Coverage Pointers - Volume XVII, No. 22
Volume XVII, No. 22 (No. 452)
Friday, April 22, 2016
A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
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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.
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Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
You know that history does repeat itself.
A tip of the hat to my friend Tim Pena for his service as Chair of the PLRB Claims Conference recently concluded in San Antonio. He was kind enough to mention our publication, situationally, during his keynote welcoming remarks. We thank him for the props.
Greetings from Monterey where I’m attending the 75th Anniversary of the Association of Defense Trial Attorneys; along with my friends Vicki Roberts of Meadowbrook Insurance and Rich Traub of Traub Lieberman, we’ll be speaking on ethical issues during our CLE later on this morning.
I was delighted to speak on risk transfer issues: additional insured and trade contract indemnity, at the PLRB Claim Conference in San Antonio. I thank those who attended, some of whom are new CP subscribers and some who have subscribed for many years. For those two women in the hallway who laughed that I would speak at the meeting and then talk about it in CP: “you’re right”.
For our new subscribers, know that you will receive your issue of Coverage Pointers on alternating Fridays (actually sent out the night before). Each issue has a cover letter (you’re reading it) and the actual issue is attached as an MS Word document. Feel free to cut and paste our summaries into your claims files and we try to make it as easy as possible for you to do so. Most cases have live links to the reported decision.
Greetings from 30,000 feet. Traveling back from the PLRB Annual Conference in San Antonio. I was blessed with the opportunity to lead two discussions on emerging issues in the Duty to Defend. A special thanks to those brave souls who stayed to very end, and wrapped up the conference with me yesterday afternoon.
No time to travel. We certainly get that. If you're in New York, we remind you of the NY Bar Association's annual coverage update. If you're anywhere between Long Island and Buffalo, you are not far from a rendezvous spot. Take a look at the NYSBA website for further details.
That's it for now. Spring appears to have finally reached the East Coast; enjoy it.
Steven E. Peiper
Congrats to April Elkovitch on her new gig with Philadelphia Insurance Company. A loss for Meadowbrook, a gain for Philadelphia.
We survived the New York primaries.
For those who love politics and want some insights into what might happen this year if there is a contested convention on the GOP side, I’ll give you an opportunity to read about it before it happens. If someone other than the current frontrunner is nominated and you want a preview of what might happen, I suggest you read about the 1912 Presidential election. As you do so, substitute: Clinton for Wilson, Trump for Roosevelt and [the Republican nominee] for Taft. Read, “The Bully Pulpit” by Dorothy Kerns Goodwin. Here is a review. Talk amongst yourselves.
Baseball Debut – 100 Years Ago Today:
I love random baseball stories. I can’t help myself. You’ll find them here. This one’s about an average ball player who has had his major league debut 100 years ago today. He was no Babe Ruth. He was no Honus Wagner. He was no Mel Ott (who still ends up as a great crossword answer in puzzles to this day). Verne Clemmons was an average player, one of so many whose names grace baseball almanacs.
Verne “Stinger” or “Tubby” Clemons, came up for four games in 1916, whose baseball career was interrupted by World War I. He served in the Navy from 1917 to January 1919, then returned to the St. Louis baseball franchise (the Browns and the Cardinals) in 1919 – 1924. He was a catcher with a life time batting average of .286. After a brief four game stint with the St. Louis Browns (a team that later moved to Baltimore and became the Orioles). in 1916, he made the Majors for good with the Cardinals in 1919, becoming their starting catcher for the next three years. He had one really good year, 1921, appearing in 117 games, batting .320 and knocking in 48 runs. However, his fortune declined the next year and served as only a back-up until he was out of baseball after the 1924 season.
Baseball is a game of teams but the stories are all individual. Those who make it up are all expected to be the best of the best. This ballplayer was one of tens of thousands of players who made it up to the big leagues. Sports writers expected him to be a star as his career was starting. Verne ended up an average player with an average career. Here are stories about him, six years earlier and those who wrote expected greatness:
The Wichita Daily Eagle
6 Sep 1910
Jake Beckley has a lot of fun with Verne Clemons when the youngster is behind the bat in a game. Jake has a right to claim credit for finding the young backstop and he is mighty proud of his find, too. He puts in most of his time kidding the youngster when he has a chance, but he is watching him work with a lot of interest and it wasn’t very hard to imagine that the old veteran was secretly not a little proud when “Clemmie” drove one over the fence the other day and slapped another one for a clean two-sacker yesterday. Jake believes the “kid” is a coming big league sensation, and there are a lot of others around the circuit who are beginning to believe the same thing.
The Wichita Daily Eagle
25 Sep 1910
Among all the crop of young players introduced into the Western League from various sources during the present season there are probably none who are recognized as giving more promise of future greatness than Izzy’s real “youngster,” Verne Clemons, the eighteen year old backstop. Already picked as one of the classiest catchers in the league before he has finished his first year of professional baseball, sport critics who have seen him universally agree that the young Iowan has all the earmarks of a real “find.”
In commencing a history of “Clemmie’s” baseball career, however, one has to commence about eighteen years ago, for ever since he can remember he has been playing ball. Up in the neighborhood of Clemons, Iowa, where he was known as a ball player almost as soon as he could walk, and his youthful thoughts and deeds centered around the school or town diamond always.
He may not be one of the immortals, but he made it to the Bigs.
I hope this letter finds you well! This week I have hobbled around the office after a weekend of physical labor. I have, admittedly with a lot of help, started the process of tearing out all the floors in my new home. Like most home repair stories this all started with the innocent idea of taking up the mismatched Pergo in the living room. It quickly became a much bigger project when we realized that the beautiful hardwood floors underneath the Pergo had been destroyed by cats, you can use your imagination. So, now my living room has no floor and I have spent all my free time watching floor installation how-to videos on YouTube. It will be quite a while before I can watch one of those cute cat videos again.
This week in litigation we have Beal-Medea Prods., Inc. v Geico Gen. Ins. Co. where the court found that no-fault plaintiff is not required to submit an executed assignment of benefits in order to demonstrate its prima facie entitlement to recover on a no-fault claim. In Charles Deng Acupuncture, P.C. v American Commerce Ins. Co., the Court applies Massachusetts No-Fault law. In ELRAC, LLC v Healthy Way Acupuncture, P.C. the moving party learned that if the underlying Order and Judgment was entered due to its Default, it does not get to appeal. Unsurprisingly the court in Lotus Acupuncture PC v Unitrin Advantage Ins. Co. concluded that a peer review which stops short of concluding the treatment in question would never be necessary is not enough for summary judgment. Additionally summary judgment is appropriate where plaintiff did not specifically deny the assignor's nonappearance at the scheduled EUOS, or otherwise raise a triable issue MDJ Med. PC v Delos Ins. Co. And Finally in Urban Well Acupuncture, P.C. v Hereford Ins. Co. the Court affirmed the holding of the lower court because plaintiff failed to raise a triable issue as to the efficacy of defendant's mailing of the denials, or the calculation of the fee.
