Volume XVIII, No. 11 (No. 467)
Friday, November 18, 2016
A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
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Phone: 716-849-8900
Fax: 716-855-0874
Long Island Office:
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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. They come in many shapes, colors and sizes. We’ll help you unravel them.
Happy Thanksgiving (with a little Thanksgiving history tossed in):
In the Coverage Pointers tradition, I bring you wishes for a Happy Thanksgiving, both from me and from the late President Woodrow Wilson, who said this, on November 17, 1916, proclaiming Thanksgiving Day to be on November 30:
It has long been the custom of our people to turn in the fruitful autumn of the year in praise and thanksgiving to Almighty God for His many blessings and mercies to us as a nation. The year that has elapsed since we last observed our day of thanksgiving has been rich in blessings to us as a people, but the whole face of the world has been darkened by war. In the midst of our peace and happiness, our thoughts dwell with painful disquiet upon the struggles and sufferings of the nations at war and of the peoples upon whom war has brought disaster without choice or possibility of escape on their part. We cannot think of our own happiness without thinking also of their pitiful distress.
Now, Therefore, I, Woodrow Wilson, President of the United States of America, do appoint Thursday, the thirtieth of November, as a day of National Thanksgiving and Prayer, and urge and advise the people to resort to their several places of worship on that day to render thanks to Almighty God for the blessings of peace and unbroken prosperity which He has bestowed upon our beloved country in such unstinted measure. And I also urge and suggest our duty in this our day of peace and abundance to think in deep sympathy of the stricken peoples of the world upon whom the curse and terror of war has so pitilessly fallen, and to contribute out of our abundant means to the relief of their suffering. Our people could in no better way show their real attitude towards the present struggle of the nations than by contributing out of their abundance to the relief of the suffering which war has brought in its train.
President Lincoln declared that the final Thursday in November would be celebrated as the day of Thanksgiving and it remained that way until President Franklin D. Roosevelt signed a joint resolution of Congress, on December 26, 1941, changing the national Thanksgiving Day to the fourth Thursday in December. He had moved the holiday by Presidential proclamation the previous two years but he “froze” the day on the fourth Thursday with the stroke of his pen.
PLRB Eastern Regional Adjusters Conference
I just returned from Richmond, VA, completing the cycle (Sacramento, St. Louis, and Richmond) for the PLRB’s Regional Adjuster Conferences, speaking on the subject Risk Transfer – Contractual Indemnity and Additional Insured Status. A great time was had by all. We welcome a number of new subscribers. So you know, what you’re reading is the cover letter for our biweekly publication. The issue is attached in Word format. Please feel free to do what so many of our subscribers find useful: cut and paste summaries into appropriate claims files.
For our new subscribers, you will note that our cover letter contains notes from most of our authors and [the favorite part of the letter for most readers], newspaper stories from 100 years ago today. We try to select stories that have relevance to current issues, are insurance related, provide historical perspective or are just plain fun.
Back issues of Coverage Pointers can be found on our website, www.hurwitzfine.com. Please feel free to contact us if you have any questions relating to this publication, its contents or New York insurance law.
Spring Training – Time to Plan:
This weekend, the first white stuff is scheduled to fall from the sky for the 2016-17 winter season. With the well-placed assumption that this will be snow and not dandruff, I begin to think about spring. When I think about spring, I think about flowers, warm weather, the beach and spring training.
When I think about spring training, I think about baseball and my insurance clients. In the late fall and winter, my insurance clients and friends begin to think about spring training for their claims professionals, setting up regional programs, webinars and related educational opportunities. We are happy to help you in that training. We customize topics for your organization but here are few samples of what we can offer:
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Tenders, Additional Insured Obligations, Indemnity Agreements and Priority of Coverage
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Protecting the Insurance Company’s Files from Discovery – Strategy in Protecting the Privilege or Responding Properly to Claims Files Subpoenas
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Chaos Breeds Resolution: Mediation and the Role of Coverage Counsel in Resolving Chaos
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Strategic Approaches to Resolving Insurance Coverage Disputes: Do We Defend and Start a DJ? Do We Sit Back and Wait? Declaratory Judgment Actions and Direct Actions
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Good Faith, Consequential Damages and Extra-Contractual Liability - the New York Experience
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NY Coverage Letters - Nuts & Bolts: How to Create and Write and Timely Send a Disclaimer Letter and NY’s Special Dangers with Reservation of Rights Letters
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Uninsured and Underinsured Claims Handling
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Endorsing Good Faith and Preventing Bad Faith Claims - First Party Cases
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Endorsing Good Faith and Preventing Bad Faith Claims - Liability Cases
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The Cooperation Clause - How to Handle
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No-Fault Arbitrations and Appeals: Mock Arbitrations
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The Serious Injury Threshold
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No Fault Regs - Knowledge is Power
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An Auto Liability Policy Primer
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A CGL Policy Primer
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A Homeowners Liability Policy Primer
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EUO's Under First Party Policies
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Insured-Selected Counsel: When is it Necessary and How to Avoid it?
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ADR and How to Get to "Yes"
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“Other Insurance”
Let us know how we can help. Let’s get it on the calendar. E-mail me at [email protected].
Syracuse Law Review Annual Survey of New York Insurance Law
Just published, the 2014-2015 Annual Survey of New York Insurance Law, authored by Dan Kohane and Audrey Seeley. Want to read it? Click here.
Wilewicz’ Wide World of Coverage
Dear Readers,
It looks like snow is in the forecast for this weekend up here in the Great White North (well, almost GWN – I know this turn of phrase generally refers to Canada, but we can see Canada from our offices – does that count?). This works out well, since the sixth season of Game of Thrones hit our stoop this week, so I will be very happily snowed in for a few days. Winter is coming!
This week in the WWW of Coverage, we feature a Second Circuit case hot off the presses. This past Wednesday, the court rendered Infrassure v. First Mutual. There, in a reinsurance dispute, at issue was interpretation of a policy with two arbitration provisions. One was in the body of the policy and assigned a New York forum, whereas the other was entitled “London Arbitration and Governing Law (UK and Bermuda Insurers Only”, and had the place of mediation set for London. Interestingly, the carrier made the argument that this letter provision was not limited to UK and Bermuda insurers because of the policy’s “Titles Clause”, which stated that titles were just that – titles that were there for the convenience of reading and did not actually affect coverage. Great argument. I guess they really wanted that trip to the UK. But the Second Circuit didn’t buy it. It was pretty clear to anyone reading that that endorsement was limited to... “UK and Bermuda Insurers Only”. Since the reinsurer was neither, it didn’t apply. Go figure.
Enjoy and stay warm!
Agnes
Agnes A. Wilewicz
From the History Channel – This Day in History, One Hundred Years Ago: Haig Ends Battle of Somme
Douglas Haig, commander of the British Expeditionary Force in World War I, calls off the Battle of the Somme in France after nearly five months of mass slaughter.
The massive Allied offensive began at 7:30 a.m. on July 1, 1916, when 100,000 British soldiers poured out of their trenches and into no-man’s-land. During the preceding week, 250,000 Allied shells had pounded German positions near the Somme River, and the British expected to find the way cleared for them. However, scores of heavy German machine guns had survived the artillery onslaught, and the invading infantry were massacred. By the end of the day, 20,000 British soldiers were dead and 40,000 wounded. It was the single heaviest day of casualties in British military history.
After the initial disaster, Haig resigned himself to smaller but equally ineffectual advances, and more than 1,000 Allied lives were extinguished for every 100 yards gained on the Germans. Even Britain’s September 15 introduction of tanks into warfare for the first time in history failed to break the deadlock in the Battle of the Somme. In October, heavy rains turned the battlefield into a sea of mud, and on November 18 Haig called off the Somme offensive after more than four months of slaughter.
