grade partial tear of the anterior cruciate ligament," and "partial tears of the . . . lateral collateral ligaments." Plaintiff underwent arthroscopic surgery four months after the accident to repair the medial meniscal tear. Plaintiff's treating physiatrist and expert, Dr. Goldenberg, and his expert orthopedic surgeon, Dr. McMahon, opined that plaintiff's injuries were traumatically induced as a result of the accident, directly controverting defendants' experts' opinions that plaintiff's injuries were degenerative in origin and/or resolved. Dr. Goldenberg opined that "[t]he fact that [plaintiff] continues to suffer from pain and limitation in motion after lengthy physical therapy indicates that his injuries and limitations are permanent." Dr. McMahon concurred that "[t]he fact that [the plaintiff] remains symptomatic to the point where he continues taking oral analgesics and wears a left knee brace, even after receiving ongoing physical therapy for a year, supports my opinion that his injuries are permanent." By ascribing plaintiff's lumbar spine and left knee injuries to a different, yet equally plausible cause, the affirmations of plaintiff's experts suffice to raise an issue of triable fact.

 

 The Appellate Division also found the affirmed reports of plaintiff's experts were admissible concerning the injuries to the left knee and lumbar spine, even though relying in part on unsworn contemporaneous MRI. The MRI reports may be considered for the further reason that they were reviewed by defendants' experts in preparing their reports and submitted by defendants in support of their motion. The Appellate Division also noted that where a plaintiff has raised a triable issue of fact as to whether certain injuries constitute "serious injury" under the statute, he is also entitled to seek damages for other injuries caused by the accident that might not otherwise satisfy the statutory threshold.

 

11/12/15                 Solomatin v. Fisher

Appellate Division, Second Department

Defendant Failed To Address the Bill of Particulars Claims of a 90/180-Day Category of Injury

The Appellate Division reversed the grant of summary judgment to defendants on the issue of serious injury. The Appellate Division noted that the defendants failed to meet their 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 Appellate Division found defendants' motion papers failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that she sustained a medically determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident. In light of the defendants' failure to meet their prima facie burden, the Court found it unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. The case is light on details.

 

11/12/15                 Genova v. Chiavaro

Appellate Division, Second Department

Plaintiff Raised Issue of Fact as to Whether She Suffered a Serious Injury to Her Cervical Spine

The Appellate Division reversed the grant of summary judgment to the defendant. The Appellate Division found the defendant met her prima facie burden of showing 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 submitted competent medical evidence establishing, prima facie, that the alleged injury to the cervical region of the plaintiff's spine did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) and that, in any event, the alleged injury was not caused by the subject accident. In opposition, however, the plaintiff raised a triable issue of fact as to whether she sustained a serious injury to the cervical region of her spine under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), and as to whether the alleged injury was caused by the accident.  The decision does not provide detail on how the issue of fact was raised.

 

11/12/15                 Boettcher v. Ryder Truck Rental, Inc.

Appellate Division, Second Department

Defendant’s Motion Need Not Address Whether Plaintiff Sustained A Significant Disfigurement As a Result of the Accident As It Was Never Raised in Plaintiff’s Bill of Particulars

The Appellate Division affirmed the grant of summary judgment to the defendants.
The Appellate Division found defendants met their prima facie burden of showing 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 defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the plaintiff's head was not caused by the accident. The defendants also submitted evidence demonstrating, prima facie, that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d). Further, contrary to the plaintiff's contention, he did not allege in his bill of particulars that he sustained a significant disfigurement as a result of the subject accident. Therefore, the defendants were not required to address this category of serious injury in their motion. In opposition, the plaintiff failed to raise a triable issue of fact.

 

11/12/15                 Abreu v. Markopoulos

Appellate Division, Second Department

Defendant’s Motion Submitted Medical Evidence That Plaintiff Did Not Suffer a Serious Injury

This case is devoid of any detail. The Appellate Division found that the defendants met their prima facie burden of showing 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 defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the plaintiff's right knee did not constitute a serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d)), and that, in any event, the alleged injury was not caused by the subject accident. In opposition, the plaintiff failed to raise a triable issue of fact.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

11/18/15       Bermejo v. New York City Health & Hospitals Corp.
Appellate Division, Second Department

Plaintiff’s Counsel Sanction for Surreptitiously Videotaping Independent Medical Examination and Failing to Disclose It until Trial

Prior to the trial on the issue of damages in this personal injury action, the plaintiff's trial attorney surreptitiously videotaped an independent medical examination (“IME”) conducted by an orthopedist retained by the defendant Ibex The attorney failed to disclose the existence of that recording to defense counsel, and then revealed its existence for the first time at trial, during redirect examination of his own paralegal, who took the witness stand to testify as to the brevity of the orthopedist's examination of the plaintiff.

 

 This resulted in the declaration of a mistrial, and the orthopedist subsequently declared that he was not willing to testify at the new trial. The trial court refused to allow the defendants to have a new exam conducted.

