Coverage Pointers - Volume XVII, No. 19

Volume XVII, No. 19 (No. 449)

Friday, March 11, 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.  One odder than the next.

 

Spring has sprung, or almost.   It is my favorite season.  I’m just back from a great FDCC Conference at the Del on Coronado Island, San Diego, followed by two days in NYC for court appearances.  You know that you travel too much when the TSA officers know you by name.

 

Thanks for all the kind words about our most recent issue – it surely was chock full of interesting (and some controversial) cases.  For past issues of CP, or our sister publication, Labor Law Pointers, visit our website, www.hurwitzfine.com.  We will not be asking for donations and you don’t have to vote for us in either a primary or caucus state.

 

We have some interesting cases in this week’s newsletter as well.  You’ll find a decision where an appellate court held that an insured was only entitled to recover the legal fees it actually spent in defending itself in a lawsuit, not those paid by others.  That raises an interesting question about what might happen if another insurer pays defense costs and then sues to recover them in the name of its insured.

 

There are three interesting late notice cases, both from the pre-prejudice era.  In both cases the insurer was successful in defeating claims for coverage. In one of the cases, notice to the insured’s counsel of the likelihood of the policy reaching the excess layer was imputed to the insured.

 

 

PLRB Claim Conference – San Antonio, April 17 – 20, 2016:

 

We hope to see you, again, in San Antonio, for the PLRB Claim Conference.  I will be joining Kipper Burke, VP and Senior Claims Counsel at Great American P&C Group in presenting a great “how to” program on:

 

Contractual Indemnity & Additional Insureds Liability

 

Session Code:  1055    Session Level:  Intermediate

 

Monday 3:30 - 5:00 -- Room 205

Tuesday 1:30 - 3:00 -- Room 205

 

Kipper Burke, Div. VP & Sr. Claims Counsel

Great American P&C Group, Cincinnati, OH

 

Dan Kohane, Senior Partner

Hurwitz & Fine, P.C., Buffalo, NY

 

  • Distinguish between an insurer's obligations to those who qualify as additional insureds and those who benefit from contractual indemnity obligations

  • Evaluate how tenders of defense and indemnity should be made under both policy and trade agreement

  • Describe the protocols to be considered when tenders are received under both insurance policy and contract

  • Identify the relevant factors when sending or receiving tenders

     

    Jen’s Gems:

     

    Greeting! 

     

    We are experiencing an early spring in Buffalo.  Third day in a row of 60-degree temperatures.  Unheard of in March.

     

    In case anyone is looking for a great conference to attend in April, there is still time to register for DRI’s Insurance Coverage and Claims Institute ("ICCI"), taking place April 6-8, 2016, at the Loews Chicago Hotel in Chicago, IL.  If you go to http://www.dri.org/Event/20160155, you can register online. 

     

    ICCI is one of the premiere events for insurance coverage lawyers and claim professionals to learn and network.  And this year’s conference promises stellar programming and unparalleled networking opportunities.  This year’s line-up of presenters includes attorneys and industry representatives from across the country speaking on those ever-evolving considerations affecting insurance law practitioners today, including:

     

    •         The Role of Independent Counsel;

    •         The Principles of Subrogation and Made-Whole Doctrines;

    •         Erosion of the Attorney-Client Privilege and Work Product Doctrine;

    •         Settlement Agreements and the Duty to Indemnify;

    •         First-Party Coverage and Computer-Related Claims 

     

    For the first time, this year ICCI will also feature a special program geared solely to in-house and claims professionals, to delve into the issues they face:  managing primary-excess relationships, overseeing counsel reporting and expense management, and hiring monitoring counsel.

     

    Hope to see many of you there!

     

    Until next issue...

     

    Jen

    Jennifer A. Ehman

    [email protected]

 

Huge Verdicts a Century Ago:

 

Big Verdicts Affirmed

 

The Courier-Journal

Louisville, Kentucky

11 Mar 1916

 

 

Two big damage verdicts were affirmed by the Court of Appeals to-day.  W. C. Goode, a brakeman, recovered $12,500 from the Cincinnati, New Orleans & Texas Pacific, for injuries sustained when he was struck by an engine in the Ludlow yards.  He recovered $8,000 on the first trial in the Lincoln Circuit Court, and on reversal was given $7,500.  That, too, was reversed; but this last verdict was affirmed in an opinion by Judge Settle.

 

The McCracken Circuit Court was affirmed in an opinion by Commissioner Clay in the case of the Illinois Central against Gus Tolar’s administrator.  Tolar, while driving an oil wagon, was killed by a train at a grade crossing, and his administrator recovered $10,000.

 

 

Tessa’s Tutelage:

 

Dear Readers,

 

I recently returned from a very quick trip to Boston and am already lamenting that I somehow was unable to stop for some clam chowder (or is it chowdah?). Anyhow, the Second Department has been busy deciding no-fault cases!

 

In this edition, we have Compas Med., P.C. v Fiduciary Ins. Co. of Am. that confirms that mailing written notice of the accident to the insurer on or before the 30th day after the accident satisfies the 30-day notice requirement. In New Millennium Med. Imaging, P.C. v American Tr. Ins. Co. defendant’s attorney created a question of fact with inconsistent accident dates.  IMA Acupuncture, P.C. v Hertz Co. touches on res judicata and previous Declaratory Judgments.

 

I particularly liked 03/01/16 Gaetane Physical Therapy, P.C. v Kemper Auto & Home Ins. Co. where the court determined that an attorney could not submit an affidavit asserting that a matter was ready for trial without further explanation for the initial delay. Moreover, in Great Health Care Chiropractic, P.C. v Infinity Group the defendant was unable to establish cancellation of auto-policy without affidavit of litigation specialist. Finally, Renelique v National Liab. & Fire Ins. Co.: the Court found that a carrier must establish that the plaintiff’s assignor made material misrepresentations but did not clarify what would be required to prove it.

 

For now, that is all!

 

My best,

 

Tessa

Tessa R. Scott

[email protected]

 

This May Be Recommended in the Next Debates:

 

The Evening World

New York, New York

11 Mar 1916

 

BOY TRUANTS IN CELL

ON BREAD AND WATER

 

Jersey Record Sentences Four Lads to Unusual

Penalty and Threatens Their Mothers

 

“What!  You kids before me again charged with being truants?” exclaimed Recorder Richard J. Cain of Bayonne, J. J., today as four youngsters were arraigned.  A few minutes later he ordered them sent to a cell for a day and night and ordered they be given nothing but bread and water.  Daniel Kirby, thirteen; Francis Lynch, fourteen; George Barish, thirteen, and Frank Barron, fourteen, were taken to cells amid the protests of fifty mothers, who crowded the courtroom.

 

“This thing has been going on too long,” said the Recorder.  “Complaint after complaint has been made to me and I will do all in my power to break it up.  I will give even worse punishment, if the dose I prescribed to-day has not the desired effect.”

 

“Now, while all you mothers are here, I can tell you, face to face, just what I intend doing.  I will fine you ten cents per day for everyday your boy plays truant and when you keep your girls home unnecessarily I will fine you fifty cents per day.”

 

“When fines have not the desired effect after two or three trials I will impose a jail sentence and will demand only bread and water be given the prisoners.”

 

The women left the courtroom to seek legal aid.  They declare the punishment given the children is uncalled for. 

Editor’s Note:  By the way, curious about what happened to these truants, I checked out one of them.  Daniel Kirby lived his entire life in Bayonne.  He never completed school beyond sixth grade, was married, had a son and was a self-employed truck driver.  He died at age 66. 

 

Wilewicz’ Wide World of Coverage:

 

Dear Readers,

 

Keeping it brief this week, as this columnist is coming down with something fast. It’s that time of year when the seasons change and dormant germs are recirculated, I suppose.

 

In this edition of the Wide World, we have two Second Circuit coverage cases for your reading pleasure. First, in Fabozzi v. Lexington Insurance, the insureds were renovating their home when they found that the walls were so rotted through as to be on the verge of collapse. As it happened, a collapse was a named peril in their homeowners policy with Lexington. Long, long story short (i.e. the damage happened in 2002 and the Second Circuit rendered a coverage decision last week), after trial the lower court found in favor of the carrier. Thereafter, the main issue on appeal was the interpretation of the Additional Coverage part that which provided for collapse coverage “caused only by one or more of the following [...]”. The Second Circuit found that this provision had more than one reasonable interpretation. It could either have meant that collapse coverage was provided “only if it is caused by one of the following” or “caused exclusively by one or more of the following”. It was thus ambiguous and the provision was to be interpreted against the drafter/carrier.

 

Next, in Weaver v. Axis Surplus, the Second Circuit took on a wrongful act exclusion and analyzed whether an agency letter was sufficiently “demanding” as to fall within the limiting language. There, the narrow issue was whether a November 2007 DOJ letter notifying a company of a pending investigation and potential legal consequences constituted a “demand”. This was critical since the policy contained an exclusion barring coverage for “any Claim ... in any way involving ... any demand, suit or other proceeding pending ... against any Insured on or prior to [February 20, 2008], or any Wrongful Act, fact, circumstance or situation underlying or alleged therein.” Ultimately, the Second Circuit found that this letter was a demand, in that it notified the company of an investigation and advised of potential legal ramifications. Under New York law, this was a “demand” for action, and thus fell into the language of the exclusion.

 

Enjoy. Until next time!

 

Agnes

Agnes A. Wilewicz

[email protected]

Mom Deserves Support – a Century Ago:

The Brooklyn Daily Eagle

Brooklyn, New York

11 Mar 1916

 

MUST SUPPORT HIS MOTHER.