Except for its effect of diverting German troops from the Battle of Verdun, the offensive was a miserable disaster. It amounted to a total gain of just 125 square miles for the Allies, with more than 600,000 British and French soldiers killed, wounded, or missing in action. German casualties were more than 650,000. Although Haig was severely criticized for the costly battle, his willingness to commit massive amounts of men and resources to the stalemate along the western front eventually contributed to the collapse of an exhausted Germany in 1918.
Altman’s Administrative (and Legislative) Agenda:
Greetings! There is nothing new to report on the legislative end, so instead, I bring you a holiday poem:
Thanksgiving just might be my favorite time of year,
A time that foodies long for, though a time most turkeys fear.
But for that one lucky bird who gets the White House pardon,
Toasts will raise, gravy pours, arteries will harden.
While I admire vegans, I could not enjoy
A Thanksgiving dinner that’s comprised of vegetables and soy.
The world “Tofurkey” is to me the vilest of curses,
Recipes, culled, no doubt, from Satanic Verses.
So, rejoice, this splendid day; eat all the food you crave.
But for the vegans reading this, dessert, for you, I’ll save.
Howard
Howard B. Altman
Wilson Won the Presidency, but Who Won the House?
The Oneonta Star
Oneonta, New York
18 Nov 1916
BOTH DEMOCRATS AND REPUBLICANS
CLAIMING A MAJORITY IN HOUSE
Returns Indicate G. O. P. Will Have 217,
Lacking One of Majority—Six Members Are
Independent
Several District Are Still In Doubt
Speculation as to who will be Elected Next Speaker
DISPUTES between the two parties over the control of the House of Representatives undoubtedly will continue until all the districts are accounted for by official canvass. Both Democrats and Republicans are claiming the majority of the body. …
Wilson eked out a narrow re-election, but his Democratic Party lost seats to the opposition Republican Party. Wilson's hybrid approach, which injected a progressive element into Democratic policies, had proved to be dissatisfying to much of the nation. International affairs also became important in the traditionally non-interventionist United States, as voters attempted to determine which party would be best served to keep the nation from entering The Great War.
Although the Republicans gained a plurality (216 Republicans to 214 Democrats), the Democrats narrowly maintained control of the House with minor party support, forming an alliance with the remaining third-party Progressives (who captured six seats) and Socialist Meyer London. The single Prohibition Party House Member, from California, aligned with the GOP). This was the last example (to date) of a type of coalition holding power in the House, rather than a single party winning a majority of seats. Specifically, this is also the only election in U.S. history when three different parties were able to form a coalition government instead of just two.
Because of this, it was only the second Congress where the party with the most seats was in opposition (versus being part of the ruling government) in the House, the first being the 34th Congress elected in 1854. This rare occurrence may have been why the parties' plan to form a coalition backfired, as voters quickly rejected the Progressive and Socialist parties in the next election. Meanwhile, the Democrats also lost support afterwards and would not control the House again until after the 1930 elections.
And because you wanted to know, James Beauchamp “Champ” Clark was reelected Speaker and served in that capacity until the end of that two year term.
Peiper’s Potables:
The past two weeks have been a bit of a whirlwind, huh. While it would have been easy to use the space to offer my commentary on the election, I trust most of you are suffering from pretty extreme fatigue. Now, no doubt, we can all suffer through post-election fatigue. Take heart, though, the campaign for 2020 will start in fewer than 18 months.
Standing as a counter-balance to the shifting winds of politics, I will take a few minutes to remember my Aunt Marie who just passed away after a lengthy battle with illness. For nearly 60 years, she lived, worked and essentially existed as a dairy farmer in Central Pennsylvania. Of which, by the way, some of that time included “encouraging” a young boy to enjoy his chores on the farm. Aunt Marie did not have a twitter account. She, to my knowledge, at least, never “liked” a post on Facebook. Despite that, she proved, quietly, in a day to day unassuming kind of way, that honesty, dedication to one’s work, and a simple understanding of “what’s right is right” is far more consistent than following what is currently trending on social media. A thought we can all take heart in. I salute her, and will remember her fondly.
The week, our first party corner of the publication was again on the light side. Fear not, however, as we have it on personal knowledge that appellate decisions involving property loss are forthcoming in the very near term. In the meantime, we’d suggest taking a close look at the Castlepoint case reviewed in the attached publication. The Court reminds us to ensure the subrogee actually derived its apparent rights from the appropriate party. Strangers to contracts are, in fact, just that. As such, a stranger can confer no rights in subrogation. A pretty simple concept, but one, which apparently needs repeating from time to time.
One final thing, if you happen to be in Western New York and are looking for a few last minute CLE credits, yours truly has been asked to speak at a local Erie County Bar Association CLE on Additional Insured Status and Risk Transfer on December 9th. It is an excellent program, and one that will engender good discussion with a lively audience. Hope to see some of you there.
That’s it for now. Enjoy Thanksgiving.
Steve
Steven E. Peiper
St. Louis Blues – A Century Ago:
The Tennessean
Nashville, Tennessee
18 Nov 1916
WOMAN OWNER OF
CARDS WANTS DIVORCE
ST. LOUIS, Nov. 17.—Mrs. Helene Robinson Britton, owner of the St. Louis National league baseball team, brought suit here today to divorce her husband, Schuyler P. Britton, president of the club.
Mrs. Britton asks for the custody of the children. Her petition states they were married in 1901 and that they separated November 13, 1916.
She sued him for a divorce in Cleveland in 1911, but they had a reconciliation about the time she became owner of the ball club through inheritance.
Helene Hathaway Robison Britton was the first woman to run a baseball franchise. She inherited the St. Louis Cardinals from her uncle Stanley Robison in 1911. She had to fight other owners, who did not like the idea of a woman joining their exclusive club, but by 1916 was holding the office of team president herself. She worked on attracting more female fans to the ballpark by multiplying the number of Ladies Days. She divorced her husband Schuyler Britton when he proved to be a lay-about drunkard and womanizer.
After the 1916 season, having found the responsibilities of the day-to-day running of the club excessive and in a precarious financial state, she decided to sell the team. The team's legal counsel, attorney James Jones put together a group of local businessmen who made an offer of $375,000. The sale was made, but Helene Britton had to file lawsuits to receive the full payment.
Hewitt’s Highlights:
Dear Subscribers:
Welcome to another serious threshold column. We are deep in November and Thanksgiving is on the horizon. The appellate courts issued a number of decisions for this edition, the busiest they have been in this area since before August. In one case, an infant plaintiff was alleged to have suffered severe psychological trauma from an accident. However, plaintiff’s expert failed to address the information in plaintiff’s own medical records that suggested the real issue for the infant plaintiff was the parents’ divorce, not the accident. In another, we have a rare exception to the presumption that the vehicle that is hit in the rear is not at fault when the vehicle backed into the other vehicle. Some of the cases also remind us that cessation of treatment is not a magic bullet win for defendants if plaintiff can reasonably explain why treatment ceased. One reason accepted was pregnancy and then childcare duties.
I hope you all get together with families and friends for the upcoming holiday. There are many things to be thankful for, and I am thankful for the readers of this column.
Until next time,
Rob
Robert Hewitt
Horses Get the Boot:
New York Herald
New York, New York
18 Nov 1916
HORSE CARS TO GO BY APRIL 1
P.S.C. Gets Promise from New York
Railways Company
The New York Railways Company yesterday notified the Public Service Commission that the last horse car will be taken from the streets of Manhattan by April 1, 1917. In fixing this date the company assured the commission that the promise must not be considered a joke.
The only line in the city on which horse cars regularly operate is the Madison Street and Avenue C line, a part of the route of which lies in Chambers Street.
The company, according to its statement to the Public Service Commission, had expected to have all horse cars off the line by November 15, but owing to delays in obtaining cars from the shops, the company has reported that it will be unable to put its first test car in operation before the latter part of November.
