Coverage Pointers - Volume XVII, No. 21

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Volume XVII, No. 21 (No. 451)

Friday, April 8, 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

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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.  That’s how the calls begin: “I have a situation!”

 

Back from a few days of R&R in Florida, following NYC mediations.  Hope all is well with you.  Audrey, Agnes and Jen are out in Chicago for the DRI insurance conference.  We’re minding the fort.

 

Busy couple of weeks ahead.  Steve and I will present at the PLRB Claims Conference in San Antonio.  I’ll be giving two presentations on Contractual Indemnity & Additional Insureds Liability.  Steve will be presenting twice on Duty to Defend – Hot Topic for 2016.  Come by, sit in and say “hi”.  I will then be at the ADTA (Association of Defense Trial Attorneys) Annual Meeting in Monterrey, CA where I will be on a panel with my friends Vicki Roberts, from Meadowbook Insurance and Rich Traub, from the Traub Lieberman firm, speaking about how legal malpractice can become an ethical nightmare.

 

Carrier v. Carrier Suits:

The response I received to my diatribe about insurer v. insurer bad faith actions has been truly monumental, from both claims professionals and attorneys all overwhelmingly supportive.  In the last issue of CP, I expressed caution to those in the industry about helping to establish a body of bad faith law in New York, a state traditionally reticent about holding carriers liable for extra contractual damages.

Excess carriers – certain ones in particular – seems ready and anxious to challenge a primary carrier’s refusal to settle when the verdict reaches the excess layer.   Personal injury plaintiffs’ lawyers are rubbing their hands with delight. 

Look for alternatives, my friends.  Consider intercompany arbitration.  Try to mediate the differences.  The more those lawsuits propagate the more likely we are to have appeals, appellate decisions and pain for the insurance industry. 

LinkedIn:  New York Insurance:

For those who use LinkedIn, remember that we founded and operated the New York Insurance group in LinkedIn.  You can find it here.  We moved Brian “Bad Faith” Barnas into the Moderator role and we hope to foster some interactive discussion of new and interesting cases.

Peiper’s Proclamations:

 

While the hairs on my head are only starting to turn a lighter shade, I ask you to indulge me in a quick story this week.  On my first day as an attorney, I showed up at the office promptly at 8:00 am (a fact which may not have happened since) eager to start handling cases.  What happened, instead, is that I was thrown a copy of an old CLE presentation, and told to digest, understand and fully memorize the three most important doctrines in New York Insurance Law.  The Holy Trinity, if you will.  Or, perhaps more accurately, the three legs of bar stool upon which coverage law rests. 

 

While there are surely other, more complex, theories and doctrines that I’ve picked up along the way, the original big three consisted of Insurance Law 3420(d), waiver and estoppel.  It’s Coverage 101 in New York, but a carrier cannot lose a valid coverage defense by any other means in New York.  If, as I came to understand then, you are conversant with how an insurer can forfeit coverage, the rest will start to fall into place. 

 

In this week’s edition, the Second Department addresses when Insurance Law 3420(d)(2) applies --- and when it does not.  Hint – if your case involves property damage or a first party coverage, it does not apply.  What you do need is a liability policy that was issued and delivered in NY.  You also need an accident, occurring in NY, which results in bodily injury or death.  Simple enough, right.  Yet, the list of appellate decisions reiterating the language of the statute continues to grow, and The Provencal, LLC is the latest example.

 

Notably, because Insurance Law 3420(d) does not apply to first party claims, there is no “specificity” requirement either.  This is because the requirement that a carrier identify, with particularity, its coverage defense is an obligation found within Insurance Law 3420(d).  If Section 3420(d) does not apply, it follows neither does the “specificity” doctrine. 

 

With respect to common law waiver, it surely can apply to first and third party policies, alike.  However, the Court of Appeals has long held that it cannot create coverage.  What this means, in the simplest of terms, is that a carrier cannot waive fundamental coverage issues (e.g., whether the loss was an “occurrence”, “property damage” or “bodily injury”; whether the loss arose during the policy period, etc.).  A carrier cannot likewise waive coverage exclusions.  It can waive, however, conditions to coverage where they are not preserved in an appropriate coverage letter.  Thusly, he asks, can a carrier waive the “flood exclusion?”  No, answered the Second Department. 

 

Finally, estoppel can, in fact, create coverage where none previously existed.  Thus, where estoppel applies, a carrier may lose an argument that the loss arose outside the effective dates of coverage, was not an “occurrence” or was otherwise excluded.  However, to prove estoppel, the insured must demonstrate how it was prejudiced.  If a carrier denies on different grounds, and never provides an affirmance of coverage, can there be prejudice?  No, and as a result, where there is no prejudice there is no estoppel.

 

That’s it for now.  We send our greetings to our friends and colleagues in Chicago.  On the seminar front, I have been blessed to make the faculty panel at the PLRB annual conference in San Antonio, which starts on April 17^th.  I have presented at regional conferences for PLRB in the past, and have been overwhelmed by the excellence of their organization. I am delighted to have the opportunity to participate in the annual conference, and look forward to meeting new and old friends, alike, in a couple of weeks.

 

That’s it for now.  See you in two weeks.

 

Steve

Steven E. Peiper

[email protected]

 

Labor Law Pointers:

 

Dave Adams’ team of New York State Labor Law lawyers have published their April issue of Labor Law Pointers, our sister publication.  It’s available here.  In its fifth year of monthly publication, Dave’s newsletter has become the go-to publication for those who handle personal injury construction litigation in New York State.  Drop a note to Dave Adams if you are silly enough NOT to be a current subscriber. Reach Dave at [email protected].

 

Cold Hard Verdict – 100 Years Ago:

 

 

Times Herald

Olean, New York

8 Apr 1916

 

GETS $100 VERDICT

FOR FROZEN FERNS

 

Franklin, April 7.—A verdict of $100 for the plaintiff was rendered in civil court yesterday in the case of Gus Couvelas of Emlenton vs. the Stoneboro & Chautauqua Lake Ice Co. of Oil City.  The plaintiff sought to recover $3000 for fern leaves which he left in the custody of the defendant concern and which, he alleges, they permitted to spoil by moving them from a cold room into a warm room.  The jury retired at 4 o’clock Wednesday afternoon and Judge Criswell and Prothonotary Davison remained at the courthouse until 11:10 p.m. in the hope that a verdict would be returned and the jurors discharged, the case being the last on the list.  The judge finally left instructions for the jury to seal its verdict when it reached one and return it at the opening of court.  The verdict was reached at midnight and returned immediately after the convening of the court.  E. W. Criswell, attorney for the plaintiff, this afternoon filed a motion for a new trial.

 

Barnas on Bad Faith:

 

Hello again:

 

Welcome back to Barnas on Bad Faith.  Here in Buffalo, winter has made an unwelcome return in the wake of a warm Easter weekend.  Maybe it’s just me, but it seems like there is something inherently wrong about watching Opening Day in Major League Baseball while the ground is covered with snow.  Although, maybe it’s not as weird to anyone who, like me, is a Blue Jays fan, and remembers that the first game in franchise history was played in the snow at the old Exhibition Stadium.

 

Speaking of the Blue Jays, following an opening series split with the Rays at the Trop, the team will be returning home for a weekend series against the rival Red Sox.  Your columnist will be attending two games during the series, including David Price’s return to the mound in Toronto following last season’s postseason run (edit: well it looked like Price was pitching Sunday, but after the Red Sox were rained out in Cleveland again on Thursday he has been pushed back to Monday.  Rats).  I can’t wait to see what the atmosphere is like in the home ballpark coming off our first playoff appearance in 22 years.

 

This week in the Barnas on Bad Faith column, you will only find a write up of the Pandarakalam v. Liberty Mutual case decided by the Second Department.  However, your attention is also directed to Phillips’ Federal Philosophies for a discussion of the United Specialty v. Fisk Fine Arts Services case.  Both of these decisions involve an insured’s claim that its insurer acted in bad faith.

 

In Pandarakalam, the plaintiff’s house was damaged by a fire, but the plaintiff and Liberty Mutual could not agree on the amount of loss or the cost of repair.  One year and five months later, after an umpire finally determined the plaintiff’s award, Liberty Mutual paid the plaintiff the full case value of the award.  Thereafter, the plaintiff commenced an action alleging that Liberty Mutual handled his claim in bad faith.  Liberty Mutual moved for summary judgment dismissing the plaintiff’s cause of action for consequential damages, but the Second Department allowed the claim to stand.  The court noted that under current New York Law, the insurer must affirmatively demonstrate that the consequential damages sought by the insured were not within the contemplation of the parties when they executed the insurance contract.  Because the court found that Liberty Mutual only pointed to gaps in the insured’s evidence regarding consequential damages, summary judgment was denied.

 

In Fisk, the Southern District of New York evaluated an insured’s bad faith counterclaim and affirmative defense against its insurer.  The decision contains an interesting discussion of the Bi-Economy case and breach of contract causes of action vis-à-vis causes of action for breach of the implied covenant of good faith and fair dealing.  The court explicitly rejected the insured’s argument that New York recognizes a separate cause of action for bad faith based on the same facts as a breach of contract cause of action.  According to the court, Bi-Economy merely held that when bad faith is sufficiently established in a breach of contract claim, consequential damages flowing from the bad faith breach are recoverable.  Thus, the court held that Fisk’s causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing, which were nearly identical, were duplicative.

 

I hope everyone enjoys the Masters this weekend.  See you next time.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

 

Russian Women in the Military – a Century Ago:

 

The Wichita Beacon

Wichita, Kansas

8 Apr 1916

 

RUSSIAN WOMEN

FIGHT LIKE MEN

 

Slav Females Most Militant of

Gentler Sex of the Entire World

 

Make Splendid Soldiers — Many Decorations for Bravery — Equal Males

 

From the Chicago Herald

 

Chicago, April 8.—Why have the Russian women put on men’s uniforms and gone into the trenches while women of other countries have contented themselves with hospital work?