 

Emil Schultheis Ordered to Pay Her $5 Weekly

 

After hearing evidence in the charge of abandonment preferred by Mrs. Christina Schultheis, 76 years old, of 252 Bleecker street, against her son, Emil Schultheis of 407 East Eighty-sixth street, Manhattan, Magistrate Dooley, in Domestic Relations Court, yesterday ordered the son, who is a talented musician, to pay his mother $5 weekly for her support.

 

Joseph Israel, who appeared for Mrs. Schultheis, asked the court to have the son give a bond for the order, and it was so ordered. 

 

HEWITT’S HIGHLIGHTS:

 

Dear Subscribers:

 

Spring is in the air as it nears 70 on Long Island. Birds are chirping, days are getting longer, and the buds for leaves and flowers are sprouting. On serious injury, the courts have given us three appellate decisions this edition. In the first, plaintiff’s case was dismissed because its expert failed to address pre-existing conditions and failed to compare qualitative or quantitative limitations in plaintiff’s knee to a normal knee. In the second case, the defendant’s motion was denied because even though plaintiff pedestrian was not crossing at the crosswalk or intersection, there was an issue of fact as to whether the driver operated with due care. In the third case, defendants tried to set aside a favorable jury verdict. While the court did reduce the pain and suffering awards to some degree, as it usually does, it let stand the jury verdict on liability. Although plaintiff’s expert did not give a percentage as to the range of motion limitations, it did make objective comparisons to a normal knee in finding that the limitations exist qualitatively, which was enough.

 

I hope you have a Happy St. Patrick’s Day and a nice first day of spring. And don’t forget to spring forward and change your clocks one hour ahead this weekend.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]


Saluting the Eagle – 100 Years Ago:

 

The Sun

New York, New York

11 Mar 1916

 

Preserve the Eagle

 

At the annual conference of the American Game Protective Association in this city an attack was made upon the American eagle as our national emblem.  Several of the speakers, following Dr. Franklin’s ancient example, advocated the symbolic superiority of the wild turkey to the bird that has made our gold coins famous.  At this moment, when almost everything that patriotic Americans hold dear is under attack, it is hard to comment calmly upon the suggestion made by the wild turkey fanatics.  We eat wild turkeys, but the American eagle, noble bird, is never to found upon the stalls of a market.

 

The advocates of the wild turkey as our national bird advanced a most astounding argument in behalf of their proposition.  They asserted that the wild turnkey “is always on the lookout for trouble and is the most suspicious of all game birds.”  Relegate the turkey to the kitchen then.  As the emblem of a nation that has too much trouble without looking for it and has a tendency to be always short on suspicions the wild turkey would be fully as inappropriate as a wild goose.

 

There are times, for course, when the American eagle doesn’t appear to typify some temporary phase of this nation’s essential characteristics.  Nevertheless, we believe that the American eagle, symbolizing our freedom and our strength, is in permanent control of what might be called our national heraldic situation.

 

Peiper’s Particulars:

 

In our final issue of winter, we start with a trip down memory lane to the year 1986.  What happened in the summer of 1986, well from review of Wikipedia, not a heck-of-a-lot.  Seriously, other than airplane crashes happening at an alarming frequency, there was not much to speak of.  Hands Across America occurred in May of 1986, but otherwise the Summer was pretty “meh” for purposes of posterity.  A review of the top music hits of 1986 reveals few great songs.  I noticed, however, how positive all of the songs and movies seemed to be.  Dion Warwick was had the top song of the year, as an apropos example.  If you want a laugh, go look at the Top 100 songs of 1986.  Eddie Murphy made the list…enough said.

 

A far different cry from the times in which we find ourselves now.  For what it is worth, at least for my generation, 1986 was an excellent year for movies.

 

Why my fascination with 1986?  Well that was also the year that I “earned’ my first pair of glasses.  Nice, heavy, metal glasses.  Those gave way to the regrettable “changing lenses” phase towards the later 1980’s, wire rimmed glasses in the 1990’s, and so on.  All of that ended last Friday afternoon when I joined the growing number of Lasik converts.  While still swollen, and a little blurry (apparently, I’m a poor healer), the first week has been pretty great. I’m glad I went through with it, so glad, in fact, that I’m wasting your Friday morning telling you about it.    

 

As for actual legal stuff this issue, we’d recommend you take a look at the Castlepoint case.  It is an excellent discussion of how court’s view “risk,” and how a deductible is meant to apply.  There are few things more confusing to policyholders and lawyers, alike, than how a deductible applies.  Or, also a frequent head scratcher, the difference between a SIR and a deductible.  As shown in Castlepoint, coverage doesn’t kick in until the deductible is satisfied, but it will kick in without the insured doing anything so long as the loss exceeds it.   With an SIR, of course, the insured has to actually pony up real cash to trigger coverage.

 

That’s it for now.  Enjoy the final weeks of winter; to the extent it even existed. 

 

Steve

Steven E. Peiper

[email protected]

 

Gadabout, Yes?  A Century Ago:

 

Poughkeepsie Eagle-News

Poughkeepsie, New York

11 Mar 1916

 

GADABOUT MOTOR COMPANY

MAY LOCATE HERE

 

            Representing the Chamber of Commerce of this city, prominent Poughkeepsians will go to New York today, it is understood, to confer with the representatives of the Gadabout Motor Company, a concern which is negotiating with this city for a site here.

 

            The company if brought here will employ several hundred men in the assembling of a popular priced clover leaf roadster.

 

            The machine will have a standard tread and a wheel base of about 100 inches.

 

            The price will be in the neighborhood of $385.

Editor’s Note:  if you read on, you’ll find that the Gadabout was not Poughkeepsie’s savior.

 

Barnas on Bad Faith:

 

Greetings from Buffalo, New York:

 

On March 9, we tied a record high temperature here in Buffalo.  Many local municipalities are already lifting their winter parking rules, and it seems like winter may be drawing to a close (stands up to knock on all wooden objects in office) at last.  The warm weather certainly has me eying my golf clubs and contemplating when I can arrange for the first round of the season to take place.  Some of our local golf courses have already opened for play so hopefully it is soon.

 

No New York cases on bad faith to evaluate for you this week.  Your writer has reached out to obtain more information regarding the Gutierrez v. GEICO case to bring an even more in depth analysis of this troubling extension of bad faith law to you.  Keep an eye on this space in the future not only for that but for analysis of cases citing and discussing the Gutierrez decision.

 

This week’s edition contains the Mr. Charlie Adventures case out of the Eleventh Circuit.  Following a yacht fire, Atlantic denied the insured’s claim based largely on the investigative report of two experts.  However, the district court found numerous flaws with the report.  The Eleventh Circuit concluded there was a triable issue of fact regarding whether the flawed investigative report gave Atlantic an arguable basis to deny the claim or whether its denial was made in bad faith.  In the Connelly case, the Delaware Supreme Court decided an important issue: when does a bad faith claim for failure to settle within the policy limits accrue?  The court held that, in Delaware, the claim accrues on the date an excess judgment against an insured becomes final and non-appealable.

 

As a reminder and practice point, New York follows the rule adopted by the Delaware Supreme Court.  A cause of action against an insurance carrier based on its alleged “bad faith” failure to settle a third party claim accrues on the date liability in excess of the policy limits is imposed on the insured.  In New York, the applicable statute of limitations for a bad faith claim against an insurance carrier based on its bad faith refusal to settle within the policy limits is governed by the six-year Statute of Limitations applicable to actions founded upon breach of contract.  This is to be distinguished from other jurisdictions, which hold that a cause of action against an insurance carrier based on bad faith refusal to settle is governed by the Statute of Limitations applicable to actions based on tort.

 

I hope everyone has a nice weekend.  If your alma mater or favorite college basketball team currently resides on the bubble, I hope the Selection Committee looks upon your team favorably this Selection Sunday.  Best of luck filling out your brackets, and hopefully your bracket is not busted by our next issue.  See you next time.

 

Signing off,

 

Brian

 

Brian D. Barnas

[email protected]

 

Gadabout?  Not So Fast …

Poughkeepsie Eagle-News

Poughkeepsie, New York

15 Mar 1916

 

WON’T BRING THE GADABOUT

MOTOR COMPANY HERE

 

A delegation of members from the Chamber of Commerce who recently went to New York City to investigate the application of the Gadabout Motor Company to locate a factory in this city has declined to recommend the proposition.  The local committee found that the company had not sufficiently established itself and did not meet the requirements asked for by the chamber. 

 

Editor’s note: The Gadabout was an unusual American automobile manufactured in Newark, New Jersey from 1913 until 1915. A four-cylinder cycle-car, it had a body woven from so-called "waterproof reeds"; Wise describes it as "looking like a mobile wastepaper basket".  To see a picture of the vehicle click here and scroll down a bit.

 

Love the vehicle’s name but not sure it was right for this short-lived car.  What’s a “gadabout”?  It’s a person who moves about restlessly or aimlessly, especially from one social activity to another or person who restlessly seeks amusement.  That triggers memories of the AMC Gremlin for bad car names. It may explain its short history on the road.

 

Phillips Federal Philosophies:

 

Hello, All:

 

Spring has sprung! The grass is riz! I wonder where the birdies is!

 

Sorry.  The above is a Phillips family seasonal tradition, normally chanted on the first day of the year that one can both wear sunglasses and not start every conversation with “cold enough for you?”

 

Today’s first case, The Netherlands Insurance Co. v. Selective Insurance Co. of America, discusses who may be considered an additional insured by reference in a written contract.  Unlike some of the other cases we’ve discussed at Coverage Pointers, resolution of this coverage issue did not necessitate a grammatical discussion – although, notably, this appears to be a result of the arguments not raised by counsel.

In a second case, Employers Ins. Co. of Wausau v. Harleysville Preferred Ins. Co., The Travelers Indemnity Company, and The Electrical Employers Self Insurance Safety Plan, the district court took a lengthy trip between Texas and New Jersey in order to resolve a coverage issue – and I’m not sure the court got off at the right exit.