 

The Second Department held that:
 

  • A plaintiff's attorney must obtain approval from the court before making a video recording of an IME of the plaintiff; and
  • There is a requirement that such a recording be disclosed to opposing counsel before trial.
  • The declaration of a mistrial in this case was attributable to the conduct of the plaintiff's trial attorney;
  • The orthopedist was unwilling to testify voluntarily at the new trial because of that conduct and because the Supreme Court repeatedly, without any basis in fact, accused the orthopedist of lying during his cross-examination. The court also repeatedly threatened to recommend that the District Attorney's office prosecute the orthopedist for perjury.
  • Accordingly, the request for leave to have the plaintiff re-examined by an orthopedist of their own choosing should have been granted;
  • Award of costs against plaintiff's counsel pursuant to 22 NYCRR 130-1.1 for frivolous conduct should have been granted

 

On the subject of costs against the plaintiff’s counsel, the court held that:

 

  • Plaintiff's counsel surreptitiously created a video recording of the second IME without providing any notice to the court or defense counsel, much less obtaining the court's approval, as is required. Had counsel obtained approval, or at least provided notice, of the videotaping, the mistrial would not have occurred.
  • Second, as discussed above, plaintiff's counsel compounded the prejudice to the appellants by improperly failing to disclose the video recording to defense counsel, as was clearly required under CPLR 3101(i). Had counsel disclosed the recording, the mistrial would not have occurred.
  • Third, plaintiff's counsel chose to reveal the existence of the recording to the jury in a way that maximized its dramatic effect, and was unfair to the defendants. Counsel waited until his re-direct examination of his paralegal to reveal the recording's existence, even though Ms. Ramirez had not been asked any questions on cross-examination regarding the duration of the second IME. This was improper.
  • Thus, the court concluded that the conduct of plaintiff's counsel was frivolous within the meaning of 22 NYCRR 130-1.1, and that the Supreme Court abused its discretion in denying those branches of the appellants' motions which were for an award of costs against plaintiff's counsel. The appellants are entitled to recover from counsel the costs they incurred in participating in the first trial on the issue of damages, as well as the costs they incurred in making and litigating the motions at issue on these appeals and in pursuing these appeals.

 

FITZ’S BITS

Elizabeth A. Fitzpatrick

[email protected]

 

On vacation.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

11/11/15       Noel Eliseo Garcia v. National Contractors Insurance Company

United States District Court, Eastern District of New York

The Eastern District Reiterates – An Underlying Claimant Cannot Maintain Direct Action against Insurer before Obtaining Judgment against the Tortfeasor – And Rejects His Novel Attempts At “Federalizing” The Claims

The plaintiff Garcia was a construction worker who was injured on the job in Queens. His employer was a subcontractor that had been retained by Fenco Construction. Fenco, in turn, was insured by National Contractors (“NCIC”), which is a risk retention group organized under the laws of the State of Montana. After Garcia filed his personal injury action, Fenco filed a declaratory judgment action in order to elucidate the applicable policy limits under their policy with NCIC. That DJ was dismissed without a coverage determination, so Garcia started his own. In it, he sought to have the Eastern District resolve the coverage dispute between Fenco and NCIC. As expected, NCIC made a quick motion to dismiss for failure to state a cause of action for which relief could be granted.

 

In addressing this motion, the Eastern District unsurprisingly granted it, dismissing Garcia’s claim against the insurer. First, Garcia had argued that the Federal Declaratory Judgment Act, 28 USC § 2201 somehow authorized his direct action against someone else’s insurer. The Court rejected this claim, saying that while “Garcia attempts to federalize his run-of-the-mill contract claim, federal law provides no basis for the instant suit”. The DJ Act simply does not create an independent cause of action and Garcia still would need to assert some substantive right to declaratory judgment on his own. Unable to do so, dismissal was inevitable. Further, Garcia tried to argue that NCIC was a “federally created entity” under the Liability Risk Retention Act of 1986, 14 USC § 3901. While again an admittedly admirable novel argument, the Court referred the claimant to established precedent that holds that “the mere fact that an entity is federal charted, rather than incorporated by a state, is not sufficient to establish federal question jurisdiction over” a state law claim. Indeed, as Garcia’s claim against the insurer was essentially state-level an attempt at a pre-judgment direct action, it was simply barred by the seminal Lang v. Hanover decision (3 N.Y.3d 350) of the Court of Appeals.

 

11/04/15       Atlantic Casualty Ins. Co. v. Torres Custom Framing Corp.

United States District Court, Eastern District of New York

An Employee Exclusion That Precludes Coverage for Injuries Arising From Employment an Insured Is Unambiguous, Valid, and Enforceable, Eastern District Holds

In this one, Atlantic Casualty insured Torres Custom Framing for bodily injury and property damage to which the policy applied, but not if those injuries or damages related to Torres’ employees. Indeed, the Atlantic policy contained a rather typical Employee Exclusion. It barred coverage for “Bodily injury” to any “employee” of any insured arising out of or in the course of: (a) Employment by any insured; or (b) Performing duties related to the conduct of any insured’s business…”.