 

This action on the part of the Slavic women is quite the most dramatic sociological aspect of the war.  It shows the Russian women to be beyond question the most militant of all nations.  It provides that the unique relationships of men and women in Russia, the freedom and equality of which no other country approaches, has resulted in the Slavic women feeling no hesitation about assuming the dangers in comradeship with the soldiers of the czar.

 

Reports of their participation in the struggle have of late been filling English and American magazines.  The names, dates, decorations and places of a long list of heroines have substantiated the generalizations drawn by correspondents earlier in the war.

 

Many Women in the Ranks

 

In England recently a book was published, “An Englishman in the Russian Ranks,” who author, thought to be a well-known British writer now in Russia, states that the Russian feminine warrior is no longer a thing to be remarked but a widespread fact to be commented upon.  Great numbers of them were serving in masculine attire, he states, and he continues that he himself saw many as officers.  “They look,” he says, “like big, lanky, rawboned boys, with pale oval faces, ‘pudding’ features and dark hair.  They enlist as men, but when their sex is discovered, the easy tolerance of the Muscovite for what has been already accomplished prevails to let them remain in the ranks.  They remind one constantly of the operatic heroine, Brunnehilde.”

 

Audrey’s Angles:

 

Dear Subscribers:

I am currently at the DRI Insurance Law Committee’s Insurance Coverage and Claims Institute (ICCI) in Chicago listening to not only excellent topics but catching up with many during our networking events.  Sadly, this is the last ICCI where I will be Chair of the Insurance Law Committee.

 

I wanted to congratulate the Insurance Law Committee for publishing yet another compendium that should be on your e-reader or bookcase.  The Duty to Defend Compendium is now for sale online through DRI.  This is an invaluable publication for your practice.  I am especially proud that our own, Dan Kohane, Jennifer Ehman, and Agnes Wilewicz who are the authors for the New York chapter.  Here is the link to purchase this publication:  http://dri.org/Store/Product?productCode=2016-01D 

 

I hope you enjoy this issue and hope to return soon to providing regular contributions to this great publication.

 

Audrey

Audrey A. Seeley

[email protected]

 

Errant Young US Woman – a Century Ago:

 

Moberly Monitor-Index

Moberly, Missouri

8 Apr 1916

 

COMMUNITY CHATS:

 

Some parents seemingly are neglecting the exercise of proper care in the education and training of their young girls in this city because we very often see these young girls loafing around on corners and in stores talking to boys with caps set at angle and smoking cigarettes.  The first impulse of anyone interested in the welfare of children is to find out the names of these indiscreet youngsters and go have a little heart-to-heart talk with the parents, but on second thought we know that the reception of this information would generally result in the youngster getting a good scolding and an injunction to cease her association with the boys.

 

From the observations we have made we know that it is natural for girls and boys to associate with each other and that in some cases a girl will yield to this impulse sooner than other girls.  We also know that the proper association of both sexes is desirable if under the proper care and surroundings.  It is as possible to make water run uphill as it is to prevent a girl from associating with members of the other sex. 

 

The proper solution to the boy problem as it thus affects the young girl is to permit the girl to bring her boyfriends to her home.  Judicious criticism and comparison will indicate to the girl in question the fitness of her boyfriends and you will find that a very large percentage of the young girls are exceedingly bright and alert and can select the right kind of boys to associate with under these conditions.  And on quiet parents—this method affords the best opportunity yet devised for getting acquainted with your girl’s boy associates.

 

Give the girl a chance to do what you did, mother, and make it as ideal as possible. 

 

Wilewicz’ Wide World of Coverage:

 

Dear Readers,

 

Hola from Chicago! This edition of the Wide World is brought to you from DRI’s Insurance Coverage and Claims Institute. There have been some truly exceptional presenters here, on cutting edge topics and the latest trends in the law. If you are attending, drop us a line. If not, make plans to attend next year!

 

This week, we again have a couple of cases from hither and yon, both of which deal with my favorite – environmental coverage issues (asbestos and lead paint, yay!). First, in Danaher Corp. v. Travelers, the Southern District of New York was faced with a carrier’s application for an interlocutory appeal in a coverage case stemming from asbestos-related bodily injury claims. The insurer was found to owe a duty to defend, but it sought to certify that ruling for appeal, as a partial final order. The court rejected that request. There is a preference in federal court for one, final appeal after all issues in a case are concluded. The carrier had proffered no compelling reason to deviate from this long-standing rule, so they would have to wait. Silver lining was that the court did permit them a rather late amendment to their third party complaint, where the insurer wanted to bring in other policies and other carriers to the litigation. As priority and allocation issues are paramount in coverage cases, it was important to bring everyone to the proverbial table, so the court permitted that part.

 

Next, we have Georgia Farm Bureau Mutual v. Smith, out of the Supreme Court of Georgia. There, in a matter of first impression, the Court dealt with whether bodily injury due to lead paint exposure was precluded from coverage under a policy containing an absolute pollution exclusion. There, the Court held that it did. In fact, it held that because absolute pollution exclusions are meant to be very broad, lead paint “unambiguously qualifies as a pollutant”. Thus, the plain language of the provision barred coverage. The decision is very well written and researched, briefly detailing the evolution of pollution exclusions and noting that, even if not expressly listed as a pollutant, lead clearly qualified. It’s a good read.

 

Finally back in Buffalo this weekend, where we will be met with yet another polar vortex. Fun stuff.

 

Until next time!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

 

Noah?  Build Me an Ark:

 

The Washington Post

Washington, District of Columbia

8 Apr 1916

 

FARMER BUILT AN ARK

FEARING SECOND DELUGE

 

Drayton, N. Dak., April 7.—John Ruie, a farmer living on the Red River south of here, believes that the present high water in that and other streams in this section is a forerunner of a flood equal to that described in Genesis, and has accordingly built an ark, in which he expects to save himself and family.

 

A large houseboat, provisioned for 40 days, has been constructed and hauled close to the porch of his farmhouse in order to provide a means of escape from the expected high water.

 

Tessa’s Tutelage:

 

Dear Readers,

 

I have been told that the primary criticism of Coverage Pointers is the lack of sports coverage.  I am not really the person to remedy this situation but for once sports seemed to be the center of my week. I was able to snag free tickets to the Buffalo Sabres v Toronto Maple Leafs game (yay!), I was forced to watch March Madness basketball (eh),  and the Women’s Soccer team lawsuit had been the primary topic of conversation (pretty important stuff).  So now that I have become well versed in the revenue production of the U.S. soccer teams and considered where I went wrong in the formation of my brackets for the office pool, I feel I have done my part in making Coverage Pointers a little more like ESPN.

 

This week we have a Court of Appeals case, Government Empls. Ins. Co. v Avanguard Med. Group, PLLC, which analyzes Insurance Law § 5102 with respect to a no fault insurance carrier’s obligation to pay a facility fee to a New York State accredited office-based surgery (OBS) center for the use of its physical location and related support services. (Spoiler alert, The Court concluded that neither the applicable statutory nor regulatory framework mandated payment for OBS facility fees).  We also have Karina K. Acupuncture, P.C. v AIG Centennial Ins. Co., where the Court found that Plaintiff's opposition to Defendant’s proof of timely mailing of denials and lack of medical necessity was insufficient to bar grant of summary judgment.  In Five Boro Med. Equip., Inc. v A. Cent. Ins. Co., the medical affidavit submitted by plaintiff, which specified the assignor's medical conditions and described the intended benefits of each of the medical supplies at issue, was sufficient to raise an issue of fact as to medical necessity.  Finally, in Matter of American Ind. Ins. Co. v Nova Acupuncture, P.C., the Court granted a motion for a Stay in Arbitration and remitted the case for a hearing regarding control between the out of state insurer and the New York State service provider.

 

Tessa

Tessa R. Scott

[email protected]

 

Disrespecting the Flag:

The Broad Ax

Salt Lake City, Utah

8 Apr 1916

 

NEGRO BOY SENTENCED FOR

INSULT TO THE FLAG

 

Des Moines, Iowa.  Special—Because of refusal to salute the flag, Hubert Eaves, the Colored boy, eleven years old, of the “Sanctified Cult” was ousted from the public schools of the city and sentenced to nine years in the reformatory by District Judge C. A. Dudley.

 

The Court suspended sentence and paroled the boy to his parents on their promise that he would be placed in a private school.

 

It seems that under the Laws of Iowa, Chapter 144, Laws of the 35^th General Assembly of that state a certain drill requires that all school children must salute the American flag, Mr. and Mrs. Eaves, the shortsighted parents of Hubert Eaves should feel by this time that they have fastened a great crime or wrong upon their son by instilling or pumping into his undeveloped mind a hatred and a contempt for the flag of this mighty nation, for the next nine years except at stated times they will greatly miss their son from around their fireside. — Editor. 

 

Be CarefuI When You Say “I Do” – 100 Years Ago”

 

  The Washington Post

Washington, District of Columbia

8 Apr 1916

 

FIGHT “JOKE” WEDDING

 

Wished to Cure Washington Man

of Infatuation, Says Bride

 

NOW SEEKS AN ANNULMENT

 

Seventeen-Year-Old Marie Genntison Asserts

Marriage Was a “Mock, Just a Childish Bit of

Deviltry,” but New York Justice May Find

That It Is Still Binding.

 

Special to The Washington Post

 

New York, April 7.—Seventeen-year-old Marie G. Genntison married a man to cure him of his infatuation for her and now that the cure has been affected she finds that stern law probably will force her to remain married.  After she had testified today in an annulment suit brought by her against Philip Genntison, a government employee of Washington, D. C., Supreme Court Justice Newberger expressed doubt as to whether an annulment could be granted.

 

Dropped Her Girl Chum

 

Mrs. Genntison had a girl friend in 1909—a school day chum—who was engaged to wed Genntison.  After one look at Marie, the young wife admitted bashfully, Genntison decided Marie and not her chum was for him.  So he popped the question without further ado.  But being true to her friend, Marie shunned Genntison.  Genntison would not be shunned.  He paid ardent and continuous court to Marie, and made life so unbearable, she testified, that she agreed to wed him.

