Volume XVII, No. 18 (No. 448)

Friday, February 26, 2016

 

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. 2016
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.  They come in all shapes, sizes and dimensions.  However, the calls come in and each one more challenging than the one before.

 

Lots of travel this past week, with more to come.

 

In the mid part of the 19th century, George Stevens operated a grocery and supply business on the Wisconsin River in central Wisconsin.   During the extensive logging of interior Wisconsin, the river was used by logging companies to float logs to market.  Loggers on the river found this a convenient stopping point, as the river bends slightly and the operation was from far upstream. The town developed from Steven’s post. Stevens Point, Wisconsin was named for him.  

 

I visited Stevens Point this week and had the pleasure of collaborating with two talented lawyers, Neil Selman and Heidi Vogt, as part of a training team for a good client.  Of course, traveling from Buffalo to Wisconsin may not be the itinerary most would select for their winter travel.  However, I met truly lovely people and it was a great program.

 

However, for those of you who are considering setting up NEXT February’s training in Phoenix, or Miami or Belize or a location with similar meteorological attributes, you can reach me at [email protected].  Just sayin’.

 

I will make it up with a trip to San Diego for the FDCC Winter Meeting tomorrow.

 

Fascinating Cases in This Week’s Issue:

 

In my recent memory, I cannot think of a more interesting array of cases than the ones I summarized in my column in this week’s issue.  One case underscores the perils of not having Data Breach insurance.  Another holds that an out-of-possession owner might still live in the household of the property in which she does not live.  A third deals with an abuse and molestation exclusion. A fourth caps off a long battle over underinsured motorists offsets.  Yet another discusses the implication of failing to timely notify an insurer of a pending lawsuit after timely notifying it of the accident.  And there’s more.

 

Bad Faith in New York – The Scent is in the Air:

 

See Brian’s column on Bad Faith.  Your editor has, for a couple of years, felt that bad faith was “in the air” in the appellate courts.  Faithful readers know that there hasn’t been a bad faith verdict against an insurer affirmed by a court in this state in the 21st century. 

 

However, the courts are sniffing around.  Look at the two cases reviewed in Brian Barnas’ column.  The SUM case, Gutierrez, from the Second Department, is most troubling.

 

Let me spend a moment discussing the Gutierrez case and tell you what is so troubling about it.

 

Gutierrez, a GEICO insured, has a car accident on February 21, 2010.  His car collides with an Allstate-insured vehicle and Gutierrez has injuries that qualify as “serious” under the No Fault statute.  Allstate tendered its $50,000 policy, apparently Gutierrez sought and received GEICO’s consent to settle and then made an underinsured (SUM) claim under his own GEICO policy.

 

That is how it is supposed to work.

 

In July 2014, he sued GEICO asserting three causes of action:

 

  • The first cause of action, sounding in breach of contract, demanded payment of the SUM benefits.

  • The second cause of action sought damages in tort for GEICO's alleged breach of "its duty to act in good faith" by unreasonably withholding payment of SUM benefits.

  • The third cause of action alleged that GEICO "breached its contract and/or policy, and absolute duties and obligations to the Plaintiff and its insureds."

 

GEICO moved pursuant to dismiss the second and third causes of action in the complaint for failure to state a cause of action. It argued that if the second and third causes of action sounded in breach of the implied covenant of good faith and fair dealing, that covenant was implicit in every contract, and therefore those causes of action were duplicative of the cause of action sounding in breach of contract. The lower court denied the motion, asserting that the second and third causes of action were not duplicative of the first cause of action, sounding in breach of contract.

 

On appeal the Second Department noted that the second cause of action alleged a failure to act in good faith and that “implicit in every contract is an implied covenant of good faith and fair dealing”. “The implied covenant of good faith and fair dealing,” it held, is “a pledge that neither party to the contract shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruit of the contract, even if the terms of the contract do not explicitly prohibit such conduct and such a cause of action is not necessarily duplicative of a cause of action alleging breach of contract”.

 

OK, we can live with that.  However, then the court went off the reservation. Citing to Bi-Economy, 10 NY3d 187, a “consequential damages” case, the court held:

 

An insurance carrier has a duty to "investigate in good faith and pay covered claims".  A breach of that duty includes both the value of the claim, and consequential damages, which may exceed the limits of the policy, for failure to pay the claim within a reasonable time. Such a cause of action is not duplicative of a cause of action sounding in breach of contract to recover the amount of the claim. Such consequential damages may include loss of earnings not directly caused by the covered loss, but caused, instead, by the breach of the implied covenant of good faith and fair dealing. The second cause of action states a claim for consequential damages for breach of the implied covenant of good faith and fair dealing. Therefore, that branch of GEICO's motion, which was to dismiss that cause of action, was properly denied.

 

  • The court dismissed the third cause of action as duplicative of the first.

 

It is this language, which is most troubling:

 

An insurance carrier has a duty to "investigate in good faith and pay covered claims" (Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187,195). Damages for breach of that duty include both the value of the claim, and consequential damages, which may exceed the limits of the policy, for failure to pay the claim within a reasonable time. 

 

Think about this in context of a SUM claim (or a third party claim).  Doesn’t the SUM endorsement permit GEICO to contest the value of the claim?  There are no time limits set forth in the endorsement.  A SUM carrier is entitled to conduct discovery, to evaluate tort liability and damages and have a hearing on the value of the claim before an arbitrator or jury.  How can the exercise of its rights to do so be a breach of the covenant of good faith and fair dealing?  This is a terrible decision.

 

Bi-Economy involved a business interruption claim and the consequent liquidation of the insured’s business because of an allegedly low-ball offer.

 

Watch this space.

 

DRI’s Duty to Defend Compendium:

 

Hot off the press is DRI’s Duty to Defend Compendium, covering all 50 states, Canada, the Virgin Islands and Puerto Rico.   Jen Ehman, Agnes Wilewicz, and the undersigned were delighted to author the New York chapter of this superb publication.

 

Whether an insurer has a duty to defend its insured and the extent of that duty is typically the most important question faced by a liability insurer when presented with a new claim. And the answer to that question is often multi-faceted, jurisdiction dependent, and regularly generates second and even third tier questions that also must be answered by the insurer. This compendium surveys the law and provides an analytical guide for insurance professionals to navigate through these issues. Researched and written by experts in the field, this compendium is an outstanding resource for insurers and practitioners alike. View Table of Contents.  The price for DRI member, in ebook or hard copy is a mere $145 and for non-members, $220. (Compare that to the cost of an hour of legal services).  Interested, click here

 

Phillips Federal Philosophies:

 

Greetings from New York City, where this Buffalo gal has been sent on a pilgrimage to Shake Shack for work.  Two cases for your perusal this week, both H&F wins on coverage.  The first is Century Surety Co. v. Whispers Inn Lounge, which provides a succinct one-two punch of a reminder on the issues of negligence claims connected with criminal acts and the use of conditional language in a disclaimer. (Full disclosure – Dan Kohane and H&F appeared on behalf of Century Surety).  The second case, Home Depot U.S.A. Inc. v Farm Family Casualty, is another H&F/Kohane win in a  coverage case arising out of a trip and fall which highlights the tendency of some New York courts to look beyond the four corners of the policy when considering additional insured issues.

 

J.

Jennifer J. Phillips

[email protected]

 

The Honeymooners – 100 Years Ago:

 

While it isn’t quite the same as Donald Trump meeting The Honeymooners, other honeymooners were celebrating their nuptials a century ago:

 

The Evening World

New York, New York 

 26 Feb 1916

 

ON THEIR HONEYMOON;

WANT ALL TO KNOW IT

 

Newark Newlywed Hands Printed

Announcement to His Fellow Passengers

 

Not for the Joseph H. Crumps of New Jersey was the blushing diffidence of the newlywed.

 

Every passenger on the Clyde liner Apache, to-day en route to Jacksonville, has a neatly printed card.  It reads:  “Just Married.  Feb. 24, 1916.  Mr. and Mrs. Joseph H. Crump of East Orange and Newark, N.J.  On their honeymoon to Florida.”

 

Mr. Crump gave out the cards.  He handed one to everybody he saw on board ship.  Mrs. Crump was Miss Hazel Anderson of No. 45 Eaton Place, East Orange.  Mr. Crump lives at No. 280 North Sixth Street, Newark.  They were married in Roseville, N.J.

 

“Now,” said Mr. Crump, “they know all about it.” 

 

Editor’s Note:  The marriage appeared successful.  In 1940, Joseph and Hazel were living in East Orange and were the parents of three daughters, Muriel, Jane and Florence.  Joseph died young, in October 1959.  Hazel, who is buried by his side in Port Murray Cemetery in New Jersey, outlived him by 30 years.

 

HEWITT’S HIGHLIGHTS:


Dear Subscribers:

Just returned from Disney World and spending the week with Mickey Mouse and company.  It was my kids first time at Disney World and they had a great time meeting Mickey, Donald, and company, and riding all the rides.  It is the happiest place on earth, with the occasional child meltdown from a long wait for a ride.

 

In serious injury news, the Second Department was busy issuing decisions that I highlight in this edition. In one case, we have yet another case in which a defendant submits medical reports from their experts that cause an issue of fact because their own experts find significant range of motion limitations. In another case, the court reminds plaintiffs that they must show set forth objective medical findings in their expert’s report, or else the court will not rely on the doctor’s unsupported conclusory opinion. Plaintiffs’ experts must also explain degenerative changes noted in their own medical records or they will not be able to show causation. 

 

These cases are a good reminder that medical expert affirmations and reports must be detailed, set forth the basis for their opinions objectively, and explain any adverse information contained within in order for a defendant to be successful on a summary judgment motion or for a plaintiff to show an issue of fact in response to such motion.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

The Perfect Woman – 100 Years Ago:

 

The Sun

New York, New York

26 Feb 1916

 

PROTECT THE PERFECT WOMAN.

