Coverage Pointers - Volume XVII, No. 20

Volume XVII, No. 20 (No. 450)

Friday, March 25, 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. 

 

Happy Easter and happy spring to all of our readers, near and far. It is my favorite season of the year.

 

Welcome to our 450^th issue of Coverage Pointers.

 

Knowing that some of you are collectors and may collect issue 450 of other publications along with this one, I wondered how our publication compared to others that have reached the 450-issue milestone. I skimmed eBay.  I found that one could purchase a copy of:

 

• Issue 450 of The Incredible Hulk (1962) for $2.61 (converted from Australian dollars).

• Issue 450 of Marvel Comics The Mighty Thor (1992) for $3.00.

• Issue 450 of Rolling Stone (1985) with David Letterman on the cover for $3.15.

• Issue 450 of Marvel Comics, Uncanny X-Men (2004) for $5.00

• Issue 450 of LFC Weekly (Liverpool Football Magazine) (c. 2009) with a poster of Sotirios Kyrgiakos for $5.33.

• Issue 450 of Detective Comics (1975) for $9.58.

• Issue 450 of Mad Magazine (2005) for $9.99.

• Issue 450 of Dr. Who Magazine (2012) for $15.00.

• Issue 450 of Vogue Brazil (2016) for $24.99.

• Issue 450 of DC’s Batman (1990) for $34.00

 

This issue is free.  Of course, it does not come with a picture of Sotirios Kyrgiakos (a/k/a the Greek Warrior) but I make it up with a link to a video.  By the way, the earlier 449 were also free and all still available on our website, www.hurwitzfine.com.

 

Soapbox Time:  Attention Insurers:  Do Not (I repeat, DO NOT) Shoot yourselves in the Foot:

 

Climbing on soapbox:

 

I must love to count.  Here’s another statistic. It’s a good one.

 

It has been 17 years, nine months and 14 days since any New York appellate court affirmed ANY bad faith case against an insurer.  Almost 18 years.  Amazing.  There hasn’t been a single first or third party bad faith verdict affirmed by any appellate court since June 11, 1998.

 

If you are an insurer, you’re happy about that.  It is a remarkable record and one that all insurers should be striving to maintain and expand.

 

In the last few years, on two separate occasions, an excess carrier has been successful in suing a primary carrier when a verdict went into the excess layer and the primary carrier could have settled the case in the primary limit.  For those not familiar with the New York approach to bad faith, a primary carrier has the same fiduciary obligation to an excess carrier as it does to its own insured.  In these two cases, both sued in federal court, the excess carrier was successful in establishing that the primary carrier exhibited a gross disregard for its interests and took the case all the way through verdict. 

 

But now we have two District Court decisions where bad faith has been established, as a matter of fact, against an insurer.  A body of case law is developing.  Appeals may be taken.  Policyholder lawyers are joyful.  Personal injury plaintiff’s are rubbing their hands with delight.  I was handed two such lawsuits lately to handle, defending insurers sued by other insurers.

 

In carrier vs. carrier lawsuits, the insurers are establishing bad faith.  The more that happens, the more likely we are to have appeals, more lawsuits, more verdicts and more pain for the insurance industry.

 

Is this what you want to do to each other?  Carrier v. carrier lawsuits that can well expand the law of bad faith in New York?    Find other ways to resolve your differences, insurers.  Do not create a body of law that may be good for you in one particular case but may end up costing you and the industry millions.  All you are doing for short-term gain is shooting yourself in the foot.  Try to avoid it.

 

That is all.  Talk amongst yourselves.

 

Climbing off soapbox.

 

Meadowbrook Insurance Group – Coverage Counsel Wanted:

 

In-house coverage counsel -- minimum 10 solid years coverage law and litigation experience [part of which could have been in-house] -- to perform coverage opinions, work on forms development and manage outside counsel in coverage and extracontractual litigation.  Location: Scottsdale, AZ or Columbus, OH, although other company locations might be considered for the right candidate.  Email resume to [email protected].

 

FDCC Litigation Management College and Grad Program:

 

FDCC 21st Annual Litigation Management College

June 7-11, 2015
Emory University

Atlanta, GA

 

"LMC is perfect for claims adjusters looking to hone their litigation management skills. I valued my time at the conference, and look forward to applying the lessons learned to improve my day to day claims handling."

- 2014 LMC participant

 

More than a conference, the FDCC's Annual Litigation Management College (LMC) is an intensive “hands-on” program that is simply the best way for claims and litigation management professionals with five to 15 years of experience to develop their full potential. Students work together in teams and groups led by experienced claims managers and trial counsel. They learn about how to become more successful in their jobs but most importantly, they learn about themselves. Our process, perfected over two decades of experience, includes a variety of learning approaches from individual coaching through a video-taped mock deposition to a multi-day team exercise to resolve a complex case most favorably. All aspects of high-level claims management are included: communication, analysis, budgeting, preparing litigation case plans, experts, negotiations, coverage mediation and working with defense and coverage counsel.

 

More seasoned claims professionals should consider enrolling in the Graduate Program, which emphasizes the thorough understanding of coverage in an environment with hands-on coaching from veteran claims and coverage counsel. If you have a client or colleague who would benefit from being a part of this “Best in Class” program, please have him or her contact David Governo, Dean of Admissions, at 617.737.9047 or [email protected].

 

 

PLRB – San Antonio:

 

Hope to see some of you there!  Come to my class and say “hi”.

 

 

Our Prayers for the Belgian People:

 

Enough said.  Timing is everything.  Two of our lawyers are over in Europe as we speak, Agnes Wilewicz is in Spain and Joel Appelbaum is in Portugal.

 

Mothers Support Child Labor – One Hundred Years Ago Today

 

Everything (Greensboro, NC)

March 26, 1916

Opposed Child Labor Bill

 

The Mothers’ Congress, composed of 100,000 mothers, opposes the Keating-Owen child labor bill.  The child labor bill is the creature of agitators who are for the most part professionally engaged on a salary to whoop it up.  Child labor is essential.  The kid who doesn’t work doesn’t become a good citizen.  Vocational training is the hobby of instructors, and the kid that goes out and works is getting just that.  The child who works is the healthy child – the child that hews his way in the world – who does things.  The idler and hot house plant is never any good.

 

Editor’s Note: The 1900 census revealed that approximately two million children were working in mills, mines, fields, factories, stores, and on city streets across the United States. The first child labor bill, the Keating-Owen bill of 1916 used the government's ability to regulate interstate commerce to regulate child labor. The act banned the sale of products from any factory, shop, or cannery that employed children under the age of 14, from any mine that employed children under the age of 16, and from any facility that had children under the age of 16 working at night or for more than 8 hours during the day.

Although the Keating-Owen Act was passed by Congress and signed into law by President Woodrow Wilson, the Supreme Court ruled that it was unconstitutional in Hammer v. Dagenhart, 247 U.S. 251 (1918) because it overstepped the purpose of the government's powers to regulate interstate commerce. 

 

Federal protection of children would not be obtained until passage of the Fair Labor Standards Act in 1938, which was also challenged before the Supreme Court. This time, the movement to end child labor was victorious. In February of 1941, the Supreme Court reversed its opinion in Hammer v. Dagenhart and in U. S. v. Darby upheld the constitutionality of the Fair Labor Standards Act. It is still in force today.

 

Jen’s Gems:

 

Greetings!

 

This week I write my note from an airplane heading to Las Vegas.  A good friend decided spur of the moment that she was going to get married this weekend.  As she was the maid-of-honor at my wedding, I am excited to attend.  My husband is also excited that he can put to use all that information he learned while watching hours of March Madness basketball last week.   

 

For anyone that has not registered yet for DRI’s Insurance Coverage and Claims Institute ("ICCI") taking place April 6-8, 2016, at the Loews Chicago Hotel in Chicago, IL, there is still time! You can register on line at http://www.dri.org/Event/20160155. 

 

Some of the topics that will be discussed include:

 

• 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

 

I have already had the opportunity to view some of the speakers’ presentations, and I can tell we are in for a great program. 

 

In terms of my column this week, I report on two decisions out of the trial courts in New York County Supreme.  While neither is going to change the landscape on any particular issue, Tower Ins. Co. v. Parodi is a good reminder that a property is not an insured location under a homeowners policy if you do not live there. 

 

Until next issue.

 

Jen

Jennifer A. Ehman

[email protected]

 

Immigration – A Hot Issue Now and a Century Ago:

 

 

El Paso Herald

El Paso, Texas

25 Mar 1916

 

HOUSE AGAIN CONSIDERS

BURNETT IMMIGRATION BILL

 

Washington, D.C., March 25.—The House today continued consideration of the Burnett immigration bill with the literacy test and Asiatic exclusion provisions again under discussion.

 

Former speaker Cannon yesterday ridiculed the bill, saying a search of census reports failed to disclose the names of many prominent men of today, indicating their forefathers had been immigrants. 

 

Editor’s Note: John Lawson Burnett (1854-1919) served Alabama's Seventh District as a Democrat in the U.S. House of Representatives from 1899 until his death in 1919. During his tenure in Congress, Burnett voted against the popular declaration of war against Germany in April 1917 and pushed through legislation that restricted immigration as chair of the Committee on Immigration and Naturalization. Burnett also worked as an educator and lawyer and briefly served in the Alabama legislature.

 

Appointed to the U.S. Immigration Commission (also known as the Dillingham Commission after its leader, Vermont senator William P. Dillingham) in 1907, Burnett worked to restrict entry of immigrants from eastern and southern Europe to the United States when their numbers began increasing at the turn of the century. By 1911, Burnett had assumed the chairm of the Committee on Immigration.

 

When first appointed to the immigration committee, Burnett began building support for a literacy test that would be part of the admission process for incoming immigrants to restrict the entrance of unskilled workers. He first introduced the Burnett Immigration Bill in 1912, but its veto by Pres. William Taft in February 1913, overridden in the Senate, was sustained by the House. By 1914, as more and more immigrants entered the country, opinions were shifting, and the bill passed the House in February of that year but was vetoed by Pres. Woodrow Wilson.

 

Another version passed Congress in 1916 and again was vetoed by Wilson, but it became law in 1917 when Congress voted to override the veto. In its final form, Burnett's bill—the Immigration Act of 1917—not only introduced a literacy test but also barred individuals, including homosexuals, the mentally disabled, and alcoholics, who were viewed as "undesirable." The act also barred migrants from a region that included most of Asia and the Pacific Islands. 