Tessa’s Tutelage:
Dear Readers:
Thanksgiving is upon us! One of the most exciting times of the year as it is filled with good food and family. I am especially excited as I hail from a very large family (I am the youngest of 8). Every year the members of my family create detailed lists of what we are thankful for and submit it to my Mother for disclosure on Thanksgiving. This list is serious. This list has rules. We are prohibited from listing generic, or overarching concepts such as “family” or “health;” those things are a given. Much to the delight, and dismay of all of these lists are meticulously chronicled and revisited … how else would we remember my late grandfather’s appreciation of a well-cushioned toilet seat (yes, really). This year I am thankful that I am only responsible for making the cranberry sauce. It is really the only thing with which I am trusted.
This week we have something that we do not get to talk about enough, subrogation and the “made whole” doctrine! If my cheeky (see what I did there) family anecdote did not get your attention that surely must have. In Grinage v Duwara, the Fourth Department considered if a third party could seek subrogation (stand in the shoes of the injured party to seek reimbursement for payments) when the record does not show that the plaintiff has been adequately compensated for his injuries.
Nonetheless, I hope that your Thanksgiving is as chaotic, cheerful, and merry as can be.
My best,
Tessa
Tessa R. Scott
Insurance Fraud – a Century Ago:
The Washington Post
Washington, District of Columbia
18 Nov 1916
SNARE FOR MOTORISTS
Adventurer Bumps Into
Mudguard as Basis for Suit
HIS PAL LISTS WITNESSES
Two Women Selected as Victims by
Pair of Fakers—One Has Presence of Mind to
Get Names of Witnesses for Defense of
Case—Insurance Company Fights Swindlers.
Special to the Washington Post
New York, Nov. 17.—All automobilists, especially women, should beware of the artful pair of adventurers who are lying in wait to entrap victims in damage suits. This is the way the scheme is worked, as shown by the experience of two well-known Brooklyn women last week.
They were driving along a downtown street at a reasonably slow rate of speed. Just as they neared the corner they saw a man dart suddenly from the sidewalk and start to cross the path of the auto. The horn was blown and the car slowed down. The man paid no attention to the warning of the car and kept bearing off at an angle, which was bound to bring him into collision with the machine.
Bumps into Mudguard
By this time the car had been brought almost to a standstill. Just before it came to a dead stop the man bumped into the mudguard and immediately tumbled over flat on his back. A look of pain appeared on his face.
At the same instant a red-faced man rushed up to the care and shouted:
“What do you mean by running down that poor man? This is an ambulance case; this is an ambulance case.”
With that he pulled a notebook from his pocket and began going around in the gathering crowd asking for names and addresses. In the meantime he was shouting out what a terrible thing it was for motorists to be running down pedestrians.
Woman Driver Terrified
The woman driver was terrified. In spite of her efforts to get out of the man’s way the latter had succeeded in bumping into the car, and then gave a good imitation of a man mortally injured. There was not a policeman in sight. The second passenger kept her nerve, got out, and commenced to get names and addresses, too.
A couple of days later the owner of the car got a summons in a damage case. The complaint was turned over to the insurance company, which is now investigating to determine just how the claimant could have been hurt in the “collision.”
Barnas on Bad Faith:
Hello again:
Diving right into the cases this week, of which I have three for your reading pleasure. In Martin, the Supreme Court of Oklahoma concludes that the choice of law analysis for torts rather than breach of contract cases applied to a bad faith claim. In so deciding, it reasoned that bad faith is an independent tort that is separate and distinct from the breach of contract cause of action.
Sticking with the choice of law theme, the Eastern District of New York concluded that New York law applied to Plaintiff’s bad faith claim in Toussie. Toussie is a nice decision for insurers when it comes to first party bad faith claims and claims for violation of General Business Law 349. Relying on Rocanova and New York University, the court dismissed Plaintiffs’ bad faith claim based on their failure to state any tortious conduct independent from the denial of the insurance claim. Plaintiffs’ General Business Law claim was also dismissed because they failed to plead an impact on the public at large. As a reminder, a plaintiff seeking to state a claim under General Business Law 349 must demonstrate that the conduct complained of has a broad impact on consumers at large. A private dispute over coverage between an insured and insurer is insufficient.
Finally, Olson is an oldie but a goodie. The insureds moved for an appraisal after a fire loss. Much of the documentation demonstrating proof of ownership was apparently destroyed in the fire. Upon receiving their contents inventory, the insurer agreed to pay all the items valued at $999 or less, but demanded more documentation for items with a claimed value over $1,000. In compelling the appraisal, the trial court stated that the insured’s unilateral value determination on items less than $1,000 and extensive demands for documentation destroyed in the fire illustrated both bad faith and unfair dealing.
I hope everyone has a very Happy Thanksgiving.
See you next time.
Signing off,
Brian
Brian D. Barnas
Unexpected Guests?
Democrat and Chronicle
Rochester, New York
18 Nov 1916
USES FOR CHEESE MANY
Mechanics Seniors Give Demonstration
of Ways of Preparing
A demonstration of just how the housewife combats the odds against her when she is confronting suddenly the problem of serving refreshments to unexpected visitors, was given last night at Mechanics Institute by members of the women’s senior class, under the direction of Miss May Gooley and Miss May Oaks.
Dainty and appetizing lunches that might be prepared on a few minutes’ notice, were explained and demonstrated, under the general heading, “Cheese Dishes.” Baked and toasted tidbits were made under the eyes of those at the demonstration.
PHILLIPS’ FEDERAL PHILOSOPHIES
Hello, All:
Have you ever done that thing where you spend, like, twenty minutes trying to find your glasses, you look everywhere, turn your drawers inside out, check the fridge because that one time you found them in the leftover pizza box, move the cat to see if he sat on them, dump all your purses out, and then discover they’ve been sitting on top of your head the whole time? No? Me neither.
The Southern District did something like that in Barba v. Allianz Global Risks. Well, maybe not exactly like that, but I feel like I’ve been slacking in the segue department. In Barba, the district court took some time to consider the effect of a “Separation of Insureds” clause on a policy exclusion based on ownership: if a helicopter was owned by a company, could the company president avoid an ‘Owned Aircraft exclusion’ based on the separation clause? After a trip through several different jurisdictions, the district court said no – based on the language found right there in the exclusion itself.
As always, thanks for reading.
J.
Jennifer J. Phillips
Thanksgiving Postscript:
In 1916, the Olean Restaurant (south of Buffalo) was offering Thanksgiving dinner for 25 cents a plate. It included roast duckling with dressing, spare ribs of pork with dressing, roast beef, green peas, cranberry sauce, celery, stuffed olives, apple pie, pumpkin pie, mince pie, plum pudding, ice cream, coffee, tea and milk. No turkey, though.
At Lena’s Café in Fort Myers, you could have an oyster cocktail, mince chicken on toast or roast turkey with dressing and cranberry sauce along with mashed potatoes, spaghetti (who wouldn’t want that on Thanksgiving), along with dessert for 35 cents.
