Coverage Pointers - Volume XVIII, No. 13

Volume XVIII, No. 13 (No. 469)

Friday, December 16, 2016

A Biweekly Electronic Newsletter


Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874


Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

© 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. 


Merry Christmas, Happy Chanukah, joy to you for all of the holidays.


For regular readers, you will remember (who wouldn’t?) that we have brought you a special holiday poem crafted in 2010 by our special Christmas team and reprised it for the past five years.  It’s been republished in a number of insurance publications over the years, with our blessing. If you’ve missed it, or want the joy of rereading our earlier missive, it’s here.


This year, our joyful team has gathered again, with a slight change in composition, to offer you a new message of joy and hope.  With special thanks to Clement Moore (or less), once again…


Saving Christmas…

Another Tale of Joy and Happiness


Dan D. Kohane

and his merry band of Christmas elves
(appearing alphabetically)


Howard Altman, Mike Perley, Tim Sullivan, Richard Traub



T’was a month before Christmas

At Hurwitz & Fine.

Our thoughts turned to friendships,

And goblets of wine.


My sister’s turned vegan, and I groaned “Oh boy,”

As my Thanksgiving meal would be focused on soy.

So I sat on the couch, while the others were snacking,

Sad at the thought that Turducken was lacking.


The first wisps of winter left a chill in the air,

The thrill of a good year, with lawyers who care.

But something was missing, as I pondered my station,

Perhaps what we needed was a new situation.


For once the associates were focused on billing,

But good gratis work, the old partners were willing.

Just sitting with eggnog was quite a temptation,

We had Christmas ahead, and the courts on vacation.


An elf was in charge of the firm’s full compliance,

Keeping track of these things was an art, not a science.

“Pro bono, we’re short,” And we cannot be liars,

More hours accrued to retain our “Esquires.”


“What we need,” said the elf, is a “worthy endeavor,”

A special sweet gift we’ll remember forever.

So, Thanksgiving I used for real heavy thinking,

While brothers and sisters were spending time drinking.


I thought of Saint Nick, a joyous old giver,

When I suddenly felt the most curious shiver.

To my left was a creature, returning my stare,

Short in stature, quite serious, with flowing white hair.


He was wearing a suit, with a holly sprayed tie,

With a button down shirt and a twinkling eye.

While I can’t say for sure, that he looked very jolly,

I did catch a scent of sweet incense and holly.


“Excuse me young man, please forgive me this banter,

They call me old Sidney, I’m counsel to Santa.

We heard you were looking to help out the needy.

We need an assist, but it has to be speedy.”


“We have a real problem, a pain in the neck

And short time to act before events turns a wreck.

As you all know, Santa’s elves make toys at the Pole.

We’ve expanded our workforce to China and Seoul.”


“The Santa Claus team is good with logistics,

With many strange tongues, they’ve mastered linguistics.

Boxes are shipped ‘round the globe by big sledders,

Dolls, toys, trains and games; and some ugly red sweaters.”


“The workers they ship the gifts far and wide,

So Santa can refill on his long winter ride.

They go into depots, warehouses and lots.

The reindeer, and Santa, they know all the spots.”


The lawyer then looked at his feet with a frown,

I could tell that some problem was getting him down.

“Tell me Sidney,” I asked, “what’s the problem with that?”

He dried a new tear, with the top of his hat.


“The shippers are bankrupt, they can’t enter port.

A lien and a judgment were filed in court.

Our cargo is trapped in containers all over,

In other words, friend, we’re dead in the clover.”


Those boats hold our goodies, shown here on this screen,

And it near time for Santa to star in his scene.

Time’s running quick; we’re a few weeks away,

To unravel these judgments and undo the stay.


I knew then and there, as I help Sidney steady,

We’d help him save Christmas, our firm would be ready.

It’s time to aid Santa; we know we can do it,

We’ve solved problems tougher; we’ll help him get through it.


He handed me papers - court orders and briefs,

From courts ‘round the world, they’re very thick sheaves.

Send out your young lawyers, with gray beards to guide them,

And spring loose our toys; we’ll need time yet to hide ‘em.


After wine, homemade cookies, and a slice of mince pie,

I rang up the partners, and laid out this great cry.

We’ll send out the young’uns by plane and by car,

The ports are world-wide, some near and some far.


We’ll file all the motions, we have the gumption,

To seek out the writs, and secure the injunction.

In Re: Santa Claus versus Mean Port Protectors,

We seek court intervention to instruct the inspectors.


So for weeks going forward, we corralled all our crew,

Good pro bono work and some nice travel too.

And papers we drew and served in courts ‘round the globe,

With young lawyers showing the patience of Job.


We said what we’d do, and we did what we said,

With friends ‘round the world matters came to a head.

By land, sea and air, every lock had been busted,

With the help of good friends, who can always be trusted.


Christmas was saved, through the efforts of many,

Though bonds were required, and they cost quite a penny.

As court granted motions, elves unloaded cargo.

We even used accounts opened once in Wells Fargo.


With all said and done, and the reindeer in stable,

We all sat together at the holiday table.