 

 

Spring Training – 1916:

 

March 25, 1916 ... After two weeks of perfect weather, the Red Sox were forced to cut out work on the diamond today due to wet grounds following severe thunder storms.  Bill Carrigan ordered a run over the mountains for those not due to pitch tomorrow or those scheduled to play golf.  Tris Speaker was the first man off and came back well heated and retired to the baths.  A large number of players spent the afternoon at the racetrack.

 

HEWITT’S HIGHLIGHTS:

 

Dear Subscribers:

 

After a brief bit of snow, the weather is warm, flowers are slowly starting to bloom on Long Island and with Easter almost here and Passover coming next month, we have put the winter behind us. My two boys have already had their pictures with the Easter Bunny and participated in a few egg hunts.   The serious injury threshold cases are light this week. However, one of the opinions is long and detailed. Thank you Fourth Department.

 

The Appellate Division found that, even though defendants had made out a prima facie case because their expert found only strains that would have resolved in weeks, an issue of fact was revealed by the competing opinion of the plaintiff’s expert. Competing expert opinions require a trial. The Appellate Division also found that the lower court wrongly disregarded a plaintiff’s expert report that it found not credible, holding that credibility was an issue for a jury, not the court, unless the issues appeared not genuine but completely feigned.  The Appellate Division also reiterated that a whiplash injury to the cervical spine and a sprain can constituted a qualifying injury for the 90/180-day category.

 

Enjoy the spring.

 

Until next time,

 

Rob
Robert Hewitt
[email protected]

 

New York Continues to Follow Frye Rule when Evaluating Experts:

 

Thanks to Chris Potenza ([email protected]) for this summary of a recent Court of Appeals decision on expert proof:

 

 

02/11/16             Sean R. v. BMW of North America, LLC

Court of Appeals

Same as It Ever Was:  New York Court of Appeals Upholds Frye Standards in Dismissing Plaintiff’s Toxic Tort Claim Where Plaintiff Failed to Show that Expert’s Methodology was Generally Accepted in the Scientific Community 

In Sean R. v. BMW of North America, LLC, the plaintiff was born with severe mental and physical disabilities, which he alleged was the result of in utero exposure to unleaded gasoline vapor caused by a defective fuel hose in his mother's BMW. After a few years of ownership of the vehicle, plaintiff’s mother began to notice a smell of gasoline in the vehicle, sometime so strong that it caused her headaches, dizziness and throat irritation. Other family members claimed the odor made them nauseous and dizzy.  BMW issued a recall on the vehicle to fix a defective fuel hose that allowed for seepage between the fuel hose and the fitting that could result in a "conspicuous fuel odor" in the vehicle. 

 

Plaintiff's causation experts opined that plaintiff's in utero exposure to gasoline vapor proximately caused his birth defects.  The level of gasoline vapor inhalation used as the foundation of the opinion was based on the symptoms reported by plaintiff’s mother, namely headaches, nausea and irritation of the throat and mucous membranes.  The defendants moved to preclude plaintiff's causation experts arguing that the plaintiff’s expert opinions lacked foundation as they did not use methods found to be generally accepted as reliable in the scientific community.  

 

The Court of Appeals upheld the lower court’s rulings that granted the defendants' motion to preclude plaintiff’s experts’ testimony at trial.   Although it is not always necessary for a plaintiff to quantify exposure levels precisely, at a minimum there must be evidence from which the fact finder can conclude that the plaintiff was exposed to levels of the alleged toxic substance that are known to cause the kind of harm that the plaintiff claims to have suffered. To make this conclusion, the expert must do so through methods found to be generally accepted as reliable in the scientific community.  This "general acceptance" requirement, also known as the Frye test, governs the admissibility of expert testimony in New York, and is used to assess whether the expert's techniques, when properly performed, generate results accepted as reliable within the scientific community generally.  

 

In this case, the expert’s methodology was essentially working backwards from reported symptoms to divine an otherwise unknown concentration of gasoline vapor.  Plaintiff and his experts did not identify any text, scholarly article or scientific study that approves of or applies this type of methodology. Plaintiff has not shown that such a "symptom-threshold" methodology has been generally accepted in the scientific community.

Wilewicz’ Wide World of Coverage:

Dear Readers,

 

A wide world indeed this week! As you read this, your humble author is making her way down the southern Spanish coast for a much needed siesta break (is that redundant?). My grandmother, mother, daughter, and I are celebrating the Easter holidays en España and sin hombres, but I would not miss the chance to write a note from afar, given my column name.

 

This week, as it happens, while I’m away I bring you a case that is much closer to home than usual. In Bennett v. State Farm, New York’s Second Department addressed an insurer’s pre-answer motion to dismiss a complaint against it, one that had alleged a litany of causes of action against the carrier. Following an oil spill, the insured homeowners were covered for the remediation costs, as directed by the DEC, but that was it. Needing more, the insureds then sued State Farm, alleging everything from fraud to tortious interference to negligence. You will have to read the attached summary for all the details. However, most notably the Appellate Division found the suit limitation clause at issue ambiguous (cue gasps!), but only because it was also alleged that the insurer supervised the remediation and repair work. Under those circumstances, the claim did not just sound in a “breach of policy provision”, but something more. So the Court let it stand, for now. It is an interesting one for sure, and the decision is well worth a more in-depth read, if I do say so myself. Enjoy.

 

When I return, I hope to see many of you in Chicago for DRI’s Insurance Coverage and Claims Institute, April 6th through April 8th. Drop me a line if you will be attending, so that we can finally meet or meet again, as the case may be. It’s always nice to put faces to names.

 

Until next time!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Editor’s Note:  Hasta la vista!

 

Was it Worth It?

 

The Evening World

New York, New York

25 Mar 1916

 

TRIED TWICE TO DIE RATHER THAN

GO HOME AFTER LOSING HIS $7

 

Gregory Couldn’t Face Wife,

But Gas Made Him Ill and

Strangling Failed

 

 

Harry Gregory, 23, of No. 229 West Sixty-Seventh Street, went to the Park Hospital at One Hundredth Street and Central Park West at 2 A.M. to-day and said he had tried to kill himself with gas, but it only made him ill.  After being treated he was taken to the West One Hundredth Street station.

 

He told Lieut. Thompson he worked in an ammunition factory at Edgewater, N.J., but “got trimmed” for $7 last night and had no money to take home to his wife.  He wandered into a basement in One Hundredth Street and turned on the gas, but the nausea convinced him some other way would be more pleasant.

 

“A man in your frame of mind is dangerous around an ammunition plan,” said the Lieutenant.  “He might blow it up for $3.”

 

“Yes,” the prisoner replied, “the way I felt last night I would have blown it up for anyone who offered me money.”  He said he was worth more dead than alive because his wife would get $500 insurance.

 

Three hours later when the doorman passed Gregory’s cell he found the prisoner with his neck in a noose made from his coat sleeve, almost strangled.  Gregory was revived then and taken to Bellevue. 

 

Barnas on Bad Faith:

 

Hello again:

 

I hope everyone is enjoying the NCAA Basketball Tournament as much as I am.  I suspect that not anyone who selected Michigan State to win has been enjoying it nearly as much as they were hoping to.  As for my bracket, Kansas is in the middle and still alive, as are two of my other Final Four picks, Virginia and Texas A&M (barely), but my pick of Kentucky was not so lucky in the East Region.  I’m hoping for another exciting weekend of games.

 

In the cases this week, we are reminded of some common rules relevant to bad faith and insurance coverage cases in New York and New Jersey.  First, in New York, a cause of action alleging breach of the covenant of good faith and fair dealing is not necessarily duplicative of a cause of action alleging breach of the insurance contract. 

 

The Second Department cites this rule in the Doody v. Liberty Mutual case, in which it denies the carrier’s motion for summary judgment to dismiss a bad faith cause of action.  Second, in New York, if an insured commences an action against its insurer to settle its rights under the policy the insured is not entitled to fees and costs associated with bringing the action.  The Doody court also cites this rule in granting the insurer’s motion for summary judgment dismissing the part of the insurer’s complaint seeking fees.  Finally, in New Jersey, the prevailing rule is that proof an insured is entitled to coverage as a matter of law is a necessary pre-requisite to pursuing discovery regarding a bad faith claim.  The court cites this rule in the Abiona v. Geico case, in which it severed and stayed the insured’s bad faith cause of action pending resolution of the SUM claim.

 

I hope everyone has a nice weekend, and a very Happy Easter to all of those celebrating.  See you next time.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Love This One, From 100 Years Ago:

 

Middletown Times-Press

Middletown, New York

25 Mar 1916

 

A Doubtful Compliment

 

Landon Ronald, the noted musician, tells the following story about himself:  “I went into my club one day, looked into the reading room and saw a great friend of mine talking to one of the ugliest men I have ever seen in my life.  My friend called me over and, much to my regret, as I dislike ugly things in life, introduced me to the man in question.  He turned out to be quite a decent fellow and paid me the usual silly compliments which all professionals receive.  I conversed with him about five minutes, and when I had had enough he reiterated the statement that he was delighted to have met me, being one of my greatest admirers, and added, ‘In any case, Mr. Ronald, I was most anxious to know you because I am always being mistaken for you!’”—London Globe

 

Phillips Federal Philosophies:

 

Hello, All:

 

Spring has indeed sprung….. a leak, through which winter snuck back in.  Meteorologists who thought their prime viewing season was over spent a few extra days endlessly teasing the weather report that would tell us -- after this break -- exactly when and where the dastardly snow and ice was going to hit.  Ah, well, not bad weather to curl up in front of the fire with your favorite beverage and the latest issue of Coverage Pointers.

 

A short read this week (at least from me), so you can spend more time contemplating the fire.  The first, Sefcik v. State Farm Fire and Casualty Company, is, in addition to a Hurwitz & Fine win on summary judgment, a reminder of the maxim that “insurance cannot be purchased for a home that has already burned down.”

 

For the second case I snuck into the Second Circuit Court of Appeals (not literally, they actually do have pretty decent security.  Not that I’ve tested it).  In U.S. Underwriters Insurance Company, the Second Circuit found that a distinction in exclusion language was sufficient to create an issue of fact, and a denial of summary judgment to the insurer, as to whether a worker was an excluded subcontractor or a covered supplier.

 

As always, thanks for reading.

 

J.