Highlights of the Attached Issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
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Special Relationship between Agent and Broker Properly Alleged to Give Rise to Potentially Viable Claim for Breach of Fiduciary Duty
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
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Court Does Not Have to Address Whether Plaintiff Raised an Issue of Fact When Defendants Fail to Meet Their Prima Facie Buren
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Infant Plaintiff’s Expert Failed to Explain the Evidence in Plaintiff’s Own Medical Records that Her Psychological Trauma Was Related to Her Parent’s Divorce and Not the Accident
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Without Limitations There Can Be No Finding of Serious Injury and Minor Limitations Are Not Enough
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Jury Could Give Credence to Earlier Report that Showed Only Minor Limitations As Opposed to Later Examinations by an Expert
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Plaintiff Can Raise an Issue of Fact Even with a Cessation of Treatment if there is a Reasonable Explanation Offered
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Court Does Not Have to Address Whether Plaintiff Raised an Issue of Fact When Defendants Fail to Meet Their Prima Facie Buren
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Defendants Submitted Medical Evidence Establishing No Injury to Lumbar Spine
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Plaintiff with Pre-Existing Conditions Must Address Condition and Why It Is Not the Cause of the Injuries
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Competing Expert Opinions All Based on the Medical Record and Examination Led to Issue of Fact
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
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Plaintiff Establishes Breach of Contract, but Summary Judgment Denied Based Upon Question over its Standing to Assert the Claim in the First Place
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Motion to Amend to Name Proper Subrogor was Appropriate Where there was No Prejudice to the Defendant and the Record Established the Proposed Subrogor was the Real Party in Interest
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Plaintiff’s Decision to Settle Employment Discrimination Claim, Precludes Recovery of Future Workers’ Compensation Benefits
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
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Second Circuit Holds Arbitration Clause Does Not Displace Arbitration Endorsement Due to Limiting Language
JEN’S GEMS
Jennifer A. Ehman
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Trial Court Declines to Further Stay Discovery in Declaratory Judgment Action Brought by Insurers of the NFL for Concussion Related Claims
BARNAS ON BAD FAITH
Brian D. Barnas
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Tort Conflict of Laws Analysis Applied to Bad Faith Claim
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Lack of Independent Tortious Conduct was Fatal to Plaintiffs’ Bad Faith Claim
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Insurer’s Handling of Fire Claim Illustrated Bad Faith and Unfair Dealing
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
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Separation of Insureds Anxiety
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
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Nothing new this week, but perhaps after the holiday we’ll have new legislation to be thankful for. Happy, healthy Thanksgiving!
EARL’S PEARLS
Earl K. Cantwell
[email protected]
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How Is a Policy Found to be “Ambiguous”?
Best wishes to each of you for a joyous Thanksgiving, my favorite holiday of the year.
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
Twitter: @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
Agnes A. Wilewicz
ASSISTANT EDITOR
Jennifer A. Ehman
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
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
Howard B. Altman
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
Patricia A. Fay
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Jennifer J. Phillips
Diane F. Bosse
Topical Index
Hewitt’s Highlights on Serious Injury
Tessa’s Tutelage
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Barnas on Bad Faith
Phillips’ Federal Philosophies
Altman’s Administrative (and Legislative) Agenda
Earl’s Pearls
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
11/09/16 JT Queens Carwash, Inc. v. JDW & Associates, Inc.
Appellate Division, Second Department
Special Relationship between Agent and Broker Properly Alleged to Give Rise to Potentially Viable Claim for Breach of Fiduciary Duty
Frank Roman and JT Queens Carwash, Inc., (“Carwash”) sued his insurance brokers JDW & Associates, Inc. and its owner Weiss (“JDW”) claiming that certain insurance policies procured by JDW failed to name the Carwash’s landlord as an additional insured. The complaint further alleged that the JDW issued a certificate of insurance falsely stating that the landlord had been added as an additional insured on one of the policies. The complaint asserted causes of action sounding in breach of contract, negligence, breach of fiduciary duty, and negligent misrepresentation. This is an appeal dealing with a motion to dismiss the complaint.
Corporate officers may not be held personally liable on contracts of their corporations, provided they did not purport to bind themselves individually under such contracts. However, corporate officers may be held personally liable for torts committed in the performance of their corporate duties.
In considering a motion to dismiss the court should accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory.
The complaint, as amplified by the evidentiary materials submitted by the plaintiffs, alleged that Weiss personally signed a certificate of insurance falsely stating that the plaintiffs' landlord had been added as an additional insured on a certain commercial general liability insurance policy, and forwarded this certificate to the plaintiffs, knowing that it was required by the plaintiffs' landlord. This is sufficient to state a cause of action against Weiss, based on his personal participation in the commission of a tort, but only in his capacity as a corporate officer, not personally.
As to the claim against JDW, the corporation, an insurance broker acting as an agent of its customer has a duty of reasonable care to the customer to obtain specifically requested coverage within a reasonable time after the request, or to inform the customer of the agent's inability to do so, but the agent owes no continuing duty to advise, guide or direct the customer insured to obtain additional coverage. However where a special relationship develops between the broker and client, the broker may be liable, even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage.
There are three "exceptional situations" which may give rise to such a special relationship: " (1) the agent receives compensation for consultation apart from payment of the premiums; (2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on”.
Here, the complaint sufficiently alleged that there was a course of dealing between JDW and the plaintiffs over an extended period of time, which may have given rise to a special relationship between them.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
11/16/16 Bruno v. Flip Cab Corp.
Appellate Division, Second Department
Court Does Not Have to Address Whether Plaintiff Raised an Issue of Fact When Defendants Fail to Meet Their Prima Facie Buren
The defendants failed to meet their prima facie burdens of demonstrating that the plaintiff did not sustain a serious injury to his lumbar spine within the meaning of Insurance Law § 5102(d) as a result of the subject accident. Although the injured plaintiff alleged in the amended bill of particulars that he sustained a serious injury to his lumbar spine, the defendants failed to submit any medical evidence addressing that alleged injury. Since the defendants did not sustain their prima facie burdens, it is unnecessary to determine whether the papers submitted by the plaintiffs in opposition were sufficient to raise a triable issue of fact.
The court also held that plaintiff Livoti twice failed to appear for depositions in violation of two court orders and never responded to a demand for a bill of particulars. Livoti's failures to comply with court-ordered discovery coupled with her failure to provide any excuse therefor supported an inference that her conduct was willful and contumacious and she would not be allowed to testify as to the issues in her complaint.
11/15/16 Diaz v. Barimah
Appellate Division, First Department
Infant Plaintiff’s Expert Failed to Explain the Evidence in Plaintiff’s Own Medical Records that Her Psychological Trauma Was Related to Her Parent’s Divorce and Not the Accident
Defendants established prima facie that the infant plaintiff did not suffer a serious psychological injury as a result of the accident in which she was struck by defendants' vehicle, through an affidavit by a psychologist who examined her and found no objective symptoms of posttraumatic stress disorder or any other psychological illness. In opposition, plaintiffs failed to raise an issue of fact. Plaintiffs’ expert did not consider or address the evidence in the infant plaintiff's own medical records suggesting that her psychological symptoms were causally related to her parents' ongoing divorce and custody dispute, and thus her opinion that the accident caused the psychological injuries is impermissibly conclusory. Defendants also established prima facie that the infant plaintiff did not suffer a 90/180-day injury, through her own testimony that she missed only one day of school and the absence of any evidence of a "medically determined" injury, in opposition to which plaintiffs failed to raise an issue of fact.
11/15/16 Lopez v. Morel-Ulla
Appellate Division, First Department
Without Limitations There Can Be No Finding of Serious Injury and Minor Limitations Are Not Enough
Plaintiff alleges she suffered serious injuries to her knees, back and neck as the result of an accident that occurred when defendant Fernandez's car collided with the Castillo defendants' livery cab in which she was a passenger. The Castillo defendants established their absence of fault in connection with the accident. Defendant Morel-Ulloa testified that Fernandez's vehicle backed up into the cab while it was stopped to discharge plaintiff, even though he honked his horn in warning; plaintiff testified that Fernandez's car backed into the cab while it was slowing down; and Fernandez did not believe there was an accident, but testified that she rolled back slightly to let a truck pass and was informed that she made contact with another vehicle. While these versions differed, none of them provided any basis for finding that Morel-Ulloa was at fault. Fernandez did not oppose the motion, and thus did not offer any further explanation for her action in rolling back into the Castillo vehicle, which is negligent as a matter of law under Vehicle and Traffic Law Section 1211[a]. Plaintiff's assertion that Morel-Ulloa could have done something to avoid the accident did not raise an issue of fact, since it was speculative.