 

As for me, I’m looking for an exit ramp to sandy beaches and drinks with tiny umbrellas.  Enjoy the sunshine!

 

J.

Jennifer J. Phillips

[email protected]

 

Highlights of this week’s issue (attached):

 

 

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

 

  • Recovery of Legal Fees for Failure to Defend Insured is Limited to Fees Actually Paid by Insured

  • Late Notice of Accident and Lawsuit Sinks Claim for Coverage

  • Late Notice Dooms Insured’s Claim under Excess Insurer.  Its Attorneys and Brokers Knew of Reasonable Likelihood that Verdict would Exceed Primary Coverage and Attorney’s Knowledge is Imputed.   Notice Given by AI to Excess Carrier Did Not Satisfy Named Insured’s Notice Obligations.

  • Life Insurance Proceeds Can be Assigned Unless Restricted in the Policy

  • Rare Construction Defect Decision:  Work Product Exclusion Sustains Coverage Denial and Occurrence was Collapse, not Impairment

  • In Pre-Prejudice Statute Case, Insured’s Notice was Late but Question of Fact as to Its Good Faith Belief in Non-Liability

 

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

Robert E.B. Hewitt III

[email protected]

 

  • Plaintiff’s Physician Must Explain Pre-Existing Conditions and Also Qualitatively or Quantitatively Compare Limitations to a Normal Knee

  • Deposition Testimony Established Issue of Fact As To Whether Defendant Driver Exercised Due Care When His Vehicle Hit Pedestrian Who Was Not Crossing Street At Crosswalk

  • An Expert’s Qualitative Assessment of a Plaintiff’s Condition Suffices to Establish a Serious Injury Provided it had an Objective Basis and Compares Plaintiff’s Limitations to The Normal Function

 

TESSA’S TUTELAGE
Tessa R. Scott

[email protected]

 

Litigation:

 

  • Mailing Written Notice of the Accident to the Insurer on or before the 30th Day after the Accident Satisfied the 30-day Notice Requirement.

  • A Carrier Must Establish that the Plaintiff’s Assignor Made Material Misrepresentations

  • Double Check that You Have the Right Accident Date

  • Previous Declaratory Judgments and Res Judicata

  • Defendant was Unable to Establish Cancellation of Auto-Policy Without Affidavit of Litigation Specialist

  • An Attorney’s Affidavit Asserting a Matter is Ready for Trial Must be Supported

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Deductible for Flood Loss Based Upon Total Risk, Rather than Flood Coverage Sub-Limit

  • Claims of Fraud against Title Insurer Survive; Claims for Punitives Dismissed

  • Plaintiff Cannot Re-Plead Causes of Action that Were Previously Denied and/or Abandoned

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Second Circuit Finds Additional Coverage – Covered Peril Collapse Provision Ambiguous in Property Damage Case

  • Second Circuit Finds that Agency Letter Notifying of Potential Legal Ramifications with DOJ was a “Demand” Sufficient to Trigger Wrongful Acts Exclusion and Preclude Coverage

 

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Carrier Complied with No-Fault Insurance Regulations and Timely Requested EUOs

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Delaware Supreme Court Holds that a Bad Faith Cause of Action in a Failure to Settle Case Accrues when an Excess Judgment against the Insured is Final and Non-Appealable

  • Boat Burning Breeds Bad Faith Claim: Insurer did not have an Arguable Reason to Deny the Claim based on Insufficient Investigative Report

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

  • The More the Merrier: The Additional Insured and the Written Contract.

  • Conflict of Laws: Taking the Express Train from Texas to New Jersey

 

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

 

  • Judge to Rule on Bad Faith Claim

 

 

That’s all the news from New York’s Insurance Coverage universe.  We always love your comments, notes and inquiries.  Keep them coming.

Dan

 

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

Office: 716.849.8942

Cell:     716.445.2258
Fax:      716.855.0874

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

LinkedIn: www.linkedin.com/in/kohane

 

 

 

 

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]

 

03/09/16       Financial Services Vehicle Trust v. Saad

Appellate Division, Second Department

Recovery of Legal Fees for Failure to Defend Insured is Limited to Fees Actually Paid by Insured

In July 2003, Andre H. Saad was driving a vehicle leased from the plaintiff, Financial Services Vehicle Trust (hereinafter Financial), when he was involved in an accident that resulted in the deaths of two pedestrians. On the date of the accident, Saad was insured by GEICO. The estates of the two pedestrians killed in the accident subsequently commenced wrongful death actions against both Saad and Financial. GEICO retained attorneys O'Connor, McGuiness, Conte, Doyle & Oleson and William Watson (“O'Connor” to defend Saad and Financial in the wrongful death actions, and Saad retained attorneys Bellavia to monitor the case on his behalf. In February 2007, the wrongful death claims were settled for an aggregate total of $1,150,000. GEICO paid its policy limits toward the settlement, and Financial contributed the remaining balance of $750,000.

 

Financial thereafter commenced an action against Saad seeking to recover the $750,000 it had contributed toward the settlement of the wrongful death claims pursuant to a contractual indemnification provision contained in its lease between Financial and Saad (“Subro Action”).  Saad then commenced a third-party action against GEICO to recover damages for breach of contract based upon GEICO's refusal to defend him in the Subro Action and against the O'Connor defendants and the Bellavia defendants to recover damages for their alleged malpractice in representing him in connection with the underlying wrongful death claims.

 

Insofar as the coverage action is concerned, GEICO for summary judgment dismissing the third-party complaint and Saad cross-moved for summary judgment against GEICO, the O'Connor defendants, and the Bellavia defendants.

 

GEICO was liable to Saad for breach of contract based on GEICO's refusal to defend Saad in the Subro Action against him for contractual indemnification arising out the underlying wrongful death action.   The action against him outlined a reasonable possibility of coverage for the indemnity claim.  Saad could not recover, from Geico, to costs of prosecuting that action.  Fees to prosecute a coverage lawsuit are not recoverable.

 

With respect to those attorneys' fees incurred by Saad in defending the main action, the Supreme Court erred in failing to limit Saad's recovery to those attorneys' fees paid by him. Attorneys' fees paid by Saad's father's business are not recoverable.

 

The Supreme Court properly awarded GEICO summary judgment dismissing the causes of action in the third-party complaint to recover damages for alleged tortious conduct. GEICO established as a matter of law that it did not act in bad faith, since its conduct, under the circumstances, did not constitute a gross disregard of Saad's interests

Editor’s Note:  Not sure we agree that the fees paid by others should not be recoverable.  What if they had been paid by another insurer?

 

03/09/16       Karl v. North Country Insurance Company

Appellate Division, Second Department

Late Notice of Accident and Lawsuit Sinks Claim for Coverage

This was a direct action against North Country by the plaintiff, Karl. He had obtained a default judgment against a Chinese restaurant, Crystal Garden (“Crystal”) arising out of a December 22, 2006 slip and fall.

                   

Crystal had a policy with North Country which required notice of the occurrence to be given to North Country as soon as practicable, and required legal papers to be forwarded promptly.

 

Karl had commenced the underlying action in February 2008, and Crystal was served with notice of entry of a default judgment in the underlying action in favor of the plaintiff on May 28, 2010. Neither Crystal Gardens nor the Restaurant satisfied the judgment.

 

North Country was known by the plaintiff to insure Crystal although he did not notify North Country of the accident until four months after the 2008 personal injury lawsuit was commenced. North Country promptly disclaimed coverage based upon the plaintiff's failure to provide timely notice of the occurrence and timely notice of commencement of the lawsuit.

North Country made a prima facie showing that it timely and properly disclaimed coverage based upon the plaintiff's failure to promptly forward a copy of the summons and complaint to North Country.  In opposition, the plaintiff failed to raise a triable issue of fact. Therefore, the Supreme Court properly granted North Country's cross motion for summary judgment dismissing the complaint.

 

This was a pre-prejudice case so the presence or absence of prejudice was of no consequence.

Editor’s Note: Attalawyer Ed Flink from Smith Flink Law.  Right decision for the right reason.

 

03/08/16       Martin Associates, Inc. v. Illinois National Ins. Co.
Appellate Division, First Department

Late Notice Dooms Insured’s Claim under Excess Insurer.  Its Attorneys and Brokers Knew of Reasonable Likelihood that Verdict would Exceed Primary Coverage and Attorney’s Knowledge is Imputed.   Notice Given by AI to Excess Carrier Did Not Satisfy Named Insured’s Notice Obligations.

The record shows that Martin’s broker and attorneys knew that there was a reasonable possibility that the underlying personal injury action would exceed Martin's $1 million primary coverage, thereby triggering Martin's obligation to notify its excess insurer, Illinois National.  Neither notified Illinois.

 

The information in its attorneys' possession is imputed to Martin.  Likewise,  Martin received a copy of the injured party's notice of claim against the Dormitory Authority in April 2006 and the summons and complaint in the personal injury action in August 2006, both of which it forwarded to its broker; yet it failed to provide notice to Illinois National or take other steps to insure that Illinois National received notice. Thus, Martin's notice to Illinois National in November 2011 was untimely. Illinois National's disclaimer, issued 26 days after it received Martin's notice, was timely as a matter of law.

 

The notice provided to Illinois National by defendant Dormitory Authority of the State of New York and by Zurich American Insurance Company on behalf of defendant Bovis Lend Lease LMB, Inc. was not sufficient to satisfy Martin's own notice obligation, since Martin's interests were at all times adverse to those of the other insureds.

 

03/03/16       ADB Net Corp v. Columbian Mutual Life Insurance Co.

Appellate Division, First Department

Life Insurance Proceeds can be Assigned Unless Restricted in the Policy

Life insurance proceeds are freely assignable in New York, where, as here, it is undisputed that the assignment provision contains no restriction on the beneficiary's right to assign. Columbian, which was put on notice of the assignments, chose to disburse the assigned funds to the original beneficiaries, rather than to the beneficiaries' assignee, Preferred. Columbian thus might be obligated to remit the assigned life insurance proceeds to Preferred although there are issues of fact to be decided.