 

As one might predict with that preamble, one of Torres’ employees was injured while working on a construction project for which Torres was hired to perform work. The claimant started an underlying personal injury action, and Atlantic Casualty initiated this action seeking a declaration that no coverage was owed due to the Employee Exclusion. Torres defaulted in the DJ and Atlantic’s summary judgment motion was submitted unopposed. Nevertheless, the Eastern District went through the applicable standards and analyzed the submission on its merits.

 

Finding the exclusion “unambiguous, valid, and enforceable”, the Court held that Atlantic was entitled to summary judgment. It went even further and held that this exclusion applied “in clear and unmistakable language” to the claim, where the claimant was indisputably injured while in the course of his employment. Moreover, the claimant’s wife was allegedly derivatively injured as a consequence of that work-related injury and her claim necessarily failed as a result. Thus, the carrier was entitled to a declaration of no coverage – neither defense nor indemnification of the first or third-party claims.

 

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

Nothing to report…

 

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

 

06/10/15       Pennsylvania National Mutual Casualty Insurance Co. v. St. Catherine of Siena Parish

Eleventh Circuit

CGL Coverage for Construction Defects, Redux

The Eleventh Circuit Court of Appeals reversed a trial court ruling and held that Penn National had to indemnify its insured under a CGL policy for a construction defect claim.  The Parish hired Kiker Corp to repair its roof and replace shingles.  In the course of that work, Kiker learned that the roof deck was made of gypsum panels.  Kiker attached the new shingles directly to the gypsum deck using a special fastener.  The Parish again hired Kiker two years later to repair leaks on another roof.  A few months later, water began to leak through the ceiling.  The Parish alleged that Kiker’s use of the special fasteners to the gypsum deck caused the leak, and that problems with the second roof were also allegedly caused by Kiker’s work.  The Parish sued Kiker in Alabama State Court, and the company put Penn National on notice of the claim.  The insurer provided a defense under a reservation of rights.

 

A jury awarded the Parish $350,000.00 in damages.  Penn National filed suit in the Southern District of Alabama seeking a declaration it did not have a duty to indemnify Kiker for the verdict.  The District Court granted Penn National’s Motion for Summary Judgment finding that the policy’s “contractual liability” exclusion precluded coverage.  This typical exclusion stated that coverage was not available for damages the insured might become obligated to pay by reason of the assumption of liability by contract or agreement.

 

On appeal, however, the Eleventh Circuit reversed the judgment, and ruled that the policy provided coverage for property damage caused by an “accident”.  The Court held that an “accident” does not necessarily occur when a contractor performs faulty work, but may occur under Alabama law if the faulty work/defect creates a condition that causes property damage.

 

The damages in the underlying litigation were for the cost of repairing water damage to the ceilings, fixing improper installation of shingles, and destruction of the gypsum decking.  Since Kiker did not work on the ceilings, they were not part of the alleged faulty work/defect, and the water damage thus arose from an “accident”.  The Court also found that damage to the decking resulted from an accident because Kiker did not really perform work on the decking either.  The cost of removing and replacing the shingles was covered because those tasks necessarily had to be undertaken to repair the underlying damaged roof deck.

 

Consequently, the Appellate Court reversed Penn National’s Summary Judgment and directed the case back to the District Court with instructions to enter judgment in favor of the Parish.

 

This case represents a recent and continuing dialogue on whether and when construction defects are covered by a contractor’s CGL liability policy. This case gives the issue a fairly thorough treatment focused on Alabama state law.

 

One of the common issues is whether a construction defect is truly an “accident”, with many cases and courts holding that a construction defect may be accomplished with intent and purposefully and therefore is not an “accidental occurrence” that triggers coverage.  The analysis in this case is somewhat unusual since whether or not the defect was an accident, according to this Court, seems to depend on the outcome and not on the act itself.  This Court seems to say that, if there is damage to property which is not strictly speaking part of the construction work or defect that may constitute an “accident” which appears to be an odd analysis.  Most cases discussing this issue have focused on whether the construction defect was intended, a surprise, or not to be expected and therefore an accident.

 

This case also discusses the common contractual exclusion argument.  Many construction defect claims and related breach of warranty claims are barred by various contractual liability exclusion clauses in CGL policies.  The Court argued that the breach of warranty claim, while requiring a contractor to use reasonable skill, did not constitute “assumption of liability” under a contract, whereas other courts and cases have held that such claims are indeed contractual in nature and subject to the policy exclusion.

 

Some states have fairly universally denied coverage under CGL policies for construction defects, whereas Alabama apparently draws a common distinction where a construction defect might be covered if it damages personal property other than the construction work itself. However, this case is fairly unique in extending that analysis to determine whether an “accident” had occurred in addition to covered property damage.

 

This issue has become very contested, convoluted, and contradictory on a national basis, and even within states.  State courts have issued conflicting rulings that are often overturned or modified on appeal, and the federal courts have consequently struggle to interpret and apply perceived state law.  Many states have had to address this issue by statute or insurance regulations to clarify the extent of construction defect coverage.