 

Physical Culture Teacher Denies

Disability to Get Married

 

Miss Sigma Ahlgren, a physical culture teacher, who is suing Ward Hall Ream for $10,000 damages for breach of promise of marriage, asked Supreme Court Justice Cohalan yesterday to vacate an order for her examination before trial on Ream’s allegation that she had tuberculosis.

 

Miss Ahlgren said she was one of nine perfectly formed children of robust parents living in Vexio, Sweden.  She denied she had incapacitated herself for the duties of a wife by drinking cocktails or other beverages, and said:

 

“My students, among the most prominent in the city, would not seek my services if I were the cocktail drinking person I have been described to be.  I am more healthy than most women of my age.”

 

When Miss Ahlgren submitted certificates by Dr. Edward Parke and Dr. Sidney V. Haas that she is a splendid specimen of womanhood Justice Cohalan decided she had been examined sufficiently. 

 

Editor’s Notes:  Sigma accused her doctor, Lucetta Morden, of providing that diagnoses because she, Dr. Morden, has affections for Mr. Ream. For a discussion of this lawsuit and other claims that the lack of “eugenic perfection” led to the end of engagements and marriages, click here.

 

I know you wanted a postscript on our stars:

 

  • First Lieutenant Ward Hall Ream, Company C, 305th Engineers, US Army, was killed in action on October 1, 1918.  His death certificate notes that he was unmarried. Ward Hall Ream was killed in World War I.

  • When we last found Dr. Morden in the 1940 census, she was single, 59 years old, and living with her younger sister, also a doctor, in Brooklyn.

  • Sigma Ahlgren vanished from the annals of genealogical records, at least I couldn’t find her anywhere during my searches.

 

Jen’s Gems:

 

Greetings.

 

I write this note from JFK airport in New York City.    I was in town for a preliminary conference and with my flight being delayed I have some time to get work done before it departs.  I always appreciate Jetblue’s free internet in its terminal.   

 

Beyond that, it is hard to believe that my little Charlotte is not going to be a baby much longer.  She is already ten months.  She walks around the house and makes a run for the stairs whenever she thinks my husband and I are not looking.  Before I know it, she will be ordering me around like her sister.  Cannot wait.

 

In terms of my column, the trial courts were pretty quiet for the past two weeks.  I have one decision to report on.  It analyzes a provision contained in an additional insured endorsement which limits coverage to only those in privity of contract with the named insured.   With the court’s stance on this language now pretty well settled, look for privity when reviewing tenders. 

 

Hope everyone has a nice weekend!  Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

Matrimony, a Century Ago:

 

The Courier Journal

Louisville, Kentucky

February 26, 1916

 

College Girls Outline

Ideals of Matrimony

 

Some Money and Love, But

Much Dancing Prevalent Demand of Minnesota Co-eds 

 

Minneapolis, Minn., Feb. 25.—The Minnesota Daily, the student newspaper of the University of Minnesota, which had asked the women students of the institution the question, “How much salary must a man receive before you would consent to marry?” to-day received replies ranging from $800 to $10,000 a year.  Most of the girls were conservative in their demands, however, and the general average based on early replies, is about $1,600.

 

One girl wrote:  “What is money to me!  Give me a true, loving husband and a cottage.”

 

A large majority of the girls demanded that their future husbands be good dancers, some said they must know the “latest steps,” and one went so far as to say she would marry only a man who was a “dreamy dancer.”

 

Smoking would be permitted, even demanded, by a large number of the girls, but drinking would be prohibited and those who advocated card playing say bridge should be substituted for poker, although one girl conceded her husband can have one night a week for the latter game. 

 

Wilewicz’ Wide World of Coverage:

 

Dear Readers,

 

Greetings to all of our old friends, and to all of our recent/new subscribers, welcome! In Wiliewicz’ Wide (sometimes Wild) World of Coverage, we bring you cool coverage cases from the Second Circuit, the nation’s Federal Circuit Courts, and beyond. We also focus on environmental law cases, as my personal faves in terms of science and substance. From Georgia to Guam and Maine to Miami, every other week we present some of the more notable precedent coming down the pike around the country, with a dash of enlivening alliteration along the way.

 

First, from our own Second Circuit, we bring you Brown v. Lockheed. This asbestos-related personal injury case was first started in federal court in Alabama. When the statute of limitations there prevented the suit from going forward, Mr. Brown’s estate tried again in Connecticut state court. Lockheed Martin removed to the federal district court there, but moved to dismiss for lack of personal jurisdiction over it in Connecticut. In a well-reasoned and thoroughly researched opinion, the Second Circuit sided with Lockheed. Though the company had, years before, registered to do business in the state and also appointed an agent for service of process, they were not “essentially at home” in the state sufficient to bring it without its jurisdiction. As an international company, its contacts outside of the state were grossly disproportionate to those within it. With no personal jurisdiction, Lockheed could not be sued there. 

 

Next, out of a Louisiana Court of Appeal (Fifth Circuit), we have an electrifying case interpreting a Cross Liability Exclusion. In Maestri v. Entergy Corp., a commercial glazer was installing glass panels at a construction site. He was on a boom lift in close proximity to a power line when he was electrocuted. As it happens, litigation ensued. At issue on the coverage end was whether there was coverage for the lift rental company, as an AI under the employer’s policy, under a CGL policy that contained a cross liability exclusion. That endorsement barred coverage for bodily injury an employee of any insured and/or for bodily injury to any insured. Here, since the glazer qualified as an insured under either interpretation, there was no coverage for the AI for this claim. The Court interpreted the cross liability exclusion to play out consistently with the purpose of CGL policies – “which are designed to protect the insured against claims brought by third parties”. Note: A hat tip to Chris Strapp and Michael McMyne at IFG Companies for this one. We understand that this is Chris’s third appellate win on this endorsement. Kudos!

 

As we ride out these last few weeks of winter, stay warm everyone. See you in a couple of weeks!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Life Insurance Fraud – A Century Ago:

 

The Evening World

New York, New York

26 Feb 1916

 

COURT MUST DECIDE IF MAN KILLED SELF

 

Widow Contends Grant Was

Murdered, but Insurance Company Alleges

He Committed Suicide

 

A lawsuit involving the question of whether a man committed suicide or was murdered will be brought to trial in the Supreme Court next week.  The action is that of Mrs. F. Rogers Grant of Asheville, N.C., against the United States Casualty Company of New York.

 

Julian S. Eaton of No. 141 Broadway, attorney for Mrs. Grant, contends Grant was murdered.  The insurance company says he killed himself.  Grant, a real estate dealer of Asheville, had gone into the country Oct. 4, 1912, to inspect land.  He had a man companion with him.  Grant stepped into some woods and a few minutes later a shot was heard.  Grant was found dead with two bullet holes in his head.  A revolver was found nearby.  There were signs of a struggle.

 

It is hinted by the attorneys of both sides that a mysterious woman friend of the dead man will be called as a witness.  Mrs. Grant is suing to recover $5,000 on an accident policy her husband carried. 

 

Editor’s Note:  I could not find the results of the trial or the name of any mystery woman revealed.   I imagine the case settled.  Hard to imagine a suicide with two bullet holes in the head, but what do I know?

 

Tessa’s Tutelage:

Dear Readers,

I have just returned from Mexico and it seems winter is still holding on in Western New York.  I have hope for the swift arrival of warmer weather on account that my father is currently toiling away in the sugar house boiling sap to make maple syrup.  That is the surest indicator of spring’s arrival in my family.

 

This issue includes several no-fault litigation cases and what I consider an interesting arbitration case concerning compliance with the Workers’ Compensation Fee Schedule. If I didn’t catch your interest with the Fee Schedule case (understandable),  the First Department has three no-fault cases ranging from a chiropractor/acupuncturist who didn’t keep records of nonappearances, to a chiropractor/acupuncturist erroneously identified as a licensed physician, to a defendant who didn’t demonstrate personal knowledge of nonappearance. And finally, the Second Department makes clear that a Plaintiff is not required to establish that its claim forms were admissible for the truth of the matters asserted pursuant to CPLR 4518.  

Enjoy!

Tessa

Tessa R. Scott

[email protected]

 

Want Ads:  A Century Ago:

 

Democrat and Chronicle

Rochester, New York

26 Feb 1916

 

“SWAPS”

 

TO SWAP—Phonograph or gas range for motorcycle, any make.  Deninger, 335 North Street

 

TO SWAP—My hot water boiler big enough for nine-room house for good motorcycle.  Deninger, 335 North Street

 

TO SWAP—Lady’s genuine Alaska sealskin coat, beaver collar, in fine condition, for vacant lot, second mortgage, automobile, or what have you? B-30, this office.

 

 

Barnas on Bad Faith:


Is there anybody alive out there?


Welcome to another installment of Barnas on Bad Faith.  By the time this issue is published I will be enjoying my ninth Bruce Springsteen & the E Street Band concert at the First Niagara Center here in Buffalo, New York.  I can’t wait.  The Boss is bringing his “River Tour” to town, which is somewhat odd seeing as The River album came out in 1980.  However, 35 years later, I’m excited to hear Bruce play my third favorite Springsteen album from front to back.  For the record, my favorite Boss album is Born to Run followed by Darkness on the Edge of Town.