In arbitration we have Amherst Medical Supply v. Geico Ins. a decision by Arbitrator Brown regarding the burden of proof for Respondents who wish to establish that there was a lack of medical necessity. Here a woman was prescribed orthotics and was able to establish entitlement to reimbursement. The Respondent, who relied on an IME report, failed to meet its burden to show that the equipment was not necessary because the report was conclusory and did not cite adequate scientific support for the Dr.’s opinion.
I hope that you enjoy your weekend!
Tessa R. Scott
The weather is warm down here on Long Island and our freeze is over. The daffodils were destroyed by the two freezing nights we had but other flowers are now blooming. Baseball has begun and my children have started t-ball and soccer. They are also up at the crack of dawn every day now that the sun is out so early in the morning.
After a large number of cases in serious injury threshold land last column, we have been reduced to a handful of cases this edition. Oddly, the most detailed case involves yet another emergency vehicle and the applicable standard when one is involved in an accident. We had a similar case last edition but I cannot remember other such cases since my column started. The emergency vehicle was being driven by a fire lieutenant, who stated that he was responding to a fire alarm at the time of the accident. He testified that he brought his vehicle to a stop before red lights at two intersections and did not proceed until he was sure it was clear.
He checked the traffic, and proceeded through the intersections after he determined that it was safe to do so. He also testified that as he approached the intersections, the siren and lights on his vehicle were on. The defendants also submitted a transcript of the deposition testimony of William, who testified that, prior to the impact, he did not hear any sirens, and did not see any flashing lights. Emergency vehicles are granted an exception to the normal traffic laws in 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, the exception is only allowed when the emergency vehicle has its lights and sirens on, and in this case, an issue of fact was found as the fire lieutenant testified the lights were on and the plaintiff driver testified he did not hear any sirens or see any lights.
Enjoy the spring. A time of rebirth and new hope.
Until next time,
A Century Ago – Work Stoppages More Common:
Olean, New York
22 Apr 1916
INDUCE MANY TO JOIN STRIKE
FOR EIGHT HOUR DAY
Pittsburgh Westinghouse Plant
Well Picketed—13,000 Out
Pittsburgh, April 22.—Pickets at all entrances to the plants of the Westinghouse Electric and Manufacturing Company at East Pittsburgh this morning pleaded so successfully with the workmen on their way to the shops that the leaders of the strike, inaugurated yesterday, to enforce an eight hour day demand; declared that only five thousand of the eighteen thousand employees had entered. There was no disorder.
Barnas on Bad Faith:
Welcome back to Barnas on Bad Faith. April is always one of my favorite times of the year when it comes to sports. All four of the major sports have something interesting going on this month. April is, of course, the opening month of the baseball season. The NHL and NBA playoffs are underway, and the NFL Draft is making its return to April this year after a brief hiatus in May. What does this all mean? It means your columnist spends quite a bit of his free time in April glued to his television.
This week I also want to take a brief moment to mention the New York Insurance group on LinkedIn, also known as the interactive home of Coverage Pointers. We have had some good back and forth in that group about recent insurance cases in the past couple weeks. Currently the group has 1,251 members, and we would love to see more Coverage Pointers subscribers join the group and give us feedback about things posted in the group or anything else related to New York insurance.
No New York bad faith cases to report on this week, so, like the Republican and Democratic presidential primaries, Barnas on Bad Faith turns its attention to the great states of Pennsylvania and Connecticut. In North River, the U.S. District Court for the District of Connecticut allows victims of the Kleen Energy power plant explosion to intervene in a DJ action between a carrier and insured to assert a bad faith counterclaim.
Turning to Pennsylvania, in Leboon the U.S. District Court for the Eastern District of Pennsylvania dismisses a claim by an overly litigious pro se plaintiff against an insurance carrier asserting causes of action for bad faith and breach of the implied covenant of good faith and fair dealing. There, the insurer had no duty to settle the plaintiff’s claim against its insured from a prior lawsuit in good faith, especially since that prior lawsuit was dismissed after the pro se plaintiff failed to appear for trial.
Finally, the Linko case from the U.S. District Court for the Middle District of Pennsylvania is interesting for a couple reasons. First, the plaintiff claimed he purchased an auto insurance policy for his truck from Nationwide, but, after he filed a claim, Nationwide claimed it had no record of ever issuing the policy. Second, after the plaintiff commenced an action against Nationwide for breach of contract and bad faith, the court denied Nationwide’s motion to dismiss the bad faith claim. However, in doing so, it read the plaintiff’s bad faith allegations, which the court suggested were insufficient standing alone, in conjunction with his breach of contract allegations. In doing so, the bad faith claim was allowed to go forward.
See you next time.
Brian D. Barnas
For Abe Lincoln Assassination Aficionados – A Century Ago:
San Francisco Chronicle
San Francisco, California
22 Apr 1916
J. H. Surratt, Accused
In Lincoln Plot, Dies
Was Last Survivor of Corps of
BALTIMORE, April 21.—John Harrison Surratt, last survivor of the corps of alleged conspirators tried for implication in the plot to assassinate Abraham Lincoln, died here tonight. He was 72 years old.
Surratt retired as general freight agent of the Baltimore Steam Packet Company recently. In the Civil War he served in the Confederate secret service. When he heard that a warrant had been issued for him he fled from New York to Canada, and then to Europe, Egypt and South America. He was acquitted after being brought back for trial, and came to Baltimore.
Wilewicz’ Wide World of Coverage
Spring is upon us. Finally. That’s all I have to say about that. Now, this week in the Wide World, we have a couple of cases of some significance for your reading pleasure.
First, in an important decision in cutting edge cyber liability issues, we bring you Travelers v. Portal Healthcare out of the Fourth Circuit. There, Travelers issued a couple of custom liability insurance companies to Portal, a company in the specialized business of electronic safekeeping of medical records for hospitals, clinics, and other medical providers. When they allegedly posted some of those confidential medical records online and made them publically available, a few patients were displeased (they had Googled themselves and found their records readily downloadable - oops). They started a class action suit against Portal, but Travelers disclaimed and averred that it had no duty to defend. Their rationale was that there was no actual publication, since Portal was the entity which maintained the online records in the first instance and also because no third-party was alleged to have viewed them.
The District Court of Virginia, and now Fourth Circuit, rejected Travelers’ arguments. The carrier itself had provided the Court with a definition of “publication” as “to place before the public (as through a mass medium)”. Just because the publication was unintentional, did not make it any less a publication. Moreover, the definition does not hinge on third party access. The plain meaning of “publication” included making confidential medical records accessible to the public online, and the class-action complaint at least potentially or arguably alleged such a “publication”. Thus, the carrier had a duty to defend the suit.
This case is distinguishable from other data breach cases that have come down in recent years. Here, the insured itself allegedly published the materials online, not hackers or something of that nature, while many of the recent cases has involved hacking. Further, this policy did not appear to have any exclusions for electronic data loss, or other potentially applicable endorsements. (I pulled up the motion papers and policy itself to double check.) Nevertheless, it does provide some interesting reading on the cyber liability front, as these types of claims are becoming increasingly nuance and common.