 

Preferred's claims as attorney-in-fact were properly dismissed. An attorney in fact is essentially an alter ego of the principal and is authorized to act with respect to any and all matters on behalf of the principal with the exception of those acts which, by their nature, by public policy, or by contract require personal performance".  Since the beneficiaries have already been paid, Preferred is not entitled to receive payments as attorney-in-fact.

 

03/03/16       Preferred Mut. Ins. Co. v. Zani  

Appellate Division, First Department

Rare Construction Defect Decision:  Work Product Exclusion Sustains Coverage Denial and Occurrence was Collapse, not Impairment

Aspen's brought a subrogation action alleging that as a result of Zani's negligent work on Aspen's insured's building, the building was severely damaged by a partial collapse of a wall and that those allegations do not give rise to a duty on plaintiff's part to defend Zani in that action. First, the policy excludes from coverage damage attributable to Zani's own defective work product. Second, the partial collapse of the wall constitutes an occurrence under the occurrence-based policy, and the occurrence took place outside the policy coverage period; the policy had been cancelled in October 2010.

 

Aspen and Zani's contention that the occurrence was not the collapse of the wall but the continuous movement of the outer layer of brick for several years, which had impaired the structural integrity of the wall, is belied by the policy definition of occurrence as an "accident."

 

03/02/16       Aspen Insurance UK Limited v. Nieto

Appellate Division, Second Department

In Pre-Prejudice Statute Case, Insured’s Notice was Late but Question of Fact as to Its Good Faith Belief in Non-Liability

Another late notice case, where the insurance policy requires that notice of an occurrence be given "as soon as practicable." When the policy so provides, notice must be given within a reasonable time in view of all of the circumstances.

It is the insured's burden to demonstrate the reasonableness of the excuse, if notice is not provided promptly.

 

In general, whether there existed a good faith belief that the injured party would not seek to hold the insured liable, and whether that belief was reasonable, are questions of fact for the fact-finder. 

 

The insurer established its prima facie entitlement to judgment as a matter of law by demonstrating that the insured defendants were notified of the injured party's workers' compensation claim approximately 17 months before they notified the insurer of the occurrence.  This was a pre-prejudice case, since the subject insurance policies were issued in 2008, prior to the amendment to Insurance Law § 3420 (for policies issued after January 17, 2009). The insurer did not have to show that it was prejudiced by the failure to provide timely notice.

 

However, the insured raised a triable issue of fact as to whether the delay was reasonably based on a good-faith belief of nonliability.  What its good faith belief might have been was not discussed in the opinion.

Editor’s Note:  For policies issued or renewed after 01/17/09, the insurer must demonstrate material prejudice in its ability to defend or investigate claim it is receives notice within two years of time notice should have been given.

 

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

Robert E.B. Hewitt III

[email protected]

 

03/10/16                 Shea v. Ives

Appellate Division, Third Department

Plaintiff’s Physician Must Explain Pre-Existing Conditions and Also Qualitatively or Quantitatively Compare Limitations to a Normal Knee

The Appellate Division affirmed the Supreme Court’s grant of defendants’ motion for summary judgment.  Plaintiff Shea and defendant Ives were involved in a car accident. Shea and her husband, derivatively, brought this negligence action against defendants, alleging that Shea sustained serious injuries to her right knee, left hip, back, neck and left ear as a result of the accident and economic loss greater than basic economic loss. The Appellate Division held that as to the permanent consequential limitation and significant limitation statutory categories relates to medical significance and involves a comparative determination of the degree or qualitative nature of an injury based on the normal function, purpose and use of the body part. An orthopedic surgeon averred that, based on multiple observations, including that Shea could bend her knee beyond 90 degrees, the knee was "objectively normal." This proof satisfied defendants' burden by establishing that there was no comparative loss of the normal function, purpose and use of Shea's knee. Plaintiffs failed to raise a triable issue of fact. Plaintiffs' medical proof, an affidavit from an orthopedist, did not provide a quantitative or qualitative comparison of Shea's knee to the normal function, purpose and use of a knee.

 

The Appellate Division also found that in regard to the aforementioned statutory categories, that summary judgment was appropriate based on causation. Once a defendant provides evidence establishing a preexisting condition, a plaintiff must provide objective medical evidence distinguishing a preexisting condition from the injuries claimed to have been caused by the accident. Defendants put forward proof establishing a preexisting degenerative knee condition based on, among other things, Shea's reports of pain in her right knee and a radiologist's opinion that Shea suffered from a preexisting degenerative arthritic condition, affecting her right knee, that was unrelated to the accident. Although plaintiffs' submissions included the opinion of the orthopedist who opined that the accident caused the present knee problems, the orthopedist provided no factual explanation distinguishing Shea's preexisting knee condition.

 

Finally, the Appellate Division found summary judgment was properly granted in regard to the 90/180-day category of serious injury. Treatment records from after the accident reveal that Shea was discharged from the hospital on the day of the accident with instructions to take Tylenol. Shea's treatment records following the accident do not impose any restrictions on work or other activities. Shea's physical therapy evaluations reflect that, within approximately two months of the accident, Shea reported playing golf. This evidence satisfied defendants' prima facie burden. Given that Shea was unable to provide objective medical evidence to support her self-serving assertions that she was prevented from performing substantially all of the material acts that constituted her usual and customary daily activities" for the relevant period, plaintiffs' submissions failed to raise a question of fact regarding the 90/180-day category.

 

03/09/16                 Rodriguez v. Areloina

Appellate Division, Second Department

Deposition Testimony Established Issue of Fact as To Whether Defendant Driver Exercised Due Care When His Vehicle Hit Pedestrian Who Was Not Crossing Street at Crosswalk

The Appellate Division affirmed the Supreme Court’s denial of defendants’ motion for summary judgment.  In this case, the defendants’ vehicle allegedly struck the plaintiff, a pedestrian, who was crossing the street at a point other than an intersection or crosswalk. The Appellate Division held that the 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 subject accident. The defendants' motion papers failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that he sustained a medically determined injury or impairment of a nonpermanent nature which prevented him from performing substantially all of the material acts which constituted his usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident. Moreover, the Appellate Division held that on the issue of liability, based upon the deposition testimony of the parties, a triable issue of fact existed as to whether the defendant driver contributed to the subject accident by failing to exercise due care to avoid the collision with the plaintiff. Accordingly, the defendants failed to establish, prima facie, that the defendant driver was free from negligence.

 

03/02/16                 McEachin v. City of New York

Appellate Division, Second Department

An Expert’s Qualitative Assessment of a Plaintiff’s Condition Suffices to Establish a Serious Injury Provided it Had an Objective Basis and Compares Plaintiff’s Limitations to The Normal Function

Defendants appealed from a judgment of the Supreme Court which, upon a jury verdict finding them 85% at fault in the happening of the accident and the plaintiff 15% at fault, and upon a jury verdict on the issue of damages finding that the plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident, awarded  damages for past pain and suffering in the principal sum of $600,000, future pain and suffering in the principal sum of $500,000, past medical expenses in the principal sum of $55,000, and future medical expenses in the principal sum of $87,500. The trial court refused to set aside the jury verdict on the issue of damages and for judgment as a matter of law, or, alternatively, to set aside the verdict as contrary to the weight of the evidence and excessive and for a new trial. The Appellate Division modified the damages award by deleting the provisions awarding damages to the plaintiff in the principal sums of $600,000 for past pain and suffering and $500,000 for future pain and suffering; and otherwise affirmed the verdict and remanded the matter for a new trial on the issue of damages for past and future pain and suffering, unless within 30 days  plaintiff consented to reduce the amount of damages for past pain and suffering from the principal sum of $600,000 to the principal sum of $400,000, and to reduce the amount of damages for future pain and suffering from the principal sum of $500,000 to the principal sum of $350,000. In that case, the amendment judgment would be affirmed.

 

The facts are as follows: On January 23, 2009, the plaintiff Elgin McEachin and the defendant Michael McMahon were involved in a motor vehicle collision.  McMahon's vehicle was owned by the defendant New York City Police Department. The plaintiff was 49 years of age at the time of the accident. At the ensuing trial, the plaintiff presented the testimony of an orthopedic surgeon who treated him for injuries to his lumbar spine approximately two months after the accident. Among other things, this physician testified that the plaintiff reported severe pain in his lower back, his straight-leg raising test was positive, and he walked with an antalgic gate and a limp favoring his left side. Moreover, the results of a discogram of the plaintiff's lumbar spine were not normal, because there were fissures in several of the discs. He diagnosed the plaintiff with low back pain secondary to low lumbar post-traumatic pathology, and lower radiculopathy. After the surgeon administered epidural steroid injections, he eventually implanted a spinal cord stimulator in the plaintiff's back to block pain reception. During a trial period before the plaintiff received a permanent implant, his pain was reduced by at least 50%.The plaintiff testified that, at the time of trial, the spinal implant device was still in his back, and he used it every day. Although the device made his pain "manageable," he still experienced back pain and he could no longer engage in certain activities.

 

The plaintiff also presented the testimony of another orthopedic surgeon, who performed arthroscopic surgery on his left knee approximately two months after the accident. Relying on photographs of the inside of the knee taken during the surgery, this physician identified a "whole lot" of cartilage damage throughout the knee, and diagnosed the plaintiff with tri-compartment degenerative arthritis with grade four chondromalacia. Further, he offered testimony that these injuries were caused by the subject accident. Although the physician did not write down measurements for the loss of motion with respect to the knee, his examination showed positive tenderness over the condyles and gross loss of motion. Further, this physician opined that, without a doubt, the plaintiff would need at least one total knee replacement in the future. He recommended that the plaintiff live with his knee pain as long as he can take it before undergoing knee replacement surgery. The plaintiff testified, among other things, that he used crutches or a cane for three weeks after his arthroscopic knee surgery, and his ability to bend the knee did not improve much after the surgery. Moreover, at the time of trial, he could not walk for long periods and he was constantly feeling pain in his left knee.