Jennifer J. Phillips

[email protected]

 

What’s in a Name?  A Century Ago:

 

The Sun

New York, New York

25 Mar 1916

 

NUTTY’S NAME NOW NUTLEY

 

Insurance Agent Tells Court He

Objects to Ridicule

 

John David Nutty, an insurance agent of 567 West 186^th street, got permission from Supreme court Justice Gavegan yesterday to change his name to Nutley.  Nutty told the court that in his business he was subjected to much ridicule because of the slang use now made to the word “nutty,” and said he believed he would be benefited financially by the change.

 

Supreme Court Justice Ford refused yesterday to permit Aaron Demschofsky to change his name to Denman because he said it would disguise both the petitioner’s race and religion and there was no legal justification for a change on such grounds.

 

When the late Mayor Gaynor was on the bench he ruled that there was no law prohibiting a man from taking any name he chose without getting the permission of the court, and said that the only requirement of a change of name was that it should be done in good faith.  Other Judges have followed this ruling.  

 

Peiper’s Pitch:

 

We devote our focus this week not on anything in the property/potpourri column, but rather in Barnas’ Bad Faith column.  As reviewed below, Brian summarizes a Second Department discussing First Party Bad Faith.  While the Court cites to the appropriate precedent, we are not so sure we agree with its conclusion.  Specifically, the Court appears to have permitted plaintiff’s Bad Faith claim to survive dismissal due to questions related to Liberty Mutual’s actions in adjusting the claim.  What we would suggest is missing from this analysis is plaintiff’s obligation to support a bad faith claim with evidence that the carrier’s conduct was “directed toward the general public as a whole.” 

 

Thus, despite how objectionable the conduct of an insurer is alleged to be, the standard is supposed to also require that it be part of a larger plan directed at all policyholders.  We doubt that was demonstrated, nor even alleged, and as such it is certainly questionable as to why a discussion on the breadth of Liberty’s actions did not make it into the decision.  What is not questionable is that this case represents a further example of additional movement toward eroding the long established precedent of Rocanova and New York University.

 

We were heartened, however, to see the Court (regardless of the potential merits of a bad faith claim) outright dismiss plaintiff’s attempts to recover legal fees.  It has long been the rule that a party seeking to overcome a wrongful denial is not entitled to its fees where, as here, it is the aggressor in the lawsuit.  The rule, as most of you know, is different where the carrier commences the action, and thereby places its insured in a defense posture.  Here, where the plaintiff commences the action, it has no right to recovery of expended fees under the American Rule. 

 

Lastly, if, on this Good Friday, you have the stamina to continue on, we’d direct you to take a look at the Kandel decision reviewed in our Potpourri section this week.  It is a good read on the application of the “emergency doctrine.” 

 

That’s it for now.  Happy Spring Break, and happier Easter. 

 

Steve

Steve E. Peiper

[email protected]

 

Speaking of Pitches, Pitchers and Catchers Reported a Century Ago:

 

 

  The Sun

New York, New York

25 Mar 1916

 

YANKS START NORTH

IN FINE CONDITION

 

Donovan Still Has Thirty-one Actual

Players on His Staff.

 

TEAM PRACTICE NEEDED

 

Macon, Ga., March 24.—The Yankees are through with the Macon part of their training.  The rest of their preparation period will be devoted to exhibition games.  They left here to-day in excellent condition.  The pitchers are as fit as a staff of pitchers could be and individually the players are all well off physically.  Team practice is needed most now, for the attack of the Yankees is variable and not concerted, and a good deal of loose work has been done on the bases.

 

However, after the poor headwork in that line yesterday, the limit may be reached and better work set in.  It would not be at all surprising if, against outside teams, the Yankees struck harder and to more purpose as a team, for the individual goods are there.

 

The party bundled on a train this afternoon headed for Birmingham.  A game will be played there tomorrow and Manager Donovan expects to pitch two youngsters, Piercy and Tapple, against the Coal Barons.

 

Tessa’s Tutelage

 

Dear Readers,

 

I am fresh from the Clerk’s Office where I signed my name, seemingly a million times, and finalized the purchase of my very first house.  I felt pretty good about the whole deal after realizing that the restaurant down the street makes enormous overly sweet desserts.  The proximity of restaurants, and a fire station, was important to me, as my cooking skills are nebulous at best.  The desserts are so good at this place that it is impossible to think about how expensive new appliances are (who needs a fridge when you can order bread pudding?).

 

Anyhow, it seems that I am not the only one who had an eventful week; the Courts have produced a veritable cornucopia of No-Fault decisions. As there are about thirteen decisions, I will not attempt to summarize them all.  So settle down with your favorite dessert of choice, and enjoy the flurry of Court activity.

 

My best,

 

Tessa

Tessa R. Scott

[email protected]

 

All’s Fair in Love and …. Cars:

 

  Belvidere Daily Republican

Belvidere, Illinois

25 Mar 1916

 

KISS FOR AUTO FAIR TRADE

 

That Was Verdict of Iowa Jury

Upholding Woman

 

Davenport, IA.—That the kiss which Mrs. Bertha Spangler claims she gave Thomas Brown for an automobile was a fair trade was the verdict of a Scott county jury.

 

Brown brought the suit in an attempt to show that he was the owner of the car and had merely let Mrs. Spangler, his housekeeper, use the machine.  The woman testified that Brown had given her the car, the compensation being a kiss.  The jury was out for four hours before a verdict was finally agreed upon which gave the machine to the woman. 

 

 

Highlights from this Issue, Attached:

 

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

 

• High Court Gently “Loosens” Notice Requirements for Additional Insured

• Uninsured Motorists Earlier Claim and Lawsuit Alleging that He Knew the Identity of the Drivers in the Accident is Inconsistent with Later Claim that He Did Not.  Uninsured Motorist Claim Stayed.

• Since Insurer Mentioned that Additional Insured was in Franchise Relationship, Additional Insured Provisions that Provide Coverage for “Liability as a Grantor of a Franchise” Trigger Obligation to Defend and Indemnify

• When Damage is Only to Insured’s Work Product, Coverage, the Claim Does Not Constitute Property Damage Caused by an “Occurrence” and Fall Squarely Within Workmanship Exclusions

• Action for Reformation of Policy, Where Insured Could be Adversely Affected, Requires Insured to be Party
  Insurer Found to have improperly Failed to Defend.  Accordingly, Insured Recovered Defense Costs and Covered Settlement Amounts

• Insured Stated Claim Against Broker for Failure to Secure Appropriate Insurance Coverage

• Finding in Framed Issue Hearing was Supported by Record

 

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

Robert E.B. Hewitt III

[email protected]

 

• Plaintiff’s Gap in Treatment Was Adequately Explained by Doing Prescribed Home Exercises and Competing Expert Opinions Regarding Injuries Necessarily Leads to A Finding of Issues of Fact

• Lower Court Properly Searched the Record and Awarded Summary Judgment to Nonmoving Defendant Where Plaintiff Failed to Address In Bill Of Particulars That He Sustained a Serious Injury to Lumbar Spine and Medical Records Showed No Serious Injury to Cervical Spine

• Defendants Failed to Adequately Address Plaintiff’s 90/180-day Category Claim of Serious Injury Set Forth In Bill of Particulars

 

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

Litigation:

 

• Defendant Is Entitled To Summary Judgment Where It Can Show It Properly Used The Worker’s Compensation Fee Schedule

• Affidavit of Defendant's Employee was Sufficient to Establish the Mailing of the EUO Scheduling Letters

• Affiant Did Not Work For The Company At The Time Of Mailing

• The Affidavit Of Plaintiff's Billing Supervisor Was Sufficient To Demonstrate The Existence Of A Triable Issue Of Fact

• The Court Would Not Hear Plaintiff’s Objections Regarding Defective EUO Letters As Plaintiff Made No Attempt To Respond

• It Is Not Part Of Plaintiff's Burden To Establish That The Supplies Furnished By Plaintiff Had Actually Been Delivered

• Employee Affidavit Was Enough To Show Claim Was Not A Covered Incident

• Defendant Did Not Sufficiently Set Forth A Standard Office Practice Or Procedure

• Defendant Failed to Establish That It Timely Mailed EUO Notices

• Defendant Paid Plaintiff In Accordance With The Workers' Compensation Fee Schedule

• Public Policy Favors Arbitration, And Modifying Or Vacating Arbitration Awards Are Rare And Narrowly Applied

• Pending IME’s Do Not Serve to Toll the 30-Day Statutory Period for Payment

• Plaintiff’s Submission Of An Affidavit From Its Principal Saved The Claim From Dismissal

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

• Failure to Timely File Petition is a Jurisdictional Defect

• Previous Crash, and Unexpected Black Ice, Provide Basis for an Emergency Doctrine Defense

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

• Where Complaint against Insurer Pleads Fraud And Not Breach, Suit Limitation Provision Ambiguous and Inapplicable; But Where Insurer Allegedly Supervised Remediation in Oil Spill Claim, Cause of Action for Negligence Stands

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

• Residence Requirement Strikes Again

• No Coverage for Loss of Business Income During Sandy Due to Off Premises Power Outage

 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

• Disagreement with Value of Insurer’s Offer Alone is Insufficient for a Bad Faith Claim

• Bad Faith Claim against Insurer Arising out of Fire Loss Survives Summary Judgment

• Insured’s Claim that he was a Surgical Candidate Following Motor Vehicle Accident stated a Bad Faith Claim against Insurer who Completely Denied SUM Benefits

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

• Cancellation of Coverage and Known Loss

• Subcontractor or Supplier?

 

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

• Hold The Phone – No Coverage For Debt Collection Phone Calls

 

 

Happy Easter, happy spring.

 

Write us from time to time!

 

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]

 

03/24/16       Spoleta Construction, LLC v. Aspen Insurance UK Limited

New York State Court of Appeals

High Court Gently “Loosens” Notice Requirements for Additional Insured

This one has a long history, which we reported on in Vol. XVI, No. 11.  We’ll first provide our analysis from the Fourth Department and then follow with the high court’s decision:

 

07/11/14       Spoleta Construction, LLC v. Aspen Insurance UK Limited

Appellate Division, Fourth Department

Split Court Wrestles Over Sufficiency of Additional Insured’s Notice

Shane VanDerwall was hurt on October 20 2008 while working on a construction project. Spoleta was the general contractor, VanDerwall worked for a subcontractor, Hub-Langie, a paving company (“Hub”). Under the trade contract, Hub agreed to defend and indemnify Spoleta for all claims arising out of Hub’s work and to name plaintiff on its general liability policy.

 

Hub secured a policy from Aspen which provided blanket AI coverage for

"any person or organization . . . when you and such person or organization has agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy."