Finally, from the environmental realm, we bring you a Court of Appeals case involving lead paint liability. In Yaniveth v. LTD Realty Co., at issue was whether a child which stayed with her grandmother for about 50 hours a week (for months) could bring a claim against the grandmother’s landlord, if the kid did not actually “reside” at that location. As per New York City’s Local Law 1, a landlord has a duty to remediate lead-based paint products in units where children under the age of six “reside”. (Of course, this term is undefined in the statute). Long story short, the Court held that the child did not “reside” with the grandmother. Indeed, it was undisputed that, though she spent a considerable amount of time at her grandmother’s apartment, the kid lived with her parents. There was no intention for her to reside with her grandmother, nor was there any permanence in the caregiving arrangement. While a person can have more than one residence (unlike a “domicile”), “that does not mean that every place in which a person spends time constitutes a residence”. As such, the landlord was entitled to summary judgment as it had no duty to the plaintiff to abate the property of lead paint. Very interesting decision indeed, given that I understand that the authoring Judge used to represent lead-paint exposure plaintiffs.
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Dan D. Kohane
Audrey A. Seeley
Jennifer A. Ehman
INSURANCE COVERAGE TEAM
Dan D. Kohane, Chair
Steven E. Peiper, Co-Chair
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
Michael F. Perley
Robert E. Hewitt, III
Jennifer J. Phillips
Brian D, Barnas
Audrey A. Seeley, Team Leader
Jennifer A. Ehman
Jody E. Briandi, Team Leader
Diane F. Bosse
04/13/16 Hertz Vehicles, LLC v. Monroe
Appellate Division, First Department
Scraps of Paper with Hearsay Commentary are Insufficient to Prove Existence of Policy
Willis rented a vehicle from the petitioner and was operating it when it was struck by a vehicle owned and operated by Thomas (“offending vehicle”). Monroe was a passenger in the Willis and was hurt. She sought arbitration of a claim against Hertz for uninsured motorist benefits. Hertz brought this application to permanently stay arbitration arguing that the offending vehicle was insured by Infinity. After a framed-issue hearing, the lower court determined that the alleged offending vehicle's insurance policy had been cancelled by Infinity prior to the accident.
The party seeking a stay of arbitration has the burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay. Here, to meet its initial burden, the Hertz was required to identify the alleged offending vehicle and show that it was, in fact, insured at the time of the accident.
At the hearing, Willis testified that, at the scene of the accident, Thomas, gave him the telephone number for Thomas's insurance carrier. Willis wrote that information, along with other information relating to the identity of the vehicle, on a piece of paper. The next day, Willis called the number given by Thomas and spoke with an unnamed insurance agent who gave him Thomas's insurance information. Willis then wrote that information on a separate piece of paper.
Ten days after the accident, Willis used both pieces of paper to prepare a MV-104 motor vehicle accident report. The MV-104 accident report included the name and address of the driver of the alleged offending vehicle, but did not include any identifying information about the vehicle itself, including its license plate number, state of registration, make, model, or year. The MV-104 accident report indicated that the alleged offending vehicle was insured by Esurance, but it is undisputed that the insurance policy number shown therein correlated with an Infinity policy. Over the objection of Infinity, the Supreme Court admitted an uncertified and unsworn copy of the MV-104 accident report into evidence for "limited purposes because some information is hearsay."
Hertz failed to make an evidentiary showing that the MV-104 accident report was admissible as a memorandum of a past recollection. The requirements for admission of a memorandum of a past recollection are generally stated to be that the witness observed the matter recorded, the recollection was fairly fresh when recorded or adopted, the witness can presently testify that the record correctly represented his knowledge and recollection when made, and the witness lacks sufficient present recollection of the recorded information. A witness who verifies the correctness of the facts recorded must have had personal knowledge of the facts in the first instance.
Since Willis did not have personal knowledge of Thomas's insurance information in the first instance, the petitioner may not rely upon the portion of the MV-104 accident report containing that insurance information. Moreover, the information on the MV-104 accident report relating to the alleged offending vehicle and its insurance was derived from pieces of paper that were not produced at the hearing. Since the MV-104 accident report did not meet the criteria for admissibility as a memorandum of a past recollection, the Supreme Court erred in considering the MV-104 accident report as proof of identification of the alleged offending vehicle and that it was, in fact, insured at the time of the accident.
Appellate Division, First Department
Non-Resident is Non-Insured; Late Disclaimer of No Consequence
It is undisputed that the named insured under the homeowner's policy issued by plaintiff did not reside at the subject premises. Accordingly, under the terms of the policy, the subject premises were not covered.
Since the policy never provided coverage for these circumstances in the first place, the timeliness of plaintiff's disclaimer is irrelevant. Nor can the insured rely on the estoppel doctrine, since she failed to establish that she was prejudiced by the issuance of the disclaimer four months before the note of issue was filed
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
04/20/16 Leong v. Defuria
Appellate Division, Second Department
Defendant’s Established Prima Facie Case through Competent Medical Evidence but Plaintiff’s Medical Evidence Created an Issue of Fact
The Appellate Division reversed the Supreme Court’s grant of summary judgment to defendants and reinstated the action. The Appellate Division held that defendant met his prima facie burden of showing that the appellant did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant submitted competent evidence establishing, prima facie, that the alleged injury to the cervical region of the appellant'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 appellant raised a triable issue of fact as to whether he sustained a serious injury to the cervical region of his spine. Thus, the Supreme Court should have denied the defendant's motion for summary judgment dismissing the complaint insofar as asserted by him.
04/13/16 Bryan v. City of Long Beach
Appellate Division, Second Department
Emergency Vehicles are Only Entitled to Statutory Exemption if Their Lights and Sirens are On
The grant of defendants’ motion for summary judgment was reversed and the matter reinstated. The facts are as follows: on November 30, 2011, the plaintiff William Bryan) and the defendant Michael Geller were involved in a motor vehicle collision at the intersection of National Boulevard and West Park Avenue in Long Beach. Geller's vehicle was owned by the Defendant City of Long Beach. Thereafter, William, and his wife suing derivatively, commenced this negligence action against Geller and the City of Long Beach. The defendants moved for summary judgment dismissing the complaint on the grounds that they were not liable for William's injuries and, in any event, William did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.
In support of the motion, the defendants submitted a transcript of the deposition testimony of Geller, a fire lieutenant, who stated that he was responding to a fire alarm at the time of the accident. He testified that he brought his vehicle to a stop before red lights at two intersections, checked the traffic, and proceeded through the intersections after he determined that it was safe to do so. He also testified that as he approached the intersections, the siren and lights on his vehicle were on. The defendants also submitted a transcript of the deposition testimony of William, who testified that, prior to the impact, he did not hear any sirens, and did not see any flashing lights.
The Appellate Division held that the Supreme Court erred in granting that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that they were not liable for William's injuries. 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 herein granted to an authorized emergency vehicle shall 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." In support of their motion, the defendants submitted the deposition testimony of both Geller and William. This evidence failed to eliminate all triable issues of fact as to whether Geller had activated his vehicle's siren and lights prior to the accident. Thus, the defendants failed to meet their prima facie burden.