Defendants made a prima facie showing of a lack of serious injury through the reports of their radiologist, who found MRI evidence of preexisting degenerative disease in the claimed injured body parts, and their orthopedist, who found normal to near normal ranges of motion and no evidence of orthopedic injury caused by the subject accident. In opposition, plaintiff raised an issue of fact as to whether she sustained serious injuries to her lumbar spine, by submitting the affirmation of her treating physician, who rendered a nonconclusory opinion adequately addressing the defense claims that the spine injury was degenerative, and found limitations caused by the subject accident.
Plaintiff's treating surgeon also adequately addressed the evidence of degeneration in her knees, which was acknowledged by her own radiologist's report, and explained why he believed the accident caused the meniscal tears that he observed in both knees during surgery. However, the limitations that the surgeon measured in both knees were minor, and therefore insufficient to raise an issue of fact as to significant or permanent consequential limitations in use of her knees.
As to the cervical spine claim, plaintiff's doctor rebutted the defense claims of degeneration, but did not provide any evidence of limitations. Absent limitations, there is no serious. In any event, if plaintiff establishes a serious injury to her lumbar spine at trial, she will be entitled to recover damages for all injuries caused by the accident, even those that do not meet the serious injury threshold.
11/15/16 Sanchez v. Alam
Appellate Division, First Department
Jury Could Give Credence to Earlier Report that Showed Only Minor Limitations As Opposed to Later Examinations by an Expert
The Appellate Division found a jury verdict in favor of the defendants was based on a fair interpretation of the evidence. Although plaintiff established through the testimony and reports of his radiologist that he sustained a herniated lumbar disc as a result of the motor vehicle accident, the jury could rationally have found that he did not sustain a "permanent consequential" or "significant" limitation in the use of his lumber spine as a result of the accident. Plaintiff relied on his chiropractor's findings of limitations during examinations conducted in February 2012 and July 2014. However, the records from plaintiff's last day of treatment for the accident, in July 2009, reflect only a minor limitation in flexion and plaintiff presented no proof reconciling the 2012 and 2014 findings with the 2009 findings. As to plaintiff's claimed 90/180-day injury, the testimony of his chiropractor that he was disabled from work for six months is belied by the chiropractor's own office records, and plaintiff presented no other objective medical proof in support of this claim
11/10/16 Strangio v. Vasquez
Appellate Division, Fourth Department
Plaintiff Can Raise an Issue of Fact Even with a Cessation of Treatment if there is a Reasonable Explanation Offered
With respect to the permanent consequential limitation of use category, even assuming, arguendo, that defendant met her initial burden of establishing her entitlement to judgment as a matter of law, the Appellate Division concluded that plaintiffs raised an issue of fact by submitting the affirmation of plaintiff's orthopedic surgeon, who measured significant restrictions in the flexion, extension and rotation of plaintiff's cervical spine three years after the accident and opined that those restrictions are permanent. With respect to the significant limitation of use category, we conclude that defendant raised an issue of fact with her own submissions in support of the motion. Those submissions included evidence that plaintiff's orthopedist and another physician had reviewed an imaging study and found a herniated disc in plaintiff's cervical spine, and defendant also submitted objective evidence of the extent of alleged physical limitations resulting from the disc injury i.e., medical records from plaintiff's treating physicians designating numeric percentages of plaintiff's range of motion losses. Contrary to defendant's contention, plaintiff's cessation of treatment is not fatal to her claim. Plaintiff offered a reasonable explanation for discontinuing treatment, and she is not required to create a record of needless treatment.
11/09/16 Peters v. Rice
Appellate Division, Second Department
Court Does Not Have to Address Whether Plaintiff Raised an Issue of Fact When Defendants Fail to Meet Their Prima Facie Buren
The defendants failed to meet their 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 papers submitted by the respondents failed to adequately address the appellant's claim, set forth in the bill of particulars, that he sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the respondents failed to meet their prima facie burden, it is unnecessary to determine whether the papers submitted by the appellant in opposition were sufficient to raise a triable issue of fact. No case facts are given.
11/09/16 Flaack v. Tavarez-Estevez
Appellate Division, Second Department
Defendants Submitted Medical Evidence Establishing No Injury to Lumbar Spine
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. They submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the plaintiff's spine was not caused by the subject accident. In opposition, the plaintiff failed to raise a triable issue of fact. No case facts are given.
11/03/16 Brown v. Bawa
Appellate Division, First Department
Plaintiff with Pre-Existing Conditions Must Address Condition and Why It Is Not the Cause of the Injuries
Defendants established entitlement to judgment as a matter of law by showing that plaintiff did not suffer a serious injury to his left shoulder. Defendants submitted the affirmed reports of a radiologist and an orthopedist who opined that the MRI of plaintiff's left shoulder revealed a preexisting congenital condition, which predisposed the shoulder joint to degenerative changes, which were also depicted in the MRI. In opposition, plaintiff failed to raise a triable issue of fact. As plaintiff's MRI report showed a pre-existing condition, he was required to address that condition and explain why it was not the cause of his claimed injuries Plaintiff's orthopedic surgeon opined, based on his observations and review of medical records, that the injuries were caused by the accident, but he did not rebut the opinions of defendants' experts that plaintiff's shoulder condition was related to a preexisting congenital condition.
11/03/16 Acosta v. Ramos
Appellate Division, First Department
Competing Expert Opinions All Based on the Medical Record and Examination Led to Issue of Fact
Defendants met their burden of showing that plaintiff did not sustain a serious injury to her right shoulder as a result of the accident by submitting the affirmed report of a radiologist who opined that the MRI of the 22-year-old plaintiff's right shoulder showed a labrum tear, which is a chronic degenerative condition, and no evidence of a traumatic supraspinatus tear. In addition, after reviewing plaintiff's postaccident medical records, defendants' expert neurologist noted that plaintiff made no contemporaneous complaints of shoulder pain and that the first record of such complaints was four months later.
In opposition, plaintiff submitted medical records showing that she complained of shoulder pain to a medical provider six days after the accident, that she continued to complain of shoulder pain while receiving therapy, and that she sought further treatment for her shoulder about four months after the accident; she then underwent an MRI that revealed supraspinatus and labral tears for which she eventually underwent arthroscopic surgery. These medical records provided sufficient evidence of contemporaneous treatment to permit a finding that plaintiff's shoulder injuries were a result of the accident. Further, plaintiff's orthopedic surgeon disputed defendants' experts' findings of a degenerative condition and opined, based on his examination of plaintiff, his observations during surgery, his review of the MRI, and plaintiff's lack of history of previous shoulder injuries, that the shoulder tears were causally related to the accident. The surgeon also made findings of limitations in range of motion, and attributed these limitations, as well as the objective findings of ligament tears, to plaintiff's accident.
Defendants argue that plaintiff's prolonged delay in seeking further treatment for her shoulder after the surgeon diagnosed tears precludes a finding of serious injury. However, plaintiff's explanation for the gap in treatment, including her pregnancy and ensuing care of the baby without help, is sufficient to raise an issue of. Defendants' other arguments concerning discrepancies in plaintiff's medical records raised issues of fact for a factfinder to resolve.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
11/16/09 Fairlane Fin. Corp. v Longspaugh
Appellate Division, Second Department
Plaintiff Establishes Breach of Contract, but Summary Judgment Denied Based Upon Question over its Standing to Assert the Claim in the First Place
Defendant previously sold insurance and annuity policies for non-party National Western. As part of the agreement, defendant was paid a commission for any policy underwritten through her efforts. However, if such policy was later cancelled with premiums returned, it was agreed that defendant would forfeit the earned commission. Apparently, several policies sold by defendant were rescinded with premiums returned. As such, by way of letters dated April 24th and April 30th, National Western demanded refunded commissions.