 

Here’s the timetable:

 

Late December 2009, Spoleta learned of the accident for the first time in late December 2009 in a letter from VanDerwall's attorney.

• January 27, 2010, Spoleta’s liability carrier sent a letter to Hub notifying it of VanDerwall's "claim," noting Hub’s contractual agreement to defend and indemnify Spoleta, and requesting that Hub put its own insurance carrier on notice to allow the carrier to conduct its own investigation. There is no claim of additional insured status.
   

• February 9, 2010, Hub sent Aspen a "General Liability Notice of Occurrence/Claim form regarding VanDerwall's alleged injury, with the January 2010 letter attached.

• February 22, 2010, Aspen had requested and received a copy of the contract between Hub and Spoleta containing the defense, indemnification and additional insured requirements.

• April 15, 2010 VanDerwall commenced the underlying action;

• May 27, 2010, Spoleta’s counsel demanded that Aspen defend and indemnify it in the underlying action;

• June 2, 2010 Aspen disclaims on late notice.
   

  The lower court found the notice to Aspen untimely and granted Aspen judgment.

   

  Initially, the court concluded that the December 2009 letter was a notice of an "occurrence . . . which may result in a claim" and not a "claim" under the policy. The court finds that the December 2009 letter "neither makes any demand for payment nor advises that legal action will be forthcoming. Rather, the letter advised plaintiff that VanDerwall had retained an attorney in connection with personal injuries he had sustained during the course of his work on the construction project, requested that Spoleta forward the letter to its insurance carrier, and warned Spoleta that failure to notify its carrier could result in a denial of coverage and "personal responsibility for any obligations that may arise" from VanDerwall's accident.

   

  The court concluded that the January 2010 letter and form that Hub sent to Aspen was sufficient to constitute notice of an occurrence.

   

  The majority then concludes that the May 2010 letter constituted notice of a "claim" or "suit" based upon VanDerwall's April 15, 2010 commencement of the underlying action. The majority therefore agreed with Spoleta that the lower court erred in dismissing the complaint against Aspen inasmuch as the documentary evidence does not conclusively establish a defense to Spoleta’s claim as a matter of law.  In other words, the original letter constituted notice of an occurrence on behalf of the name insured and additional insured.

   

  Editor’s Interim Note:  There is a long line of cases requiring each insured to give its own notice, unless the parties are united in interest. How notice by one insured can be notice by another does not comport with existing case law, we submit.  And of course, if there was notice by both with the earlier letter, wouldn’t the insurer then have an obligation to deny coverage to both?

   

  A strong two-judge dissent disagreed.

   

  "As an additional insured under the policy issued by defendant, plaintiff had, in the absence of an express duty, an implied duty, independent of the named insured's obligation, to provide defendant with timely notice of the occurrence for which it seeks coverage". Where, as here, a contract of primary insurance requires notice "as soon as practicable" after an occurrence, "the absence of timely notice of an occurrence is a failure to comply with a condition precedent which, as a matter of law, vitiates the contract"

   

  The dissent agreed that the December 2009 letter to plaintiff from the attorney of for VanDerwall was, under the terms of the policy in question, "notice of an occurrence . . . which may result in a claim," and not notice of a claim.

   

  The dissent did not agree with the majority that the January 27, 2010 letter from plaintiff's liability carrier to Hub, which was subsequently sent to Aspen by Hub constituted notice of an occurrence by the AI under the terms of the policy.

   

  The dissent argued that the January 27, 2010 letter did not notify Aspen of an occurrence that may result in a claim under the policy. Instead, the letter merely stated that plaintiff was seeking defense and indemnification from Hub pursuant to the indemnification provision of the subcontract. The letter does not indicate that plaintiff is seeking coverage directly from Aspen as an additional insured on the policy nor does it ask Hub to provide notice of any kind to Aspen on Spoleta’s behalf.

   

  Upon receipt of the January 27, 2010 letter, Aspen disclaimed coverage to Hub because of Hub’s failure to comply with the notice provisions of the policy, and then notified Spoleta’s liability carrier of such disclaimer. In the letter to plaintiff's liability carrier notifying it of the disclaimer to Hub, defendant stated that it had received the January 27, 2010 letter "making a claim of contractual indemnity" against Hub, and advised that plaintiff had not provided a copy of the contract containing the "claimed indemnity provision." Plaintiff's liability carrier did not respond to that letter

   

  It was not until May 27, 2010 — more than four months after Spoleta was informed of VanDerwall's injury, and a month after Spoleta had been sued by VanDerwall — that plaintiff, through its attorney, notified Aspen that it was seeking coverage directly from Aspen as an additional insured. Defendant promptly disclaimed coverage because of plaintiff's failure to comply with the notice provisions of the policy, among other reasons.

   

  Inasmuch as Spoleta clearly did not intend for the January 27, 2010 letter to serve as notice of an occurrence under the policy, and in fact did not even then realize that it was an additional insured under the Hub, the January 27, 2010 letter cannot serve as sufficient notice of an occurrence that might result in a claim for coverage under the policy by plaintiff.  The disclaimer was therefore proper.

   

  Editors Second Note:      I would agree that the earlier notice was NOT notice of an occurrence or a request for coverage.  It was a request for contractual indemnification.  The Court may have thought that the carrier was playing “gotcha” – that while the words of the request did not specifically seek AI coverage, it should have been clear enough to the insurer that AI coverage was being sought.

   

  We’re purists.  We do not believe that the carrier had an obligation to determine, without a request to do so, that Spoleta was or could be an additional insured unless a request for that status was included.

 

Court of Appeals:

 

Interestingly, and what has become much more commonplace in recent months, the Court of Appeals sided with the party seeking coverage.

 

The Court rejected Aspen's argument that the documentary evidence established as a matter of law that Spoleta did not timely see to it that Aspen was notified of an occurrence. Aspen claims that it interpreted Spoleta's initial letter as seeking only a defense and indemnity from Hub-Langie pursuant to the indemnification provision of the subcontract because Spoleta did not expressly state that it was seeking coverage as an additional insured.

 

The Court found that the letter itself did not identify the indemnification provision of the subcontract as the basis for the communication — it simply requested a defense and indemnity under the contract without specifically invoking either the indemnification or additional insurance provisions.

 

Moreover, the letter requested that Hub "place [its] insurance carrier on notice of this claim" (emphasis added) and provided information about the identity of the injured employee, as well as the date, location and general nature of the accident. That is, in addition to requesting that the insurer be put on notice, the letter provided the details that the policy required to be included by an insured in notice of an occurrence.

 

Under these circumstances, the Court reinstated the complaint concluding that “It cannot be said that the "documentary evidence submitted conclusively established a defense to the asserted claims as a matter of law".

Editor’s Note:  Traditionally, a party seeking additional insured status has an independent obligation to give notice to the insurer requesting AI status.  That did not occur here.  Coverage should not have been afforded under the policy but nobody asked me for my opinion. Of course, this was on a motion to dismiss based on the pleadings.  The final nail in the coffin has not been hammered.

 

03/24/15       In re Allstate Insurance Company v. Rosado

Appellate Division, First Department,  

Uninsured Motorists Earlier Claim and Lawsuit Alleging that He Knew the Identity of the Drivers in the Accident is Inconsistent with Later Claim that He Did Not.  Uninsured Motorist Claim Stayed.

Allstate sought to stay an uninsured motorist (UM) arbitration on the ground that the applicant had previously alleged that he knew the parties that caused his injuries in the collision and therefore, he could not seek UM benefits.

 

Rosado sued certain insured owners and drivers of vehicles involved in an automobile accident in which he sustained injuries and claimed negligence on the part of the drivers (and derivative liability on the part of the owners).

 

Rosado's deposition testimony three years after this admission was that he was struck from behind by a truck that fled the scene.  That testimony is inconsistent with his judicial admission that he knew the identities of the drivers who cause his injuries.  The owner and driver of the truck were never sued in the underlying action, even as a John Doe, and Rosado did not seek uninsured motorist benefits from petitioner with regard to the truck until shortly after his deposition testimony. Further, the only other evidence regarding the truck indicates that the truck did not strike Rosado's vehicle.

 

Under these circumstances, Allstate was able to permanently stay the UM arbitration.

 

03/23/16       Cumberland Farms, Inc. v. Tower Group, Inc.

Appellate Division, Second Department

Since Insurer Mentioned that Additional Insured was in Franchise Relationship, Additional Insured Provisions that Provide Coverage for “Liability as a Grantor of a Franchise” Trigger Obligation to Defend and Indemnify

In 2008, Zevlakis allegedly was injured when he tripped and fell on a sidewalk outside a gas station operated by Noori pursuant to franchise and lease agreements with Cumberland Farms, Inc. (“Cumberland”). Noori had an insurance policy with Mountain Valley Indemnity Company that listed Cumberland as an additional insured. After the accident, Zevlakis commenced an action against Cumberland to recover damages for personal injuries (“the underlying action”).

 

Cumberland then commenced seeking coverage under a Mountain Valley, policy as well as policies under its affiliated companies (collectively referred to as “Tower Group”). Cumberland sought defense and indemnify under the Cumberland and Tower Group policies, and the carriers sought a determination that they had no such duty.

 

Cumberland contends that it was named as an additional insured under Noori's policy with Mountain Valley. The carriers argued that although Cumberland is named as an additional insured on the policy, an endorsement to the policy provides that Cumberland is an additional insured "only with respect to [its] liability as a grantor of a franchise to the named insured."   The insurers argue that Cumberland is not named as a defendant in its capacity as a franchisor.

 

The Tower Group also argues that it is not obligated to defend and indemnify Cumberland in the underlying action since they did not issue the subject insurance policy.

 

Here, the complaint in the underlying action alleged that Cumberland was negligent in its ownership, operation, control, and maintenance of the subject gas station. However, the defendants’ submissions in support of their motion included evidence that Cumberland leased the gas station to Noori as a franchisee. Since Cumberland's liability, if any, may hinge on the scope of its obligations under the agreements entered into with Noori that established their franchisor/franchisee relationship, the allegations of the complaint in the underlying action suggest a reasonable possibility of coverage for Cumberland in the underlying action.

 

Cumberland is therefore entitled to an order declaring that Mountain Valley is obligated to defend and indemnify it in the underlying action, and the defendants failed to raise a triable issue of fact in opposition.

 

Tower, however, is out of the case since they did not issue the policy.

Editor’s Note: Both defense AND indemnity?  Sorry, don’t buy it.  Defense we can understand.

 

03/22/16       Eurotech Construction Corp. v. QBE Insurance Corp.