The Appellate Division also held that the Supreme Court further erred in granting that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that William did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants failed to meet their prima facie burden on this branch of their motion, as the papers submitted by the defendants in support of their motion failed to adequately address the plaintiffs' claims, set forth in the bill of particulars, that William sustained serious injuries to his head and brain.
04/13/16 Martell v. Silva
Appellate Division, Second Department
Plaintiff Raised an Issue of Fact as to Whether the Injuries to His Lumbar Spine but Not His Hip Constituted a Serious Injury
The Appellate Division affirmed the lower court’s denial of summary judgment to defendants. The Appellate Division determined that the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the lumbar region of the plaintiff's spine and his right hip 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 triable issues of fact as to whether he sustained a serious injury to the lumbar region of his spine as a result of the subject accident.
04/13/16 Navarro v. Afifi
Appellate Division, Second Department
Plaintiff Submitted Medical Evidence Indicating an Issue of Fact Which Led to the Denial of the Motion
The Appellate Division reversed the grant of summary judgment to defendants and reinstated the action. The Appellate Division determined that defendants established their prima facie entitlement to judgment as a matter of law by 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, inter alia, that the alleged injury to the plaintiff's right shoulder 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 his right. Since the plaintiff raised a triable issue of fact with respect to the injury to his right shoulder, it is not necessary to determine whether the evidence he submitted raised a triable issue of fact as to whether his other alleged injuries meet the "no fault" threshold. The Appellate Division also found that defendants failed to make a prima facie showing that the alleged injury to the plaintiff's right shoulder was not causally related to the subject accident. Therefore, the burden did not shift to the plaintiff to raise a triable issue of fact as to causation. No facts were given in the opinion.
Appellate Term, Second Department
No-Fault Plaintiff Is Not Required To Submit An Executed Assignment Of Benefits In Order To Demonstrate Its Prima Facie Entitlement To Recover On A No-Fault Claim.
At a jury trial plaintiff sought repeatedly to have its purported assignment of benefits admitted into evidence. The Civil Court denied each application, and ultimately granted defendant's application to dismiss the complaint, finding that plaintiff could not establish a prima facie case because it had been unsuccessful in having its assignment of benefits admitted into evidence. Plaintiff appealed from an order of the Civil Court entered June 10, 2013 which denied its subsequent motion to vacate the trial order dismissing the complaint.
Plaintiff's motion should have been granted. Defendant's motion for judgment as a matter of law was made before the close of plaintiff's case, and was therefore premature. Furthermore, the court's reason for granting the application was erroneous, as a no-fault plaintiff is not required to submit an executed assignment of benefits in order to demonstrate its prima facie entitlement to recover on a no-fault claim. Rather, for the assignment of benefits to become a subject of inquiry, a defendant must first demonstrate that it timely and properly raised an issue with respect to the assignment.
Accordingly, plaintiff's motion to vacate the prior order granting defendant's motion for judgment dismissing the complaint was granted, defendant's oral motion was denied, and the matter was remitted to the Civil Court for a new trial.
Appellate Term, Second Department
Plaintiff Failed To Raise A Triable Issue Of Fact, Thus, Summary Judgment Was Proper.
Plaintiff raised no issue with respect to defendant's showing that the policy in question is a Massachusetts insurance policy. On the record before us, the application of Massachusetts law to the substantive issues is proper. Massachusetts law requires minimum compensation for personal injury protection benefits in the amount of $8,000 for one person in any one accident and provides for optional medical payments under an insurance policy "to a limit of at least" $5,000 for one person in any one accident. Defendant made a prima facie showing, through the affidavits of its employees and through the submission of evidence in admissible form, including the insurance policy at issue and defendant's payment log that the policy provided for a limit of $13,000 in medical expenses coverage. Plaintiff's own submission, the affidavit of its owner, showed that plaintiff had mailed the claim, which comprised the first cause of action, to defendant after the policy limit had been exhausted.
The record further demonstrated that defendant established that it had paid the claims which comprised the second and third causes of action. Plaintiff failed to raise a triable issue of fact in opposition, and its remaining arguments were without merit or were not preserved for appellate review. Consequently, plaintiff's motion for summary judgment was properly denied and defendant's cross motion for summary judgment dismissing the complaint was properly granted.
Appellate Division, First Department
As The Underlying Order And Judgment Appealed From Was Entered Upon The Defendant's Default, The Appeal Must Be Dismissed.
In an action for a judgment declaring that the defendant has no right to receive payment for certain no-fault claims submitted to the plaintiff, the defendant appeals from an order and judgment of the Supreme Court, Queens County dated October 21, 2013, which, upon an order of the same court dated August 27, 2013, and upon its failure to produce a witness for deposition or disclose certain documents on or before a date certain as directed by that order, struck its answer and declared that it had no right to receive payment for certain no-fault claims submitted to the plaintiff.
The court dismissed the Defendant’s appeal with costs reasoning that “No appeal lies from an order or judgment granted upon the default of the appealing party.” Thus, since the order and judgment appealed from was entered upon the defendant's default, the appeal must be dismissed.
Appellate Division, First Department
A Peer Review Which Stops Short Of Concluding The Treatment In Question Would Never Be Necessary Is Not Enough For Summary Judgment.
The peer review report pertaining to acupuncture services rendered November 19, 2007 through November 29, 2007, failed to make a showing that the services rendered during this time frame were not medically necessary. The peer reviewer's assertion, in effect, that the documentation submitted for his review lacked "supportive information" was insufficient to sustain defendant's burden of eliminating all triable issues as to medical necessity.
Moreover, inasmuch as the peer reviewer did not address plaintiff's claim for services rendered January 2, 2008, and "stopped short of concluding that the assignor's medical condition could never be shown to warrant further acupuncture treatment," his report could not properly form the basis for denial of this claim.
04/18/16 MDJ Med. PC v Delos Ins. Co.
Appellate Division, First Department
Plaintiff Did Not Specifically Deny The Assignor's Nonappearance At The Scheduled EUOs, Or Otherwise Raise A Triable Issue.
The defendant-insurer made a showing of entitlement to summary judgment dismissing the action for first-party no-fault benefits by establishing that it timely and properly mailed the notices for examinations under oath (EUOs) to plaintiff's assignor (see
Contrary to plaintiff's specific contention, defendant established that it requested the EUOs within the applicable time frames set forth in the no-fault regulations, by submitting its EUO letters dated February 4, 2011 and March 1, 2011. Moreover, the attorney who was assigned by defendant to take an EUO of plaintiff's assignor with respect to the subject claim, and "who would have conducted the EUO if the [assignor] had appeared certainly was in a position to state that the [assignor] . . . did not . . . appear in his office on the date[s] indicated."
In opposition to defendant's prima facie showing, plaintiff did not specifically deny the assignor's nonappearance at the scheduled EUOs, or otherwise raise a triable issue with respect thereto, or as to the mailing or reasonableness of the underlying notices.