 

Much like Bruce Springsteen is known to inquire if anyone is alive out there, one might ask if bad faith claims are alive in New York.  The answer to this question may be changing right before our eyes.  This edition, we have two Appellate Division cases evaluating claims of bad faith.  In the Freeman LLC case, the First Department considered a claim by two plaintiffs who owned commercial properties in Ohio.  When the insurer denied coverage following losses due to vandalism, the plaintiffs brought a bad faith claim.  The First Department, evaluating the case under Ohio Law, denied the insurer’s motion to dismiss, concluding that the plaintiffs were entitled to move forward with discovery.

 

In the Gutierrez case, the Second Department considered whether GEICO’s decision to deny SUM benefits to its insured violated its duty to act in good faith.  The court nicely summarized the differences between a breach of contract action and a bad faith action, and also articulated the rule for damages in a bad faith claim.  In the end, the Second Department concluded that the plaintiff stated a viable cause of action for breach of the implied covenant of good faith and fair dealing, allowing the case to go forward.

 

I hope everyone makes it through the end of winter.  Personally this is one of my favorite times of year, as all 30 MLB teams have officially reported for Spring Training.  In the words of the great Rogers Hornsby, “People ask me what I do in winter when there’s no baseball.  I’ll tell you what I do.  I stare out the window and wait for spring.”  I’m expecting big things from my Toronto Blue Jays this year, and I can’t wait for Opening Day to get here.  See you next time.

 

Signing off,

Brian

Brian D. Barnas

[email protected]

 

Nominating a Supreme Court Justice in One’s Last Year of the Presidency – The Nomination of Justice Brandeis, revisited:

 

In a recent issue, I discussed the nomination of Justice Brandeis to the Supreme Court of the United States.  In light of the controversy surrounding President Obama’s intention to nominate a replacement to the late Justice Scalia, we look back, again, to Justice Brandeis’ nomination, a century ago.

 

One hundred years ago last month, on January 28, 1916, President Wilson, an incumbent was in the last year of his first term. He nominated Louis Brandeis, one of the most controversial nominees in American history, to the SCOTUS. President Wilson's was up for re-election on November 7, 1916. Wilson was a Democrat. The New York Times editorialized against him.

Brandeis was confirmed June 1, 1916. The Senate was composed of 56 Dems and 40 Republicans. He was confirmed by a vote of 47-22. Some 47 Democrats and three Republicans voted for his confirmation. One Dem and 21 Republicans voted against. Eleven Dems and 16 Republicans did not vote.

Few can argue about Justice Brandeis' contribution to the Court.

 

Peiper’s Ponderings:

 

I start this week off with a thank you to our Editor for holding the presses long enough to allow me to submit my cover note.  I had to run out of the office earlier than expected tonight to ensure I was present for the Micron Hockey Award Night at our local town rink.  I assured Dan, by the way, that if he received an award, I had already prepared a speech to accept in his honor.  He suggested going with a Trump-esque mockery, and I think he may have had a point.

 

Alas, he did not win anything.  My son, on the other hand, did receive the “unsung hero” award.  I usually do not mention this type of stuff, but I had the opportunity  to experience tonight what so many other parents already know…the sheer pride in watching a child accomplish something they’ve worked towards for months.  Proof positive for him that hard work pays off; a good lesson to be learned at 6 or 60. 

 

He’s thrilled, and I’m back at the office.  At least I’m in the 716, which is a move in the right direction.

 

As for our offerings this week, potpourri is as varied as ever.  We review two snowplow cases this week, well, because you know you’re going to be seeing them as we wind our way through the remainder of winter.  In both cases, the Second Department does an excellent job of explaining duties of landowners and contractors, as well as their potential duties to each other. 

 

We also review an interesting case on insurance agent/broker malpractice.  With the latest decision, this time, out of the Third Department, the door opens a bit farther on the longstanding Murphy v Kuhn “special relationship” test. 

 

Finally, we review one of the more interesting rear-end collision cases you’ll ever come across.  In this case, the striking vehicle was a NYPD van being driven by commercial car wash attendant.  As readers of this publication will recall, police vehicles are usually exempt from vicarious liability under V&T 388.  That only applies when the vehicle is being operated by the police, however.  Thus, the question is whether the police were operating a vehicle that was being driven by a third-party.  What say you?  Answer follows inside; no peeking. 

 

That’s it for now.  Enjoy your last weekend of February. 

 

Steve

Steven E. Peiper

[email protected]

 

Headlines from the attached issue:

 

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

 

  • Settlement Agreements and Releases in Coverage Suits Only Release What is Specified in the Agreements

  • In Pre-Prejudice Case, Failure to Give Notice of Lawsuit Commenced is a Breach of the Policy; Excuse Offered is Unacceptable

  • “Loss of Electronic Data Exclusion” Means what it Says. No Liability Coverage for Bank’s Lawsuit against Restaurant for Failing to Safeguard Credit Card Data

  • Court of Appeals Grants Leave to Appeal in Carlson

  • Can an Out-of-Possession Landlord Live in the Same Household as a Tenant who Resides There?  “Perhaps so,” says the Second Department as Thousands Flee.

  • First Department Grants Leave to Appeal to Court of Appeals

  • Insurer Loses Right to Rely Upon Abuse and Molestation Exclusion by Not Disclaiming Promptly.  Limitation of Coverage to Designated Premises Exclusion Inapplicable

 

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

Robert E.B. Hewitt III

[email protected]

 

  • Defendants’ Own Expert Found Significant Limitations in Range of Motion Such That Summary Judgment Was Inappropriate

  • Supreme Court Should Not Have Awarded Nonmoving Defendants Summary Judgment Where Plaintiff Demonstrated Issue of Fact

  • Defendants Submitted Competent Medical Evidence That the Alleged Injuries to Plaintiff’s Spine were not Caused by the Accident

  • Plaintiff’s Expert Failed to Set Forth Any Objective Medical Evidence from a Recent Examination and Plaintiff’s Expert Affirmation Submitted only With Sur-Reply Was not Considered

  • Plaintiff’s Expert Report Which Identified Range of Motion Limitations Failed to Set Forth the Objective Tests Conducted Which Identified Such Limitations

  • Plaintiff’s Expert Failed to Refute or Address the Findings in Plaintiff’s Own Medical Reports That the Condition Was Degenerative

 

 

TESSA’S TUTELAGE
Tessa R. Scott

[email protected]

 

Arbitration:

 

  • You Can’t Prove a “By Report” Fee Using Another “By Report” Fee

  • A Chiropractor or an Acupuncturist May Not Affirm the Contents of a Medical Report Pursuant to CPLR 2106

  • You Must have Competent Evidence of the Assignor’s Nonappearance

  • Personal Knowledge of Plaintiff’s Nonappearance Needed

  • Plaintiff is not Required to Establish as Part of Its Prima Facie Case, that Its Claims Forms were Admissible for the Truth of the Matters Asserted Pursuant to CPLR 4518

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Snow Plow Contractor Owes No Duty to Injured Third Party

  • Strict Construction of Lease Indemnity Clause Melts Owner’s Attempts to Shift Risk for Slip & Fall on Ice

  • Question of Fact on Broker Negligence; Question of Fact on Special Relationship with Insurance Agent

  • No Duty to “Voir Dire” the Car Wash Attendant BEFORE Turning Over Keys; Section 388(2) Prohibition of Liability against Police Vehicles Applies Even if Police are not Driving

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Second Circuit Rules That Mere Business Registration and Appointment of Agent for Service of Process, Without More, Are Insufficient To Create Personal Jurisdiction over a Corporation in Federal Court

  • Louisiana Fifth Circuit Court of Appeal Holds That Cross Liability Exclusion Unambiguously Bars Coverage for Claims between Insureds, Noting Liability Policies Are Designed To Protect Insureds against Third Party Claims

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Additional Insured Endorsement Required Privity of Contract

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Plaintiff Stated a Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing Based on Insurer’s Refusal to Pay SUM Benefits (Thousands Flee)

  • Plaintiffs’ Bad Faith Claims Survived Defendant’s Motion to Dismiss where Defendant was Unable to Provide Documentary Evidence Conclusively Establishing its Denial of Coverage was Reasonably Justified

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

  • Negligence and the Assault/Battery Exclusion; Conditional Language

  • Additional Insureds and Additional Agreements

 

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

 

  • Measuring the Duty to Defend

                      

 

All the best and thanks for your continued feedback.

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]
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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, Chair
[email protected]

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Audrey A. Seeley

Jennifer A. Ehman

Patricia A. Fay

Agnieszka A. Wilewicz

Jennifer J. Phillips

Brian D. Barnas

Diane F. Bosse

Joel R. Appelbaum

 

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

 

Michael F. Perley

Robert E. Hewitt, III

Jennifer J. Phillips

Brian D, Barnas

 

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

 

Jennifer A. Ehman

 

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

 

Diane F. Bosse

 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Earl’s Pearls

 

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

 

02/25/16       National Union Fire Ins. Co. v. Compaction Systems Corp.

Appellate Division, First Department

Settlement Agreements and Releases in Coverage Suits Only Release What is Specified in the Agreements

There was a settlement agreement and release entered into between National Union and Compaction in a coverage action.  The claims released are those asserted against Compaction for its own acts and liability as a landfill operator and transporter. The general rule is that where a release contains a recital of a particular claim, obligation or controversy and there is nothing on the face of the instrument other than general words of release to show that anything more than the matters particularly specified were intended to be discharged, the general words of release are deemed to be limited thereby.

 

Compaction has stated its intent to seek recovery from National Union in the event any judgment obtained is otherwise unrecoverable and National Union has commenced a declaratory judgment action as a result.