Appellate Division, First Department

When Damage is Only to Insured’s Work Product, Coverage, the Claim Does Not Constitute Property Damage Caused by an “Occurrence” and Fall Squarely Within Workmanship Exclusions

Plaintiff was sued for damage to its own work product, the installation of defective fire stops and the failure to install wooden sub-flooring.  There are no allegations suggesting that the policyholder caused damage aside from or beyond its own work.  Damage to an insured's own work or product does not constitute "property damage" caused by an "occurrence".

 

The underlying allegations also fall squarely within the "business risk" exclusions of the policy, most pertinently, exclusions (j)(5) and (6), which have been held to bar coverage for damage to property resulting from the contractor's work.

 

03/22/16       Jerusalem Avenue Taxpayer, LLC, v. Liberty Mutual Ins. Co.
Appellate Division, First Department
Action for Reformation of Policy, Where Insured Could be Adversely Affected, Requires Insured to be Party
Jerusalem seeks reformation of a policy of insurance to which it is not a party and which was executed between defendant Liberty and nonparty Best Yet.  Jerusalem wants to argue that parties to the policy intended that Best Yet, as lessor, obtain insurance coverage for Jerusalem, as lessee of the Best Yet premises in Hicksville.

 

The issue of whether Best Yet intended to obtain coverage from Liberty for Jerusalem, which it was not obliged to do in the underlying lease, and whom Best Yet never expressly requested be included in the Liberty insurance policy, is at the heart of the reformation claim.  The reformation claim would have adverse effects on Best Yet, which would be obligated to pay the deductible if Liberty is ordered to indemnify Jerusalem, and who could incur increased premiums.

It would also affect the amount of insurance coverage available at that Best Yet location. In addition, as Best Yet would not otherwise be bound by the trial court's order, there could be inconsistent results where Best Yet argues that Liberty improperly paid the claim.

 

Accordingly, Best Yet is interested in the outcome and should be made a party to the lawsuit before reformation is determined.
Editor’s Note:  Rare to see a reformation action brought by a non-party to the contract. 

 

03/16/16       Americare Certified Special Services, Inc.v. Nautilus Ins. Co.
Appellate Division, Second Department

Insurer Found to have improperly Failed to Defend.  Accordingly, Insured Recovered Defense Costs and Covered Settlement Amounts

Americare is a certified home health care agency (“CHHA”) approved to participate in the Medicaid program. Americare was named as a defendant in an underlying class action lawsuit also asserted against Personal Touch Home Care, Inc., another CHHA, and various state and local officials involved in administering the Medicaid program in New York. The named plaintiffs in the underlying action, who received Medicaid-funded home health services from Americare or Personal Touch, sought class certification, declaratory and injunctive relief, and compensatory damages.

 

They alleged that, in response to state budget cuts which changed the reimbursement rates applicable to Medicaid-funded home care services in a manner designed to discourage providing unnecessarily high levels of services to particular patients, Americare and Personal Touch had terminated or reduced their home health services even though their patients' medical needs remained the same. Americare and Personal Touch allegedly did so without affording patients the statutory due process protections to which they were entitled in violation of the Medicaid Act.

 

Americare sought defense and indemnification in the underlying action under two insurance policies issued to it by the defendant, Nautilus – a healthcare general liability policy and a healthcare professional liability policy—which were in effect at the time of Americare's alleged improper reduction or termination of home health services. Nautilus disclaimed coverage on the grounds that the allegations of the class action complaint fell outside the scope of both policies and both policies excluded coverage for non-monetary damages. Americare undertook its own defense in the underlying action, and ultimately entered into a stipulation of settlement pursuant to which it agreed to pay $50,000 to the plaintiffs' counsel for damages and attorneys' fees.

 

Following the settlement, Americare commenced this action against Nautilus, seeking, among other things, a judgment declaring, in effect, that Nautilus is obligated to pay the settlement and defense costs Americare incurred in the underlying action.

 

Americare demonstrated, prima facie, that Nautilus was obligated to defend and indemnify it in the underlying action by submitting evidence establishing that the class action complaint contained claims for compensatory damages for physical and emotional injuries falling within the scope of coverage of both the general liability and professional liability policies, and that the $50,000 payment was to settle these covered claims. Nautilus failed to raise a triable issue of fact in opposition...

Editor’s Note:  While we do not have enough information to comment on the correctness of the determination that the insurer had a defense obligation, we do agree that the remedy for failure to defend, under Servidone, is reimbursement of reasonable defense costs and payment of that part of the settlement covered by the policy.  Generally, the burden is on the carrier that wrongfully fails to defend, to establish that the settlement is for claims outside of the policy.

 

03/16/16       Freundlich v. Pacific Indemnity Company

Appellate Division, Second Department

Insured Stated Claim Against Broker for Failure to Secure Appropriate Insurance Coverage

The plaintiff commenced this action against, among others, Foa & Son Corporation (“Foa”), a company that the plaintiff allegedly used for personal insurance brokerage and risk management services. It was claimed that Foa negligently failed to advise the plaintiff to obtain workers' compensation insurance, and negligently failed to procure such insurance, after being informed that the plaintiff hired workers at his home. Foa moved to dismiss the claims on the pleadings.

 

Insurance brokers have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage". However, situations may arise in which insurance agents, through their conduct or by express or implied contract with customers and clients, may assume or acquire duties in addition to those fixed at common law.

 

 

Based on the allegations and giving plaintiff the benefit of every possible favorable inference, the plaintiff sufficiently alleged the existence of a special relationship between Foa and the plaintiff so as to give rise to a duty to advise.

Editor’s Note:  So my friends down in Florida do not break out into a cold sweat, it must be recognized that this was not a determination of fact, only whether the complaint stated a claim.  The case is a long way from over.

 

03/16/16       American Transit Ins. Co. v, Caba

Appellate Division, Second Department

Finding in Framed Issue Hearing was Supported by Record

This was an application to permanently stay the arbitration of an uninsured motorists claim.  Caba was injured when a vehicle he was driving came into contact with a Jaguar in Brooklyn. Although the Jaguar drove away from the scene, the claimant was able to record the license plate number and provided it to the police.
 

The Jaguar was owned by a GEICO insured.  GEICO denied the claim, based on a written statement provided to it by its insured denying that the Jaguar had been involved in the accident. The claimant then filed a claim against his own insurance carrier, American Transit under the uninsured motorist (“UM”) endorsement of his policy, demanded arbitration. American Transit sought to stay arbitration on the ground that the Jaguar was insured by GEICO and, thus, the claimant had no valid claim under the uninsured motorist endorsement of his policy. After a framed-issue hearing, the Supreme Court granted the petition and permanently stayed arbitration. GEICO appeals.

 

In reviewing a determination made after a hearing, the power of this Court is as broad as that of the hearing court, and this Court may render the judgment it finds warranted by the facts, bearing in mind that in a close case, the hearing court had the advantage of seeing the witnesses and hearing the testimony'.

 

Here, the determination that in fact Caba’s car was struck by the GEICO vehicle is supported by the record.
 

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

Robert E.B. Hewitt III

[email protected]

 

03/18/16                 Cook v. Peterson

Appellate Division, Fourth Department

Plaintiff’s Gap in Treatment Was Adequately Explained by Doing Prescribed Home Exercises and Competing Expert Opinions Regarding Injuries Necessarily Leads to A Finding of Issues of Fact

The Appellate Division unanimously reversed the Supreme Court’s grant of defendant Thomas Mike’s motion for summary judgment and reinstated the proceedings in an unusually detailed opinion. The facts are as follows: In June 2009, plaintiff was a passenger in a vehicle operated by defendant Alyssa S. Peterson. The vehicle was struck by a vehicle operated by defendant Thomas M. Mike, who was proceeding straight through an intersection when Peterson turned left in front of him. Plaintiff went directly to the hospital from the scene of the accident, complaining of pain in his head, neck, lower back and right shoulder. In the two weeks following the accident, plaintiff treated with an orthopedist for right shoulder pain and occipital type headaches. The orthopedist diagnosed plaintiff with a cervical strain sprain and occipital headaches- posttraumatic, bilateral paracervical strains- posttraumatic and right shoulder tendonitis. Plaintiff was prescribed various medications, and the orthopedist recommended postural improvements which plaintiff could do in a self-managed fashion and the specific exercise was reviewed/demonstrated in the office" on July 8, 2009. Plaintiff did not see any physician again for complaints related to the accident until September 2010, when he sought treatment for back pain. It was not until March 2011 that plaintiff presented to his primary care physician for complaints of debilitating headaches. From that point forward, plaintiff was diagnosed with occipital neuralgia, underwent numerous occipital nerve block injections and ultimately, in July 2013, underwent surgery to have a permanent occipital nerve stimulator implanted, resulting in five scars measuring 2.5 to 3 inches each along the line of plaintiff's spine.

 

Plaintiff commenced this action in April 2012, i.e., before the stimulator surgery, alleging that he had sustained serious physical injuries in the motor vehicle accident and that he had sustained an economic loss greater than the basic economic loss. In his initial bill of particulars, plaintiff alleged serious injuries under the categories of permanent loss of use and/or permanent consequential limitations of use and/or significant limitation of use of his neck and hip, and he further alleged that he sustained a serious injury under the 90/180-day category.

 

Defendant Mike moved for summary judgment dismissing the complaint and any cross claims against him on the ground that Peterson's negligence was the sole proximate cause of the accident. Peterson cross-moved for summary judgment dismissing the complaint against her on the ground that plaintiff did not sustain a qualifying serious injury. Mike then cross-moved for summary judgment dismissing the complaint and cross claims based on plaintiff's failure to meet the serious injury threshold, joining in Peterson's cross motion and incorporating all of the arguments and exhibits she submitted in support of her cross motion.

 

By amended verified bills of particulars dated May 30, 2014, i.e., before Mike's cross motion for summary judgment, plaintiff claimed that he had sustained a serious injury under the significant disfigurement category. He based that new claim on the scars that resulted from his stimulator surgery. Plaintiff opposed the motion and cross motions, but in his opposing papers he expressly withdrew his claim under the permanent loss of use category of serious injury.

 

The Supreme Court granted the cross motions, awarding defendants summary judgment dismissing the complaint, and implicitly the cross claims, on the ground that plaintiff did not sustain a serious injury. The court found that defendants met their initial burden of establishing that plaintiff did not sustain a serious injury and that, even though there were conflicting medical opinions on the issue of serious injury, the gaps in plaintiff's treatment interrupted the chain of causation. Based on its determination, the court found that there was no reason to rule on Mike's motion, in which he asserted that Peterson's negligence was the sole proximate cause of the accident.