Appellate Term, First Department
Plaintiff Failed To Raise A Triable Issue As To The Efficacy Of Defendant's Mailing Of The Denials, Or The Calculation Of The Fee.
The defendant-insurer made a showing of entitlement to summary judgment dismissing the action for first-party no-fault benefits by establishing that it timely denied certain no-fault claims on the ground that the fees plaintiff charged for the acupuncture services it rendered to the assignor exceeded the amount permitted by the worker's compensation fee schedule, and that the remaining claims were paid by defendant pursuant to a settlement agreement.
In opposition, plaintiff failed to raise a triable issue as to the efficacy of defendant's mailing of the denials, or the calculation of the fee. Accordingly, defendant's motion for summary judgment dismissing plaintiff's claims - which sought the difference between the amount charged for the acupuncture services and payments made to plaintiff pursuant to the fee schedule or settlement agreement, was properly granted.
Plaintiff's remaining contentions were either without merit or, where plaintiff failed to articulate any specific arguments in its appellate brief, abandoned on appeal.
04/13/16 Amherst Medical Supply v. Geico Ins.
Conclusory IME Reports, Not Supported By Factual Basis Or Scientific Support Will Not Demonstrate Lack Of Medical Necessity.
Here, the applicant sought reimbursement for custom-fitted lumbosacral orthotic provided to the injured party form injuries sustain in a motor vehicle accident which occurred on 7/21/12. Payment was denied based on a peer review report.
The claimant was evaluated, treated and released from a hospital emergency department after the accident. She stated that she suffered pain in her back, right shoulder and right hip, and was recommended to seek chiropractic therapy. She did so, and on 8/6/12 her chiropractor signed a prescription for a custom-fitted lumbosacral orthotic. Her provider has also signed a letter of medical necessity sating that the device was being prescribed for lumbar segmental dysfunction, muscle spasms and lumbar radiculopathy. The letter further specified that it was being prescribed to "stabilize spinal segments" and "retard further degenerations." The device was provided on 9/24/12. Reimbursement has been denied based on a peer review prepared by Dr. Brian Wolin, DC, on 10/15/12.
Once an applicant has established entitlement to No-Fault benefits, the burden then shifts to the insurer to prove that the disputed services were not medically necessary. When an insurer uses a peer review as a basis for the denial(s), the peer review report must contain (1) evidence of the applicable generally accepted medical/professional standards, and (2) a statement or statements by the peer reviewer, based upon his or her application of the facts of the case, which set forth the provider's departure from those standards
In the instant matter, Respondent’s IME report conclusively states that the LSO was not a chiropractic necessity. However, it provided no factual basis for that statement. It simply concluded that the device was unnecessary because the EIP was already receiving chiropractic treatment three times per week, and therefore the use of the brace would be "excessive."
Based on the foregoing, Arbitrator Brown found that Respondent’s IME report was not sufficient to shift the burden of proving medical necessity to the claimant.
Steven E. Peiper
04/20/16 Jardin v A Very Special Place, Inc.
Appellate Division, Second Department
Indemnity Agreement Entered into After the Accident was Not Enforceable, Absent Language Demonstrating an Intention to Make it Retroactive
Plaintiff sustained injury while in the course of his employment with CRM. The site was owned by A Very Special Place, Inc. (VSP). VSP retained Kang Suk to serve as the general contractor for the project, and Kang Suck, in turn, subcontracted some of the work to Trinity. By way of contract between Trinity and CRM, CRM agreed to perform some of Trinity’s obligations.
Plaintiff, who fell from a ladder, sued both VSP and Kang Suk under Labor Law 240(1). VSP appeared in the action, and asserted a claim for contractual indemnity against Kang Suk. VSP also commenced a third-party action against Trinity on the basis of the contractual indemnity language of the Kang Suk/Trinity contract.
On motions for summary judgment, VSP was able to create a question of fact as to whether plaintiff had established his right to judgment under Labor Law 240(1). The remaining focus was placed upon VSP’s indemnity claims.
Because VSP established that it bore no percentage of negligence for the incident involving plaintiff, the Court determined that it was entitled to a condition order of contractual indemnification against Kang Suk. The incident clearly fell within the terms of the contract between VSP and Kang Suk, and there was nothing prohibiting VSP from full indemnity.
VSP’s claims against Trinity, on the other hand, were denied on the basis of a question of fact. The Record established that the Kang Suk/Trinity contract was not executed until several weeks after plaintiff’s fall. While the Court noted that an indemnity clause may have retroactive effect, the party seeking indemnity has the burden of establishing all parties’ intention that the provision would apply to pre-execution losses. Here, VSP did not meet that burden.
Appellate Division, Second Department
Severance of Third-Party Action Based Solely upon Unavoidable Delay was an Abuse of Trial Court’s Discretion
Plaintiff commenced the instant action seeking to recover, in subrogation, certain damages which were caused as result of a fire. As part of discovery, defendant learned that other parties, who were unnamed in the main party action, may have performed work which caused, or contributed, to the cause of the fire. In turn, defendant commenced a third-party action seeking contribution/indemnification against said newly identified contractors.
Plaintiff moved to sever the third-party action on the basis that it would result in delay, and otherwise impair its ability to prosecute the main-party action. While plaintiff’s motion was granted by the trial court, the Appellate Division reversed on the basis that severance is to be exercised sparingly.
In instances like the current matter, where the only issue caused by the added third-party action was the potential for a delay, the Court held that there was no basis for a severance. This was particularly true where, like the current instance, the basis for the third-party action could not have been ascertained until the completion of plaintiff’s deposition. In further support, the Court noted that discovery in the main-party action was ongoing at the time of the commencement of the third-party action. Moreover, the Court also referenced the fact that both the main-party allegations, as well as the third-party allegations, arose from a common set of facts.
4/13/16 Botach Mgt. Group v Gurash
Appellate Division, Second Department
Claims for Property Damage Property Time Barred by One Year Suit Limitation Clause
Botech was insured under a policy of insurance issued by First Specialty which covered certain real property in California. Importantly, the policy contained a forum selection clause which required that any action commenced against the carrier had to be venued in the State of New York. Plaintiff sustained damage to its property in 2010, and subsequently submitted a claim to First Specialty. First Specialty denied the claim in a 2011 disclaimer letter.
Botech then filed a lawsuit in California seeking recovery under the policy. First Specialty responded by moving for a permanent stay based upon the improper venue, and its application was granted by the presiding court in California.
In response, plaintiff commenced an action in Supreme Court, Westchester County in 2013. First Specialty immediately moved to dismiss the Botech claim in New York as timed barred pursuant to the policy’s one year suit limitation clause. Because First Specialty could clearly establish the suit was filed well over one year after the loss, the Appellate Division noted that it had met its burden. The burden then shifted to Botech to demonstrate that it had been lulled into inactivity by First Specialty’s actions. Botech could not establish a basis for the delay particularly where it was provided with correspondence in 2011 advising the First Specialty was not waiving any potential coverage defenses, terms or conditions of the policy. The one year suit limitation clause clearly falls within the scope of that reservation.