A communal project, one sure to endure,

And a holiday greeting, to those that insure.


So from Dan, Mike and Richie and Howard and Tim,

We’re glad that you gave our new missive a skim.

Please sit by the fire, and tune in Pandora,

Enjoying your tree or the nine-branched menorah.


We wish to our colleagues, and friends near and far,

Let your season be splendid, wherever you are.

May this be a year you have pleasure and luck in,

(Though I’m sorry to say, I’ve still no Turducken).



Patrick Curran Joins Hurwitz & Fine, P.C.:


We are pleased to announce that as of January 1, 2017, Patrick Curran, one of Western New York’s premier medical malpractice defense attorneys, will be joining the firm.  More about Pat’s background in our next issue.


NAMIC Webinar:


I had the pleasure of presenting at a NAMIC webinar on risk transfer this week.  We welcome new subscribers who attended that presentation.


Barnas on Bad Faith:


Hello again:


My ability to accomplish my Christmas shopping in a timely manner seems to fluctuate on a yearly basis.  Last year, I was essentially done before the first week of December was over.  This year, I have picked up a couple of things, but the vast majority of my Christmas shopping remains outstanding.  I don’t know how it is already ten days until Christmas.  Where has the time gone?  The holiday season always goes by way too fast.


I have three presents (read as: cases) for you in this issue.  LeBoon is another example of a well-established rule: an unsuccessful plaintiff cannot bring a cause of action against the defendant’s insurer for bad faith failure to settle.  The Third Circuit affirmed the dismissal of Plaintiff’s claim that Zurich acted in bad faith in failing to settle his discrimination action against its insured, which was dismissed for want of prosecution. 


Gonzalez is a bit different than the cases normally reported on in this space, as it concerns what evidence is relevant in a bad faith trial.  The court considered and ruled on a number of types of evidence that Geico sought to preclude, including insurance company advertisements, employee personnel files, bonus and compensation evidence, claim handling and training materials, and evidence of payment of premiums.  Check out the write up to see what the court decided.


Finally, Kelly is a bad faith action arising out of a hit and run accident.  The court concluded that State Farm’s handling of the claim, which included providing the insured with detailed reasoning as to why it was valuing the claim the way it did, did not support a finding of bad faith.


I hope everyone out there has a very Merry Christmas and a happy and healthy holiday season.


See you next time.


Signing off,



Brian D. Barnas

[email protected]




We were happy to see so many friends in NYC at the DRI Insurance Coverage and Practice Symposium.  If you missed it this year, schedule it for next.


Nice Jail:  Is it Still There 100 Years Later?


Middletown Times-Press

Middletown, New York

16 Dec 1916


Newburgh Jail is

Praised by Jurors


Newburgh, Dec. 16— The grand jury which is sitting at the present term of the Supreme Court in this city Thursday passed a resolution commending the splendid condition of the Newburgh jail and the efficiency of Under Sheriff Henry Hallock, Jr. The resolution, which is signed by Walton P. Westlake, of Middle Hope foreman of the grand jury, follows: “We the December, 1916 Grand Jury of Orange County, in session at the court house in the City of Newburgh, after a thorough inspection of the Newburgh county jail desire to express our satisfaction at the clean, sanitary conditions and efficient method employed by Under Sheriff Henry Hallock, Jr. in conducting the affairs of the jail. The prisoner are clean and well fed and they find no fault with their treatment”


Hewitt’s Highlights:


Dear Subscribers:


By the time this column goes out, I will be in Buffalo for our Holiday party. It appears they received snow prior to my visit and will be receiving snow after my visit, but I should be able to sneak in and out without having a weather related delay. I look forward to visiting the office in person, as it has been too long since I have been there. My six-year-old asked me to bring a real Buffalo back but a stuffed toy will have to do, I think.


On the serious threshold front, we have several cases for you from the Second Department in this edition. A couple of the cases reinforce the rule that if the defendants’ own doctors are finding significant range of motion limitations, summary judgment is going to be denied. Another highlight is that a jury is allowed to choose between two experts offering competing analysis when coming to a verdict. Finally, there is a long case focusing mostly on liability, involving a town’s duty to maintain safe roads and whether a homeowner has a duty to keep its hedges trimmed so as to keep sightlines for drivers clear. The court found no duty at common law to keep hedges trimmed but the duty can be imposed by statute.


I will try to stay warm as Buffalo plunges down into negative real feel temperatures tonight. Enjoy the upcoming holidays.


Until next time,


Robert Hewitt

[email protected]


Suffragist Marries and It’s News:


The Philadelphia Inquirer

Philadelphia, Pennsylvania

16 Dec 1916


Eva Ward, Suffragist, Cupid’s Victim


Miss Eva Ward that was, who came here from England as a militant suffragist and uncompromising feminist several years ago to aid the cause there and has been comparatively busy at it since, is on her way home, utterly beaten by the forces of Cupid and a willing captive to his bow and spear. Her captor is Gilbert Rose, New York lawyer, and she has been Mrs. Gilbert Rose for more than year. The wedding was a decidedly simply and quiet one, of the City Hall variety, and up to a short time ago Mr. and Mrs. Rose did not publicly parade the fact of their union.