 

At the close of the plaintiff's case, the defendants moved for an order of dismissal, inter alia, on the ground that the plaintiff failed to establish that he sustained a serious injury within the meaning of Insurance Law § 5102, and the motion was denied. During their case, the defendants did not present the testimony of any physicians or other experts. Thereafter, they moved for a directed verdict on the ground that the plaintiff failed to establish that he sustained a serious injury within the meaning of Insurance Law § 5102, and the motion was denied. The jury returned a verdict finding that the plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d), the defendants were 85% at fault in the happening of the accident, and the plaintiff was 15% at fault. The jury awarded the plaintiff $600,000 in past pain and suffering, $500,000 for 20 years of future pain and suffering, $55,000 for past medical expenses, and $87,500 for future medical expenses. The defendants moved to set aside the verdict pursuant to CPLR 4404(a) on the ground, inter alia, that the plaintiff failed to establish that he sustained a serious injury within the meaning of Insurance Law § 5102(d). The Supreme Court denied that motion.

 

The Appellate Division noted the legislative intent of the No-Fault law was to weed out frivolous claims and limit recovery to significant injuries. As such, there must be some objective proof of a plaintiff's injury in order to satisfy the statutory serious injury threshold, subjective complaints alone are insufficient.  One way to substantiate a claim of serious injury is through an expert's designation of a numeric percentage of a plaintiff's loss of range of motion, i.e., quantitatively. However, the Appellate Division held that an expert's qualitative assessment of a plaintiff's condition also may suffice, provided that the evaluation has an objective basis and compares the plaintiff's limitations to the normal function, purpose and use of the affected body organ, member, function or system. Contrary to the defendants' contention, the Appellate Division found that the trial evidence demonstrated that the plaintiff's experts provided a valid qualitative assessment of the plaintiff's condition, with respect to both his lumbar spine and his left knee, and their evaluations had an objective basis. In view of the foregoing, the Appellate Division found there was a rational process by which the jury could have found that the plaintiff sustained a serious injury under the significant limitation of use and permanent consequential limitation of use categories as a result of the subject accident, and the verdict as to that issue was based upon a fair interpretation of the evidence.   The Appellate Division, however, did find that the damages awarded for past pain and suffering and future pain and suffering deviated materially from what would be reasonable under the circumstances without explanation.

 

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

 

Litigation:

 

02/26/16       Compas Med., P.C. v Fiduciary Ins. Co. of Am.

Appellate Term, Second Department

Mailing Written Notice of the Accident to the Insurer On or Before the 30th Day After the Accident Satisfied the 30-day Notice Requirement.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appealed from an order of the Civil Court which denied plaintiff's motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint.

 

As a preliminary matter, because plaintiff failed to establish either that defendant had failed to pay or deny the claim within the requisite 30-day period, or that defendant had issued a timely denial of claim that was conclusory, vague or without merit as a matter of law, plaintiff failed to demonstrate its prima facie entitlement to summary judgment.

 

Defendant cross-moved for summary judgment, arguing that one ground upon which it had timely denied plaintiff's claims was that no one on plaintiff's behalf had complied with the requirement that written notice of an accident must be "given" to the insurer "as soon as reasonably practicable, but in no event more than 30 days after the date of the accident."[sic]

 

The affidavit of defendant's no-fault claims manager, submitted in support of defendant's cross motion, stated that defendant had first learned of the October 14, 2010 accident when it received an NF-2 form on November 15, 2010, thereby demonstrating that defendant had not received written notice of the accident within 30 days after it had occurred.

 

The Court agreed with Plaintiff’s argument that mailing written notice of the accident to the insurer on or before the 30th day after the accident satisfied the 30-day notice requirement. Here, defendant did not demonstrate that timely written notice of the accident had not been mailed to it. Rather, the 30th day after the accident fell on a Saturday, November 13, 2010, making Monday, November 15, 2010, the date on which defendant alleges it first received an NF-2 form, the last date by which written notice of the accident could be timely mailed Thus, defendant did not demonstrate its entitlement to summary judgment dismissing the complaint.

 

Accordingly, the order was modified by providing that defendant's cross motion for summary judgment was denied.

 

03/01/16       Renelique v National Liab. & Fire Ins. Co.

Appellate Term, Second Department

A Carrier Must Establish That the Plaintiff’s Assignor Made Material Misrepresentations.

Here, plaintiff appealed both the denial of his motion for summary judgment and the grant of defendant's cross motion for summary judgment dismissing the complaint.

 

The Court found that Plaintiff’s motion for summary judgment was properly denied because defendant’s opposition was sufficient to establish that defendant had timely mailed its denial of claim form.  Defendant had denied plaintiff’s claim on the basis that plaintiff's assignor's fraudulent procurement of the insurance policy in question by virtue of her misrepresentation of her place of residence in order to obtain insurance at a lower premium.  Additionally, defendant's papers demonstrated that there was, at least, a triable issue of fact as to whether the assignor had provided a fraudulent address when she obtained the insurance policy.

 

It is well settled that no-fault benefits may be denied to an insured where an insurer submits evidence showing that the insured had fraudulently procured the insurance policy.  However, the Court found that defendant failed to establish that the assignor had made material misrepresentations in order to obtain insurance at reduced premiums.  The Court did not opine on what would constitute adequate proof.

 

The Court ultimately decided to uphold the dismissal of plaintiff’s motion and amended the order to deny defendant's cross motion for summary judgment.

 

03/01/16       New Millennium Med. Imaging, P.C. v American Tr. Ins. Co.

Appellate Term, Second Department

Double Check That You Have the Right Accident Date.

Plaintiff commenced this action against defendant to recover first-party no-fault benefits for medical services provided to assignor for a motor vehicle accident occurring on March 17, 20012.

 

Before plaintiff had commenced this action, defendant had commenced a declaratory judgment action in Supreme Court, New York County, against plaintiff and its assignor, alleging that the providers' claims had been timely and properly denied on the ground that their assignor had failed to attend duly scheduled independent medical examinations (IMEs). After the providers had failed to appear in the Supreme Court action, defendant moved in the Supreme Court for an order granting it leave to enter a default declaratory judgment, declaring that, because of the assignor's nonappearances at the scheduled IMEs, New Millennium and the other providers were not entitled to no-fault coverage "for the motor vehicle accident that occurred on 4/2/2012.” The Supreme Court issued a declaratory judgment “with respect to the April 2, 2011 collision.”

 

Thereafter, defendant moved in the Civil Court for summary judgment dismissing plaintiff’s complaint citing the default judgment. Plaintiff opposed the motion. The affirmation of defendant's counsel, and a letter submitted by the insurer as an exhibit to the motion, both referred to an accident as occurring on March 17, 2012. By order, the Civil Court denied defendant’s motion, finding that an issue of fact exists as to whether the Supreme Court judgment applies to the present litigation.

 

The Court agreed and concluded that defendant had failed to establish its entitlement to summary judgment, because its own papers presented two different accident dates. Thus, a question of fact existed as to whether plaintiff's claim arose out of the same transaction as was in controversy in the Supreme Court litigation

 

03/01/16       IMA Acupuncture, P.C. v Hertz Co.

Appellate Term, Second Department

Previous Declaratory Judgments and Res Judicata.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment. Defendant cross-moved for summary judgment dismissing the complaint and opposed plaintiff's motion for summary judgment on the ground that plaintiff had breached the terms of the insurance policy by failing to appear at duly scheduled examinations under oath.

 

After plaintiff submitted opposition to defendant's cross motion, defendant's attorney asserted, in a reply affirmation, that plaintiff's action was barred by the doctrine of res judicata, in that, since making its cross motion, defendant had been awarded a declaratory judgment entered on default in Supreme Court, New York County, which found that defendant had no duty to pay any no-fault claims to plaintiff with respect to the motor vehicle accident at issue. By order entered on April 2, 2014, the Civil Court granted plaintiff's motion and denied defendant's cross motion. Defendant's appeal from the April 2, 2014 order was deemed to be from the judgment entered pursuant on April 10, 2014, which awarded plaintiff the principal sum of $3,414.54.

 

The Court determined, contrary to plaintiff's argument on appeal, that defendant could not have raised the affirmative defense of res judicata in its answer, as the declaratory judgment action had not yet been filed at the time defendant answered the instant complaint. Similarly, the judgment in the declaratory judgment action was not rendered until after defendant had made its cross motion for summary judgment in this case. Thus, as defendant argued, it could not have sought summary judgment dismissing the complaint based on res judicata initially.

 

The Court concluded that defendant’s cross motion to dismiss should have been granted under the doctrine of res judicata, as any judgment in favor of plaintiff in this action would destroy or impair rights or interests established by the Supreme Court's declaratory judgment.

 

03/01/16       Great Health Care Chiropractic, P.C. v Infinity Group

Appellate Term, Second Department

Defendant Was Unable To Establish Cancellation Of Auto-Policy Without Affidavit Of Litigation Specialist.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved for summary judgment dismissing the complaint on the ground that plaintiff was ineligible for reimbursement of no-fault benefits due to the cancellation of the Pennsylvania automobile insurance policy at issue in this case, as a result of the policyholder's nonpayment of premiums. By order entered April 3, 2014, from which defendant appeals, the Civil Court denied defendant's motion on the ground that defendant's notice of termination of the policy did not comply with the requirements of Pennsylvania law.