Appellate Division, First Department
Premium Audit Permitted by Operation of Insurance Law 3426
Seneca issued a series of policies to defendant based upon information it was provided in the application process. The policy, however, preserved Seneca’s rights to conduct a policy audit, of which Seneca availed itself.
Agnes A. Wilewicz
United States Court of Appeals, Fourth Circuit
Making Confidential Records Publically Accessible On the Internet Constitutes “Publication” Under Liability Policy, Thereby Triggering Duty to Defend, Says Fourth Circuit
Travelers issued two custom liability insurance policies to Portal Healthcare Solutions, a business specializing in the electronic safekeeping of medical records for hospitals, clinics, and other medical providers. According to the underlying Eastern District of Virginia decision, the “2012 and 2013 policies obligate Travelers to pay sums Portal becomes legally obligated to pay as damages because of injury arising from (1) the ‘electronic publication ... of material that ... gives unreasonable publicity to a person’s private life’ (the language found in the 2012 policy) or (2) the ‘electronic publication of material that ... discloses information about a person’s private life’ (the language found in the 2013 policy)”.
In 2013, a class action was filed against Portal for its alleged failure to safeguard confidential medical records by posting those records on the internet and causing them to be publically accessible. The class action plaintiffs had found out about this when they separately Goggled themselves and found that essentially anyone could access, view, copy, and download their personal medical records. Portal made a claim under its Travelers policies, but Travelers disclaimed. The carrier asserted that it did not even have a duty to defend the claims under its policies because the pleadings did not allege “publication” as meant under the terms of the policy. Notably, the term “publication” was not a defined term therein, but Travelers averred in its motion papers that this was defined as “to place before the public (as through a mass medium)”.
In the District Court, Travelers proffered two main arguments for why Portal’s alleged conduct was not a “publication”. First, they suggested that since “the entire purpose of the services Portal provided was to keep the medical records private and confidential,” there could not have been a publication. However, because an unintentional publication is still a publication, said the Court, this argument was rejected. Second, Travelers argued that since no third party was alleged to have viewed the information, there was no publication. The Court rejected that argument as well. Whether or not something was published does not hinge on third-party access, merely placement before the public.
The District Court went on to state: “Publication occurs when information is ‘placed before the public,’ not when a member of the public reads the information placed before it. By Travelers’ logic, a book that is bound and placed on the shelves of Barnes & Noble is not ‘published’ until a customer takes the book off the shelf and reads it. Travelers’ understanding of the term ‘publication’ does not comport with the term’s plain meaning, and the medical records were published the moment they became accessible to the public via an online search.”
At the appellate level, the Fourth Circuit agreed with and affirmed the District Court’s analysis. Applying the Eight Corners Rule (the four corners of the complaint plus the four corners of the policy), the duty to defend was certainly triggered in this case. The pleadings at least potentially or arguably alleged a “publication” of private medical information. “Such conduct, if proven, would have given ‘unreasonable publicity to, and disclose[d] information about, patients’ private lives,’ because any member of the public with an internet connection could have viewed the plaintiffs’ private medical records during the time the records were available online.” Accordingly, Travelers had a duty to defend the class action.
Environmental Tort Litigation – Lead Paint
04/05/16 Yaniveth v. LTD Realty Co.
New York Court of Appeals
In Lead Paint Exposure Case, New York Court of Appeals Holds That Child Who Stayed With A Relative 50 Hours A Week Did Not “Reside” With Caregiver Sufficient To Trigger Landlord’s Duty To Abate Under NYC Code
The plaintiff Yaniveth was born in 1997. During the years of 1997 to 2002, she lived with her parents in the Bronx. Starting at about three months old, Yaniveth was cared for by her paternal grandmother at a nearby apartment during the days that her parents worked. All told, she spent approximately 50 hours a week with her grandmother, over the course of about six months. In early 1998, Yaniveth was found to have elevated blood lead levels, which allegedly resulted in brain damage and various cognitive deficits. These results were purportedly related to Yaniveth’s exposure at her grandmother’s apartment. Thus, in 2006, plaintiff’s mother initiated suit against the grandmother’s landlord, claiming a duty to abate had been owed.
Pursuant to the Administrative Code of the City of New York applicable at the time (former § 27-2013[h] a/k/a “Local Law 1”), “The owner of a multiple dwelling shall remove or cover in a manner approved by the Department any paint or other similar surface-coating material having a reading of 0.7 milligrams of lead per square centimeter or greater or containing more than 0.5 percent of metallic lead based on the non-volatile content of the paint or other similar surface-coating material on the interior walls, ceilings, doors, window sills or moldings in any dwelling unit in which a child or children six (6) years of age and under reside.” The term “reside”, however, was not defined in Local Law 1. Thus, at issue was whether Yaniveth “resided” at the grandmother’s apartment under the statute.
In analyzing prior precedent interpreting the term, as well as Webster’s and Black’s definitions, the Court of Appeals held that Yaniveth did not reside at her grandmother’s apartment sufficient to impose liability on a landlord under Local Law 1. While the child did spend a considerable amount of time at that property, it was undisputed that she did not live there. She lived with her parents primarily. More importantly, the legal interpretations of the term “reside” contemplate both acts and intention. That is, though a person can have more than one residence (unlike a domicile), that residence entails “something more than temporary or physical presence, with some degree of permanence and an intention to remain”. Moreover, the court made clear that did not mean to eliminate the distinction between a residence and a domicile, stating that “a person may reside in more than one place, but that does not mean that every place in which a person spends time constitutes a residence”.
Here, there was no dispute that Yaniveth did not reside with her grandmother. Indeed, both her mother and grandmother testified that Yaniveth did not live in that apartment, and there was no evidence that anyone intended for her to live there or retain it as a residence. As such, the landlord was entitled to summary judgment as it had no duty to Yaniveth to abate the property of lead paint.
Jennifer A. Ehman
Supreme Court, New York County
Hon. Kelly O’Neill Levy
Court Broadly Interprets Additional Insured Endorsement
CCA Civil-Halmar International, LLC (“CCA”) entered into an agreement with Achilles Construction to perform work at a construction project. The agreement provided that Achilles was to name CCA as an additional insured on its commercial general liability coverage.
On July 25, 2012, an employee of Achilles was injured when struck by a falling object while performing work at the project. The employee then commenced an action against the MTA, NYC Transit authority and CCA. The complaint alleged, among other things, that the defendants failed to secure objects against slippage and/or collapse, and failed to erect catchalls, safety nets and other safety devices to prevent workers from being struck by falling objects.
Zurich, on behalf of CCA, tendered its defense to Achilles carrier, Burlington. Burlington denied the tender indicating that CCA did not qualify as an additional insured under its policy. Burlington’s AI endorsement contained “caused, in whole or in part, by…1. Your acts or omissions…in the performance of your ongoing operations for the additional insured” language.