 

With respect to the category of permanent consequential limitation of use, the Appellate Division found defendants met their initial burden on the cross motions by submitting, inter alia, the report of a medical expert concluding that the only injuries sustained by plaintiff in the accident were cervical and lumbar sprain/strains, which would have resolved in weeks to months, but not years after the accident. However, it concluded, that plaintiff raised triable issues of fact by submitting the report of a medical expert who opined that plaintiff's occipital neuralgia was causally related to the accident and limited plaintiff from being functional or basically doing anything. Plaintiff's expert contended that the permanent stimulator required to alleviate the pain caused from the occipital neuralgia resulted in a permanent consequential limitation of use of plaintiff's musculoskeletal system and limited all of plaintiff's activities. The Appellate Division found those conflicting expert opinions created triable issues of fact requiring a trial and cannot be resolved on a motion for summary judgment.

 

The Appellate Division also noted that although defendant Mike correctly contended that many of the medical reports and records submitted by plaintiff in opposition to the cross motions were unsworn and uncertified, the Court may consider those reports and records that were submitted by defendants or were referenced in the reports of physicians who examined plaintiff on their behalf, and defendants submitted the reports of those physicians.  To the extent that plaintiff submitted unsworn and uncertified medical reports and records that were not submitted by defendants or relied upon by their expert, the Appellate Division held it  may nevertheless rely on the medical opinions of plaintiff's experts because the various medical opinions relying on those  reports and records are sworn and thus competent evidence. The Appellate Division further agreed with plaintiff that the court erred in discounting entirely the opinion of plaintiff's treating physician due to perceived errors in his report. The court may not weigh the credibility of the affiants on a motion for summary judgment unless it clearly appears that the issues are not genuine, but feigned. In any event, regardless of the opinion of plaintiff's treating physician, the Appellate Division noted that plaintiff also submitted an expert affirmation from another medical professional that raises triable issues of fact.

 

The Appellate Division rejected defendants' contention that the gaps in plaintiff's treatment are fatal to his claims. With respect to the 14-month gap in treatment following the July 2009 medical appointments, medical records submitted by defendants in support of their cross motions provided the unrebutted explanation that plaintiff's treating orthopedist had provided plaintiff with medication and an exercise regimen that was to be performed in a self-managed fashion. In opposition to the cross motions, plaintiff contended that he experienced only mild relief from that course of treatment and, as a result, sought a second opinion. The Appellate Division concluded that plaintiff provided a reasonable explanation for the gap in treatment that is substantiated by the record, which is sufficient to defeat defendants' cross motions With respect to two other alleged gaps in treatment, the Appellate Division concluded that the record fails to establish that plaintiff in fact ceased all therapeutic treatment during those purported gaps inasmuch as plaintiff was still under the care of physicians who had provided nerve block injections, he had received referrals for other physicians and he was exploring alternative treatments to combat the pain caused by the occipital neuralgia.

 

With respect to the significant limitation of use category, the Appellate Division concluded that defendants failed to meet their initial burden with respect to that category. Defendants' own submissions established that plaintiff sustained, at the very least, cervical and lumbar sprains/strains  which resulted in a moderately limited range of motion. Any assessment of the significance of a bodily limitation necessarily requires consideration not only of the extent or degree of the limitation, but of its duration as well, Here, the Appellate Division held that defendants failed to establish as a matter of law that the limitations sustained by plaintiff from the cervical and lumbar sprains and strains were not significant. In any event, as with the permanent consequential limitation of use category, the Appellate Division agreed with plaintiff that he raised triable issues of fact whether the occipital neuralgia was caused by the accident and, if so, whether that injury caused a significant limitation of use of plaintiff's musculoskeletal system.

 

The Appellate Division further agreed with plaintiff that defendants did not meet their burden of establishing that plaintiff did not sustain a serious injury under the 90/180-day category. Inasmuch as it had previously held that a whiplash injury to plaintiff’s cervical spine and a lumbosacral sprain/strain can constitute a qualifying injury under the 90/180-day category defendants were required to establish as a matter of law that plaintiff was not curtailed from performing his usual activities to a great extent rather than some slight curtailment during the relevant time period. Defendants failed to do so and thus the burden never shifted to plaintiff to raise an issue of fact according to the Appellate Division.

 

With respect to the final category of serious injury, i.e., significant disfigurement, Peterson contends that plaintiff improperly attempted to rely on that category of serious injury in opposing the cross motions because it was first recited in the amended verified bills of particulars that postdated Peterson's cross motion. The Appellate Division found that Peterson's contention was not properly before them  inasmuch as it is raised for the first time on appeal and is an issue that could have been obviated or cured by factual showings or legal counter steps in the trial court. In any event, the Court noted that even if it were to agree with Peterson that the significant disfigurement category of serious injury should not have been addressed by the motion court, that category of serious injury was properly asserted in the amended verified bills of particulars and thus would have remained intact following the decision on the previously asserted categories of serious injury

 

The Appellate Division held that to the extent that there was an issue of fact whether the occipital neuralgia was caused by the accident, there was likewise an issue of fact whether the scarring sustained by plaintiff as a result of the surgery necessitated by the occipital neuralgia was caused by the accident

 

The Appellate Division also agreed with plaintiff that the claim for economic loss in excess of basic economic loss should be reinstated. It noted that the lower court did not expressly address this claim in granting the cross motions for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury, and it is well settled, however, that a plaintiff may recover for economic loss in excess of basic economic loss without proof of serious injury.

 

03/16/16                 Kim v. Franco

Appellate Division, Second Department

Lower Court Properly Searched the Record and Awarded Summary Judgment to Nonmoving Defendant Where Plaintiff Failed to Address In Bill Of Particulars That He Sustained a Serious Injury to Lumbar Spine and Medical Records Showed No Serious Injury to Cervical Spine

The Appellate Division held the moving defendant met his 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. He submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical region of the plaintiff's spine and to the plaintiff's right shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, the Appellate Division held plaintiff failed to raise a triable issue of fact. The Appellate Division further held that contrary to the plaintiff's contention, the moving defendant was not required to address any alleged injuries to the lumbar region of the plaintiff's spine, since the plaintiff failed to allege in his bill of particulars that he sustained a serious injury to that area under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). The Appellate Division also found that the lower court properly searched the record and awarded summary judgment to the nonmoving defendant.

 

03/16/16                 Lamtam v. Gassosso

Appellate Division, Second Department

Defendants Failed to Adequately Address Plaintiff’s 90/180-day Category Claim of Serious Injury Set Forth In Bill of Particulars

The Appellate Division affirmed the lower court’s denial of summary judgment to defendants, holding the defendants failed to meet their prima facie burden of demonstrating that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants' motion papers failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that she sustained a medically determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident. Since the defendants failed to meet their prima facie burden, it was unnecessary for the Appellate Division to consider whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. This was a boilerplate decision with no facts given.

 

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

Litigation:

 

3/11/16         Acupuncture Healthcare Plaza I, P.C. v Truck Ins. Exch.

Appellate Term, Second Department

Defendant is Entitled to Summary Judgment Where it Can Show It Properly Used the Worker’s Compensation Fee Schedule

Contrary to Plaintiff's contention, raised in the Civil Court and on appeal, Defendant established that the denial of claim form at issue had been timely mailed and Defendant further demonstrated that it had fully paid plaintiff for the services at issue in accordance with the workers' compensation fee schedule for acupuncture services performed by chiropractors.

 

3/11/16         Atlantic Radiology Imaging, P.C. v Esurance Ins. Co.

Appellate Term, Second Department

Affidavit of Defendant's Employee was Sufficient to Establish the Mailing of the EUO Scheduling Letters

Plaintiff appealed from the grant of summary judgment which was granted on the ground that the assignor had failed to appear for a scheduled examination under oath (EUO).  The Court found, contrary to plaintiff's argument, that the affidavit of defendant's employee was sufficient to establish the mailing of the EUO scheduling letters.

 

Plaintiff also argued that the affirmation by the managing partner of defendant's law firm, which had been retained to conduct the EUOs, did not establish that the assignor had failed to appear for the EUOs. The court determined that Plaintiff’s argument lacked merit, as that affirmation was not the proof submitted by defendant to establish the assignor's failure to appear.

 

3/11/16         Atlantic Radiology, P.C. v Maya Assur. Co.

Appellate Term, Second Department

Affiant Did Not Work for The Company at The Time of Mailing

The affidavit of defendant's claims adjuster was insufficient to establish that its denial of claim form had been timely mailed. Although the claims adjuster stated that, in May 2012, she had personally generated the denial of claim form and placed it in an envelope, affixed proper postage and placed the envelope in an outgoing mailbox, she also stated that she began working for defendant as a claims adjuster in July 2012. Consequently, her affidavit was of no probative value. Defendant thus failed to demonstrate that it was not precluded from interposing its defense of lack of medical necessity.

 

3/11/16         BAB Nuclear Radiology, P.C. v Mercury Cas. Co.

Appellate Term, Second Department

The Affidavit of Plaintiff's Billing Supervisor was Sufficient to Demonstrate The Existence Of A Triable Issue Of Fact

Contrary to Defendant's sole contention on appeal, the affidavit of Plaintiff's billing supervisor was sufficient to demonstrate the existence of a triable issue of fact with respect to whether the claim had been timely submitted to defendant. Consequently, Defendant did not prove that Plaintiff had failed to comply with the regulation requiring submission of claims within 45 days of the services rendered.

 

3/11/16         Bay LS Med. Supplies, Inc. v Allstate Ins. Co.

Appellate Term, Second Department

The Court Would Not Hear Plaintiff’s Objections Regarding Defective EUO Letters as Plaintiff Made No Attempt to Respond

Defendant established that it had timely and properly mailed its EUO scheduling letters and its denial of claim forms, which denied the claims on the ground that Plaintiff had failed to appear at duly scheduled EUOs. Although the Civil Court found that defendant had established plaintiff's nonappearances, the court held that Defendant's EUO scheduling letters were defective.

However, Plaintiff did not claim to have responded in any way to defendant's EUO requests, Plaintiff's objections regarding the EUO scheduling letters were not heard. In light of the foregoing, The Court decided that Defendant's cross motion should have been granted and reversed.

 

3/11/16         EMC Health Prods., Inc. v Allstate Ins. Co.