Thereafter, on May 14th, National Western assigned its rights to Fairlane. However, National Western continued to demand repayment of the previously referenced commissions, as well as commissions earned on additional policies that had been cancelled. National Western’s efforts continued through August of the same year.
Eventually, Fairlane commenced this action seeking recovery of the commissions, and three years after starting the action moved for summary judgment. The Court’s opinion provides a nice primer on the elements of breach of contract claim, and states that plaintiff proved the existence of a contract, the duty of defendant to repay commissions on returned policies, and defendant’s breach. Nevertheless, plaintiff established a triable issue of fact with regard to whether Fairlane had standing to prosecute the action in light of National Western’s attempts to collect the commissions, even after the purported assignment. In addition, the Court found a question of fact existed as to whether defendant knew, or should have known, the commissions were returnable.
11/09/16 Castlepoint Ins. Co. v Command Sec. Corp.
Appellate Division, Second Department
Motion to Amend to Name Proper Subrogor was Appropriate Where there was No Prejudice to the Defendant and the Record Established the Proposed Subrogor was the Real Party in Interest
Castlepoint’s insured, Panichi Holding Corp. d/b/a Royal Carting Service Co., sustained a fire loss on August 29, 2009. After paying the loss, Castlepoint commenced the instant case, in subrogation, against Command. At the time of the fire, Command was employed as a security service by Royal Carting Service Co. It was alleged that Command’s negligence and/or failure to perform under the security agreement was the cause of the fire.
Upon being served with the Complaint, Command immediately moved to dismiss on the basis that Castlepoint did not have capacity to commence the action. The Record revealed that the property was owned by Watch Hill, and the building operated by Panichi. The Castlepoint policy was issued to Royal Carting, but named both Watch Hill and Panichi as “extensions” of the named insured.
Command also moved for summary judgment, but that portion of its motion was denied due to a question of fact over its potential negligence.
In addition to opposing Command’s motion, Castlepoint cross-moved to amend its Complaint. As an initial matter, Castlepoint sought to change the name of Royal Carting Service, Inc. to its correct iteration of Royal Carting Service Co. Not surprisingly, this portion of the application was granted as a cure for an otherwise ministerial defect.
Castlepoint also sought to assert its claim on behalf of Panichi and Watch Hill. The trial court denied both applications, and the Appellate Division partially overturned. With regard to Panichi, the Court ruled that Castlepoint presented enough evidence to establish that Royal Carting is simply a “business name” under which Panichi operated. As such, Panichi was the “real party in interest,” and therefore had a meritorious cause of action. Moreover, the Court noted that there was no prejudice to Command, as all parties knew Panichi’s relationship with Royal Carting.
There was no such proof adduced to support a connection between Watch Hill and Royal Carting. Accordingly, the Court affirmed the trial court’s decision to deny this portion of Castlepoint’s application. Simply stated, there was no evidence that Watch Hill was a party to, nor a third-party beneficiary of, the Royal Carting/Command security agreement. Accordingly, as a stranger to the contract, Watch Hill could not establish that it was owed a duty by Command.
11/17/16 In re: Shiner v SUNY at Buffalo
Appellate Division, Third Department
Plaintiff’s Decision to Settle Employment Discrimination Claim, Precludes Recovery of Future Workers’ Compensation Benefits
Plaintiff commenced this action against her employer, University at Buffalo, after she was sexually harassed and groped by her supervisor at an office holiday party. Initially, plaintiff filed a claim for workers’ compensation benefits for posttraumatic stress and a claimed neck injury. It is reported that plaintiff, soon thereafter, began receiving benefits from the workers’ compensation carrier.
Plaintiff also commenced a lawsuit against the University and her supervisor in Federal Court asserting claims of hostile work environment, discrimination, battery and assault. The Federal Court action was settled 2 ½ years later in August of 2013.
The workers’ compensation carrier commenced an action shortly thereafter arguing that plaintiff’s settlement violated Workers’ Compensation Law § 29(5) which required the carrier’s consent prior to settling a third-party action. In opposition, plaintiff argued that Section 29 only applied to the “negligence or wrong of another not in the same employ.” As the supervisor was a co-employee, she reasoned that the Federal Court matter was not a “third-party action,” and thus beyond the scope of Section 29.
The Workers’ Compensation Board found that Section 29 applied to plaintiff’s action against the University, and the Appellate Division affirmed. In so holding, the Court noted that the legislative design provides reimbursement for the carrier “whenever a recovery is obtained in tort for the same injury that was a predicate for the payment of compensation benefits.” The court went on to reject the distinction between the tortfeasor being a co-employee or a total stranger. Under either scenario, the plaintiff is still recovering in tort, and as such the Section 29 requirement of consent applied. Accordingly, the resolution of the Federal Court action resulted in plaintiff forfeiting any future benefits from the compensation carrier.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
11/16/16 Infrassure, Ltd. v. First Mutual Transportation Assurance
United States Court of Appeals, Second Circuit
Second Circuit Holds Arbitration Clause Does Not Displace Arbitration Endorsement Due to Limiting Language
At issue in this case was the interpretation of two arbitration provisions in one policy. The facts in the decision are scant, though we understand that this coverage dispute stems from Sandy-related claims, and the decision made the difference between arbitrating in New York versus in London.
The reinsurance certificate at issue contained two potentially-applicable arbitration clauses. First, the body of the certificate stated that “any dispute arising out of the interpretation, performance or breach of this Certificate” was to be arbitrated according to specified sets of rules. The Second was a separate endorsement headed “LONDON ARBITRATION AND GOVERNING LAW (UK AND BERMUDA INSURERS ONLY)”, stated that it applied to “any dispute, controversy or claim arising out of or relating to this agreement or the breach, termination or invalidity thereof”, and prescribed a separate set of rules for arbitration.
Notably, and indisputably, the reinsurer here was neither a UK nor a Bermuda insurer. Nevertheless, the ceding carrier made this argument: “...the tension between the two competing arbitration clauses is resolved by Paragraph AA (the “Titles Clause”), which states: “The several titles of the various paragraphs of this Certificate (and endorsements ... attached hereto) are inserted solely for convenience of reference and will not be deemed in any way to limit or affect the provisions to which they relate.” Thus, the argument was, the parenthetical above did not limit the endorsement to insurers of those countries.
The Second Circuit was not convinced. They found the provisions to be unambiguous. While a creative argument, it was clear that the language of that separate endorsement was meant to limit application to UK and Bermuda insurers.
Jennifer A. Ehman
10/28/16 Alterra Am. Ins. Co. v National Football League
Supreme Court, New York County
Judge Jeffrey K. Oing
Trial Court Declines to Further Stay Discovery in Declaratory Judgment Action Brought by Insurers of the NFL for Concussion Related Claims
On May 8, 2015, the Eastern District of Pennsylvania gave final approval of a class settlement resulting from lawsuits filed by NFL players and their families alleging neurological injuries and conditions as a result of concussive and subconcussive impacts. Thereafter, on April 18, 2016, a three-judge panel of the Third Circuit affirmed the trial court’s approval, and en banc rehearing was denied. As of the date of this decision, a petition seeking review from the U.S. Supreme Court was still pending. Of note, this class action settlement did not resolve all the lawsuits as more than 150 players opted out of the settlement. No discovery has taken place in the opt-out litigation.
Following the commencement of these lawsuits, but before the settlement, certain insurers brought this declaratory judgment action against the NFL, NFL Properties and others. In March 15, 2013, Judge Jeffrey K. Oing agreed to stay prosecution of the declaratory judgment action pending the resolution of the underlying action because of claimed discovery related concerns that could prejudice the NFL entities.
The court then brought the parties back on November 16, 2015, the day after the class action was finalized. At the conference, the insurers lobbied the court that it was finally time to move forward with discovery in the DJ action. The NFL entities objected due to the pending petition to the Supreme Court and the open opt-out litigation, and brought this motion for an order staying prosecution of all indemnity-related claims.