 

Compaction is not precluded from asserting a third-party complaint against Carter Day Industries, Inc., as successor-in-interest to National Union's insured under the subject policies, for its proportionate share of liability, if any as that was outside the settlement agreement

 

02/18/16       Kraemer Building Corp. v. Scottsdale Insurance Company

Appellate Division, Third Department

In Pre-Prejudice Case, Failure to Give Notice of Lawsuit Commenced is a Breach of the Policy; Excuse Offered is Unacceptable

Scottsdale issued a CGL policy to Kraemer, a construction firm, which was effective from October 2008 to October 2009. Kraemer was the general contractor at a construction site where, in February 2009, Allan Speirs was injured in the course of his work for a subcontractor. Scottsdale was notified of the occurrence in March 2009. Kraemer then learned that Speirs had allegedly sustained serious injuries in the accident in January 2010 that information was promptly forwarded to Scottsdale.
 

Speirs commenced an action against Kraemer and the owner of the construction site in August 2011. In November 2011, Kraemer was served with the summons and complaint pursuant to Business Corporation Law § 306 but, because its registered agent was the defunct law firm that handled its 1965 incorporation, it did not receive those documents. Plaintiff accordingly defaulted, and neither it nor Scottsdale became aware of the personal injury action until counsel for Speirs alerted defendant to that fact in March 2012. Scottsdale disclaimed coverage because, among other things, Kraemer had failed to give it notice of the lawsuit as required by the liability policy.

 

Kraemer challenged that disclaimer in this action

 

The liability insurance policy at issue here requires prompt notice of the occurrence and the lawsuit. The failure to give that notice may allow an insurer to disclaim its duty to provide coverage.

 

At the time of the policy being issued (prior to 01/17/09) no showing of prejudice was required" to justify a disclaimer.  It is clear that the policyholder failed to notify its insurer as soon as practicable that the personal injury action had been commenced. Indeed, it never gave notice to defendant, although counsel for Speirs did so approximately four months after papers had been served.

 

The insured never gave notice because it did not receive the summons and complaint but, inasmuch as its non-receipt flowed from its failure to appoint a new registered agent for service to replace a defunct one that had been named decades earlier, that explanation was "insufficient as a matter of law.

 

The "no-prejudice" rule accordingly applies to the case and the failure of insurer to affirmatively establish prejudice is of no moment.  Coverage is lost.

Editor’s Note:  Kudos to my friend, and excellent coverage lawyer, Ann Odelson from Carrol McNulty & Kull, who represented the insurer.

 

02/18/16       Rvst Holdings LLC v. Main Street America Assurance Co.

Appellate Division, Third Department

“Loss of Electronic Data Exclusion” Means what it Says. No Liability Coverage for Bank’s Lawsuit against Restaurant for Failing to Safeguard Credit Card Data

Rvst operates fast food restaurants and store their customers' credit card information on their computer network. The network was infiltrated by unknown individuals who unlawfully obtained the customers' card information and then used that information to make numerous fraudulent charges. Trustco Bank subsequently commenced an action against Rvst that alleged, as relevant here, that it failed to exercise reasonable care in safeguarding the information of Trustco cardholders, which, in turn, caused Trustco to sustain damages related to its reimbursement of the fraudulent charges.

 

Rvst then sought coverage under their business owner's insurance policy issued by Main Street. Main Street declined to defend or indemnify plaintiffs in the underlying Trustco action, asserting that the policy excludes from coverage third-party claims arising out of the loss of electronic data.

 

The court noted that the nature of the allegations contained in Trustco's complaint is not in dispute – the underlying leadings claimed "losses due to the theft and subsequent misuse of electronic account data and/or electronic vandalism at certain [of plaintiffs' restaurant] locations." Nor is there any dispute that the electronically stored cardholder information at issue in the underlying action qualifies as "electronic data" under the policy's definition of that term. Thus, the only question, for the court, is whether the policy clearly and unmistakably excludes from coverage third-party damages flowing from stolen electronic data.

 

The liability section of plaintiffs' policy provided, that "[defendant] will pay those sums that [plaintiffs] become[] legally obligated to pay as damages because of . . . 'property damage.'" The policy defines "property damage" as "[p]hysical injury to tangible property . . . or . . . [l]oss of use of tangible property that is not physically injured." Crucially, the policy further states that, "[f]or the purposes of this insurance, electronic data is not tangible property."

 

Moreover, the policy specifically excluded "[d]amages arising out of the loss of … electronic data."

 

In light of this unambiguous language, the court agreed that Trustco's claim for damages arising out of plaintiffs' negligent handling of electronic data is not a claim for "property damage" under the policy and is excluded from coverage.

 

The insured attempted to avoid this result by arguing that defendant has a duty to defend based upon provisions of a separate section of the policy providing coverage for property damage, the coverage provided under that section is expressly limited to plaintiffs' claims for "direct physical loss of or damage to" plaintiffs' own property. That section provided first party coverage, not liability coverage, so it was inapplicable.

 

02/18/16       Redeye v. Progressive Insurance Company

Court of Appeals Denies Leave to Appeal
We are pleased to report that the high court denied leave to appeal in this case, that our office handled successfully for Progressive.

 

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

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.

 

02/18/16       Carlson v. American International Group

Court of Appeals Grants Leave to Appeal in Carlson

         

          07/02/15       Carlson v. American International Group (I)

Appellate Division, Fourth Department

Direct Action by Judgment Creditor Can Only Be Commenced if Policy was Issued or Delivered in New York.   MCS-90 Applies Only to Named Insured

Carlson commenced this direct action pursuant to Insurance Law § 3420 (a) (2) to collect on certain insurance policies after a second amended judgment against MVP Delivery (MVP) and William Porter was entered upon a jury verdict .  American Alternative Insurance Company (“AAIC”) issued a commercial umbrella policy to Airborne, Inc. and later changed the named insured to DHL.

 

A direct action can be commenced against an insurer only when a policy is “issued or delivered in New York.” The parties and the court have improperly conflated the phrase "issued or delivered" with "issued for delivery," which was used in the former version of Insurance Law § 3420 (d), and therefore the definition of "issued for delivery" is not relevant here

 

The policy was issued in New Jersey and delivered in Seattle, Washington, and then in Florida. It was not issued or delivered in New York, and therefore the first cause of action of the complaint against AAIC must be dismissed.

 

Contrary to plaintiff's alternative contention he may not seek payment of the judgment against AAIC pursuant to the MCS-90 endorsement. That federally-mandated endorsement provides that "the insurer . . . agrees to pay . . . any final judgment recovered against the insured" However, the Federal Motor Carrier Safety Administration (FMCSA), which regulates the interstate trucking industry, defined the term "insured" on the MCS-90 endorsement as the named insured only.

 

02/17/16       Vincel v. State Farm Fire and Casualty Company

Appellate Division, Second Department

Can an Out-of-Possession Landlord Live in the Same Household as a Tenant who Resides There?  “Perhaps So,” says the Second Department as Thousands Flee.

Vincel was attacked by a pit bull while getting his car from a garage he rented.  The garage was next door to premises owned by Rita.  When Rita purchased the premises, she procured a homeowners insurance policy from State Farm.  At the time of the dog attack, Rita's mother, Mary resided at the subject premises.

 

Vincel sued Rita and Mary, as the alleged owners of the dog, to recover damages for personal injuries.  The non-jury trial resulted in the action against Rita being dismissed on the basis that Rita was an out-of-possession owner of the premises. At the conclusion of the trial, the Supreme Court found Mary liable and awarded the plaintiff $150,000.

 

Vincel, as a judgment creditor, thereafter commenced this direct action pursuant to Insurance Law § 3420(a)(2) against State Farm to recover the amount of the unsatisfied judgment against Mary, alleging that she was an insured under the policy.

 

State Farm failed to meet its prima facie burden of establishing its entitlement to judgment as a matter of law. It contended that Rita was the named insured, and that the policy required Rita to be a resident of the premises in order for her relative Mary to be insured under the policy.

 

The terms "household" and "reside" are not defined in the subject policy. Under the circumstances presented here, contrary to State Farm’s contention, there are triable issues of fact as to whether the subject premises was Rita's household and whether Rita resided at the premises within the meaning of the policy.

Editor’s Note:  Only in the America – or perhaps, in the Second Department – can someone who is an out-of-possession landlord -- perhaps -- be a resident of that household.  

 

02/16/16       Estee Lauder Inc. v. OneBeacon Insurance Group, LLC
First Department Grants Leave to Appeal to Court of Appeals

In our July 16, 2015, we expressed our displeasure in the First Department decision in the Estee Lauder decision, linked below.  We called it one “destined for reversal”.  The First Department may have been listening, because it has granted leave to appeal its decision to the Court of Appeals where, we hope, it is reversed.  Our July 16th review follows:

 

07/09/15       Estee Lauder Inc. v. OneBeacon Insurance Group, LLC
Appellate Division, First Department
Court Applies Common Law Waiver Principles, It Says, to Property Damage Denial and Finds Insurer Waived Coverage Defenses
OneBeacon waived its right to assert the affirmative defense of late notice when it failed to raise that ground in its letter of disclaimer to plaintiff.  The Court did not decide this case on statutory waiver (which only applies to bodily injury or wrongful death cases under Insurance Law Section 3420(d)(2) but on common law waiver.  This one seems destined for reversal.

 

The court held that It notes that under New York law, "an insurer is deemed, as a matter of law, to have intended to waive a defense to coverage where other defenses are asserted" and the insurer knows of "the circumstances relating to its defense of untimely notice" and states that OneBeacon did not dispute that it had such knowledge long before it sent the 2002 letters (id.at 36). Thus, in a matter involving property damage claims, it relied on the common law for the proposition that "[a] ground not raised in the letter of disclaimer may not later be asserted as an affirmative defense.