The court found that there was a reasonable possibility that CCA was an additional insured on the Burlington policy. Because the allegations contained in the underlying complaint are potentially covered, the court determined that Burlington was obligated to provide a defense. The court began by finding that under the CCA/Achilles contract, Achilles agreed that the “Contractor” i.e., CCA shall be included as an insured on the CGL policy. Thus, Achilles agreed to name CCA as an additional insured, and Burlington’s AI endorsement was applicable.
The court next considered the language of the AI endorsement. Relying upon W&W Glass Sys. Inc. v. Admiral Ins. Co., the court noted that the phrase “caused by” does not materially differ from the phrase “arising out of.” The court accordingly applied the “arising out of” case law, which interprets this language very broadly. It then held that because “Cappellino was an employee of Achilles performing work under the Achilles contract, his injuries necessarily arose out of the acts of Achilles.”
Further, the court held that it was clear that the employee was injured while performing ongoing operations as an employee of Achilles. Of interest, the court addressed Burlington’s argument that coverage for Zurich was premature, as there was relatively limited discovery in either the underlying action or this action. Zurich cited that fact that Achilles was not named as a direct defendant in the underlying action, and there was no evidence that Achilles was responsible in any for the accident. Burlington further argued that it had not been established what the employee was doing at the time of the injury. The court held that the standard is “reasonable possibility.” Thus, because the employee was injured while on the jobsite, even if the employee was walking to get a coffee or to go to the bathroom at the time of the injury, CCA was entitled to a defense in the underlying action.
Supreme Court, New York County
Hon. Ellen M. Coin
Court Addresses Challenge to Reasonableness of Attorneys’ Fees Owed After Carrier Commenced an Unsuccessful Declaratory Judgment Action against Its Insured
Following successful judgment awards, defendant moved to recoup its attorneys’ fees as a prevailing party pursuant to the Mighty Midgets decision. Navigators attacked the request for over $200,000 as excessive. Specifically, it disputed the reasonableness of defense counsel’s hourly rates and the appropriateness of the number of hours expended on motion practice.
Navigators first argued that defendant was limited to the recovery of fees actually paid. In considering this argument, the court declined to find a requirement of pre-payment. The court found that the Danaher decision relied upon by Sterling Infosystems emphasized the relevance of the actual payment of legal fees by the client as an indication of the fees’ reasonableness, not as a condition of their award. Nevertheless, the court found the argument moot as Sterling Infosystems had established that it paid the subject fees.
The next issue addressed was the claim that the partner rates of $625 to $685 per hour, and associate rates of between $310 and $470 per hour were excessive. The court found that Sterling Infosystems properly supported the rates through affirmations from insurance recovery practitioners at firms of comparable sizes. Likewise, the court looked to the National Law Journal surveys of the high, low and average hourly rates charged by the largest national law firms. The court also found the rates comparable to awards approved in other cases.
The court was not persuaded by Navigators’ final argument that the cases whereby these high rates were approved were more complex than this case. The court noted that this action qualified for assignment to the Commercial Division. It also noted that this declaratory judgment action resulted in substantial benefit to Sterling Infosystems as the investment of approximately $200,000 permitted it to secure coverage of almost $4 million. The court lastly noted that Sterling Infosystems’ counsel’s work was performed by one partner and no more than two associates at a time and involved highly sophisticated legal analysis of issues of first impression in this jurisdiction.
Brian D. Barnas
United States District Court District of Connecticut
Injured Parties were permitted to Intervene and Assert Bad Faith Counterclaims against Excess Insurer.
This case arose out of the tragic Kleen Energy plant explosion in Middletown, Connecticut. The owner of the power plant hired defendant O&G Industries, Co. as the general contractor for the construction of the plant in 2009. O&G then hired Keystone to install, test, and flush the above-ground piping system. As part of that work, Keystone performed a “natural gas blow” in February of 2010 to clear out debris in the above-ground piping system. This procedure provoked an explosion that killed six workers, injured dozens more, and caused extensive property damage.
The explosion prompted many legal actions against Keystone, which turned to its insurance carriers for help in defending against these actions. Keystone held a second-layer excess policy with North River. In December 2011, O&G filed an arbitration action against Keystone seeking damages suffered as a result of the explosion; Keystone presented this action to North River in December 2011 and demanded that North River defend and indemnify it against the arbitration. North River informed Keystone in May 2012 that the North River policy did not include a defense obligation.
In 2013, North River brought a diversity action against Keystone for breach of contract. North River argued that Keystone breached the terms of the insurance contract by not cooperating, communicating, and being honest with North River as Keystone sought insurance coverage in the aftermath of the explosion. As a result, North River claimed that it did not have obligations to Keystone for any claims arising from the explosion.
This decision arose out of a motion of victims of the plant explosion to intervene in the litigation between North River and Keystone. The victims-intervenors had a $35 million arbitration award against Keystone. Among the claims the intervenors sought to assert against Keystone was a claim for bad faith failure to provide coverage to Keystone and its bad faith failure to settle the underlying action within Keystone's policy limits when it allegedly had multiple, reasonable opportunities to do so.
The court concluded that the victims were permitted to intervene in the litigation under Federal Rule of Civil Procedure 24. The court noted that the victims had an interest in the litigation because they had obtained a judgment against Keystone, which was directly enforceable against North River. The court also concluded that the victims’ interest would be impaired if they were not permitted to intervene and a declaration of no coverage was issued to North River. Further, the court noted that Keystone did not have as strong of an interest to litigate the coverage issues as the intervenors. Following the explosion, Keystone was a defunct corporation that merely existed to wrap up litigation. In contrast, the victims had a direct financial interest in the outcome.
United States District Court Eastern District of Pennsylvania
An Insurer does not owe a Duty to Negotiate a Settlement in Good Faith to a Claimant.
Steve Leboon, a man described by the court as a “serial pro se litigant,” brought a claim against Zurich alleging that Zurich's conduct while defending a prior lawsuit that Leboon brought against his previous employer, Alan McIlvain Company, constituted bad faith. Leboon claimed that Zurich, as Alan McIlvain's liability insurance provider and counsel, failed to make offers to settle the case in good faith.
Zurich filed a motion to dismiss the complaint. Notably, Leboon’s prior lawsuit against Alan Mcllvain was dismissed after he failed to appear for trial.
The court also dismissed Leboon’s action against Zurich. The court noted that the duty to negotiate a settlement in good faith arises from the insurance policy and is owed to the insured, not to a third-party claimant. In this case, Leboon was not an insured under the Zurich policy issued to Alan Mcllvain. To the contrary, he was an adversary of the insured who Zurich had the right and duty to defend. Accordingly, Leboon’s claim was dismissed because Zurich had no duty to him or to settle his claim.
The court also dismissed Leboon’s claim that Zurich breached the implied covenant of good faith and fair dealing because he was not an insured under the contract, and because Pennsylvania does not permit independent claims for breach of the covenant of good faith outside of an insurer-insured relationship.
United States District Court Middle District of Pennsylvania
Court read Plaintiff’s Bad Faith Allegations in Conjunction with his Breach of Contract Allegations in allowing Bad Faith Claim to Survive Dismissal.