In support of the argument for a stay, the NFL entities claimed that by allowing discovery on the indemnity-related claims to go forward the insurers would essentially be assisting plaintiffs with respect to establishing the NFL entities’ liability. For instance, the insurers asserted an “expected or intended” defense (i.e., that the NFL entities expected or intended the injuries suffered by the plaintiffs). They also argued that to permit discovery here would deprive the underlying court of the authority to manage and control discovery in the opt-out litigation and would be misallocation of resources.
In considering these arguments, the court acknowledged the existence of case law holding that determination of indemnity-related issues must await resolution of the underlying personal injury action for which coverage is sought. But, the court noted, plaintiff insurers in this action are not seeking determination concerning the indemnity coverage. Rather, they merely want discovery. And, discovery concerning indemnity coverage issues is not the same as adjudicating them.
The court then went on to note that despite the case law cited by the NFL entities, adjudication may be appropriate in certain instances where as a matter of law it can be concluded that there is no possible factual or legal basis on which the insurer may be held liable under the policy. The court questioned how such a determination could be made without discovery.
Lastly, the court addressed the NFL entities argument that, pursuant to CPLR 2201, it was just for a stay to be granted. The court found that such a situation was not present considering the lack of complete identity of the parties. It also noted that the claims advanced in the underlying action were essentially negligence and fraud based claims whereas the claims in the DJ action concerned coverage. It then noted that, despite the NFL’s argument that discovery in the DJ action could be used against it in the underlying, this by itself was not a basis for a stay. Accordingly, the court denied the motion and directed the parties to submit a proposed case management plan.
Brian D. Barnas
11/08/16 Martin v. Gray
Supreme Court of Oklahoma
Tort Conflict of Laws Analysis Applied to Bad Faith Claim
Kourtni S. Martin (suffered serious injuries from an automobile collision in Oklahoma City with Nicholas L. Gray on May 31, 2013. At the time of the collision, Martin had UM coverage with Goodville Mutual Casualty Company. Martin’s parents purchased the policy while they lived in Kansas. She was, however, a listed/rated driver in the policy. Before the collision, Martin’s parents notified the Kansas agent that she was moving to Oklahoma to live with her grandmother and that her vehicle would be garaged in Oklahoma. After the collision, the claim was reported to the agent in Kansas who then transmitted the claim to Goodville, which is located principally in Pennsylvania. The claim was adjusted out of Pennsylvania. Martin was unable to locate Gray, and her attempts to serve Gray, or his insurer, in Oklahoma and Texas failed.
Martin filed a lawsuit against Gray on January 4, 2015, alleging negligence. Martin sought compensation from Goodville pursuant to her UM policy and negotiations began between Martin and Goodville regarding medical bills and projected future medical bills substantially in excess of $100,000. Goodville offered $27,000 for medical expenses under the “Kansas No Fault Benefits” and $10,000 in UM coverage.
On August 17, 2015, Martin filed an amended petition, which added breach of contract and bad faith claims against Goodville. In response, Goodville filed a motion to dismiss the bad-faith claim insofar as Kansas law does not recognize such a claim as a matter of law. The trial court granted the motion and held Kansas law applied.
The Supreme Court of Oklahoma concluded that the trial court erred in concluding that Kansas law applied to both claims because a bad-faith claim arises out of contract. Under Oklahoma law, an insurer’s breach of its duty to act in good faith gives rise to an independent tort claim for which consequential and sometimes punitive damages are available. Thus, the trial court should have applied the choice of law analysis for a tort claim, which in Oklahoma focuses on the most significant relationship to the claim. Here the actions by Goodville related to the bad-faith claim occurred primarily in Oklahoma and Pennsylvania: (1) any injury from the alleged bad faith occurred in Oklahoma where Martin was located; (2) the alleged conduct causing injury from bad faith occurred in Oklahoma or Pennsylvania, where the claim was handled; (3) the domiciles of Goodville and Martin were Pennsylvania and Oklahoma, respectively, and (4) the place where the relationship between the parties occurred was yet to be determined.
11/03/16 Toussie v. Allstate Insurance Company
United States District Court, Eastern District of New York
Lack of Independent Tortious Conduct was Fatal to Plaintiffs’ Bad Faith Claim
The Toussies owned a beachfront home in Brooklyn. The home contained a wide array of valuable personal property. Both the Toussies' home and their property were insured under an Allstate's “Deluxe Plus” homeowner's insurance policy. In October, 2012, the Toussies' home was significantly damaged by Hurricane Sandy while the Toussies were out of town. The storm broke through the walls of the home, leaving a large opening, and knocked out utilities, including the home's security system. After the storm, the Toussie's home was looted, and property that was not damaged by the floodwaters or wind was stolen.
The Toussies filed multiple claims for coverage under various aspects of their insurance policy. Allstate eventually paid most of their claims. The present dispute arose from Allstate's refusal to pay a $1.65 million theft claim for items stolen from the Toussies' home following Hurricane Sandy. The Toussies filed a lawsuit alleging breach of contract, bad faith denial of an insurance claim, and deceptive business practices in violation of New York General Business Law § 349. Allstate moved to dismiss.
First, the Court concluded that New York law applied. The Toussies were domiciled in New York. Allstate is incorporated in, and has its principal place of business in, Illinois. Finally, Allstate employees in Alabama allegedly committed the torts in question. However, New York law applied because the Toussies were injured in New York.
Turning to the Toussies’ bad faith claim, the Court concluded that they had failed to state a claim for damages other than damages for breach of contract. The Toussies failed to acknowledge any independent tortious conduct separate from the denial of their insurance claim. Plaintiff’s bad faith claim was dismissed with prejudice because they had no allegations of an independent tort.
The Toussies’ General Business Law § 349 claim was also dismissed. The Toussies could not show that their dispute with Allstate had an impact on the public at large as was required to state a General Business Law § 349 claim. The dispute was unique to the parties. The only public-directed actions alleged in the complaint was advertising and selling insurance policies. The private contractual dispute between the Toussies and Allstate was insufficient.
09/20/16 Olson v. Eastern Mutual Insurance Company
Supreme Court, Columbia County
Insurer’s Handling of Fire Claim Illustrated Bad Faith and Unfair Dealing
Petitioners John and Nancy Olson suffered a total loss when a fire destroyed their home on March 4, 2015. Eastern Mutual Insurance Company insured the home. Petitioners claimed that over 1,000 items were damaged in the fire. In November 2015, Petitioners presented an extensive inventory of the personal property that they lost in the fire totaling an actual cash value of $353,360.00. The inventory was produced on a 32 page excel spreadsheet that took Nancy Olson four months to complete. Petitioners were examined under oath, and provided proof of loss affidavits.
In February 2016, Eastern’s adjuster advised Petitioners it would only pay $143,791.00, and that was only for claimed items under $999.00. Eastern requested more proof for items valued over that amount. Petitioners then sent additional photographs on multiple occasions. Petitioners’ adjuster was unable to meet with Eastern’s adjuster to discuss any of the items that might have been in dispute.
Petitioners requested that Eastern proceed with an appraisal of their contents claim, but Eastern claimed an appraisal was premature as the parties had not yet reached an agreement or disagreement on the Petitioners’ contents loss due to Petitioners’ failure to produce requested proof of ownership. However, Petitioners claimed that most if not all of its documentation demonstrating proof of ownership was destroyed in the home where they had resided since 1972.
Petitioners filed a motion for an order directing Eastern to conduct an appraisal pursuant to Insurance Law 3408. The Court granted their motion. Eastern made unilateral value determinations regarding the claimed items under $999.00 and rejected claimed values over $1,000.00 without meeting with Petitioners’ adjuster. The Court stated that this illustrated both bad faith and unfair dealing. The Court also rejected Eastern’s argument that it could require bills of sale or other proof that the Petitioners purchased or owned the items because the documentation was destroyed in the fire. Requiring this level of documentation in an insurance policy that covered a fire loss to a private home was another example of bad faith and unfair dealing.