 

The Court did note that the Court of Appeals frowned on an earlier decision in the same case: In KeySpan Gas E. Corp. v Munich Reins. Am., Inc. (23 NY3d 583 [2014]) the Court of Appeals stated that "[t]o the extent Estee Lauder Inc. v OneBeacon Ins. Group, LLC (62 AD3d 33 [1st Dept 2009]) ... and other Appellate Division cases hold that Insurance Law § 3420(d)(2) applies to claims not based on death and bodily injury, those cases were wrongly decided and should not be followed". 
Editor’s Note:  No matter how the court couches it, it is waiver principles without proof that the insurer had abandoned this defense.  Sorry, don’t buy it.

 

02/16/16       The City of New York v. Granite State Insurance Company Appellate Division, First Department

Insurer Loses Right to Rely Upon Abuse and Molestation Exclusion by Not Disclaiming Promptly.  Limitation of Coverage to Designated Premises Exclusion Inapplicable

Plaintiff City of New York, its Administration for Children's Services, and a foster care agency with which it contracted were named as defendants in a lawsuit alleging that the decedent suffered abuse, and ultimately death, as a result of their negligence. The City sought insurance coverage as an additional insured under a commercial general liability (CGL) policy issued by Granite State. The CGL part of the policy was occurrence-based but contained an exclusion for liability arising from occurrences of abuse or molestation. However, it also contained an abuse or molestation endorsement that added such coverage back in but only if reported during the policy period or 60 days after its expiration.

 

Here, the incidents occurred during the policy period but the City did not receive notice of the claim against it until June 2011, more than 60 days after expiration of the policy. The City promptly notified Granite of the claim but Granite did not disclaim coverage as to the City for more than six months.

 

The claim was outside of coverage and therefore a prompt disclaimer was unnecessary.  Coverage cannot be created where none exists.

 

However, here, the reason coverage did not exist was because of an exclusion.  The failure to raise that exclusion timely, within 30 days of being placed on notice, leads to a statutory waiver of the carrier’s right to rely upon it.


The insurer had another reason to deny coverage, one that, if applicable, would eliminate coverage even without a timely disclaimer.  That was a Limitation of Coverage to Designated Premises or Project endorsement (Premises Limitation endorsement).  However, the First Department found that this endorsement does not provide a basis for Granite to decline coverage here. The Premises Limitation endorsement restricts coverage only to injuries or damages arising from the "ownership, maintenance or use of the [designated] premises . . . and operations necessary or incidental to those premises." The acts of negligence alleged in the underlying complaint here are "incidental to" the "use" of the premises designated in the Premises Limitation.

 

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

Robert E.B. Hewitt III

[email protected]

 

02/24/16                 Cabrera v. Shivecharan

Appellate Division, Second Department

Defendants’ Own Expert Found Significant Limitations in Range of Motion Such That Summary Judgment Was Inappropriate

The Appellate Division modified the Supreme Court’s partial grant of defendant’s summary judgment motion and denied summary judgment across the board. The plaintiff commenced this action to recover damages for personal injuries resulting from a three-car motor vehicle accident that occurred on North Conduit Avenue in Queens. The plaintiff allegedly sustained personal injuries when a vehicle that he was driving was struck in the rear by a vehicle operated by the defendant N. Shivecharan. Shivecharan's vehicle was struck in the rear by a vehicle operated by the defendant Jairaj Yamraj and allegedly owned by the defendant Sankardial Yamraj. The parties’ dispute whether Shivecharan's vehicle was struck in the rear by the Yamraj vehicle before or after Shivecharan's vehicle struck the plaintiff's vehicle. The Yamraj defendants moved for summary judgment dismissing the complaint insofar as asserted against them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. Shivecharan cross-moved for summary judgment dismissing the complaint.

 

The Appellate Division held that the Yamraj defendants failed to meet 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 accident . Their experts found significant limitations in the ranges of motion of the cervical and lumbar regions of the plaintiff's spine and their evidentiary submissions demonstrated the existence of a triable issue of fact as to whether the alleged injuries to those regions were caused by the accident. Since the Yamraj defendants failed to meet their prima facie burden, as usual the Appellate Division found it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. 

 

02/24/16                 Ciaravino v. Brody

Appellate Division, Second Department

Supreme Court Should Not Have Awarded Nonmoving Defendants Summary Judgment Where Plaintiff Demonstrated Issue of Fact

The Appellate Division reversed the order of the Supreme Court which granted summary judgment and dismissed the case to moving and nonmoving defendants. The Supreme Court had found that plaintiff did not suffer a serious injury and searched the record to grant summary judgment to several defendants that did not move and dismissed the case against them too.

 

The Appellate Division, without analysis, found that in opposition to the prima facie showing of the moving defendants 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 plaintiff raised a triable issue of fact as to whether she sustained serious injuries to the cervical and lumbar regions of her spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d), and as to whether these alleged injuries, as well as the alleged injury to her left knee, were caused by the accident. Thus, the Appellate Division held that the Supreme Court should not have searched the record and awarded the nonmoving defendants summary judgment.

 

02/24/16                 Robles v. Mulligan

Appellate Division, Second Department

Defendants Submitted Competent Medical Evidence That the Alleged Injuries to Plaintiff’s Spine were not Caused by the Accident

The Appellate Division affirmed the denial of summary judgment. The Appellate Division found 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 Appellate Division found that defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine were not caused by the subject accident. In opposition, however, the Appellate Division found the plaintiff raised triable issues of fact as to whether the alleged injuries to the cervical and lumbar regions of his spine were caused by the accident. The decision gives absolutely no details.


02/24/16                 Sukalic v. Ozone

Appellate Division, Second Department

Plaintiff’s Expert Failed to Set Forth Any Objective Medical Evidence from a Recent Examination and Plaintiff’s Expert Affirmation Submitted only With Sur-Reply Was not Considered

The Appellate Division affirmed the grant of summary judgment. 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 injuries to the plaintiff's 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) In opposition, the Appellate Division found the plaintiff failed to raise a triable issue of fact. It found the affirmation of the plaintiff's examining physician, William J. Kulak, failed to raise a triable issue of fact as to whether the plaintiff sustained a serious injury under the permanent consequential limitation of use category of Insurance Law § 5102(d) since Kulak failed to set forth any objective medical findings from a recent examination. Moreover, the plaintiff failed to raise a triable issue of fact under the significant limitation of use category of Insurance Law § 5102(d) , as he did not submit any competent medical evidence containing either a qualitative or a quantitative assessment of his condition made contemporaneously with the subject accident. Furthermore, the Appellate Division found that the Supreme Court properly declined to consider the affirmed report of Dr. Pauline Raites, which was improperly submitted by the plaintiff for the first time in a surreply.

 

02/16/16                 Schilling v. Labrador

Appellate Division, Second Department

Plaintiff’s Expert Report Which Identified Range of Motion Limitations Failed to Set Forth the Objective Tests Conducted Which Identified Such Limitations

The Appellate Division affirmed the decision of the trial court to grant summary judgment to defendants and dismiss the case. 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 and that the defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine and to the plaintiff's hips did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).  In addition, the defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff's hips were not caused by the accident but, instead, were degenerative in nature.

 

In opposition, the Appellate Division found that plaintiff failed to raise a triable issue of fact as to whether the alleged injuries to his hips constituted a serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). The plaintiff submitted an affirmation from his treating physician, who concluded that the plaintiff's hips suffered from range-of-motion limitations as a result of the subject accident.

 

However, the affirmation did not identify the objective tests which were utilized to measure range of motion and, thus, does not support the limitation conclusion. Moreover, the plaintiff failed to raise a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of his spine constituted a serious injury under the permanent consequential limitation of use category of Insurance Law § 5102(d), as he did not offer any objective medical findings from a recent examination of those regions of his spine Further, the Appellate Division held that while a significant limitation of use of a body function or member need not be permanent in order to constitute a serious injury, any assessment of the significance of a bodily limitation necessarily requires consideration not only of the extent or degree of the limitation, but of its duration as well, notwithstanding the fact that Insurance Law § 5102(d) does not expressly set forth any temporal requirement for a significant limitation.  As the plaintiff submitted objective medical findings from only one examination of the cervical and lumbar regions of his spine that was conducted shortly after the accident, he failed to raise a triable issue of fact as to whether these alleged injuries constituted a serious injury under the significant limitation of use category of Insurance Law § 5102(d).

 

02/16/16                 Acosta v. Traore

Appellate Division, First Department

Plaintiff’s Expert Failed to Refute or Address the Findings in Plaintiff’s Own Medical Reports That the Condition Was Degenerative

The Appellate Division affirmed the grant of summary judgment to defendants.  

 

The Appellate Division found defendants established their entitlement to judgment as a matter of law by submitting the affirmed report of an orthopedic surgeon who opined that the condition of plaintiff's left knee was degenerative in nature, and by relying on plaintiff's medical records, which contained similar findings of arthritis and degeneration. In opposition, plaintiff failed to raise a triable issue of fact as to causation. Her treating orthopedic surgeon did not adequately refute or address the findings of preexisting degeneration found in plaintiff's own medical records, or explain how the accident, rather than her preexisting arthritis or obesity, was the cause of the alleged injury to plaintiff's left knee.

 

TESSA’S TUTELAGE
Tessa R. Scott
[email protected]

Arbitration:

 

02/24/16       Munroe Chiropractic v. Allstate Property and Casualty Ins.

Arbitrator Bargnesi

You Can’t Prove a “By Report” Fee Using Another “By Report” Fee

The Assignor sought chiropractic treatment complaining of neck pain radiating to the left arm. It was determined by her chiropractor that Assignor was a candidate for non-surgical spinal decompression.  Respondent, denied coverage for this treatment on the basis that there lacked medical necessity and that the submitted bills were not in accordance with the Workers’ Compensation Fee Schedule. Arbitrator Bargnesi denied Applicant’s claim on the basis that it did not comply with the Fee Schedule.