In order to prevail on its motion for summary judgment dismissing the complaint, defendant was required to demonstrate that the insurance policy at issue had been validly cancelled in accordance with Pennsylvania law. Although defendant's motion papers contained a supporting affirmation by defense counsel and accompanying documents, and purported to include an affidavit by defendant's litigation specialist, in fact, the affidavit of defendant's litigation specialist was not included. In the absence of that affidavit, defendant failed to show that it had fully complied with Pennsylvania's requirements for cancelling a policy due to nonpayment of premiums.

 

As a result, defendant did not establish its entitlement to summary judgment dismissing the complaint and the order was affirmed.

 

03/01/16       Gaetane Physical Therapy, P.C. v Kemper Auto & Home Ins. Co.

Appellate Term, Second Department

An Attorney’s Affidavit Asserting a Matter is Ready For Trial Must Be Supported.

This action by a provider to recover assigned first-party no-fault benefits was "marked off" the trial calendar on April 3, 2013. On April 8, 2013, plaintiff moved to restore the action to the trial calendar. In an affirmation in support of the motion, plaintiff's counsel stated that the case had been "marked off" when plaintiff's witness was "unavailable and unable to appear" for trial. Counsel further stated that "the action is ready to resume trial."

 

In opposition to the motion, defendant's attorney argued that plaintiff's motion failed to demonstrate that plaintiff was presently ready for trial. The Civil Court denied plaintiff's motion, stating, erroneously, that more than one year had passed since the case had been marked off without restoration. The court also stated that plaintiff had failed to demonstrate "a reasonable excuse, a meritorious claim, lack of intent to abandon [and a] lack of prejudice to [defendant]."

 

The court noted that pursuant to Uniform Rules for New York City Civil Court a motion to restore an action to the trial calendar "must be supported by affidavit by a person having firsthand knowledge, satisfactorily explaining the reasons for the action having been stricken and showing that it is presently ready for trial." Here, plaintiff's counsel's bare assertion, that the action had been stricken because plaintiff's witness had been "unavailable," was conclusory, since it failed to provide any indication as to who the witness was or any reason as to why the witness was unavailable.

 

As plaintiff failed to proffer a satisfactory explanation for the action having been stricken from the calendar, plaintiff's motion was found to have been properly denied.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

03/09/16       Castle Oil Corp. v ACE Am Ins. Co.

Appellate Division, Second Department

Deductible For Flood Loss Based Upon Total Risk, Rather than Flood Coverage Sub-Limit

Castle owns a large fuel oil terminal in the Port Morris section of the Bronx, and it sustained significant damage due to Hurricane Sandy.  That property was insured by ACE under a policy which provided $150,000,000 per occurrence, and in excess of deductibles.  The policy also contained two separate sublimits for flood, and both parties acknowledge that the sublimit of $2,500,000 applied to the loss at issue.

 

The dispute between the parties was over the amount of deductible.  The policy provided for a deductible of 2% of total insurable values at risk or a minimum of $250,000.  The insured listed a total value of $124,701,000 of real and personal property at the location.  Applying the 2% deductible, ACE determined that the claimed loss of $2,284,239.95 was less than the calculated deductible of $2,494,020. 

 

Castle maintained that the deductible was calculated by applying the 2% to the coverage amount at issue.  Thus, 2% of $2,500,000 was $50,000. Because it was subject to a minimum override of $250,000, Castle conceded that the “override” deductible applied.   

 

In finding for Castle, the Supreme Court held that ACE’s interpretation rendered flood coverage illusory.  This is because the calculated deductible using the total declared value exceeded the loss.  In overturning the trial court, the Appellate Division noted the coverage was not superfluous.  The loss at issue here simply fell under the deductible.  Moreover, if the deductible was calculated on the coverage sublimit for flood ($2,500,000), the 2% calculation would also fall under the “override” position of $2,500,000.  Accordingly, it was Castle’s interpretation that would render policy language meaningless. 

 

As such, in the current claim, plaintiff’s damages fell under the appropriate deductible and coverage was never triggered.

 

03/02/16       Podesta v Assumable Homes Dev. II Corp.

Appellate Division, Second Department

Claims of Fraud against Title Insurer Survive; Claims for Punitives Dismissed

In 2003, plaintiff sold an 11 acre parcel of land to defendants.  As part of that agreement, defendants secured the property by way of purchase money mortgage.  Thereafter, in 2006, defendants wished to transfer a 4.63 acre parcel of the original purchase to the Town of Brookhaven.  At the request of defendants, plaintiff executed a Release of the mortgage as respects the parcel sold to Brookhaven.  

 

Third-party defendant National issued a title insurance policy which correctly identified the portion transferred as the 4.63 acre parcel at issue.  However, after closing, it is alleged that defendant directed an employee or agent of Fidelity to alter the deed and Release to provide for the transfer of the entire 11 acres.  The result of which made it appear as though plaintiff executed a release on the entirety of the mortgage.


After defendants were sued, they commenced a third-party action against Fidelity seeking indemnification.  Fidelity responded by moving to dismiss the claims.  The Appellate Court, in affirming the lower court’s decision, held that the allegations that Fidelity, or its agent, assumed a duty of care to properly record the mortgage and failed in their efforts was sufficient to state a cognizable cause of action.  However, defendant’s claims for punitive damages were dismissed because NY law does not recognize them as an independent right.  Rather, punitive damages are “parasitic,” and must be derived from a substantive cause of action.  The claims for punitive damages further failed where the complaint did not allege that Fidelity’s alleged actions were directed at the public in general or conduct so “egregious in nature” to constitute exemplary damages. 

 

03/10/16       Town of Fort Ann v Liberty Mut. Ins. Co.

Appellate Division, Third Department

Plaintiff Cannot Re-Plead Causes of Action that Were Previously Denied and/or Abandoned

Liberty issued a policy of insurance covering the construction of a certain dam.  As part of settlement payments paid to damaged third-parties, Liberty exhausted its coverage.  In turn, plaintiff and Liberty agreed that plaintiff would release all claims asserted against Liberty that were not made part of a subsequent pleading.   The pleading, which was attached to the executed Release, was then filed by plaintiff as the start of the instant proceeding. 

 

At some point, plaintiff wanted to add a cause of action for bad faith and extra-contractual exposure.  Liberty was understandably not pleased by plaintiff’s change of heart, and moved to dismiss the Amended Complaint based upon collateral estoppel principles.  In support of its motion, Liberty established that the previous action, which gave rise to the Release, included claims for costs beyond the policy limit.  The extra-contractual claims were dismissed in that action as part of partial motion for summary judgment filed by Liberty. 

Thus, where extra-contractual claims were previously dismissed, and further not preserved in the Release document, it follows that they are not proper in the subsequent action at issue.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

03/07/16       Paul and Annette Fabozzi v. Lexington Insurance Company

United States Court of Appeals, Second Circuit

Second Circuit Finds Additional Coverage – Covered Peril Collapse Provision Ambiguous In Property Damage Case

In 2002, the Fabozzis were renovating their Staten Island home when they learned that the interior walls were so thoroughly rotted away that the structure was near collapse. They filed a claim under their homeowners policy with Lexington, which denied coverage. Litigation ensued. Having litigated the matter through trial, judgment was entered in favor of Lexington, which lead to this Second Circuit appeal.

 

Before the Circuit Court were two main issues: 1) whose burden of proof it was to establish potential coverage, and 2) whether the policy’s Additional Coverage section unambiguously precluded coverage. On this first point, the Court reiterated some long-standing precepts of coverage law. It is the burden of the insured to establish coverage in the first instance, while it is the burden of the insurer to establish the applicability of any exclusionary language. Here, the Fabozzis were required to prove that the collapse was caused by a covered peril.

 

More interesting, however, was the second issue and the Second Circuit’s analysis of the Additional Coverage section. This provision stated, in relevant part: “Collapse. We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following: a. Perils Insured Against in COVERAGE C – PERSONAL PROPERTY. These perils apply to covered buildings and personal property for loss insured by this additional coverage; b. Hidden decay; c. Hidden insect or vermin damage; ...”. The Court analyzed it thus:

 

The Fabozzis read this to mean, “We insure for direct physical loss to covered property involving collapse ... only if it is caused by one of the following” (and argue in the alternative that the provision is ambiguous). Under this reading, the Fabozzis would be covered if one of the listed perils caused the collapse but some non-listed peril also contributed. Lexington reads it to mean, “We insure for direct physical loss to covered property involving collapse caused exclusively by one or more of the following.” Under this reading, the Fabozzis would not be covered if a listed peril caused the collapse but a non-listed peril contributed as well.

 

The District Court agreed with Lexington, but we cannot. Additional Coverage 8 is ambiguous. It obviously limits in some fashion the perils against which Lexington insureds. But nothing in the text makes clear whether we should prefer the reading, “We insure for collapse only if it is caused by one of the following,” or “We insure for collapse only if it is caused by one of the following, to the exclusion of all other causes.” Defendants do not argue that their reading of the provision is the only grammatically correct one, or the most grammatically correct one, and we do not think that it is. Neither is clearly sounder than the other.

 

The Court went on to note that the use of the term “caused” is “fraught with legal meaning”  and implications, such as including the principle of proximate causation in New York. As such, if the parties wanted to override the settled principle that concurrent operation of a non-listed peril will not necessarily preclude coverage, they should have been clear about it. Here, they were not. Finding a potential ambiguity in the language of the endorsement, the Court held that it would interpret it as against the drafter and in light of the reasonable expectations of the insured. Since a reasonable person whose home collapses (“predominantly by operation of a named peril”) would expect coverage, at best the provision was ambiguous. The District Court should therefore have construed it in their favor. As such, the Circuit Court remanded the matter back to the Eastern District for further proceedings.