 

“It was just a bit of childish deviltry,” said Mrs. Genntison.  “I never intended to wed Mr. Genntison.  I only wanted to cure him of his infatuation and I thought a mock marriage would settle everything. 

 

25-Cent Wedding Ring

 

“Philip bought a 25-cent wedding ring of a street fakir.  He paid a dollar for a marriage license, and we went before a minister and had a ceremony.  They played the wedding march on a musical machine.  There wasn’t a serious thing about the whole ceremony.  I laughed and cut up, but Phil took the joke with the utmost seriousness. 

 

“We hurried out into the street.  I begged Phil to throw the ring away.  When he wouldn’t I took it from my finger and cast it into the gutter with a big laugh.  Then I started for the ferry.  He went along with me.  On the boat I tore up the marriage certificate and threw the pieces in the North River. 

 

Parted in Jersey

 

“In Jersey I took a train for the West and he went his way—to Washington, I think.  I have not seen him since, and don’t really care to.  It was only a mock marriage, and now I want to be free.”

 

Justice Newburger thought the story too strange for immediate adjudication and reserved decision. 

 

 

Phillips Federal Philosophies:

 

Hello, All:

 

This week’s Coverage Pointers contribution is being sent to you from a small tropical island just southwest of Martinique.  I stumbled upon it by chance while sailing about the other day and, much to my surprise, the locals have mistaken me for a long-lost descendent of their royal family.  Thinking it rude to argue with them, I’m now sitting on the west veranda of the Summer Palace watching the sunset and sipping on a local libation, the only ingredient of which I can identify is the tiny paper umbrella.  I must unfortunately be brief because I have an early morning tomorrow – coronation day and all.

 

You may have guessed by now that today’s cases involve the rescission of policies based on material misrepresentations.  The first, United Specialty Insurance Company, raises the possibility of an equitable affirmative defense to rescission based on the doctrine of ‘unclean hands, The second, United National Insurance Company, discusses an insurer’s burden in proving that a misrepresentation was material as a matter of law on a summary judgment motion. For example, although my above statements may have been misrepresentations, are they material misrepresentations if I don’t submit an expense request to billing for my coronation tiara?

 

Must dash – those royal decrees aren’t going to sign themselves.

 

As always, thanks for reading.

 

J.

Jennifer J. Phillips

[email protected]

 

I Hope They Found Her:

 

Personals

Rochester Democrat & Chronicle

April 8, 1916

 

Will anyone who knows her address please inform Mrs. Rose Covington Van Glosen that her father is critically ill in Spencerport and desires to see her.

 

Jen’s Gems

 

Greetings from the Windy City.  I am currently in Chicago attending DRI’s Insurance Coverage and Claims Institute.  Thus far, it has been a great program, which has addressed many of the issues we regularly see in our practice including the current state of independent counsel, subrogation and duty to defend/indemnify. 

 

In terms of my column, I report on National Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc., a decision out of New York County.  This case addresses a claim by TransCanada Energy for loss of business income due to the breakdown of a unit at an electrical generating station.  The two main coverage questions were whether the loss was covered where the crack, which eventually caused the breakdown, began to form prior to the policy period, and whether TransCanada could recover for lost capacity.  By way of background, electricity generation is regulated by the Federal Regulatory Commission, and administered in New York by the New York Independent System Operator (NYISO), which pays service providers for generating electricity and for being available to generate electricity.  The facility’s capacity to produce electricity is then sold to utilities at auctions conducted by the NYISO.  In this action, the bulk of TransCanada’s claim was a loss of capacity to auction off due to the downed unit.   As a sneak peak, the court found the loss and claimed damages were covered. 

 

Hope everyone has a nice weekend.

 

Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

 

Head’s Up:

 

Rochester Democrat & Chronicle

April 8, 1916

Verdict for Bath Man

 

Corning, April 7 -- In Supreme Court this afternoon, a sheriff’s jury awarded Henry A. Emerson of Bath a verdict of $250 in damages against Fred Woodhouse of Bath.  According to the testimony, the defendant with a stick in a quarrel struck plaintiff over the head when Emerson tried to oust a tenant from a home owned by him.

Editor’s note:  The head injury wasn’t too serious.  Mr. Emerson, a farmer who was 57 at the time of the incident, lived to age 91, his entire life in Bath, Steuben County, NY.  He never married.  Perhaps the bump in the head led to his singledom.  Woodhouse was a married man and a mason.  Why didn’t he use a stone?

 

 

HEWITT’S HIGHLIGHTS:

 

Dear Subscribers:

 

Spring was a false alarm. It has become cold, windy, and odd weather on Long Island after a spring tease. Some snow is even in the forecast. Daffodils are confused. But I finally spotted the woodpecker I could hear every morning before I was ready to get up. He had a redhead just like Woody Woodpecker.  At least it is finally baseball season. In serious injury threshold news, we have the most cases we have had in some time. The cases remind us of a few principles. First, an issue of fact will likely be found where a defendant’s own expert finds a significant limitation in the range of motion. However, minor limitations in the range of motion do not constitute a serious injury. If a Plaintiff’s expert is specific in his qualitative or quantitative measure of range of motion limitations, and not conclusory, then an issue of fact will be found. 

 

One case also notes, procedurally, that a motion to resettle an order can only be used to correct clerical issues with the order and not substantively change the decision. For that motions to reargue must be used.  Another case informs us, which should probably already realize, that it is not a non-negligent explanation for why you collided with the rear of another vehicle to contend that it occurred because your brake pedal was missing its pad and your foot slipped onto the accelerator as a result. Finally, a plaintiff cannot submit a supplemental bill of particulars alleging a new category of injury for the first time in opposition to a summary judgment motion.

 

Play ball!

 

Until next time,

 

Rob
Robert Hewitt
[email protected]  

 

 

Highlights of this week’s issue:

 

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

 

• Contractor’s Condition Endorsement and Late Notice Justified Disclaimers

• $50,000 = $50,000.  No SUM Claim Available

• In One of the First Cases Applying the Notice/Prejudice Statute (That Went into Effect in January 2009), Court Finds No Prejudice in Late Notice of SUM Claim

 

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

Robert E.B. Hewitt III

[email protected]

 

• Defendant’s Established Prima Facie Case through Use of Reports from Doctors Who Conducted Independent Medical Examinations

• Defendant’s Own Expert Found a Significant Limitation in the Range of Motion and Therefore an Issue of Fact Existed as to Whether the Injury Met the Threshold

• Emergency Vehicles with Lights and Sirens on Must Have Acted In Reckless Disregard for the Safety of Others

• Minor Limitations in Range of Motion Do Not Constitute a Serious Injury for Purposes of the Threshold

• Plaintiff Submitted Medical Evidence Showcasing an Issue of Fact and Defendant Failed to Address All Items in the Bill of Particulars

• Plaintiff’s Doctor Found Significant Range of Motion Limitations Which He Found to Be Permanent and Causally Related to the Accident Leading to an Issue of Fact

• Motions to Resettle Orders Can Only Be Used to Correct Clerical Errors

• Driving With a Missing Brake Pad and Having Your Foot Slip onto the Accelerator Is Not a Non-Negligent Explanation for a Rear End Collision

• Defendants Failed to Establish That Injuries In Question Were Entirely Attributable to a Prior Accident and Not Exacerbated By the Current Accident

• New Category of Injury First Asserted By Plaintiff in Response to Motion for Summary Judgment Could Not Be Considered By the Lower Court

• Defendant’s Expert in Declaring Injuries Degenerative in Nature Must Account for the Fact That Plaintiff Had No Complaints of Pain Prior to the Accident

 

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

 

• Plaintiff’s Affidavit Describing the Intended Benefits of the Medical Supplies Was Enough to Raise a Question of Fact

• Plaintiff’s Opposition to A Showing of Timely and Proper Denial Must Contain Competent Proof

• Case Remitted and Arbitration Stayed For a Determination of Control

• Costs for the Use of an OBS Center are Not a Reimbursable Service under 11 NYCRR 68.5

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

• Incendiary Fire Qualifies as Vandalism, and Turns Coverage to Ashes

• Insurance Law 101:  Court Defines Insurance 3420(d), Waiver and Estoppel

• Summary Judgment Denied Where Carrier Did Not Establish the Loss was Beyond the Parties’ Contemplation at the Time of the Agreement

• Workers’ Comp. Determination of Special Employee is Binding in Subsequent Personal Injury Action                            

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

• In Coverage Dispute Stemming From Asbestos-Related Claims, Southern District Reiterates Rules Barring Interlocutory Appeals, But Permits Pleading Amendment in Interests of Justice to Bring In Other Carriers

• Supreme Court of Georgia Finds Absolute Pollution Exclusion Plainly and Unambiguously Bars Lead Exposure Claim

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

• Court Finds Coverage for Generating Station’s Loss of Capacity Claim Due to Mechanical Breakdown

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

• Insurer could not Obtain Summary Judgment on Insured’s Consequential Damages Claim by Merely Pointing to the Plaintiff’s Lack of Evidence

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

• Duplicative Claims and Potential Defenses

• Materiality as a Matter of Law

 

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

 

• Beware of the Default Judgment against an Insured

 

 

All for now.  We love your feedback and we do get a good deal of it.  Write often. 

 

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]

 

03/31/16       Hermitage Insurance Co. v. Skyview & Son Construction Corp.

Appellate Division, First Department

Contractor’s Condition Endorsement and Late Notice Justified Disclaimers

Diaz was injured while working for defendant 786 Iron Works on a project rehabilitating premises owned by the Mirzos.  Skyview, operated by the Mirzos' son, acted as the general contractor for the project and hired Iron Works as a framing subcontractor. Diaz's injury occurred outside the premises when a steel metal rolling gate fell on him.

 

Diaz sued Mirzos and Skyview alleging negligence and Labor Law violations. Hermitage provided coverage to the Mirzos and Skyview under two separate polices. Aspen Insurance provided coverage to Iron Works.