Appellate Term, Second Department

It is Not Part of Plaintiff's Burden to Establish that the Supplies Furnished by Plaintiff had Actually Been Delivered

Defendant's contention—that plaintiff failed to make a prima facie showing of its entitlement to summary judgment because plaintiff did not establish that the supplies furnished by plaintiff had actually been delivered to plaintiff's assignor and by whom they had been delivered—lacked merit, as it is not part of plaintiff's prima facie case to establish these facts.

 

3/11/16         EMC Health Prods., Inc. v Allstate Ins. Co.

Appellate Term, Second Department

Employee Affidavit Was Enough to Show Claim Was Not a Covered Incident

Defendant submitted an affidavit by its employee, who described the details of a record search which she had performed and stated that her search had revealed that there was no Allstate Insurance Company policy covering the vehicle in question on the date of the accident. The Court found that defendant's affidavit was sufficient to demonstrate that Plaintiff's claim did not arise out of a covered incident.

 

3/11/16         Gl Acupuncture, P.C. v Maya Assur. Co.

Appellate Term, Second Department

Defendant Did Not Sufficiently Set Forth a Standard Office Practice or Procedure

The Court reversed the holding of the lower court and decided that the affidavit submitted by Defendant in support of its motion did not sufficiently set forth a standard office practice or procedure that would ensure that the letters scheduling independent medical examinations (IMEs) had been properly addressed and mailed. As a result, Defendant failed to demonstrate that the IMEs had been properly scheduled and, thus, that Plaintiff's assignor had failed to appear at duly scheduled IMEs. 

 

3/11/16         Great Health Care Chiropractic, P.C. v Allstate Ins. Co.

Appellate Term, Second Department

Defendant Failed to Establish that it Timely Mailed EUO Notices

Defendant failed to establish that the initial and follow-up EUO scheduling letters had been timely mailed. As a result, Defendant failed to demonstrate that the EUOs had been properly scheduled and, thus, that Plaintiff's assignor had failed to appear at duly scheduled EUOs.

 

3/15/16         GBI Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co.

Appellate Division, Second Department

Defendant Paid Plaintiff in Accordance With the Workers' Compensation Fee Schedule

Plaintiff argued on appeal, as it did in the Civil Court, that defendant failed to establish that its fee schedule reductions were proper. The Court disagreed and held that Defendant demonstrated that it had fully paid Plaintiff for the services at issue in accordance with the Workers' Compensation Fee Schedule for acupuncture services performed by chiropractors.

 

3/16/16         Matter of Singh v Allstate Ins. Co.

Appellate Term, Second Department

Public Policy Favors Arbitration, And Modifying Or Vacating Arbitration Awards Are Rare And Narrowly Applied

Here, the petitioner failed to demonstrate any ground for vacating the subject master arbitration awards. In addition, the determinations of the Master Arbitrator confirming the original arbitration awards had evidentiary support and a rational basis.

 

3/21/16         R Med., P.C. v Praetorian Ins. Co.

Appellate Term, First Department

Pending IME’s Do Not Serve to Toll the 30-Day Statutory Period for Payment

The Court found that defendant's letter advising that payment was delayed pending independent medical examinations (IMEs) of plaintiff's assignor did not serve to toll the 30-day statutory period. Additionally, Defendant failed to raise a triable issue as to whether the 30-day period was tolled by verification requests that preceded its receipt of the underlying claims.

 

3/22/16         High Definition MRI, P.C. v Travelers Cos., Inc.

Appellate Term, First Department

Plaintiff’s Submission of an Affidavit from Its Principal Saved the Claim From Dismissal

Here, the complaint standing alone failed to apprise defendant insurance companies of basic pertinent information to put them on notice of the claims against them, such as the patients treated and the insurance policies issued by defendant, under which plaintiff submitted claims for treatment rendered. However, in opposition to defendant insurance companies' motion to dismiss, plaintiff submitted an affidavit from its principal with an exhibit attached providing such information.

 

The Court further found that the Complaint adequately alleged that Plaintiff was an assignee. Furthermore, Defendant’s argument that Plaintiff failed to appear for examinations under oath, which is a condition precedent to coverage presented a factual issue not amenable to resolution on a motion to dismiss.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

03/23/16       Wesco Ins. Co. v Vinson

Appellate Division, Second Department

Failure to Timely File Petition is a Jurisdictional Defect

Plaintiff purchased an Index Number, and filed an Order to Show Cause seeking to fix the amount of a Workers’ Compensation lien.  However, plaintiff failed to file the Petition which was necessary to formally commence a Special Proceeding.  Because plaintiff did not timely commence the action, it followed that plaintiff did not actually trigger the Supreme Court’s jurisdiction.

 

In denying plaintiff’s appeal, the Second Department noted that the failure to file the Petition amounted to a jurisdictional defect, and could not be remedied.

 

03/16/16       Kandel v FN Taxi, Inc.

Appellate Division, Second Department

Previous Crash, and Unexpected Black Ice, Provide Basis for an Emergency Doctrine Defense

Plaintiff was involved an in minor two car collision on the Van Wyck Expressway near John F. Kennedy Airport.  The two damaged cars blocked the right side of the three lane highway.  While they were still blocking the right lane, another car lost control and struck the center concrete median.  That car was disabled, and blocked the left lane. 

 

Shortly thereafter, a taxi owned by defendant approached the area.  When he was confronted with the situation, the driver applied his brakes but slid on black ice into plaintiff.  All parties argued that ice had formed on the road due to an irrigation system owned by JFK Airport, and otherwise there no reason to expect icy conditions. 

 

In upholding the defendant’s motion for summary judgment based upon the emergency doctrine, the Court agreed that discovery of two out of three lanes fully blocked, and further encountering ice that was unexpected created an “emergency” situation. Where, as here, the evidence established that the driver of the taxi was not speeding, attempted to avoid the collision, and the events occurred in a matter of seconds, the Court agreed that the driver reacted “as a reasonable person would under the circumstances.”  Accordingly, the case against defendant was dismissed.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

03/02/16       Richard Bennett, et al. v. State Farm Fire & Casualty Company

Appellate Division, Second Department

Where Complaint against Insurer Pleads Fraud And Not Breach, Suit Limitation Provision Ambiguous and Inapplicable; But Where Insurer Allegedly Supervised Remediation in Oil Spill Claim, Cause of Action for Negligence Stands

Plaintiffs in this case were homeowners who insured their property with State Farm. Following an oil spill in May 2011, plaintiffs tendered the costs of remediation to their carrier. State Farm’s policy, however, contained exclusions for damages to the property caused by “contamination” and for damage to the “land”. Nevertheless, State Farm’s policy did provide for coverage for third-party liability, to the extent of remediation the property as directed by the New York DEC, as a third-party claimant. When this was not enough, the insureds sued State Farm to recover further damages related to the spill. The insureds also sued a remediation contractor and engineering/architectural firms hired by the carrier. State Farm moved to dismiss that complaint, which relief was initially granted.

 

On appeal, however, the Second Department faced a couple of issues. First, whether the action against the insurer was timely. The applicable suit limitation provision stated “[n]o action shall be brought [against State Farm] unless there has been compliance with the policy provisions and the action is started within two years after the occurrence causing loss or damage”. The Appellate Division found that this provision was ambiguous, and if thus construed against the drafting insurer, “the provision only applies to suits alleging breach of the ‘policy provisions”. Here, the plaintiffs did not allege such breach, in that they did not allege that State Farm failed to pay for damages under the policy. Rather, they “essentially allege that State Farm engaged in negligence and fraud, in connection with its supervision of the remediation and repair work at their property. Under these circumstances, the provision of the policy that sets forth a two-year limitations period is inapplicable”.

 

Second, the Appellate Division found that the Complaint was deficient with respect to other causes of action. They failed to state a viable cause of action based upon the theory of tortious interference with contract, where they neglected to plead the terms of any alleged underlying agreement. They also failed to plead with requisite specificity a cause of action for fraud as to the insurer. Moreover, they failed to state a cause of action to recover for damages as to alleged aiding and abetting a breach of fiduciary duty, where they simply failed to assert facts giving rise to any fiduciary duty in the first instance.

 

Finally, however, the Second Department held that the insured’s cause of action sounding in negligence was viable. Limiting this holding to the factual scenario presented, the Court stated that “the plaintiffs do not allege that State Farm breached its insurance policy by failing to pay for damages as required by the policy. Rather, the plaintiffs allege that State Farm affirmatively undertook to supervise, direct, and perform the remediation and repair of the property. Specifically, the complaint alleges, inter alia, that State Farm and H2M [the engineering firm], acting as State Farm’s agent, failed to exercise reasonable care in the course of supervising remediation and repair, and that such failure caused additional damage to the property. The complaint also alleges that State Farm supervised and directed the work of H2M, potentially giving rise to vicarious liability on the part of State Farm for negligence, if any, of that contractor. Under these circumstances, the complaint states a cause of action for negligence against State Farm.” The Court went on to hold that the complaint failed to otherwise plead conduct potentially warranting the imposition of punitive damages, though – as there was no showing of “reckless disregard for the rights of others, bordering on intentional wrongdoing that affects the public generally”.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

03/15/16       Tower Ins. Co. v. Parodi

Supreme Court, New York County

Judge Manuel J. Mendez

Residence Requirement Strikes Again

Richard Kozuck allegedly sustained injury as a result of a trip and fall on the front stoop of a property located in Ozone Park, New York.  Kozuck brought suit against property owners.  They tendered their defense to defendant, their homeowner’s insurer.

 

Defendant investigated the claim and determined that the insureds did not live at the premises on the date of the loss rather it was being used as a rental property.

 

The court upheld defendant’s denial of coverage agreeing that as the insureds even admitted they did not reside at the subject premises on the date of the alleged injury, the property did not qualify as an insured location and there was no coverage available to the insureds for the claim. 

 

03/09/16       CAC 3, LLC v. Tower Natl. Ins. Co.

Supreme Court, New York County

Judge Geoffrey D. Wright

No Coverage for Loss of Business Income During Sandy Due to Off Premises Power Outage

This decision arises out of a Super Storm Sandy claim.  Plaintiff brought this action seeking recovery for loss of business income suffered during a temporary power outage.  Defendant denied coverage for the claim based upon an exclusion from coverage for interruption in utility service that occurs away from the premises. 

 

In affirming the denial, the court held that it was a given that the loss of power in question was due to an anticipatory shut down by Con Edison.  Whether or not the premises suffered direct water damage, the loss of power was the ultimate cause of the damage, and the loss of power was due to the shut down by Con Edison, which was off premises. 