 

03/07/16       Edward Morris Weaver v. Axis Surplus Insurance Company

United States Court of Appeals, Second Circuit

Second Circuit Finds That Agency Letter Notifying Of Potential Legal Ramifications with DOJ Was a “Demand” Sufficient To Trigger Wrongful Acts Exclusion and Preclude Coverage

Multivend, LLC was insured by Axis Surplus under a directors and officers policy. Following initiation of a Department of Justice action against the company, Edward Weaver, as former CEO, tendered the defense of the case to the carrier. Axis disclaimed on the basis that the action related to a claim that was first made prior to the policy’s effective period. At issue in particular was whether a DOJ letter to Multivend, issued on November 26, 2007, constituted a “demand” sufficient to implicate the language of the policy.

 

Axis’s policy included an exclusion for “any Claim ... in any way involving ... any demand, suit or other proceeding pending ... against any Insured on or prior to [February 20, 2008], or any Wrongful Act, fact, circumstance or situation underlying or alleged therein.” The parties agreed that the only issue on appeal was whether the November 2007 letter constituted a “demand” under this provision. The Second Circuit held that it was.

 

Though “demand” was undefined under the policy, this term has been interpreted by New York courts as requiring “an imperative solicitation for what is legally owed, as distinguished from a request carrying no legal consequences”. The November 2007 letter, the Court said, satisfied those requirements. It necessitated that Multivend not only provide documentation and information, but also “cease all offers and sales of the Vendstar business opportunity to Maryland residents”. Further, it notified of a pending investigation and that failure to respond could result in more formal legal action. This language was sufficiently serious and thus constituted a “demand”, as a matter of law. Therefore, the exclusion applied and precluded coverage for Weaver’s defense of the DOJ action, as it predated the date listed in the policy.

 

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

02/29/16       Infinity Ins. Co.  v. Rhodes

Supreme Court, New York County

Hon. Cynthia S. Kern

Carrier Complied with No-Fault Insurance Regulations and Timely Requested EUOs

Plaintiffs commenced this action seeking a declaratory judgment that no-fault coverage was not owed to Tamika Rhodes or her assignee providers.  One such assignee brought this motion seeking to renew/reargue this court’s prior decision granting plaintiffs summary judgment.

 

Rhodes was allegedly involved in a motor vehicle accident while riding in a vehicle insured by plaintiffs.    Afterwards Rhodes sought treatment for injuries sustained and assigned her right to collect no-fault benefits to her treating medical providers. 

 

Nine business days after the accident, plaintiffs requested an EUO of Rhodes to confirm the legitimacy of the loss, the necessity of treatment and her residency.  Rhodes was insured under a Pennsylvania policy and when she applied for it, she advised plaintiffs that the vehicle would be garaged in Pennsylvania and that the vehicle would not be used to commute into New York or New Jersey more than three times per month.  However, during plaintiffs’ investigation of the accident, it was determined that Rhodes had a New York driver’s license and that the insured vehicle was routinely driven into New York. 

 

Rhodes failed to appear for two scheduled EUOs.  Based on these failures, plaintiffs denied coverage. 

 

This litigation was then commenced and plaintiffs moved for summary judgment.  The court found that plaintiffs made out their prima facie case as they had shown that they properly mailed the notices for EUOS to Rhodes and that she failed to appear.

 

This motion to renew/reargue was then brought.  Defendants argued that plaintiffs failed to demonstrate that they timely requested the EUOs pursuant to the no-fault insurance regulations.  11 NYCRR § 65-3.5(a) provides that “[w]ithin 10 business days after receipt of the completed application for motor vehicle no-fault benefits…the insurer shall forward, to the parties required to complete them, those prescribed verification forms it will require prior to payment of the initial claim.”  11 NYCRR § 65-3.5(b) further provides that “[s]ubsequent to the receipt of one or more of the complete verification forms, any additional verification by the insurer to establish proof of claim,” including an EUO, “shall be requested within 15 business days of receipt of the prescribed verification forms.”  Based on the acknowledged failure to address this argument, the court granted leave to renew/reargue.

 

Upon such renewal/reargument, the court affirmed its prior decision.  It was undisputed that Rhodes’ accident occurred on July 27, 2013.  It was also undisputed that plaintiffs first requested that Rhodes appear for an EUO in a letter sent on August 8, 2013, a mere nine business days after the accident occurred.  Thus, even if Rhodes first made a claim to plaintiffs for no-fault benefits on the date of her accident, the EUO request was still timely. 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

03/04/16       Connelly v. State Farm Mutual Automobile Insurance Company

Supreme Court of Delaware

Delaware Supreme Court Holds that a Bad Faith Cause of Action in a Failure to Settle Case Accrues when an Excess Judgment Against the Insured is Final and Non-Appealable

This case arose out of an automobile accident that occurred on October 12, 2007.  Plaintiff’s car was rear ended by a car driven by Brown.  Brown was insured by a State Farm policy that provided limits of $100,000 per person and $300,000 per occurrence.  State Farm provided Brown legal counsel and had the exclusive right to control his defense.

 

On May 10, 2011, Plaintiff offered to settle her case against Brown for $35,000.  State Farm rejected the offer and went to trial.  At trial, the jury awarded Plaintiff $224,271.41.  After the verdict, Plaintiff and Brown filed four post-trial motions.  In a March 30, 2012 opinion, Brown’s motions were denied, and the court ordered judgment to be entered for the plaintiff for the $224,271.41 jury award, pre-judgment interest of $92,058.95, costs of $5,435.28, and post-judgment interest of $10,580.64.  State Farm later paid Plaintiff $151,601.93 of the $333,246.29 owed to her.  Neither Brown nor State Farm made any additional payments on the outstanding balance.  The thirty-day period for Brown to appeal the excess judgment against him expired on April 29, 2012.

 

On September 3, 2014, Plaintiff brought a claim against State Farm and Brown as Brown’s judgment creditor.  She alleged that State Farm acted in bad faith, maliciously, and without any reasonable justification when it refused to settle her claim against its insured for only 35% of the policy limit.  Plaintiff also alleged that State Farm acted in bad faith by not seeking appellate review of the excess judgment.

 

State Farm moved to dismiss the complaint on the ground that it was barred by the three-year statute of limitations.  State Farm argued the statute began to run either on May 10, 2011, the day the settlement offer was made, or June 9, 2011, when the settlement offer expired.  The court below determined that the statute began to run on the day State Farm denied the settlement demand.

 

On appeal, the Delaware Supreme Court, considering the issue for the first time, held that a claim that an insurer acted in bad faith by refusing to settle a third-party insurance claim accrues when an excess judgment against an insured becomes final and non-appealable.  The court noted that the majority of courts in other states have adopted the same rule.  The court also reasoned that the rule advanced several important policy goals.  First, it reduces the possibility of conflicts between the insurer and insured because it avoids the possibility that the insured would have to bring a bad faith claim against an insurer while the underlying claim is pending.  Second, the rule protects insurers from bad faith claims for failing to settle even the most frivolous claims if the third party claimant was willing to settle within the policy limits.  Finally, the rule saves the insured litigation costs that may turn out to be unnecessary if the court does not order an excess judgment.

 

Applying the rule, the court reversed the decision of the lower court because the claim in this case did not accrue until an excess judgment was entered against Brown.

 

02/29/16       Atlantic Specialty Insurance Company v. Mr. Charlie Adventures, LLC

United States Court of Appeals Eleventh Circuit

Boat Burning Breeds Bad Faith Claim: Insurer did not have an Arguable Reason to Deny the Claim based on Insufficient Investigative Report.

On March 3, 2013 a 40-foot yacht called the “Mr. Charlie” and its contents were completely destroyed in a fire.  Mr. Charlie Adventures, LLC and Kim P. Kornegay reported the loss to Atlantic and filed a claim under the insurance policy for the policy limits.  The Atlantic policy covered damages to the Mr. Charlie and its contents, but it excluded loss or damage caused by wear and tear and the failure of the insured to maintain the yacht in good condition.  Atlantic sent Korgnegay a letter denying the claim based on its expert investigators’ conclusion that the fire was caused by or resulted from growth of marine life on or in the vessel.  Atlantic also noted maintenance problems related to the loss.

 

After denying Kornegay’s claim, Atlantic filed a declaratory judgment action, seeking a declaration that it did not owe coverage for the fire damage.  Kornegay counterclaimed, seeking damages for breach of contract and bad-faith refusal to pay the insurance claim.  The parties cross-moved for summary judgment.  Atlantic argued it had an arguable reason for denying the claim based on the investigators’ reports that growth of marine life on the Mr. Charlie caused the fire.  However, the district court determined that the expert investigators’ reports were inadmissible because they were not reliable under FRE 702.  Among the errors in the reports that made them unreliable were the reports: incorrectly stated the percentage of open area on the yacht’s intake screens; relied on information from a person whose credentials were unknown; incorrectly stated the temperature the yacht’s exhaust tube could stand before burning; and the experts had recommended additional inspections, but they arrived at their conclusion without ever doing these tests.  The district court also concluded that the expert investigators had first reached a conclusion regarding how the fire started and then attempted to provide support for that conclusion.

 

Having excluded the investigative reports, the district court granted Kornegay’s motion for summary judgment on Atlantic’s declaratory judgment claim and Kornegay’s breach of contract counterclaim.  It also held, however, that Kornegay had not shown there was any reason Atlantic should have known the investigative reports were unreliable.  The district court concluded the reports provided Atlantic with an arguable basis for the denial and granted Atlantic’s motion for summary judgment on the bad faith claim.

 

On appeal, the Eleventh Circuit agreed with Kornegay that the district court erred in determining the investigative reports provided Atlantic with an arguable reason to deny the claim.  The court held that Atlantic should have known the reports were unreliable based on the errors and improper methods used by the expert investigators.  Accordingly, the court concluded that there was a triable isuse of fact regarding whether Atlantic had an arguable reason to deny Kornegay’s claim.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

03/03/16       The Netherlands Insurance Co. v. Selective Ins. Co. of America

Southern District of New York

The More the Merrier: The Additional Insured and the Written Contract.