 

The policies issued by plaintiff to the Mirzos and Skyview contain an exclusion for injuries arising from the work of independent contractors or subcontractors on the premises unless the contractors or subcontractors specifically agreed to make the Mirzos and Skyview additional insureds on their own policies. Iron Works was the named insured on a policy issued by Aspen that provided that Aspen would consider an entity to be an additional insured only if Iron Works agreed, in writing, to make that entity an additional insured. There is no writing in the record before us in which Iron Works agreed to make the Mirzos or Skyview additional insureds under its policy.  Skyview's policy also limited its coverage to specific types of interior work. Diaz was working outside the building at the time of his accident.

 

Hermitage validly disclaimed coverage to Skyview based on late notice of the occurrence and Aspen validly disclaimed coverage on that basis as to Skyview and the Mirzos.

 

03/30/16       Ameriprise Auto & Home Insurance Co. v. Savio

Appellate Division, Second Department

$50,000 = $50,000.  No SUM Claim Available

This was an application to stay supplementary uninsured/underinsured motorists (“SUM”) benefits arbitration.  Savio’s   minor daughter was a passenger in a vehicle that was involved in a motor vehicle accident resulting in her death. Savio was insured by Ameriprise. Her bodily injury policy limits were $100,000 per person and $300,000 per accident. She also carried SUM coverage a policy limit of $50,000 per person and $100,000 per accident.

 

In the section entitled "Conditions," the policy stated that the maximum payment under the SUM endorsement "shall be the difference between [:] a. the SUM limit, and b. the motor vehicle bodily injury liability insurance or bond payments received by the insured or the insured's legal representative, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured." Under the same section, the policy stated that the SUM limits payable under the SUM endorsement "shall be[:] a. the SUM limits stated in the declarations; and b. if the bodily injury results in death, we will provide SUM limits of the higher of the SUM limits stated in the declarations, or $50,000 for such bodily injury resulting in death sustained by one person as the result of any one accident and, subject to this per person limit, $100,000 for such bodily injury resulting in death sustained by two or more persons as the result of any one accident."

 

The vehicle driven by the negligent tortfeasor, which struck the vehicle in which the appellant's daughter was a passenger, had a bodily insurance policy limit of $25,000 per person and $50,000 per accident. Pursuant to Insurance Law § 3420(f)(1), since a death was involved, the minimum $25,000 per person limit was increased to $50,000. The tortfeasor's insurer tendered $50,000 to the appellant in settlement of the claim of her daughter's estate.

 

A demand to arbitrate the claim for SUM benefits was then filed. Ameriprise then commenced this proceeding to permanently stay arbitration, arguing that there was no entitlement to SUM benefits because the difference between the SUM policy limit for one person ($50,000) and the amount paid by the tortfeasor's insurer (also $50,000) was zero. Savio argued that the terms of the SUM limits provision of her policy allowed her to recover the original $50,000 SUM limit and, due to her daughter's death, another $50,000, for a total SUM limit of $100,000.

 

Based upon the above-referenced provisions of the policy, the Supreme Court properly found that the $50,000 recovered by the appellant from the tortfeasor was equivalent to the maximum SUM limit provided for in the policy. Therefore, the appellant had no possibility of an additional recovery, which rendered her SUM claim academic.

 

03/25/16       Slocum v. Progressive Northwestern Ins. Co.

Appellate Division, Fourth Department

In One of the First Cases Applying the Notice/Prejudice Statute (That Went into Effect in January 2009), Court Finds No Prejudice in Late Notice of SUM Claim
Slocum was hurt in a motor vehicle accident on July 29, 2012 when the car in which she was a passenger was struck from behind by a tortfeasor. Slocum was a named insured on an auto policy issued by Progressive to Slocum’s mother. On September 11, 2012, plaintiff learned that the coverage limit of the tortfeasor's insurance policy was $50,000.

 

The following June, she underwent cervical fusion surgery. In August 2014, more than two years after the accident, she first notified Progressive of the accident and sought coverage under the supplemental uninsured/underinsured motorist (SUM) endorsement of the policy. Defendant disclaimed coverage on the ground that plaintiff failed to provide timely notice of the SUM claim pursuant to the terms of the policy and that decision was challenged in this lawsuit.

 

Progressive argued that Slocum’s failure to notify it of her SUM claim in a timely manner vitiated coverage.

 

Here, the policy required that notice be given to defendant "[a]s soon as practicable," which means, "in the SUM context, . . . that the insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured' ".Slocum became aware of the limits of the tortfeasor's policy in September 2012, and she learned the extent of her injuries at least by June 2013, when she underwent cervical fusion surgery.

 

Under the circumstances, it was unreasonable for plaintiff to wait until August 2014 to notify defendant of her SUM claim.

 

However, the Court applied the “prejudice statute” to the SUM claim. Effective January 2009, an insurer may not deny coverage based on untimely notice "unless the failure to provide timely notice has prejudiced the insurer" (id.), and prejudice is not established "unless the failure to timely provide notice materially impairs the ability of the insurer to investigate or defend the claim" (§ 3420 [c] [2] [C]). Further, "[i]n any action in which an insurer alleges that it was prejudiced as a result of a failure to provide timely notice," the burden of proof is on the insurer to prove that it has been prejudiced "if the notice was provided within two years of the time required under the policy" (§ 3420 [c] [2] [A]).

 

Plaintiff met her initial burden by establishing that she provided notice within two years of the time required under the policy and that defendant was not prejudiced by the delay. As noted, plaintiff learned the limits of the tortfeasor's insurance coverage on September 11, 2012, and that date was the earliest "time required under the policy" for plaintiff to provide notice (Insurance Law § 3420 [c] [2] [A]; see Rekemeyer, 4 NY3d at 474). Plaintiff provided defendant with notice of the accident in August 2014, less than two years later. Thus, prejudice to defendant is not presumed under Insurance Law

 

Plaintiff also established as a matter of law that defendant was not prejudiced by her delay in providing notice, thus shifting the burden to defendant to raise an issue of fact. We conclude that defendant failed to meet that burden by demonstrating that its ability to investigate or defend the claim has been "materially impaired". Although defendant submitted an affidavit from one of its claims representatives asserting that it was prejudiced because of its inability to examine the vehicles involved in the accident, it is reasonable to conclude that the vehicles would have been repaired in the time between the accident and the date that plaintiff was required to give notice under the policy.

 

Defendant therefore failed to establish that it would have had the opportunity to inspect the damage to the vehicles even if plaintiff had provided it with timely notice of her SUM claim. Although defendant's claims representative further asserted that defendant suffered prejudice because it was unable to conduct an examination under oath or an independent medical examination of plaintiff before she underwent cervical fusion surgery in June 2013, the court concluded that defendant's submissions fail to establish that post surgery examinations and plaintiff's medical records will not yield the information sought.
Editor’s Note: The way the statute was crafted was that the insurer must demonstrate prejudice for the first two years following "time required under the policy" to give notice.  After that period, the insured has the obligation to prove lack of prejudice.  The court found that the two year period did not start on the date of the accident but on the date when the insured knew enough about the injuries to give notice.

 

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

Robert E.B. Hewitt III

[email protected]

 

04/06/16                  Nussbaum v. Bablu

Appellate Division, Second Department

Defendant’s Established Prima Facie Case through Use of Reports from Doctors Who Conducted Independent Medical Examinations

The Appellate Division affirmed the Supreme Court’s denial of summary judgment to defendants in a case with very little factual history laid out and little analysis. The Appellate Division found the moving defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The moving defendants submitted competent medical evidence by introducing medical reports from doctor’s who conducted independent medical examinations establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine 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, however, the plaintiff raised a triable issue of fact as to whether he sustained serious injuries to the cervical and lumbar regions of his spine as a result of the subject accident. How they raised an issue of fact is not set forth in the decision.

 

04/06/16                  Rivera v. Losee

Appellate Division, Second Department

Defendant’s Own Expert Found a Significant Limitation in the Range of Motion and Therefore an Issue of Fact Existed as to Whether the Injury Met the Threshold

The denial of defendants’ motion for summary judgment was affirmed. The Appellate Division held that the defendant, whose expert found a significant limitation in the range of motion in the lumbar region of the plaintiff's spine, failed to meet his 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. Since the defendant failed to meet his prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.

 

04/06/16                  Shalom v. East Midwood Volunteer Ambulance Corp.

Appellate Division, Second Department

Emergency Vehicles with Lights and Sirens on Must Have Acted In Reckless Disregard for the Safety of Others

The Appellate Division affirmed the lower court’s denial of summary judgment to defendants. The facts are as follows: On July 7, 2010, the plaintiff Shlomo Shalom and the defendant Mark Urman were involved in a motor vehicle collision at the intersection of Avenue M and Coney Island Avenue in Brooklyn. Urman, who was driving an ambulance en route to an emergency, testified at his deposition that he had activated the ambulance's lights and siren before he started driving and that the lights and siren remained on as he approached the intersection. In an affidavit, Urman's partner also stated that the siren and lights were activated before the accident. Urman testified that he brought the ambulance to a full stop before entering the intersection and that, after checking traffic in both directions; he proceeded to make a right turn onto Avenue M when he collided with Shalom's vehicle. Shalom testified at his deposition that he did not hear any sirens or see any flashing emergency lights prior to the accident. Shalom's passenger, the plaintiff Inbal Zaldetti, testified at her deposition that she did hear sirens before the accident but did not see any flashing emergency lights. Both Shalom and Zaldetti testified that they did not see the ambulance before the collision. The defendants moved for summary judgment dismissing the complaint on the ground that they could not be held liable because Urman did not act in reckless disregard for the safety of others. They also moved for summary judgment dismissing the complaint insofar as asserted by Shalom on the ground that he did not sustain a serious injury.