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
10/25/16 Barba v. Allianz Global Risks US Insurance Co.
United States District Court, Southern District of New York
Separation of Insureds Anxiety
In this coverage dispute, plaintiff was a claimant in an underlying action for bodily injuries resulting from a helicopter crash. Following the crash, plaintiff sued Pollux Aviation, Inc. (“Pollux”), the owner and lessor of the helicopter, and Pollux's president, Larry T. Larrivee in Arizona. The lawsuit alleged that Pollux and Larrivee had been “negligent in entrusting the Subject Helicopter to [an operating company and the pilot involved in the crash], who had a history of prior helicopter crashes.” The lawsuit also alleged that Pollux and Larrivee—by nature of their arrangement with the pilot—had “entered into a joint venture with [the pilot], and that Pollux and Larrivee were therefore vicariously liable for [the pilot’s] negligence and recklessness.”
Pollux and Larrivee had an Aviation Commercial General Liability Policy from defendant Allianz Global Risks US Insurance Co., which contained an “Owned Aircraft” exclusion clause, which stated, in pertinent part:
g. Bodily Injury or Property Damage arising out of the ownership, maintenance, use or entrustment to others of any aircraft, auto, watercraft owned or operated by or leased, rented, or loaned to any Insured. Use includes operation and loading or unloading and with respect to aircraft, operated by also includes operation on behalf of any Insured. This exclusion applies even if the claims against any Insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that Insured, if the occurrence which caused the Bodily Injury or Property Damage involved the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft that is owned or operated by or leased, rented or loaned to any Insured.
The Policy also contained a “Separation of Insureds” provision:
This insurance afforded under the liability coverage applies separately to each Insured against whom a claim is made or suit is brought, but the inclusion herein of more than one Insured shall not operate to increase the applicable limits of the Company's liability.
Allianz disclaimed coverage to Pollux and Larrivee for plaintiff’s personal injury suit based on the “Owned Aircraft exclusion” listed above. Plaintiff, Pollux, and Larrivee subsequently settled the personal injury action with an agreement that, among other things, called for a stipulated good faith judgment of $1 million in plaintiff’s favor and assigned to her the rights of Pollux and Larrivee under the Allianz policy. Plaintiff commenced the instant action against Allianz for breach of the insurance policy, and Allianz moved to dismiss the complaint, asserting, among other things, that the “Owned Aircraft exclusion” precludes coverage for the subject accident.
Plaintiff did not dispute that this exclusion applied to, and excluded claims against, Pollux -- the company that owned the helicopter. Plaintiff also “ implicitly acknowledge[d], but for the Separation of Insureds Clause, the text of that exclusion would exclude her claims against Larrivee, because her bodily injury claims arise from the entrustment of the Subject Helicopter to ‘any insured,’ i.e., owner Pollux.” Plaintiff argued instead that the Separation of Insureds clause rendered the Owned Aircraft exclusion ambiguous in that the Owned Aircraft exclusion could plausibly be read “in the instance of ownership of the Subject Helicopter by one of two insureds, either (1) to exclude coverage to both insureds (here, Pollux and Larrivee), or (2) only the owner-insured (Pollux).” As such, plaintiff argued that the ambiguity should be resolved in her favor based on recognized contractual interpretation principles.* In support of its motion to dismiss, Allianz argued that there was no ambiguity because “because the Owned Aircraft exclusion clearly excludes coverage for liability for both Larrivee and Pollux arising out of the latter's ownership and lease of the Subject Helicopter.”
The district court agreed with Allianz. Although the court looked at a variety of court cases from different jurisdictions considering the ability of a ‘Separation of Insureds’ clause to cause an ambiguity, ultimately its decision rested on the language of the Owned Aircraft exclusion itself, which specifically applied to bodily injury claims “arising out of the ownership, maintenance, use or entrustment to others of any aircraft, auto, watercraft owned or operated by or leased, rented, or loaned to any Insured.” (emphasis altered). The district court found that the “any Insured” reference “specifically and unavoidably highlights that the application of the exclusion to either insured (Pollux or Larrivee) precludes coverage under the Policy for the other. It is hard to imagine a clearer way to capture this concept. Unsurprisingly, the overwhelming majority of courts to consider such an exclusion have held it unambiguous, and binding, even in the presence of a Separation of Insureds clause.” The district court further noted that “[g]iving the Owned Aircraft exclusion a construction consistent with its unambiguous text thus does no violence either to the Policy or the Separation of Insureds clause.”
Allianz’s motion was granted and the complaint dismissed.
*Editor’s Note: The district court in this case applied Alaska law; however, the general contractual interpretation principles discussed above are substantially the same in New York.
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
Nothing new this week, but perhaps after the holiday we’ll have new legislation to be thankful for. Happy, healthy Thanksgiving!
Earl K. Cantwell
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06/20/16 American Family Insurance Co. v. Hansen
Colorado Supreme Court
How Is A Policy Found To Be “Ambiguous”?
Jennifer Hansen was injured in a car accident in 2007, and she submitted a claim for benefits to her insurance company, American Family Mutual. She submitted lien documents issued by her local insurance agent that showed she was a named insured. However, American Family’s records indicated she was not a named insured under the policy and denied coverage. Suit was brought for breach of contract, common law bad faith, and statutory bad faith under Colorado statutes that prohibit insurers from delaying or denying payment of first party claims, and allowing recovery of attorneys’ fees, court costs, and two times covered benefits for a violation.
Prior to trial, American Family “reformed” the policy to list Hansen as the insured, the parties settled the policy benefit amount of $75,000, and the trial court instructed a jury that the insurance records contained an ambiguity which had to be construed against the insurance company. The jury ruled in favor of American Family on the common law bad faith claim, but in favor of Hansen on the bad faith claim under the Colorado statute. The jury found that Hansen was the named insured, American Family violated the statute, but the benefit which it paid or denied was zero. However, the trial court awarded attorneys’ fees and costs, and amended the verdict to award $150,000.00, twice the amount of the covered benefits.
An intermediate appellate court affirmed the trial court’s rulings and the jury verdict. The Colorado Supreme Court took up the case and reversed the two lower courts.
The Colorado Supreme Court ruled that the lower courts erred when they allowed “extrinsic evidence” to create ambiguity in the policy. The Supreme Court ruled that extrinsic evidence can be used only to help determine the intent of the parties after an ambiguity is found to exist within the policy itself. It is interesting that several industry and legal groups participated in briefing this case as amicus curiae because of the threshold issues involved.
This case stands for the general proposition that coverage is determined from language found within the “four corners” of the policy. Here, the Colorado Supreme Court held that the issue of whether there was a policy ambiguity had to be determined from the policy language itself, and the use of outside evidence, such as the lien documents from the local insurance agent and other records, had been impermissibly allowed as proof and evidence. In this case, even documents relating to the insurance policy issued by the insurance agent were held to be “extrinsic evidence”, and not admissible in attempting to interpret the policy, here with respect to determining the named insured.
In some states, such extrinsic evidence is permitted in evidence with respect to policy definition and interpretation, especially where the evidence coexists of documents relating to the issuance and procurement of the policy in question. However, the Court in this instance attempted to differentiate the use of extrinsic evidence in an effort to “create ambiguity” which is not allowed, from the use of extrinsic evidence to define the intent and expectations of the parties after an ambiguity is determined, which might be allowed.
This case also presents another example of state statutes being enacted to define, regulate, and govern “bad faith” claims against insurance companies in a first party claim context. The jury in this case held in favor of the insurance company on the common law bad faith claim, but held in favor of the insured on the statutory bad faith claim. Therefore, the “punitive” provisions of the statute for recovery of fees, costs, and multiple damages were triggered.