Plaintiff Justin Linko leased a 2015 Toyota Tundra on February 28, 2015. Plaintiff claimed that he obtained automobile insurance on the truck from Nationwide. In fact, lease documentation listed Nationwide as the insurance provider and contained policy number 5837E918945. Nationwide also made monthly automatic withdrawals from Plaintiff’s bank account.
After Plaintiff was involved in an accident, Nationwide informed him that it had no record of him purchasing insurance for the Tundra. Accordingly, Nationwide denied Plaintiff’s claim.
Plaintiff commenced an action against Nationwide alleging claims for breach of contract and bad faith. Nationwide moved to dismiss. The court denied the motion. In doing so, it noted that a plaintiff bringing a bad faith claim under Pennsylvania law must show with clear and convincing evidence: (1) that the insurer lacked a reasonable basis for denying benefits; and (2) that the insurer knew or recklessly disregarded its lack of a reasonable basis.
Here, Plaintiff’s claims that Nationwide failed to objectively and fairly evaluate his claim and failed to promptly offer payment of the reasonable and fair value of the claim, read together with his breach of contract allegations, were sufficient to survive the motion to dismiss.
Jennifer J. Phillips
District of Rhode Island
Breaking Up Isn’t Hard to Do
The plaintiff insured commenced this action seeking a declaration that the automobile insurance policy issued to him by Defendant United Financial Casualty Company (1) had not been canceled prior to October 18, 2014; (2) was in effect on that date; and that (3) United must provide coverage for a motor vehicle accident loss that occurred on October 18, 2014.
The plaintiff insured, Joseph Arruda, owned and operated Allied Investments. Prior to October 9, 2014, Arruda purchased two commercial insurance policies. The first was issued by Travelers Insurance, effective June 2014 to June 2015, naming Allied as the insured and providing coverage for a Chevrolet Silverado owned by Allied and driven by a minority owner of Allied. The second policy was issued by Defendant United, naming Arruda as the insured and providing coverage for a Toyota Tacoma driven by Arruda. In early October, Arruda’s insurance agent learned that the Toyota was actually owned by Allied, not Arruda, and added (with Arruda’s consent) the Toyota to the Travelers Policy, with an effective date of October 9, 2014, and Arruda as the named driver. Based on the insurance agent’s policy of waiting for written confirmation, the agent did not immediately notify United of the cancellation.
On October 18, 2014, Arruda was involved in a motor vehicle accident in the Toyota, and reported the accident to United directly. On October 20, 2014, the insurance agent notified Travelers of the accident, and on that same date received confirmation that the Toyota had been added to the Travelers Policy. Arruda signed a cancellation form for United on October 23rd, which specified a cancellation date of October 9, 2014.
In resolving the coverage issue, the district court noted that the United policy contained “an Automatic Termination provision, pursuant to which ‘any similar insurance provided by this policy will terminate as to that insured auto on the effective date of the other insurance,’ in the event the insured obtains ‘other insurance on an insured auto.’ As such, there is no discernible ambiguity to that provision. It simply provides that obtaining a similar insurance policy results in the automatic termination of the [United] Policy covering the same automobile and that the termination is effective on the same date the coverage starts under the new policy.”
Arruda argued to the district court that coverage was available under the United Policy because the October 23, 2014 cancellation notice could not function as a retroactive cancellation effective October 9, 2014 and because the Automatic Termination provision was ambiguous (and therefore unenforceable); (b) the Travelers Policy was not a “similar” policy for the purpose of triggering the automatic cancellation; and (c) Arruda and Union did not mutually agree that the Progressive Policy was cancelled on October 9, 2014.
The district court rejected each argument, finding that the two policies provided sufficiently similar coverage provisions to trigger the automatic cancellation termination provision of the United policy. As such, the notice of cancellation was not retroactive; instead, it was unnecessary, as the United policy has been cancelled as of the effective date of the Travelers policy without further notice.
09/30/15 Metsack v. Liberty Mutual Fire Insurance Co.
District of Connecticut
Defective Concrete Leads to Bad Faith Claim
The Metsacks had property insurance first through Allstate and then with Liberty Mutual. They discovered water and cracks in their basement in 2014, and were informed that the defects were due to a defective concrete mixture used in late 1980’s and early 1990’s. The concrete mix supposedly contained a chemical that caused it to degrade over time. The Metsacks filed a claim with Liberty Mutual, and the claim was denied on an asserted bases that the policy did not provide coverage for “settling/earth movement” or “seepage of ground water”.
The Metsacks initiated a lawsuit against Liberty Mutual for breach of contract, bad faith, and under state insurance laws. The alleged damages were the cost to replace the basement walls estimated to be at least $125,000.00. The insureds also alleged that Liberty Mutual had a “general business practice” of denying such claims referencing several similar lawsuits, including a ruling in another concrete – decay case where a court concluded that the asserted policy exclusions were subject to more than one interpretation.
Liberty Mutual moved to dismiss the lawsuit asserting that the policy excluded coverage for loss to a “foundation” or “retaining wall”. There was also a sub-question whether the damage occurred during the relevant policy period. The District Court denied the motion allowing the claims to proceed.
The District Court noted that similar arguments by Liberty Mutual had been rejected in at least three prior lawsuits. The Court ruled that the terms “foundation” and “retaining wall” were ambiguous, and could be interpreted in a manner favorable to the insureds. Secondly, the Court was critical of Liberty Mutual for initially denying coverage on one basis, and then later raising new arguments based on other policy language and exclusions such as the foundation/retaining wall argument.
With respect to the bad faith claim, plaintiffs argued that Liberty Mutual rejected the claim without conducting any investigation, and the Court reasoned that Liberty Mutual could have acted in bad faith by including certain structural walls in the basement as a “foundation” without conducting an inspection of the premises.
The Court also allowed claims to move forward under Connecticut statutes. The Court rejected Liberty Mutual’s suggestion that the question of whether the terms “foundation” and “retaining wall” were ambiguous should be certified to the Connecticut Supreme Court for a definitive adjudication.
The lesson of this case is for insurance companies to pay attention to other court decisions and rulings in which they are involved, or where similar policy language has been interpreted and ruled upon, and be prepared to distinguish or otherwise deal any outstanding negative judicial precedent. If as reported in this case the Court previously rejected Liberty Mutual’s claim denial arguments in at least three cases, at least one of the cases could have been appealed to attempt to obtain a reversal, and in the meantime try to cite different policy provisions or exclusions in support of the denial.
A second lesson is for insurance companies to deny coverage on a consistent basis, and not in Court assert different policy language in support of a disclaimer than previously cited in a coverage denial. Courts take a very dim view of such shifting tactics by insurance companies, and in some states it may even be unlawful or impermissible for an insurance company to raise new coverage issues in litigation which were not previously part of the coverage denial analysis.
The Court was also critical of Liberty Mutual in this case for denying the claim apparently without making any inspection of the insured’s property. It would seem with respect to certain exclusions relating to building components, the nature of the loss, or the proximate cause of damage that a coverage denial would almost necessarily require such an inspection, and any event be better served by an inspection and well-documented decision.