 

The Appellate Division noted that the law as to emergency vehicles is that the manner in which an authorized emergency vehicle is operated in an emergency situation may not form the basis for civil liability unless the driver acted in reckless disregard for the safety of others. This standard requires proof that the driver intentionally committed an act of an unreasonable character while disregarding a known or obvious risk that was so great as to make it highly probable that harm would follow. However, Vehicle and Traffic Law § 1104(c) states that the exemptions apply only when audible signals are sounded from any said vehicle while in motion by bell, horn, siren, electronic device or exhaust whistle as may be reasonably necessary, and when the vehicle is equipped with at least one lighted lamp so that from any direction, under normal atmospheric conditions from a distance of five hundred feet from such vehicle, at least one red light will be displayed and visible. The Appellate Division held that the deposition testimony of Urman, Shalom, and Zaldetti failed to eliminate issues of fact as to whether Urman had activated the ambulance's siren and lights prior to the accident.  Thus, the defendants failed to meet their prima facie burden.

 

As to serious injury, the Appellate Division held that the defendants met their prima facie burden of showing that Shalom did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of Shalom's spine did not constitute a serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiffs raised a triable issue of fact as to whether Shalom sustained a serious injury to the lumbar region of his spine. No details are given.

 

03/31/16                  Nakamura v. Montalvo

Appellate Division, First Department

Minor Limitations in Range of Motion Do Not Constitute a Serious Injury for Purposes of the Threshold

The grant of defendants’ motion for summary judgment was affirmed. The Appellate Division found defendants made a prima facie showing that plaintiff did not suffer a permanent or significant limitation in use of her cervical or lumbar spine as a result of the 2012 motor vehicle accident at issue. Defendant submitted an orthopedic surgeon's report finding normal range of motion in each part, as well as plaintiff's own deposition testimony and medical records, which showed that she was previously treated for injuries to her cervical and lumbar spine following a motor vehicle accident in 2006.  The medical records relied on by defendants included a report by plaintiff's chiropractor, who stated that a report of an MRI of the lumbar spine taken after the 2012 accident correlated with the findings of a 2006 MRI. In opposition, plaintiff failed to raise a triable issue of fact. Plaintiff submitted the affirmed reports prepared by her radiologist in 2012, who found that the 2012 MRIs of plaintiff's lumbar spine and cervical spine correlated with the findings of the 2006 MRIs, showing "again" the same bulging and herniated discs. Plaintiff's chiropractor provided only a conclusory opinion that plaintiff's injuries were caused by the 2012 accident, without addressing the preexisting conditions documented in plaintiff's own medical records, or explaining why her current reported symptoms were not related to the preexisting conditions. Further, upon a recent examination, plaintiff's doctor found only minor limitations in lumbar range of motion and no limitations in cervical range of motion, which is insufficient to demonstrate a serious injury involving significant or permanent limitations in use.

 

03/30/16       Uveges v. Crill, Gooden v. Joseph, Feaster v. Cablevisions Sys.

Appellate Division, Second Department

Plaintiff Submitted Medical Evidence Showcasing an Issue of Fact and Defendant Failed to Address All Items in the Bill of Particulars

In Uveges and Gooden, the Appellate Division reversed the grant of summary judgment. The decision is devoid of fact and sparse on reasoning. The Appellate Division held defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the plaintiff's spine did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).In opposition, however, the plaintiff submitted competent medical evidence which raised a triable issue of fact as to whether she sustained a serious injury to the lumbar region of her spine under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).

 

In Feaster, defendants failed to make even a prima facie case for summary judgment. The defendants’ motion papers failed to adequately address the plaintiff's allegation 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.

 

03/30/16                  Chul Koo Jeong v. Denike

Appellate Division, Second Department

Plaintiff’s Doctor Found Significant Range of Motion Limitations Which He Found to Be Permanent and Causally Related to the Accident Leading To An Issue of Fact

The Appellate Division reversed the grant of summary judgment to defendants. The Appellate Division found the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical region of the plaintiff's spine did not constitute a serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained a serious injury to the cervical region of his spine. Dr. Sang Y. Lee, the plaintiff's treating physician, opined in an affirmation, based on both his contemporaneous and most recent examinations of the plaintiff, that there were limitations in the plaintiff's cervical spine range of motion, and that the plaintiff's cervical spine limitations and injuries were significant, permanent, and causally related to the subject accident. Thus, the plaintiff raised a triable issue of fact as to whether he sustained a serious injury under the significant limitation of use and/or the permanent consequential limitation use categories.

 

03/30/16                  Joseph v. Baksh

Appellate Division, Second Department

Motions to Resettle Orders Can Only Be Used to Correct Clerical Errors

The Appellate Division reversed the lower court’s order. The defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident but that motion was denied. The lower court held, in relevant part that "the plaintiff has raised questions of fact concerning the existence of a serious injury to the extent noted and consequently the motion for summary judgment is denied." The defendants did not appeal from this order or move to reargue. Rather they moved pursuant to CPLR 5019(a) to the order dated July 26, 2013, "so as to clarify [the Supreme] Court's ruling therein." They argued that the order was not clear as to whether it was denying their motion in part or in its entirety. The plaintiff opposed the motion. The lower court granted the defendants' motion to resettle, stating, in relevant part, that "questions of fact have only been raised regarding the plaintiff's left shoulder and right hip and evidence can only be introduced concerning those body parts. To this extent the motion is granted." The Appellate Division reversed stating resettlement is generally intended to remedy clerical errors or clear mistakes in an order or judgment when there is no dispute about the substance of what that order or judgment should contain and that it may be used where the order improperly reflects the decision or fails to include necessary recitals, but cannot be used to obtain a ruling not adjudicated on the original motion or to modify the decision which has been made. The Appellate Division ruled in granting the motion, the lower court improperly changed the substance of that order. 

 

03/25/16                  Barron v. Northtown World Auto

Appellate Division, Fourth Department

Driving With a Missing Brake Pad and Having Your Foot Slip onto the Accelerator Is Not a Non-Negligent Explanation for a Rear End Collision

The Appellate Division reversed and reinstated part of the complaint. The Appellate Division noted that plaintiff contends only that she sustained a permanent consequential limitation of use and a significant limitation of use of her left shoulder, thereby abandoning her other particularized claims of serious injury. The Appellate Division  agree with plaintiff that Supreme Court erred in granting defendants' motion insofar as the complaint, as amplified by the bill of particulars, alleged that plaintiff sustained a serious injury within the meaning of those two categories. Even assuming, arguendo, that defendants met their initial burden on the motion with respect to those categories, they concluded that plaintiff raised triable issues of fact concerning the nature, extent and cause of the alleged pain and limitations in her shoulder, to which she underwent surgery within about three months of the accident

 

It further concluded that the lower the court erred in denying plaintiff's cross motion for partial summary judgment on the issue of defendant driver's negligence in operating his vehicle at the time of the accident, which occurred in heavy traffic on the approach to a New York State Thruway toll barrier. The Appellate Division noted it was well-established that It is well established that a rear-end collision with a stopped or stopping vehicle creates a prima facie case of negligence with respect to the operator of the moving vehicle, and imposes a duty on the operator of the moving vehicle to come forward with an adequate, nonnegligent explanation for the accident.  Here, plaintiff met her burden of demonstrating that defendant driver was negligent and that such negligence was a proximate cause of the accident. Defendant driver, in admitting that he drove a vehicle with a missing brake pedal pad, and claiming that his foot slipped onto the accelerator when he attempted to brake, failed to present a nonnegligent explanation and thus failed to raise a triable issue of fact sufficient to defeat the cross motion.

 

03/25/16                  Durante v. Hogan

Appellate Division, Fourth Department

Defendants Failed to Establish That Injuries In Question Were Entirely Attributable to a Prior Accident and Not Exacerbated By the Current Accident

The Appellate Division noted that, although plaintiff failed to allege in his bill of particulars that he sustained a serious injury under any specific category set forth in the statute, the parties addressed the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories in their motion papers and briefs on appeal, and the Appellate Division therefore likewise address those categories in finding the lower court properly denied the motion. Defendants' own submissions raise triable issues of fact with respect to each of the categories of serious injury. Turning first to the 90/180-day category, the Appellate Division concluded that the report of the physician who conducted an independent medical examination (IME) of plaintiff raises triable issues of fact whether plaintiff sustained a medically determined injury or impairment of a non-permanent nature without specifying the reasons why. In addition, the deposition testimony of plaintiff, submitted by defendants in support of the motion, raises triable issues of fact whether he had been curtailed from performing his usual activities to a great extent during the statutory period, again without stating why. Finally, although defendants contended that plaintiff’s injuries were attributable to a prior accident, they failed to submit evidence that the injuries were entirely attributed to that prior accident and not exacerbated by the accident in question. Furthermore, the physician who conducted the IME acknowledged that imaging studies of plaintiff's spine showed a more severe condition following the accident in question than prior to that accident. In addition, during his deposition the Appellate Division held that plaintiff adequately explained a three-month gap in treatment, without specifying how.

 

03/25/16                  Stamps v. Pudetti

Appellate Division, Fourth Department

New Category of Injury First Asserted By Plaintiff in Response to Motion for Summary Judgment Could Not Be Considered By the Lower Court

The facts are as follows: Plaintiff commenced this action seeking damages for personal injuries allegedly sustained by her when a vehicle operated by defendant rear-ended the vehicle being operated by plaintiff. In their original bill of particulars, plaintiffs alleged that she had suffered various injuries including a cervical sprain and strain, a lumbosacral strain and sprain, disc bulging and disc protrusions at various levels of the cervical spine, narrowing of the spinal canal, and neural foraminal stenosis. Plaintiffs further alleged that plaintiff suffered a serious injury under the permanent consequential limitation of use and significant limitation of use categories of serious injury. The Supreme Court awarded plaintiffs partial summary judgment on the issue of negligence. Before that order was entered, however, defendant filed the instant motion for summary judgment seeking dismissal of plaintiffs' complaint for failure to meet the serious injury threshold and for failure to incur economic loss exceeding basic economic loss. In opposition to the motion, plaintiffs submitted, inter alia, a supplemental verified bill of particulars in which they added an allegation that plaintiff had sustained a serious injury under the significant disfigurement category of serious injury. Defendant objected to plaintiffs' attempt to supplement' their bill of particulars in opposition to the motion.