 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

03/18/16       Herrera v. State Farm Lloyds

United States District Court, Southern District of Texas

Disagreement with Value of Insurer’s Offer Alone is Insufficient for a Bad Faith Claim

Herrera owned a rental home in southern Laredo, Texas.  Herrera notified State Farm of alleged hail damage to the house on March 1, 2015, almost two years after the alleged damage occurred on March 30, 2013.  State Farm dispatched a representative to the property to evaluate the damage and found light hail damage on some sections of the roof.  The representative did not inspect the interior of the building because Herrera did not claim any damage to the interior, but he offered to return if any interior damage was later discovered.

 

The representative’s damage estimate was $499.56, which was below the policy’s deductible.  The representative discussed the estimate with Herrera’s son two days after the inspection, and State Farm mailed its estimate and a partial disclaimer to Herrera that same day.  Other than a brief phone conversation, State Farm did not hear from Herrera again until May 27, 2015, when Herrera’s attorney sent State Farm a letter demanding $29,962.12 under the Texas Deceptive Trade Practices Act.  State Farm responded with a reservation of rights letter and an offer to re-inspect the property with Herrera and her attorney.  State Farm did not receive a reply until a lawsuit was filed, alleging, inter alia, breach of contract and breach of the common law duty of good faith and fair dealing. 

 

State Farm moved for summary judgment.  First, State Farm claimed it was not liable under the contract because Herrera breached the notice provision.  State Farm argued that Herrera waited 700 days to notify it of the damage and offered no excuse for the delay.  While the court concluded that Herrera failed to provide timely notice, it denied State Farm’s motion because it did not demonstrate prejudice.  The court reasoned that State Farm was not prejudiced because, despite the lengthy delay, it was able to investigate the property, differentiate between hail damage and wear-and-tear, and determine the amount of loss.

 

However, the court granted State Farm’s summary judgment motion relative to the common law duty of good faith and fair dealing claim.  It reasoned that State Farm timely investigated the claim, explained its findings, and attempted to resolve the claim.  Further, when Herrera threatened to sue, State Farm offered to re-inspect the property.  Just because State Farm’s valuation was unacceptable to Herrera did not make it inherently unreasonable.  As such, the claim was dismissed.

 

In addition, Herrera cross-moved to compel an appraisal of the property based on the appraisal clause in the insurance contract.  The court granted the motion, noting that Texas public policy strongly favors enforcing appraisal clauses.  As such, the parties were ordered to conduct an appraisal and advise the court of the status of the appraisal process.

 

 

03/16/16       Doody v. Liberty Mutual Insurance Group, Inc.

Appellate Division, Second Department

Bad Faith Claim against Insurer Arising out of Fire Loss Survives Summary Judgment

Plaintiffs commenced an action against Liberty Mutual after their home was damaged by a fire seeking to recover damages for breach of a homeowners’ insurance policy.  Plaintiffs also sought an award of attorney’s fees.  Liberty Mutual moved for summary judgment dismissing the cause of action alleging breach of the covenant of good faith and fair dealing  and the part of the complaint seeking attorney’s fees, replacement cost benefits, and reimbursement of public adjustor fees.

 

On appeal the Second Department held that the trial court properly denied Liberty Mutual’s motion as to the bad faith claim.  The court concluded that Liberty Mutual failed to eliminate all triable issues as to whether it investigated the loss in good faith and timely paid covered claims.  The court also held that the cause of action alleging breach of contract was not duplicative of the cause of action alleging breach of the covenant of good faith and fair dealing.

 

In addition, the Second Department concluded that Liberty Mutual failed to meet its burden and eliminate all triable issues as to whether it was liable for replacement cost benefits and public adjuster fees.  However, Liberty Mutual’s motion was granted as to the part of Plaintiffs’ complaint seeking attorney’s fees.  Citing the well-established rule, the court found that the plaintiffs-insureds were not entitled to recover the expenses they incurred in bringing an affirmative action against their insurer to settle their rights under the policy.

 

03/16/2016             Abiona v. GEICO Indemnity Company

United States District Court, District of New Jersey

Insured’s Claim that he was a Surgical Candidate Following Motor Vehicle Accident stated a Bad Faith Claim against Insurer who Completely Denied SUM Benefits

Abiona was involved in a car accident in Manhattan in March 2014.  He alleged that he suffered severe back and neck injuries as a result of the accident.  The driver of the other vehicle involved conceded liability and paid the policy limit of $25,000.  Abiona contended that $25,000 was not enough to cover his injuries, and he made a SUM claim with Geico.  Abiona alleged that Geico acted in bad-faith by completely denying benefits, declining to participate in arbitration, and failing to present a good-faith settlement offer.

 

In support of his claim, Abiona submitted extensive medical documentation demonstrating the severity of his injuries.  Among this documentation was an IME report by Geico’s chosen doctor, who opined that Abiona was a surgical candidate because of significant pain from a herniated lumbar disc caused by the accident.

 

Abiona brought a claim against Geico alleging breach of contract and bad faith denial of insurance coverage.  Geico moved to dismiss for failure to state a cause of action.  The court noted that, under New Jersey law, a plaintiff must show the absence of a reasonable basis for denying benefits under the policy and that the insurer knew or recklessly disregarded the lack of a reasonable basis for denying the claim.  Applying this standard, the court held that Abiona’s allegation that Geico’s own IME opined that he was a surgical candidate made his allegation that Geico recklessly disregarded the lack of a reasonable basis for denying his claim plausible.

 

However, the court granted Geico’s motion to sever the bad faith claim from the breach of contract claim.  The court applied the prevailing rule in New Jersey that proof an insured is entitled to coverage as a matter of law is a necessary pre-requisite to pursuing discovery regarding a bad faith claim.  The rationale for this rule is that there is a potential for prejudice to the insured if it is required to produce its claim file prematurely.  Thus, Abiona’s bad faith claim was severed and stayed pending resolution of the breach of insurance contract claim.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

03/15/16       Sefcik v. State Farm Fire & Casualty Company

Eastern District of New York

Cancellation of Coverage and Known Loss

In this coverage dispute results from an automobile insurance policy that was originally effective from August 2013 to February 2014.  On September 27, 2013, the defendant insurer issued a cancellation notice for non-payment of premium.  On the morning of October 18, 2013, the plaintiff was in an automobile accident.  That same day, the plaintiff called the insurer to pay the overdue premium, and the policy was reinstated by the insurer effective at 12:01 am on October 18^th.  There was no dispute that the plaintiff did not inform the insurer of the accident at that time.  The district court quickly reached the conclusion that “[c]learly, this was a ‘known loss’ to Plaintiff when he called to reinstate the Policy and coverage for this loss is therefore precluded by operation of New York law.” 

 

The plaintiff attempted to avoid this conclusion by asserting that the defendant insurer’s notice of cancellation was ineffective because it was not also sent to his broker in compliance with New York Insurance Law § 3426.  However, as the district court stated, this provision applies only to commercial lines, and was inapplicable to the automobile policy at issue.  To that end, the court found that the defendant insurer had complied with the relevant notice requirements of New York Vehicle and Traffic Law, which requires the insurer to mail a notice of cancellation fifteen days prior to such cancellation and to advise the Department of Motor Vehicles within 30 days of the effective date of cancellation.

 

03/14/16       U.S. Underwriters Ins. Company v. 101-19 37^th Avenue LLC

Second Circuit Court of Appeals

Subcontractor or Supplier?

In this case, a worker was injured at the insured premises when he was transporting sheetrock via a fork-lift truck from one location to another at the behest of either the insured, its general contractor, or one of the insured’s subcontractors.  The worker’s employer was none of these entities, but instead was Feldman Lumber, which was argued to be merely a “supplier” or “materialman” for the work performed at the premises.  The district court had granted summary judgment to the insurer based on the exclusion for bodily injuries “to any contractor, subcontractor or any ‘employee’, ‘volunteer worker’, ‘temporary worker’ or ‘casual laborer’ of any contractor or subcontractor arising out of or in the course of the rendering or performing services of any kind or nature whatsoever by such contractor, subcontractor or ‘employee’, ‘volunteer worker’, ‘temporary worker’ or ‘casual laborer’ of such contractor or subcontractor for which any insured may become liable in any capacity.

 

In a summary order, the Court of Appeals reversed.  The Court noted that the policy language at issue here required the injured party to be an employee of the insured’s contractor or subcontractor – a fact not established by the record as a matter of law.  In distinguishing a case on which the district court relied that had a similar fact pattern, the Court noted that the policy language at issue there was more expansive, inasmuch as it covered bodily injuries “arising out of the actions of independent contractors/subcontractors for or on behalf of any insured.”  As such, this more expansive language would cover a non-employee supplier who would not have been on the insured premises but for the actions of the contractor or subcontractor in ordering the materials being delivered.

 

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

 

10/07/15       Westfield Insurance Co. v. Pinnacle Group, LLC

Southern District of West Virginia

Hold the Phone – No Coverage for Debt Collection Phone Calls

Mr. and Mrs. Burmer sued Pinnacle in State Court for allegedly violating consumer credit and protection laws, and a telephone harassment statute.  The suit alleged that Pinnacle made debt collection contacts using harassing telephone calls.  Westfield Insurance declined to defend Pinnacle in the underlying lawsuit, and filed a declaratory judgment action in U.S. District Court to obtain a ruling that the policy terms precluded coverage.  The District Court held in favor of the insurance company.

 

The Court initially noted that the policy covered bodily injury or property damage caused by a covered occurrence, generally defined as an “accident”.  The activities alleged in the underlying suit did not qualify as an occurrence because they arose from intentional conduct.  Because both the means and the result must be unforeseen for the event to be considered an accident, the insured’s argument that any consequences of intentional debt collection activities were unforeseen was not successful.  The debt collection activities were the foundation for the underlying claims, and those activities were intentional. 

 

The Court rejected a secondary argument by the insured that it held a reasonable expectation that the policy would cover suits alleging unlawful debt collection practices.  Such assumptions based only upon Westfield’s understanding of Pinnacle’s business activities did not constitute an objectively reasonable expectation of coverage. 

 

This case represents an example of how coverage issues are determined by reference to basic definitions such as occurrence, accident, and intentional conduct.  The Court essentially ruled that debt collection activities, and any resulting harassment or statutory claims, were intentional and indeed generally speaking part of usual business operations.  That is why companies that operate in debt collections, skip tracing, and repossession frequently obtain specialized debt collection and repossession insurance since such activities would not normally be covered under a general liability policy