 

Arbitrator Bargnesi explained that General Ground Rules 2 and 3 of the NYS Workers' Compensation Fee Schedule require that a service provider submit, by report, justification for services that are too variable to permit assignment of relative value units. 

 

Here, the service of non-surgical spinal decompression was billed without a relative value unit.  As such, under General Ground Rule 2, the Applicant was required to (1) submit documentation setting forth pertinent information concerning the nature, extent, and need for the procedure or service, as well as the time, the skill, and the equipment necessary to provide such service, and (2) establish a relative value unit consistent in relativity with other relative value units shown in the schedule.

 

Arbitrator Bargnesi found that the second requirement, that the “by report” establish a relative value unit consistent with other services, was not satisfied.  The report submitted by Applicant stated: "The only other RVU [relative value unit] that would give the patient similar benefits of non-surgical [sic] spinal decompression is surgical spinal decompression. Surgical spinal decompression is also a “by report” code and fees vary depending upon the procedure."  This report does not provide an actual RVU, it attempts to establish a “by report” by citing another service that requires a “by report.”

 

Arbitrator Bargnesi, made clear, "by report" codes require the provider to establish an actual RVU consistent in relativity with other RVU's already shown in the schedules, and upon the insufficiency of Applicant’s report denied the claim.

 

Litigation:

 

02/17/16       Pugsley Chiropractic PLLC v. Merchants Preferred Ins. Co.

Appellate Term, First Department

A Chiropractor or an Acupuncturist May Not Affirm the Contents of a Medical Report Pursuant to CPLR 2106

The Court unanimously determined that Defendant's motion for summary judgment dismissing this first-party no-fault action on the ground of lack of medical necessity should have been denied.

 

The independent medical examination (IME) report of defendant's chiropractor/acupuncturist should not have been considered because the report erroneously identified the chiropractor/acupuncturist as a licensed "physician. However, neither a chiropractor nor an acupuncturist may affirm the contents of a medical report pursuant to CPLR 2106. Additionally, the report was not shown to have been properly "sworn to" before a notary or other authorized official.

The Court also affirmed the denial of Plaintiff's cross motion for summary judgment since it failed to establish that its claims were not denied or paid within the prescribed 30-day period.

 

02/18/16       Metro 8 Med. Equip., Inc. v. ELRAC, Inc.

Appellate Term, First Department

You Must have Competent Evidence of the Assignor’s Nonappearance

Defendant-insurer's motion for summary judgment dismissing the underlying first-party no-fault action should have been denied, as it failed to submit proof of the assignor's nonappearance at scheduled independent medical examinations (IME).

 

The affidavit of defendant's chiropractor/acupuncturist, who affirmatively stated that she does not maintain records of a claimant's nonappearances at IMEs scheduled with her office, lacked probative value, since it failed to state the basis of her recollection, some 18 months later, that the assignor did not appear on the scheduled IME.

 

Additionally, the Court clarified that personal knowledge of nonappearances at the IMEs may not be established solely by the affidavit of the IME scheduling vendor, since recording the third party statements that there was a nonappearance would provide no guarantee of the truth, or reliability, of those statements.

 

02/18/16       EMA Acupuncture, P.C. v. Travelers Ins. Co.

Appellate Term, First Department

Personal Knowledge of Plaintiff’s Nonappearance Needed

The Court sustained the denial of defendant's motion for summary judgment dismissing the action on the basis that Defendant failed to submit evidence from anyone with personal knowledge of plaintiff's nonappearances at the scheduled examinations under oath (EUOs).  The affirmation of defendant's attorney failed to describe or demonstrate personal knowledge of the office procedures when a claimant failed to appear.

 

01/22/16       Careplus Med. Supply, Inc. v. Allstate Ins. Co.

Appellate Term, Second Department

Plaintiff is not Required to Establish as Part of Its Prima Facie Case, that Its Claims Forms were Admissible for the Truth of the Matters Asserted Pursuant to CPLR 4518

A plaintiff is entitled to summary judgment by submitting evidence that payment of no-fault benefits [is] overdue, and proof of its claim, using the statutory billing form, was mailed to and received by the defendant insurer. Plaintiff is not required to establish that its claim forms were admissible for the truth of the matters asserted therein pursuant to CPLR 4518.

 

Additionally, with respect to the $802 claim submitted by plaintiff, defendant failed to establish that its follow-up notice scheduling an examination under oath (EUO) had been timely mailed.  Furthermore, with respect to the $1,277 and $995 claims submitted by plaintiff as assignee, while defendant's papers reflected that the assignor appeared for an EUO on July 30, 2003, defendant's own submissions showed that defendant did not deny those claims until October 1, 2003.

 

Consequently, defendant failed to demonstrate that it had tolled the time to pay or deny plaintiff's claims, and, thus, that it is not precluded from raising its proffered defenses. Accordingly, the plaintiff's motion for summary judgment was granted.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

02/24/16       Bryan v. CLK-HP 225 Rabro, LLC

Appellate Division, Second Department

Snow Plow Contractor Owes No Duty to Injured Third Party

Plaintiff sustained injury when she slipped and fell on ice that had formed on the parking lot owned by defendant.  She also named Rabro’s snowplow contractor, Brickman, as a co-defendant.  Brickman moved for summary judgment on the basis that plaintiff was not a party to the agreement, and that it had done nothing to create an Espinal-type duty running toward plaintiff.  In opposition, plaintiff failed to present any competent evidence.

 

Brickman’s application to dismiss Rabro’s common law indemnity/contribution claim was also dismissed where, as here, Rabro would not be vicariously liable for the negligence of Brickman.  In other words, if Rabro was found to be liable, it would be as a result of its own wrongdoing.

 

Brickman’s application for contractual indemnification was also dismissed where Rabro was unable to establish that Brickman had done anything to breach its agreement with Rabro. 

 

02/24/16       Tafolla v. Aldrich Mgt. Co., LLC

Appellate Division, Second Department

Strict Construction of Lease Indemnity Clause Melts Owner’s Attempts to Shift Risk for Slip & Fall on Ice

Plaintiff was injured in a slip and fall on ice located on a parking lot controlled by Aldrich.  The area where plaintiff fell was adjacent to a Dunkin Donuts.  Plaintiff named both Aldrich and Dunkin as defendants, and Dunkin moved for summary judgment.

 

In granting its application to dismiss Aldrich’s cross-claims, the Court agreed that Dunkin established it had no duty to remove snow and ice from the parking lot.  Therefore, where Dunkin was not negligent, it did not owe common law indemnification or contribution. 

 

Moreover, Dunkin’s motion to dismiss contractual indemnification was also appropriately dismissed where the operative indemnity clause only applied to claims “within or about the Real Property.”  The term “Real Property” was not defined.  Nonetheless, it was undisputed that Dunkin had no obligation to remove snow, did not control the parking lot, and had no duty to maintain it.  Because indemnity language is to be strictly construed, and because the language at issue was not “unmistakable,” Aldrich’s claims for contractual indemnity failed.    

 

02/18/16       Finch v. Steve Cardell Agency

Appellate Division, Third Department

Question of Fact on Broker Negligence; Question of Fact on Special Relationship with Insurance Agent

Plaintiff owned several bulls and other animals that he liked to take to rodeos.  To do this, he also owned several trucks and trailers.  Apparently, in years past, when plaintiff endeavored to attend a rodeo, he would contact his agent who would arrange for appropriate coverage.  The same agent also handled plaintiff’s home insurance, as well as his business auto and CGL coverages.

 

In the current instance, plaintiff wanted to attend a rodeo in Pennsylvania.  When defendant was unable to place coverage with plaintiff’s usual carrier, alternative coverage was obtained from ACIC.

 

During the process of unloading four bulls, the animals got free from the handlers and resulted in the injuries of several people.  Upon receipt of the lawsuits, plaintiff tendered his defense to ACIC.  ACIC immediately disclaimed on the basis that the “auto exclusion” applied because the bulls were in the course of being loaded/unloaded at the time of their escape.  Moreover, ACIC also disclaimed on the basis that the policy included an exclusion for injuries caused by animals.

 

Plaintiff then tendered the matter to his auto carrier (also procured by defendant).  The auto carrier declined the claim because the trailer from which the bulls escaped was not scheduled.  Further, because plaintiff used a friend’s truck to haul the trailer, the plaintiff’s own policy still did not apply because the truck was also not scheduled on the policy.

 

Plaintiff, in turn, commenced the instant claim against his agent arguing that the agent breached a duty by failing to obtain the appropriate coverage by virtue of the existence of the animal exclusion.  The agent agreed that it failed to obtain coverage, but argued its error was irrelevant because the auto exclusion extinguished coverage anyway.  The Court found a question of fact on the applicability of the auto exclusion, and as such refused to dismiss plaintiff’s negligence claims.

 

Plaintiff also asserted a claim that defendant had a duty to provide proper advice due to a special relationship between the parties.  Here, plaintiff established that he knew very little about insurance, and that he relied upon the agent to handle all of his insurance needs.  Both parties testified that it had been that arrangement for a period of at least six years prior to the incident in question. In light of the Record in this case, the Court also noted that a question of fact on the issue of whether a special relationship existed.

 

02/16/16       Guevara v. Ortega

Appellate Division, First Department

No Duty to “Voir Dire” the Car Wash Attendant BEFORE Turning Over Keys; Section 388(2) Prohibition of Liability against Police Vehicles Applies Even if Police are not Driving

Plaintiff sustained injury when the car she was operating was struck in the rear bumper while stopped at a traffic signal.  Her car was struck by a NYPD van being operated by an employee of a commercial car wash.  At the time of the incident, the driver of the NYPD van did not possess a driver’s license.  It appears that he was given the keys to the van with instructions that he was to operate it solely for purposes of having the vehicle washed.