 

The lower court Supreme Court granted defendant's motion insofar as it concerned plaintiffs' claims for economic loss, but denied the motion in all other respects. In its decision supporting the order, the court wrote that the evidence submitted by plaintiffs raised triable issues of fact on all three categories of serious injury. The Appellate Division, however, found that plaintiffs improperly asserted a new injury in the “supplemental” bill of particulars and the lower court erred in considering that new category of serious injury inasmuch as it was raised for the first time in opposition to defendant's motion for summary judgment. Therefore, the claim of significant disfigurement could not be recognized by the lower court and it was error to consider it.

 

The Appellate Division agreed with plaintiff that the lower court properly denied defendant's motion for summary judgment with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury. Even assuming, arguendo, that defendant met his initial burden on the motion, the Appellate Division concluded that  plaintiffs raised triable issues of fact by submitting the reports of treating physicians and independent medical examiners who relied upon objective proof of plaintiff's injury, provided quantifications of plaintiff's loss of range of motion along with qualitative assessments of plaintiff's condition, and concluded that plaintiff's injuries were significant, permanent, and causally related to the accident. The Appellate Division also found that an eight month gap in treatment was not fatal to plaintiff’s claims where plaintiff explained that her insurance could not cover her treatment anymore, and that she was therefore compelled to pay for it herself.  

 

03/25/16                  Sobieraj v, Summers

Appellate Division, Fourth Department

Defendant’s Expert In Declaring Injuries Degenerative in Nature Must Account For the Fact That Plaintiff Had No Complaints of Pain Prior to the Accident

Plaintiff commenced this negligence action seeking damages for injuries she sustained in a motor vehicle accident. Plaintiff moved for partial summary judgment on the issue of negligence, and defendants cross-moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury as a result of the accident. In appeal No. 1, plaintiff appeals from an order and judgment granting defendants' cross motion and, in appeal No. 2, she appeals from an order insofar as it denied that part of her motion for leave to renew her opposition to defendants' cross motion. The parties conceded at the oral argument of the appeal that the only issue was whether plaintiff’s injuries were caused by the motor vehicle accident. The Appellate Division found that the lower court erred in granting defendants' cross motion inasmuch as defendants failed to meet their initial burden. Here, defendants' own expert concluded that plaintiff sustained a temporary cervical muscle strain in the accident and that plaintiff denied any preexisting complaints of pain in her neck. Furthermore, the opinion of that expert that plaintiff's condition was the result of degenerative changes predating the accident fails to account for evidence that plaintiff had no complaints of pain prior to the accident.

 

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

 

03/28/16       Five Boro Med. Equip., Inc. v A. Cent. Ins. Co.

Appellate Term, First Department

Plaintiff’s Affidavit Describing the Intended Benefits of the Medical Supplies Was Enough to Raise a Question of Fact

The peer review report submitted by defendant made a showing that the medical supplies underlying plaintiff's claims in the amounts of $1,107.70 and $1,150 were not medically necessary. However, the medical affidavit submitted by plaintiff, which specified the assignor's medical conditions and described the intended benefits of each of the medical supplies at issue, was sufficient to raise an issue of fact as to medical necessity.  Defendant’s motion for summary judgment should not have been granted.

 

03/28/16       Karina K. Acupuncture, P.C. v AIG Centennial Ins. Co.

Appellate Term, First Department

Plaintiff’s Opposition to A Showing of Timely and Proper Denial Must Contain Competent Proof

Defendant made showing of entitlement to judgment by demonstrating that it timely and properly denied plaintiff's no-fault claim. Defendant's submissions included affidavits of employees of the entities which administer its no-fault claims, which detailed their respective office mailing procedures and the report of the independent medical examination performed by its chiropractor/acupuncturist, which set forth a sufficient factual basis and medical rationale for the conclusion that there was no need for further acupuncture treatment.

 

Plaintiff's opposition consisting of an attorney's affirmation unaccompanied by any medical evidence or other competent proof was insufficient to raise a triable issue as to medical necessity.

 

03/30/16       Matter of American Ind. Ins. Co. v Nova Acupuncture, P.C.

Appellate Division, Second Department

Case Remitted And Arbitration Stayed For A Determination Of Control

The petitioner was a Pennsylvania corporation not licensed to do business in the State of New York. The petitioner had moved to stay arbitration, which was denied. 

 

First, this Court addressed the lower court’s determination that petitioner was estopped from raising its current arguments because it should have raised them in the first proceeding. This Court disagreed, reasoning that in the first proceeding, petitioner argued only that it was not subject to personal jurisdiction in New York. Had petitioner argued the merits, it would have indicated an intention to submit to the court's jurisdiction.

 

Second, the Court found, contrary to petitioner’s contention, that the fact that the subject policies do not contain any agreement to arbitrate disputes involving the payment of first-party benefits did not preclude the respondents from exercising their option to arbitrate the underlying dispute in this proceeding. The Court stated “although this Court has held, in the context of claims for uninsured or supplemental underinsured motorist benefits, that " [a] party will not be compelled to arbitrate absent evidence affirmatively establishing that the parties expressly agreed to arbitrate their disputes,' those cases do not apply to claims for the payment of first-party benefits, ostensibly because Insurance Law § 5106(b) mandates every insurer to provide a claimant with the option to arbitrate disputes concerning first-party benefits.” 

 

Finally, the matter was remitted to the Supreme Court, Kings County, for a hearing on the issue of whether petitioner controls, is controlled by, or is under common control by or with an authorized insurer and, thereafter, for a new determination of the petition.

 

03/31/16       Government Empls. Ins. Co. v Avanguard Med. Group, PLLC  

Court of Appeals

Costs for the Use of an OBS Center are Not a Reimbursable Service under 11 NYCRR 68.5

Defendant, Avandgaurd, claimed that Insurance Law § 5102 requires a no fault insurance carrier to pay a facility fee to a New York State accredited office-based surgery (OBS) center for the use of its physical location and related support services. The Court concluded that neither the applicable statutory nor regulatory framework mandated payment for OBS facility fees.

 

Avanguard asserted that pursuant to Insurance Law § 5102 (a) (1), OBS centers may recover a facility fee as a reimbursable "basic economic loss," payable at a rate to be determined in accordance with 11 NYCRR 68.5. The Court rejected Avanguard's interpretation because it would permit Avanguard and other OBS centers to collect facility fees even though these types of fees are not expressly permitted by statute or payment schedules authorized thereby, and regardless of the fact that costs for the use of an OBS center are not reimbursable services under 11 NYCRR 68.5. Moreover, the Court found that Avanguard's view of the law undermined the obvious legislative purpose behind this framework, to contain costs by subjecting service charges to statutory ceilings and regulatory-fixed rates.

 

The Court explained that Avanguard's argument missed the mark because the basic economic loss provided for under Insurance Law § 5102 (a) (1), is subject to the limitations of section 5108, which provides that charges for services "shall not exceed the permissible charges" promulgated under the Chair's schedules. Here there are no existing schedules provide reimbursement for OBS facility fees.

 

Avanguard argued alternatively that because the Superintendent had failed to adopt a fee schedule that includes OBS facility fees, those fees are reimbursable under 11 NYCRR 68.5, which Avanguard claimed serves as a catch-all for all other services. The Court was not persuaded, finding Avanguard's reliance on the Superintendent's regulation misplaced because 11 NYCCR 68.5 expressly applies solely to "professional health services" and facility fees are not services and are not licensed.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

04/06/16       Capek v Allstate Indemnity Company

Appellate Division, Second Department

Incendiary Fire Qualifies as Vandalism, and Turns Coverage to Ashes

Plaintiff owned a rental property which became vacant in 2009.  In December of 2010, the premises were destroyed by an intentionally set fire.  Allstate disclaimed due to the exclusion for vandalism which applied if the premises was vacant for more than 90 days prior to the loss.  Here, there was little dispute that the vacancy provision was satisfied by Allstate. 

 

With respect to vandalism, the policy defined the act as “willful or malicious conduct resulting in damage or destruction of property.”  Here, again, there was little doubt that the intentionally set fire was willful destruction of property. 

 

Plaintiff opposed on the basis that the vandalism exclusion contained an exception which covered fire losses which resulted from the vandalism act.  Accordingly, plaintiff argued that the loss was resultant from vandalism –or, the term was ambiguous.  Either way, the exception should apply confirm coverage.

 

In affirming the trial court, the Appellate Division noted that the loss fell within the plain and unambiguous definition of vandalism.  Here, there was little doubt that the fire was willful or malicious destruction of property.

 

Peiper’s Point – A quick thought on this one.  The Court appears to be saying that the act of setting the fire was the vandalism.  The result, we presume, may have been different if the vandalism started a fire which resulted in further damage. 

 

As an aside, this is a creative way to avoid an arson argument. By casting as vandalism, you avoid having to prove the coverage defense by “clear and convincing” evidence.  What is the insured to argue in the alternative…? “It wasn’t vandalism because we set the fire.” We think not.

 

04/06/16       The Provencal, LLC v Tower Ins. Co of NY

Appellate Division, Second Department

Insurance Law 101:  Court Defines Insurance 3420(d), Waiver and Estoppel

Plaintiff’s retaining wall was severely damaged by the impact of heavy rains and flood waters in 2011.  In denying coverage, Tower cited the exclusion for pressure of water on foundation, walls, floors, etc.  However, at summary judgment, Tower correctly referenced the “flood exclusion” as the reason for plaintiff’s loss of coverage. 

 

Plaintiff responded by arguing that Tower was precluded by operation of Insurance Law 3420(d)(2) from referencing a denial that was not referenced in its denial letter.  In addition, plaintiff argued that Tower’s decision to forego including the flood exclusion resulted in waiver/estoppel.

 

The Second Department was not fooled.  For starters, Insurance Law 3420(d)(2) only applies to claims involving death or bodily injury.  This involved a retaining wall, and, as such, was not applicable.  Insurance 3420(d)(2) also only applies to liability policies, and the Tower policy at issue provided first party coverage.

 

With respect to waiver, the Court noted that long standing rule that the doctrine of waiver will not act to create coverage where it does not exist.  Thus, waiver can never result in the loss of a policy exclusion.