This coverage dispute follows a worker’s slip and fall on premises owned by Bonefish Grill, LLC (“owner”).  Bonefish hired Crossection, Inc. (“contractor”) to perform certain construction work, and Crossection in turn hired Souza Drywall Co. (subcontractor).  The worker commenced an action for negligence and Labor Law violations against the owner and contractor, and the contractor commenced a third-party action against the subcontractor.

 

A contract between the contractor and subcontractor obligated the subcontractor, as relevant, to obtain liability insurance naming the contractor and owner, their officers, agents, and employees, as additional insureds with primary and noncontributory coverage.  Defendant Selective Insurance provided a general liability policy to the subcontractor which, by endorsement, included as an additional insured “any person or organization whom [sic] you have agreed in a written contract, written agreement or written permit that such person or organization be added as an additional insured on your policy,” but only for liability caused in whole or in part by the subcontractor’s “ongoing operations, ‘your product’, or premises owned or used by you.”  The additional insured status was also subject to a primary and non-contributory provision that stated that the Selective policy would provide only excess coverage to any other insurance policy unless three conditions were met: (1) the additional insured on the Selective policy was a named insured under the other policy; (2) the subcontractor had agreed in a written contract or agreement to include that additional insured on the liability policy on a primary and/or non-contributory basis; and (3) the written contract or agreement was executed prior to the bodily injury or property damage claimed.

 

The district court found that, despite the sparse allegations in the worker’s complaint, Defendant Selective had a duty to defend both the owner and the contractor in the suit.  Initially, the court noted that Defendant Selective “cannot – and did not – dispute” that the subcontractor agreed in a written contract to add both the contractor and owner* as additional insureds.  Further, the complaint alleged the dangerous condition was created by the owner, contractor, and “their contractors, agents and employees,” a group including the subcontractor.  Thus, the complaint sufficiently suggested a reasonable possibility that the worker’s injuries were caused, in whole or in part, by the subcontractor’s ongoing operations, and the duty to defend was triggered.

 

The district court went on to conclude that the Selective policy provided primary coverage for both the owner and the contractor.  The contractor was found to have met all three of the Selective policy conditions for such primary coverage.  With respect to the owner, the district court noted that it was not clear that all three preconditions for primary coverage were met, but decided the issue on procedural grounds: Defendant Selective failed to respond to that argument in Plaintiff Netherland’s brief. The district court granted a declaratory judgment accordingly.

 

*Editor’s Note: The additional insured endorsement, as quoted by the court, provided additional insured status to “any person or organization whom you have agreed . . .” Because Selective did not dispute that the owner – with whom the subcontractor did not directly contract -- is an additional insured, there is no need to consider whether the absence of the word “with” renders this case distinguishable from other additional insured cases Coverage Pointers has discussed in the past.  But for more fun with prepositional phrases, please see AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc.   and Liberty Mutual Fire Ins. Co. v. Zurich.  And for those wondering, the worker, a member of a local union, does not appear to have been an employee of any of the players at issue – no employee exception was discussed.

 

02/29/16       Employers Ins. Co. of Wausau v. Harleysville Preferred Ins. Co., The Travelers Indemnity Company, and The Electrical Employers Self Insurance Safety Plan

Southern District of New York

Conflict of Laws: Taking the Express Train from Texas to New Jersey

This underlying incident in this coverage case was the tragic death of a Hellman Electric Corporation employee when a multiple-ton battery fell on him while being unloaded from a truck by use of a hydraulic pallet jack.  Plaintiff Employers Insurance Company of Wausau, Hellman’s insurer, commenced this action seeking, among other things, a declaration that Defendants Travelers Indemnity Company and Harleysville Preferred Insurance Company have a duty to defend Hellman and others in the underlying action.  Travelers issued a commercial auto policy to Monarch Electric Company, the company that provided the batteries, and Harleysville Preferred issued a business auto policy to Hellman.

 

With respect to the Travelers policy, the district court was first faced with a choice of law issue: although Monarch’s domicile was in New Jersey and the truck at issue was principally garaged there, Monarch was only an additional insured added by endorsement to a policy issued to its parent corporation in Texas.  Because the risk being insured against spanned multiple states, the district court concluded that the principal place of business of the named insured – the parent corporation – required that Texas law be applied.

 

Despite this conclusion, the district court went on to conclude that the New Jersey endorsement included in the Travelers policy was ultimately determinative of whether Hellman qualified as an additional insured under the policy.  To that end, although Hellman did not qualify as an “insured’ as this term was defined by the Traveler’s policy, the New Jersey endorsement required that any contractual definition of an “insured” could not preclude statutorily-required coverage up to the minimum financial responsibility specified by New Jersey’s “Omnibus Statute.” This statute, as quoted, requires that the owner of a motor vehicle registered or principally garaged in New Jersey shall maintain motor vehicle liability insurance coverage in an amount of at least $15,000.00 against, among other things, death sustained by any person arising out of the ownership, maintenance, operation or use of a motor vehicle.  Because New Jersey law recognized “that the obligation to provide coverage in a loading and unloading accident arises from statute and therefore cannot be limited by contract.” (citation omitted). The district court further concluded that, although Monarch was not the owner of the truck, it had assumed a contractual responsibility to obtain insurance in compliance with New Jersey law, and the Omnibus Statute applied, rendering Hellman an insured under the Travelers policy only up to the minimum required by that statute.

 

This conclusion, and any issues it may raise, was ultimately not determinative.  Instead, the district court concluded that a Mechanical Device Exclusion in both the Travelers and the Harleysville Preferred policies warranted a finding that these insurers did not have any duty to defend or indemnify, whether under Texas or New York law (there was no dispute that New York law applied to the Harleysville Preferred policy).  The relevant language excluded coverage for bodily injury “resulting from the movement of property by a mechanical device (other than a hand truck) unless the device is attached to the covered ‘auto,’” and there could be no dispute that the hydraulic pallet lift was not a hand truck.

 

Editor’s Note:  Referenced in the district court’s decision, although not discussed, is the fact that the application of New Jersey law rather than Texas would have invalidated the Mechanical Device Exclusion in the Travelers policy.  See Parkway Iron & Metal Co. v. New Jersey Mfrs. Ins. Co., 629 A.2d 1352, 1354-55 (App. Div. 1993) (citing N.J. Statute § 39:6B-1; Ryder/P.I.E. Nationwide, Inc. v. Harbor Bay, 119 N.J. 402, 575 A.2d 416 (1990)).  The district court’s decision therefore appears to have an internal contradiction on its face that may invite appeal:  the court relied on the New Jersey endorsement and Monarch’s contractual obligation to obtain a policy that complied with New Jersey law to conclude that, pursuant to New Jersey law, Hellman was an insured under the Travelers policy.  It then ignored those factors when applying Texas law to preserve the Mechanical Device Exclusion.  Regardless of the correct outcome in this coverage case, I suspect the parties are not done with this issue yet.

 

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

 

09/17/15       Revi, LLC v. Chicago Title Insurance Co.

Virginia Supreme Court

Judge to Rule on Bad Faith Claim

Revi purchased property along the Potomac River with a title insurance policy from Chicago Title.  It was later discovered there were restrictions on the property because of a prior condemnation action.  Chicago Title negotiated to modify the restrictions, and a new agreement allowed Revi to subdivide the property but contained limitations on building height.  Revi submitted a proof of loss in 2012 alleging the restrictions lessened the value of the property by over $1.5 Million.  Chicago Title claimed there was no loss in value and denied the claim.

 

Revi sued Chicago Title for breach of contract and bad faith.  Revi also requested attorneys’ fees and costs under the Virginia Insurance Code which allows policyholders to recover attorneys’ fees and costs due to a bad faith coverage denial.  Chicago Title moved to bifurcate the trial and have the judge rule on the issue of bad faith and attorneys’ fees.  The trial was bifurcated, but the Court ruled that the jury would determine the issue of bad faith and make any award of attorneys’ fees.  The jury awarded Revi $1.2 Million in damages, and also found that Chicago Title acted in bad faith and awarded Revi $450,000.00 in attorneys’ fees and costs.

 

However, the Trial Court vacated the jury award of attorneys’ fees and costs ruling that the Virginia Insurance Code required the judge and not the jury to decide the bad faith claim.  He ultimately concluded there was insufficient evidence to support the bad faith claim.  Revi appealed, and the Virginia Supreme Court affirmed the decision, holding that the word “court” used in the Insurance Code meant the “judge”.

 

The Supreme Court reviewed Virginia’s legal history back to the 18th Century and concluded that, generally, an award of attorneys’ fees was not commonly a question for the jury.  The Court ruled that the Insurance Code did not incorporate any right to a jury trial, and did not call for a jury trial under any requirements of the Virginia Constitution.

 

The first interesting note about this case is that state statutes are increasingly intruding and affecting the definition of bad faith claims, when such claims can be made, and any allowable or extra-contractual damages that may be recovered.  Carriers should always strongly press for the maximum available judicial review and oversight of bad faith claims and any concomitant damages. 

 

This case also represents the interesting use of bifurcation to separate bad faith liability determinations from consideration of bad faith damages.  The apparent thought is the more a court or jury hears about a policyholder’s damages the more the bad faith interpretation and analysis may become skewed in favor of some recovery against the insurance company.

 

Although not necessarily extensively reviewed in this case, even if a statute or procedural rule allows a party to recover “costs”, those items are commonly narrowly and specifically defined and usually by no means include all expenses a party may incur in initiating and processing an action.  A layman policyholder may think that “costs” means all of their “expenses”, but this is usually not the case and many routinely incurred litigation expenses are not included within the definition of legal “costs”, and there are also frequently monetary caps to any award of costs.

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