 

Plaintiff sued NYC on the basis that it negligently entrusted the vehicle to an unlicensed, improper driver.  In reversing the motion court, the Appellate Division noted that plaintiff failed to demonstrate how the owner of the van failed to exercise reasonable control in handing over the keys to the car wash attendant.  In support of its position, the Court noted that the owner was not required to ask for proof of the attendant’s driver’s license prior to handing over the keys.  Rather, to create an affirmative duty to inquire into the qualifications of a car wash attendant would “unduly extend liability.”

 

In addition, the Court also held that as a police vehicle, the City of New York was exempt from liability under V&T 388.  Recall that V&T 388 specifically exempts police vehicles owned by the state, town, village, etc., and operated by the police department or law enforcement agency.  Here, plaintiff argued that the vehicle, at the time of the collision, was not being “operated” by the police department, and as such the protections of Section 388 should not apply.

 

In denying plaintiff’s position, the Court first noted that the term “operated” means, among other things, “to exert power or influence.” The Court noted that adopt plaintiff’s view that “operated” equated to “drive” would too narrowly restrict the protection to only the police department.  As a police department cannot “drive” the vehicle, it follows the term had to apply to a larger cross-section of people.

 

The Court also advised that the Section 388 exemption applies to protect owners when their vehicles are being driven by third-parties.  If, as urged by the plaintiff, the Section 388 bar only applied to police (who would be, in a sense owners), it would render the entire protection for police vehicles meaningless. 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

02/19/16       Cindy S. Brown, as Personal Representative of the Estate of Walter E. Brown v. Lockheed Martin Corp.

United States Court of Appeals, Second Circuit

Second Circuit Rules That Mere Business Registration and Appointment of Agent for Service of Process, Without More, Are Insufficient To Create Personal Jurisdiction over a Corporation in Federal Court

Walter Brown was an airplane mechanic in the U.S. Air Force from approximately 1950 to 1970, and he worked at various bases in the U.S. and Europe. During those years, he came into close contact with asbestos and was subsequently diagnosed with malignant mesothelioma (a cancer caused almost exclusively by asbestos exposure), which resulted in his death in 2012. He, and later his estate, first brought suit against Lockheed Martin and thirteen other companies in the Southern District of Alabama. When that Court dismissed the case on statute of limitations grounds, he brought the case in Connecticut Superior Court. Lockheed removed the case to Federal Court and the matter was heard before the district court in Connecticut.

 

After some discovery, as initially limited to jurisdictional issues, Lockheed moved to dismiss based upon lack of general jurisdiction over it in Connecticut. They argued that, though they are an international company and had previously consented to specific jurisdiction, there were not enough contacts to warrant exercising general jurisdiction over the company. Brown, on the other hand, countered that Lockheed had expressly consented to jurisdiction years prior when it had registered to do business in the state and appointed an agent to receive service of process there. The Estate argued that this rose to the level of “continuous and systematic” contacts in the State enough to place it “essentially at home” there.

 

The Second Circuit disagreed with Brown. Though it acknowledged that Lockheed had registered to do business and accept process in Connecticut, its contacts there were insufficient “in light of the gross disproportion between its few Connecticut contacts and its very substantial activity worldwide”. Accordingly, in a detailed and well-researched opinion, the appellate court dismissed the case against Lockheed for want of personal jurisdiction. Due process and other constitutional concerns ultimately were infringed upon here. Lockheed was not “essentially at home” in the state, as required under the case law.

 

01/27/16       John Maestri, et al. v. Entergy Corporation, et al.

Court of Appeal, Fifth Circuit, State of Louisiana

Louisiana Fifth Circuit Court of Appeal Holds That Cross Liability Exclusion Unambiguously Bars Coverage for Claims between Insureds, Noting Liability Policies Are Designed To Protect Insureds against Third Party Claims

This coverage case stems from an underlying workplace accident involving a commercial glazer who was electrocuted while riding a boom lift. John Maetri was employed by A-1 Glass Services, and was installing glass panels at the time of the incident. A-1 Glass was a subcontractor of Walton Construction, the project’s general contractor. A-1 Glass had rented the boom lift from RSC Equipment Rentals (subsequently called “United Rentals”), and the accident took place near a power line that was owned by Entergy Louisiana.

 

After the accident, Maestri sued all of the above. He also sued Liberty Mutual, RSC/United’s insurer, as well as Genie Industries as the manufacturer of the lift. Entergy filed a third party action against Walton and A-1, alleging violations of labor safety acts and averring that those statutes required Walton and A-1 to indemnify Entergy for all damages for which Entergy might become liable in the suit.

 

First Financial Insurance Corp. had issued a CGL policy to A-1 Glass, which was in effect at the time of the accident. Both Walton and RSC/United Rentals filed third party claims under that policy, seeking defense and indemnity coverage as additional insureds. That policy contained an Automatic Additional Insureds By Written Contract, Written Agreement, or Permit endorsement, which arguably could have provided coverage. However the policy also contained a Cross Liability Exclusion clause (and a separation of insured provision). This exclusion read, in pertinent part: “This insurance does not apply to any actual or alleged ‘bodily injury’ ... to: ... 3. A present, former, future or prospective partner, officer, director, stockholder or employee of any insured; 4. Any insured; or 5. The spouse, child, parent or sibling of any of the above as a consequence of Paragraphs 1., 2., 3., or 4. above.” (Emphasis added by the Court).

 

In analyzing this provision, the Court found this provision to unambiguously bar coverage for United Rentals. Maestri, the Court reasoned, was both an employee of an insured (A-1 Glass), and an insured in his own right. Such actions between insureds were not covered under this policy. The Court further noted that this “is consistent with the purpose of commercial general liability policies, which are designed to protect the insured against claims brought by third parties. As previously noted, insurers, like other individuals, are entitled to limit their liability and to impose and to enforce reasonable conditions upon the policy obligations they contractually assume.”

 

The Court went on to state that “in this instance, the plain language of the cross liability exclusion, which bars coverage for claims of ‘bodily injury’ to ‘any insured,’ places a reasonable limitation on a general commercial liability contract designed to protect insureds against claims brought by third parties. The plain meaning of “any insured” is broad enough to include any party insured under the contract, be they named in the original insuring agreement or additional insureds by the terms of the endorsement.”

 

WWW Editor Note: A hat tip to Chris Strapp and Michael McMyne at IFG Companies for this one. We understand that this is Chris’s third appellate win on this endorsement. Kudos!

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

01/22/16       Downing St. Devs., LLC v. Harleysville Ins. Co.

Supreme Court, New York County

Hon. Doris Ling-Cohan

Additional Insured Endorsement Required Privity of Contract

Harleysville issued a policy of insurance to J.M. Haley Corp. (“Haley”).  A Haley employee was injured on a job site and brought suit against the owner and general contractor, among others.  The owner and general contractor tendered their defense to the Harleysville.  The broad form additional insured endorsement defined an insured as “any person or organization for whom you are performing operations only as specified under a written contract ... that requires that such person or organization be added as an additional insured on your policy…”

 

Affirming Harleysville’s denial of coverage the court held that that plaintiffs did not qualify as additional insureds under the Harleysville policy because there was no allegation or evidence that its named insured was performing work under a written contract with either the owner or general contractor.  The court found no privity of contract between the parties.

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

02/24/16       Gutierrez v. Government Employees Insurance Company

Appellate Division, Second Department

Plaintiff Stated a Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing Based on Insurer’s Refusal to Pay SUM Benefits “Within a Reasonable Time” (Thousands Flee)

This case arose from a claim for SUM benefits relating to a motor vehicle accident.  Plaintiff was operating a vehicle insured by the defendant GEICO with the permission of the vehicle's owner.  The vehicle collided with a vehicle insured by Allstate, allegedly causing the plaintiff serious injuries as defined in Insurance Law § 5102(d), and property damage.  The plaintiff alleged that he would incur future medical expenses "in any effort to be cured" and would be "unable to pursue [his] usual duties with the same degree of efficiency as prior to this accident."

 

Allstate offered the plaintiff its policy limit of $50,000, which the plaintiff contended was insufficient to make him whole.  Therefore, the plaintiff made a claim under the SUM endorsement to the GEICO policy.  The plaintiff alleged that GEICO unreasonably refused to pay the claim.

 

In July 2014, the plaintiff commenced an action.  He asserted a breach of contract cause of action for payment of the SUM benefits and a cause of action seeking damages in tort for GEICO's alleged breach of "its duty to act in good faith" by unreasonably withholding payment of SUM benefits.

 

GEICO moved to dismiss.  It argued that the cause of action based on breach of the implied covenant of good faith and fair dealing was duplicative of the cause of action sounding in breach of contract.  Supreme Court denied GEICO's motion on the ground, inter alia, that the causes of action were not duplicative.

 

On appeal, the court first concluded that the breach of the covenant of good faith and fair dealing clam was not duplicative of the cause of action for breach of contract.  It noted that an implied covenant of good faith and fair dealing is a pledge that neither party to the contract shall do anything that has the effect of destroying or injuring the right of the other party to receive the fruit of the contract, even if the terms of the contract do not explicitly prohibit such conduct.  Such a cause of action is not necessarily duplicative of a cause of action alleging breach of contract.

 

The court then concluded that the plaintiff stated a claim for breach of the implied covenant of good faith and fair dealing.  The court articulated the rule for damages in a bad faith claim.  Damages in such a claim include both the value of the claim, and consequential damages, which may exceed the limits of the policy, for failure to pay the claim within a reasonable time and is separate from a cause of action sounding in breach of contract to recover the amount of the claim.  Such consequential damages may include loss of earnings not directly caused by the covered loss, but caused, instead, by the breach of the implied covenant of good faith and fair dealing.  GEICO's motion to dismiss was denied because the court determined that the plaintiff stated a cause of action for breach of the implied covenant of good faith and fair dealing.