Finally, with respect to estoppel, the Court noted that the insured must be prejudiced by the carrier’s conduct. Here, where Tower denied coverage from the start, albeit on a different ground, there was no prejudice to plaintiff.

 

03/30/16       Pandarakalam v Liberty Mutual Ins. Co.

Appellate Division, Second Department

Summary Judgment Denied Where Carrier Did Not Establish the Loss was Beyond the Parties’ Contemplation at the Time of the Agreement

Plaintiff sustained a covered fire loss which, despite the parties’ best efforts, could not be resolved to everyone’s satisfaction.  In turn, plaintiff asserted his rights to appraisal.  While both sides appear to have selected their appraisers without issue, the fight over the umpire lasted another full year. 

 

In the interim, plaintiff’s ALE coverage expired because it was only limited to 12 months after the covered loss. Plaintiff commenced this action, inter alia, to recovery extended ALE payments as a consequential damage of Liberty’s alleged breach of contract.

 

Liberty moved to dismiss on the basis that the expanded ALE payments were not in the parties’ contemplation at the time the contract was executed.  However, in support of its motion, it only argued that plaintiff failed to establish how it expected additional ALE payments if the policy was breached.  It did not, however, demonstrate that, in fact, the payments were beyond the scope anticipated by the parties.

 

Liberty’s motion to dismiss plaintiff’s claims for attorneys’ fees was dismissed in line with long established precedent on this matter.  An insured is not entitled to attorneys’ fees where, as here, it commences the lawsuit.

 

03/25/16       King v Malone Home Bldrs., Inc.

Appellate Division, Fourth Department       

Workers’ Comp. Determination of Special Employee is Binding in Subsequent Personal Injury Action                            

Plaintiff, a framer, allegedly was injured when he fell through an unguarded stairwell opening while performing framing work in constructing a single-family residence.  Plaintiff was employed by Hollands, who had a relationship with defendant whereby Hollands would periodically perform framing work for defendant at its residential construction projects.  On his C-3 form, plaintiff listed Hollands as his employer and the ALJ at the Workers’ Comp. Board ultimately determined plaintiff remained in the employ of Holland’s at all relevant times and thus the special employee doctrine was inapplicable to defendant in the Workers’ Comp. case.

 

In moving to dismiss defendant’s affirmative defense of special employee in this personal injury action, plaintiff argued that defendant was collaterally estopped from asserting that defense based upon the Workers’ Comp. Board’s decision. 

 

With respect to defendant’s affirmative defense, the Fourth Department agreed with plaintiff and held that the trial court erred in determining that collateral estoppel did not apply to the Workers’ Comp. Board’s decision because, citing to Malmon v East 84th Apt. Corp., “a determination of employment status made by the Workers’ Comp. Board can have preclusive effect in a subsequent personal injury action.”  Here, the court noted that the issue whether defendant was plaintiff’s special employer, albeit for purposes of insurance carrier liability, was the issue directly addressed and resolved by the Board and defendant had a full and fair opportunity to contest that issue, appear as a party and fully participate in that evidentiary hearing.

 

With respect to defendant’s cross-appeal granting plaintiff’s motion on the § 240(1) claim, the court further held plaintiff established that he was injured while working at a building under construction, that he fell through an open, unfinished stairwell and that he was not provided with any safety devices to prevent or break his fall.  Thus, the Fourth Department held the trial court should have granted plaintiff’s motion in its entirety, and dismissed the affirmative defense.

 

Peiper’s Point – Special thanks the David Adams and the Labor Law Pointers Staff from whom I borrowed the above summary. 

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

03/30/16       Danaher Corporation v. The Travelers Indemnity Company, et al.

United States District Court, Southern District of New York

In Coverage Dispute Stemming From Asbestos-Related Claims, Southern District Reiterates Rules Barring Interlocutory Appeals, But Permits Pleading Amendment in Interests of Justice to Bring In Other Carriers

This insurance coverage dispute stems from underlying claims involving silica- and asbestos-related injuries. Travelers’ insured was sued in a number of such claims, and after disclaimer the insured sued Travelers for a declaration of coverage. In 2012, the court held that Travelers had a duty to defend those claims. The carrier then appealed and sought to certify those orders as partial final judgments. Travelers also sought to amend their third party complaint to add claims for contribution and allocation against other entities.

 

As for the first aspect of their motion, to certify the partial final judgments for appeal, the court found that application inappropriate. It wrote that as a general rule, “there is a historic federal policy against piecemeal appeals”. Indeed, the federal courts frown upon interlocutory appeals generally, unless there is some special reason or interest at issue. Here, there was no such reason. This was a complex, multi-party suit with many separate full and partial summary judgment motions. Trial would be necessary for parts of the case, and there was no demonstration that Travelers would suffer any hardship or prejudice that would offset the “obvious efficiency benefits of a single appeal”. As such, they would have to wait until the matter concluded in order to appeal all at once.

 

However, the court did entertain Travelers’ request to amend its third party complaint to add further parties. Finding that priority of coverage and appropriate allocation issues are critical in coverage litigation cases, the court held that it would permit the amendment, despite it being asserted relatively late.

 

03/21/16       Georgia Farm Bureau Mutual Insurance Company v. Smith, et al.

Supreme Court of Georgia

Supreme Court of Georgia Finds Absolute Pollution Exclusion Plainly and Unambiguously Bars Lead Exposure Claim

In a matter of first impression before the highest court of the State of Georgia, the Supreme Court there was faced with the question of whether personal injury claims arising from lead poisoning due to injection of lead-based pain were excluded under a CGL policy’s absolute pollution exclusion. The facts echo those of thousands of cases – plaintiff Smith’s daughter sustained injuries from ingesting paint chips from deteriorating lead-based pain at a house the mother had rented from the insured Chupp. The insured’s policy contained an absolute pollution exclusion and the carrier disclaimed.

 

The pollution exclusion at issue was a very common one: “This insurance does not apply to: (f) Pollution (1) “Bodily injury” or “property damage” arising from the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants”: (a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured.” The term “pollutant”, in turn, was defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste”.

 

In a detailed and well-researched opinion that outlined the evolution of pollution exclusions, as well as insurance contract interpretation in Georgia, the Court held that the exclusion was clear. The absolute pollution exclusion of the policy precluded recovery for bodily injury resulting from exposure to any pollutant. The fact that lead was not expressly listed was of no moment. Rather, pollution exclusions such as these were meant to be interpreted very broadly. Not only do they preclude coverage for more traditional environmental contamination, but also other types of pollutant exposure. “Under the broad definition contained in Chupp’s policy” the Court wrote, “we conclude that lead present in paint unambiguously qualifies as a pollutant and that the plain language of the policy’s pollution exclusion clause thus excludes Smith’s claims against Chupp from coverage.”

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

03/02/16       National Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc.

Supreme Court, New York County (Hon. Barbara Jaffe)

Court Finds Coverage for Generating Station’s Loss of Capacity Claim Due to Mechanical Breakdown

On August 26, 2008, TransCanada Energy USA Inc. acquired the Ravenswood Generating Station in Long Island City.  Between August 29, 2008 and September 12, 2008, excessive vibrations emanated from unit 30 of the facility, reaching a level that resulted in a breakdown, and required that the unit be shut down.  After the unit was shut down a crack in the unit’s rotor was discovered.  The unit was not placed back into service until May 18, 2009.

 

Thereafter, a claim was made seeking coverage under a first-party property and combined business interruption insurance policy for lost sales of capacity, which resulted when unit 30 was out of service.

 

By way of background, electricity generation is regulated by the Federal Regulatory Commission, and administered in New York by the New York Independent System Operator (NYISO), which pays service providers for generating electricity and for being available to generate electricity.  Unit 30 generated approximately 39 percent of the facility’s capacity, and over 50 percent of the revenue attributable to unit 30 was capacity revenue received from the NYISO.  The facility’s capacity to produce electricity is then sold to utilities at auctions conducted by the NYISO.         

 

Here, the insurers’ policy went into effect on August 26, 2008.   It insured the property against all risks of physical loss or damage, and against TransCanada's loss of "gross earnings" arising from the interruption of business activities, including mechanical breakdown.  An "occurrence" was defined as the "sum total of all loss or damage of the type insured, including any insured Time Element loss, arising out of or caused by one discrete event of physical loss or damages," excluding certain types of events not pertinent here. 

 

The insurers denied coverage on the ground that TransCanada’s loss or damage during the policy period was caused by the crack that formed before the policy commenced, thereby barring coverage.  TransCanada argued in opposition that:  (1) the policy covers "all risks"; (2) unit 30 was operating properly on August 26, 2008; (3) the breakdown of unit 30 occurred after August 26 when it purchased the facility and the start of the policy period; (4) unit 30 was generating electricity between August 26 and September 12, the date of the breakdown; and (5) the crack that was found in the rotor of unit 30 on September 16, 2008, had expanded during the policy period, and caused the breakdown of unit 30 during the policy period.

 

In deciding this motion, the court found that the policy insured against "all risks of physical loss or damage" to the property occurring during the policy period, without regard to the date or time of the incident giving rise to the loss or damage. Here, it was undisputed that TransCanada's property sustained a physical loss or damage when the policy was in effect, and that there was no provision in the policy that excluded physical loss or damage originating before the commencement of the policy period, or any requirement that the cause of the loss or damage occur during the policy period, or even any provision linking coverage to the cause of the loss or damage.

 

Next, the court addressed the claimed loss of capacity payments.  The insurers took the position that the majority of the claimed loss of capacity sales were only realized at auctions of capacity held after the policy period expired.  And, the policy limited coverage to TransCanada’s loss of capacity sales to the period between September 12, 2006 and May 18, 2009, as coverage was limited to the actual loss sustained during the period of liability. 

 

The court disagreed finding that the purpose of business interruption insurance is to indemnify the insured against losses arising from inability to continue normal business operations and functions due to the damage sustained.  Here, it was undisputed that between September 12, 2008 and May 18, 2009, as a result of the damaged unit, TransCanada was unable to generate any or the usual amount of electricity, and that when it sold those months of electricity capacity at auctions held after May 18, 2009, it did so at a decreased amount due to its decreased capacity. Thus, its loss, the decreased capacity, was not manifest or realized until the auctions were held. In other words, the loss at issue here is the decreased capacity sustained during the period of liability, even though the amount of the loss was not ascertained until after the period of liability when the auctions were held.

 

Lastly, the court held that the insurers could not rely upon the capacity payments exclusion in their policy.  “Capacity payments" under the policy were defined as those "that become payable to the Insured in return for attaining or exceeding certain production levels.”  In light of the plain wording of the provision for capacity payments, and as it was undisputed that TransCanada gets paid based on its actual production capacity and not when it attains or exceeds any specific production level, the insurers failed to sustain their burden of establishing that the capacity payments exclusion applied to bar coverage for TransCanada's lost capacity sales.

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

03/30/16       Pandarakalam v. Liberty Mutual Insurance Company

Appellate Division Second Department

Insurer could not Obtain Summary Judgment on Insured’s Consequential Damages Claim by Merely Pointing to the Plaintiff’s Lack of Evidence

A fire damaged the plaintiff’s house on April 7, 2010.  The house was covered by a homeowners’ policy issued by the defendant, Liberty Mutual.  Plaintiff filed an insurance claim, but the defendant and the plaintiff were unable to agree on the amount of loss sustained by the plaintiff or the cost to repair the home.

 

As a result, the defendant invoked the appraisal provision of the insurance policy.  The parties were unable to agree on an umpire, and the matter was not submitted to an umpire for determination until more than one year later.  In April 2011, the defendant advised the plaintiff that it would no longer pay for any additional living expenses he incurred while his home was being repaired because the policy provided for the payment of such expenses for a maximum of 12 months.  The umpire ultimately determined the plaintiff’s award on September 8, 2011.  The defendant paid the plaintiff the full actual cash value of the umpire’s award just over one month later.

 

The plaintiff thereafter commenced this action against the defendant alleging, inter alia, that the defendant breached the insurance policy by acting in bad faith in its handling of the plaintiff’s claim.  The complaint sought, among other things, damages for debris removal that the plaintiff incurred during the rebuilding of his house, as well as consequential damages for the plaintiff’s additional living expenses.  The plaintiff moved for summary judgment and demanded attorneys’ fees, and the defendant cross-moved. 

 

On appeal of the denied motions, the Second Department first concluded that Liberty Mutual failed to establish that the plaintiff’s damages for debris removal were considered by the umpire or accounted for in the award.  Thus, the plaintiff’s claim for damages for debris removal remained.

 

Second, the Second Department held that Supreme Court properly denied Liberty Mutual’s motion to dismiss the cause of action for consequential damages for additional living expenses incurred by the plaintiff.  It reasoned that Liberty Mutual failed to show that the consequential damages sought by the plaintiff were not within the contemplation of the parties when they executed the insurance policy.  The defendant’s argument that the plaintiff failed to present evidence that consequential damages for additional living expenses were foreseeable and contemplated by the parties was not enough to obtain summary judgment.

 

However, the Second Department agreed with Liberty Mutual that the plaintiff was not entitled to attorneys’ fees because the plaintiff brought the action against the insurer to determine his rights under the policy.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

03/31/16 United Specialty Insurance Co. v. Fisk Fine Art Services, LLC, et al.

Southern District of New York

Duplicative Claims and Potential Defenses

In this coverage dispute, the plaintiff insurer seeks to rescind a commercial lines insurance artisan’s contractors insurance policy based on an alleged material misrepresentation in the application.  At issue before the District Court was, among other things, the plaintiff insurer’s motion to dismiss at the pleading stage the defendant insured’s counterclaim and affirmative defense based on bad faith.

 

With respect to the counterclaim, the district court recognized that the insured’s “bad faith” counterclaim was “virtually identical” to his first counterclaim for breach of contract, and identified no wrong independent of the alleged breach itself.  Accordingly, the district court found that the counterclaim was merely duplicative as it failed to allege sufficient facts to state either a bad faith claim that would be recognized under New York law or a claim for consequential damages as a result of the breach.

 

The district court reached a different conclusion, however, with respect to the insured’s assertion in his affirmative defense that the insurer “has acted in bad faith and is thus barred from recovery.”  The court recognized that recession is an equitable remedy, and noted that it was well established that “a court of equity will not exercise its power in favor of a plaintiff whose actions show inequitable conduct or bad faith where the misconduct has a material relation to the equitable relief that plaintiffs seeks.” (citing Laugh Factory, Inc. v. Basciano, 608 F.Supp.2d 549, 560 [SDNY 2009]).  Thus, although recognizing that the insured failed to state a claim that the insurer acted in bad faith, the District Court declined to dismiss the possibility of an equitable defense at that preliminary stage of the litigation.

 

03/31/16       United National Insurance Co. v. Program Risk Management, Inc. et al.

Northern District of New York

Materiality as a Matter of Law

The plaintiff insurer commenced this action seeking an order rescinding three Professional Liability Insurance Policies for Insurance Agents and Brokers on the basis of numerous alleged material misrepresentations made by the defendant insured in its applications for those policies.  In this case, the defendant insured specialized in providing its own client insureds with non-traditional types of workers compensation insurance.  The alleged misrepresentations included, for example, answering ‘yes’ when asked if “numbers projected for self-insured accounts were actuarially sound” despite the Workers’ Compensation Board calling into question the accuracy of the actuarial work relied on in years past. 

 

The plaintiff insurer moved for summary judgment without submitting any documentary evidence such as manuals or other underwriting guidelines to establish that the misrepresentations were material as a matter of law. The insurer instead argued that such a requirement “only makes sense in the scenario of mass marketed, high volume, ubiquitous types of insurance clerically underwritten following predetermined criteria,” but not in the instant case involving the relatively unique risks related to the professional policies at issue.  Although the district court agreed that underwriting manuals and other evidence may not be necessary in all situations to support a finding of materiality as a matter of law, “the alleged misrepresentations in the present matter are not sufficiently ‘egregious’ for the Court to decide the issue.”  In particular, the court noted that the unsupported statements in the plaintiff’s affidavits were in sufficient “[g]iven the changing statutory and regulatory landscape surrounding self-insured trusts during this time frame.”  Materiality therefore could not be determined as a matter of law.

 

Notably, the district court emphasized the situations where, absent documentary evidence, materiality could be found as a matter of law was “extraordinary.” By way of example, the court cited to cases that found misrepresentations regarding the existence of an ongoing criminal conspiracy to be material as a matter of law without the submission of underwriting guidelines because one could “hardly expect an insurer to maintain written guidelines as to how an admission of an ongoing criminal fraud would affect the decision whether to issue a malpractice policy.”  Indeed, such guidelines “would be not just superfluous, but downright silly.” (quoting Continental Cas. Co. v. Marshall Granger & Co., LLP, 6 F.Supp.3d 380, 392-93 (S.D.N.Y. 2014)).  The plaintiff insurer’s motion for summary judgment was therefore denied despite the recognition that “it appear[ed] that misrepresentations were made and information was clearly omitted.”

 

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

 

10/15/15       Perea v. Sanchez

California Court of Appeal

Beware of the Default Judgment against an Insured

Perea and her daughter were injured in an accident with a car owned by Sanchez.  The driver of Sanchez’s car allegedly fled the scene, and Sanchez told Alliance Insurance his car had been stolen prior to the accident.  Alliance Insurance denied the claim by Perea on grounds the vehicle was stolen and being used without permission.

 

Perea brought a personal injury action against Sanchez and attempted to serve him unsuccessfully.  Alliance Insurance declined a request to accept service of process, and its own efforts to locate Mr. Sanchez also apparently proved unsuccessful.  Perea eventually obtained court approval to serve Sanchez by publication.  Sanchez never answered the complaint, and Perea ultimately obtained a default judgment for $125,000.00.  Perea then sued Alliance Insurance to recover the judgment. 

 

Alliance Insurance filed a motion in the underlying personal injury action attempting to have the default judgment vacated.  The primary argument was that a necessary showing of diligence and attempts at personal service prior to service by publication had not been satisfied.  The Trial Court denied the motion, and Alliance Insurance appealed.

 

Alliance Insurance asserted it had a sufficient interest in the judgment against Sanchez to move to vacate it, in part because of the pending action by Perea to collect on that judgment.  Indeed, California law according to the Court permits an insurer to intervene in a lawsuit against an insured to contest liability when the insured cannot or is not defending the action.  To the Court, however, the corollary to this right is that, if an insurer with notice of a claim refuses to defend or intervene, it becomes bound by the judgment.  The Court ruled that, when Sanchez could not be located, Alliance Insurance could have intervened in the personal injury action while reserving the right to assert coverage.  This finding was all the more apparent in this case because Alliance Insurance knew about all significant developments in this personal injury claim from the filing of the complaint up to the point where the default was entered. 

 

Ultimately, the Court ruled that Alliance Insurance lacked “standing” to vacate the default judgment because it failed to intervene in the personal injury lawsuit.  The Court did note that its decision did not prevent Alliance Insurance from continuing to defend the separate lawsuit seeking payment on the judgment based on arguments that coverage did not exist. 

 

This case confirms the perils to an insurance company if a default judgment is entered against an insured.  Such default judgments can fly in the face of obvious liability defenses, and the damages awarded by such judgments are usually inflated due to uncontested damages inquests.  If an insured is not present or able to defend an action, the insurance company should review the policy and applicable state law and seek to intervene and enter an appearance in the case to avoid judgment by default. 

 

While the appeals court here noted that Alliance Insurance could continue to defend the lawsuit seeking payment on the judgment based on a lack of coverage, that route may not be very productive or viable.  The question is raised as to how Alliance Insurance is going to be able to contest coverage based on the argument that the vehicle was stolen and being operated without permissive use when Mr. Sanchez ostensibly cannot be found or located to testify about any such theft or who was driving his vehicle at the time.  Mr. Sanchez’s absence which led to the default judgment may likewise be a critical problem to any defense by Alliance Insurance in asserting lack of coverage in the judgment collection action based on alleged theft of the vehicle.