 

02/16/16       Freeman LLC v. Seneca Specialty Insurance Company

Appellate Division, First Department

Plaintiffs’ Bad Faith Claims Survived Defendant’s Motion to Dismiss where Defendant was Unable to Provide Documentary Evidence Conclusively Establishing its Denial of Coverage was Reasonably Justified

 

The facts in this case, as detailed below, are from the underlying decision.  The plaintiffs were two LLCs formed in Ohio.  In 2013, the plaintiffs purchased two commercial insurance policies from the defendant for two commercial buildings in Ohio.  While the policy was in effect, both buildings suffered losses due to vandalism, which was covered under the policies.  Defendant denied coverage on the ground that majority of the claimed losses were a result of theft, which was not covered under the policies, that there were material misrepresentations on the application, and the premises were not properly secured.

 

Plaintiffs commenced an action alleging the denial of coverage was in bad faith, without proper and reasonable grounds, and with intentional and reckless disregard of the plaintiffs’ contractual and statutory rights.  Supreme Court denied the defendant's motion to dismiss or for summary judgment seeking dismissal the plaintiffs' claim of bad faith denial of insurance coverage.

 

Importantly, the court determined that Ohio Law applied because both commercial property insurance policies at issue insured buildings located in Ohio.  Regarding the bad faith claim, under Ohio Law, the insurer was required to submit documentary evidence conclusively establishing as a matter of law that its denial of insurance coverage was reasonably justified to prevail on its pre-answer motion to dismiss.  The First Department concluded that the documentary evidence submitted by the defendant failed to do so, and the plaintiffs were entitled to proceed with discovery.  The court also concluded that further discovery was warranted with respect to the plaintiffs' request for punitive damages and attorneys' fees, which, under Ohio Law, were recoverable even though their claim of bad faith denial of insurance coverage arose from their breach of contract claims.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

02/10/16       Century Surety Company v. Whispers Inn Lounge, Inc. et al.

Southern District of New York

Negligence and the Assault/Battery Exclusion; Conditional Language

In this case, Plaintiff Century Surety issued a policy to Defendant Whispers Inn Lounge which contained an exclusion for liability for bodily injury or property damage arising out of “any actual, threatened or alleged assault or battery” and “the failure to any insured or anyone else for whom any insured is or could be held legally liable to prevent or suppress any assault or battery.” The underlying claim for which Whispers Inn Lounge sought coverage involved an allegation of negligent security following a shooting inside the premises.  In response to defendant’s argument that the exclusion was ambiguous, the district court reaffirmed that it was well-settled under New York law that “assault and battery exclusions like [the one at issue] preclude coverage for injuries even where the claims are brought as negligence claims.”

 

The district court then rejected defendant’s further argument that the conditional language in the plaintiff’s disclaimer letter rendered it a mere reservation of rights.  The challenged language was the insured’s statements that “the circumstances .. . remain unclear;” that “the shooter[] has been criminally charged;” and that “[i]n the event that it is determined that [the] death was caused by an assault or battery” the exclusion would apply to bar coverage.  As the district court noted, the disclaimer letter also expressly stated that, to the extent the damages sought did relate to an assault or battery, “Century hereby disclaims all coverage.” “The letter thus clearly identified the conduct excluded, the provision of the policy under which it is excluded, and that the coverage [] is disclaimed.”  The district court found the fact that the letter was labeled a “partial disclaimer” to be immaterial.

 

02/11/16       Home Depot U.S.A., Inc. v. Farm Family Insurance Company

Eastern District of New York

Additional Insureds and Additional Agreements

This insurance coverage dispute arises out of a slip and fall at Plaintiff Home Depot’s location in Shirley, New York. Home Depot and J&J Maintenance, Inc. had a written maintenance agreement in which JJ agreed to provide snow removal services at five specific Home Depot locations, but not the Shirley location.  This maintenance agreement obligated JJ to maintain certain insurance coverage for Home Depot and “provide an Owners and Contractors Protective Liability Policy in lieu of the additional insured requirement” that showed Home Depot as the named insured. This agreement could not be modified absent a writing signed by all parties, and a further provision specified that the contract constituted the whole agreement between the parties.

 

JJ’s was insured by Defendant Farm Family Casualty Insurance Company.  JJ’s policy did not name Home Depot as an additional insured; however, Farm Family did issue a certificate of insurance to Home Depot indicating its intention to afford Home Depot coverage as an additional insured.

 

After the maintenance agreement was executed, Home Depot requested and verbally accepted JJ’s proposal for snow removal services at the Shirley location.  Shortly after the parties entered into the verbal agreement, claimant Morris slipped and fell on an accumulation of ice and snow in the parking lot of this location.  Morris sued Home Depot for his injuries, and Home Depot commenced a third-party action against JJ. The third-party action was resolved in favor of JJ on the grounds that: (1) the leaving of some residual snow and ice did not create a dangerous condition such that JJ could be found liable; and (2) the parties’ verbal agreement was insufficient to modify the written maintenance agreement to include the Shirley location.

 

Home Depot then commenced the present action in the Eastern District seeking declarations that: (1) Farm Family had a duty to defend and indemnify Home Depot in the Morris action; (2) Farm Family was required to reimburse Home Depot’s defense expenses; and (3) Farm Family was estopped from disclaiming liability because it failed to timely disclaim.

 

Farm Family argued that the decision in the Morris action resolved the coverage issue in the federal action.  The district court disagreed, finding that the issues in the two actions were not identical: the issue in the district court action was whether Home Depot was an additional insured under the Farm Family policy, whereas the Morris court considered whether the maintenance agreement applied to the Shirley location.

 

In resolving the coverage issue, the district court recognized that the four-corners of the insurance agreement generally control, and that Home Depot did not appear listed as an additional insured in the Schedule or anywhere else in the policy. The district court nonetheless noted that “some New York courts have reviewed the underlying agreement for insurance companies.” (The named culprits being in Kings County, the First Department, and the Second Department.) The court continued with the additional insured analysis, recognizing that consideration of the underlying agreement is triggered by language in the policy itself.  Although no such language appeared in the Farm Family policy, the district court found that “other facts, including the certificate of insurance, indicate that Farm Family intended to cover Home Depot in some capacity.”

 

The district court therefore considered the maintenance agreement and found, as the state court did, that this agreement did not include the Shirley location. Home Depot was therefore determined not to be an additional insured under the Farm Family policy for that location.

 

The court rejected Home Depot’s arguments that various defects in the time and manner of Farm Family’s disclaimer estopped Farm Family from denying coverage.  The district court rejected these arguments primarily on the basis that – as in Century discussed above – coverage cannot be created by a disclaimer defect where no coverage ever existed.

 

Finally, the district recognized that, where the policy itself does not name or indicate that a party is an additional insured, a certificate of insurance, particularly one that expressly states that it confers no rights (as in the case of the certificate issued to Home Depot), will not create coverage.

Editor’s Note: The district court recognized the erosion of the ‘four corners of the policy’ rule applied in additional insured analysis, but stepped through these external possible bases for coverage with an apparent interest in thoroughness as opposed to any real endorsement that this expansion has solidified in New York law. I do not think this case necessarily projects what the outcome would be if, for example, the maintenance agreement had been construed to include the Shirley location, particularly in the absence of any triggering contract language in the policy.

 

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

 

09/02/15       Pekin Insurance Co. v. Martin Cement Co., Inc.

Illinois Appellate Court

Measuring the Duty to Defend

In this case, an Appeals Court in Illinois held that an insurance company owed coverage to a contractor as an additional insured under a policy issued to its subcontractor.  The plaintiff, Jake Swartz, was injured in July 2010 when rebar broke from a building causing him to fall.  His employer was Platinum Steel, a subcontractor to Martin Cement.  The subcontract agreement required Platinum to maintain insurance naming Martin as an additional insured.  Swartz sued Martin and one other party for his injuries, and the defense was tendered to Pekin which insured Platinum under a CGL policy.  Pekin Insurance rejected the tender arguing that the policy only covered Martin for vicarious liability imputed through Platinum to Martin, but did not apply to claims arising from Martin’s own alleged negligence.  A declaratory judgment action was eventually filed with Pekin and Martin filing competing summary judgment motions with respect to the tender of coverage.

 

Pekin argued that the Platinum policy did not cover Martin because Swartz alleged direct negligence against Martin, and the Platinum policy only applied to vicarious or imputed claims against Martin.  Martin alleged that the claims against it were potentially the responsibility of Platinum, and that Platinum was actively at fault.  The trial court granted summary judgment to Pekin Insurance, declining to consider the content or allegations of a third party complaint.  The Appellate Court reversed.  The Appellate Court held that the trial court should be able to consider all of the relevant facts contained in the pleadings, including third party complaints and counterclaims, to determine whether there may be a duty to defend.  The third party complaint made sufficient allegations that actions or omissions of Platinum may have caused the injuries, making summary judgment in favor of Pekin Insurance on the duty to defend in error.  The summary judgment for Pekin Insurance was reversed, and the case was remanded to the trial court to enter summary judgment for Martin Cement in the declaratory judgment action. 

 

The existence or non-existence of coverage is largely determined by the allegations within the four corners of the pleadings.  This case stands for the proposition that courts may consider all of the relevant pleadings including answers, cross claims, counterclaims, and third party complaints, to review the factual allegations and legal theories of recovery and liability to determine whether a coverage threshold triggering the duty to defend has been crossed.