Obama-Care Trashed, 100 Years Ago:



Eau Claire Leader

Eau Clarie, Wisconsin

16 Dec 1916


Flays Proposed Insurance Law


President of Casualty Company

Says Compulsory Insurance is Undesirable.


            NEW YORK, Dec.  15—Compulsory health insurance for wage earners, legislation for which has been proposed, was strongly disapproved by W.G. Curtis of Detroit, Mich., president of a casualty insurance company, in an address before the tenth annual convention of the association of Life Insurance Presidents here today.  Mr. Curtis summarized his objections to compulsory health insurance by saying it would produce these results: 


            Impose a tax of $5 to effect a saving of $1.


            Discard 3,350,000 of the 33,500,000 wage earners because of age or physical condition.


            Provide employment for 250,000 politicians.


            Create a fund of $150,000,000 that would be controlled or exclusively administered politically.


            Permit a small percentage of physicians to control most of the industrial medical practice.


Phillips Federal Philosophies:


Hello, All:


This week, dear readers, we reach the conclusion of the ongoing saga that was The University of Pittsburgh v. Lexington Insurance Co. and AXIS Insurance Co.  As some of you may recall, this coverage dispute resulted from a notice of claim submitted by the insured on the last day of the coverage period of a claims-made policy with Lexington Insurance Company. When Lexington disclaimed, the insured submitted to AXIS under the insured’s new policy with that company; however, AXIS also disclaimed because the insured had knowledge of a situation that reasonably could be expected to result in a claim prior to the policy’s effective date.


We’ve previously reported on the district’s court’s consideration of the strict notice requirements in a claims made policy and granting of Lexington’s summary judgment motion dismissing the insured’s claims against it.  Each time we noted that, in the interest of full disclosure, H&F represented AXIS, but was not yet in the batter’s box on that particular motion.  Well, batter’s up, and the district court called a home run in favor of AXIS, dismissing the complaint against the insurer and closing the case.


As always, thanks for reading. 



Jennifer J. Phillips

j[email protected]



Cars are Really Expensive, a Century Ago:



The Wall Street Journal

New York, New York

16 Dec 1916









Nineteen Cars Are Selling at an Average Advance of $150

Production Also Will be Greater Than in 1916 and

Manufacturers predict Larger Profits

Than Last Year’s – Review of Price Advances


The 1917 year in the automobile industry is ushered in with announcements of price advance by almost all the companies.  Higher materials and labor cots have more than offset economies resultant from larger production schedule in the cases of the vast majority of the manufacturers.


Nineteen representative motor cars, made by seventeen companies, will sell $150 higher in 1917 than they did in the last year.  A few companies have as yet announced no price advances, but some of these are expected before long to fall in line with the majority.


Ford, of course, occupies a niche all its own in the motor industry and 750,000 Ford cars are scheduled to be sold this season at the price reduction announced last August, which brought the touring car down $80 to $360.  Chevrolet Motor, which has jumped into the class of big producers in a single year, is selling its “Four-ninety” model (its big seller) this year with entire electrical equipment and self-starter, for $490, whereas previously $60 additional was charged for this equipment.  Its “Baby Grand” for 1917 is marked $800, against $750 last year, but the model has been increased in size and otherwise equipped so that the $50 does not represent a price advance. 


These two companies, however, are exceptions to the rule.  They are about the only companies which have such increased production as to enable them to sell their output at any lower prices than 1916 figures.


Several companies are entering 1917 with prices the same as in the past months.  Among these are Willys-Overland, second only to the Ford in the number of cars produced; Maxwell, with over 100,000 care planned for the 1917 season, against 60,000 in the 1916 year; Buick, Chalmers Motor, Peerless, Dodge and Stutz.  Certain of these companies may soon make announcements.  Saxon, which has had a remarkable growth in two years, is marketing its 4-cylinder for $495, instead of $395, but additional equipment is included.  No change in price for the “six” has been announced.


Altman’s Administrative (and Legislative) Agenda:  


Greetings, subscribers. Nothing new in the legislative area this week. Today we are traveling to Buffalo for a holiday party. I wish you all a merry everything!


Howard B. Altman

[email protected]



More Erroneous Baseball Predictions:



The Winnipeg Tribune

Winnipeg, Manitoba, Canada

16 Dec 1916






Too much prosperity and the aging of many stars may weaken the Boston Red Sox in 1917.  Yet Foster, Mays, Shore and Ruth should be better pitchers in 1917 than they were in 1916.  Hoblitzel never showed better form than in 1916.  It is not reasonable to expect that Sir Richard will go back over the winter.  Barry will not go back, and if he does Janvrin is improving.  Scott, too, is very young and will improve.


Gardner is aging, especially in winning world’s championships, but 1916 was his best year.  Lewis probably will go back, Walker will not improve, but Shorten, a really great hitter, will.  Hooper seems to defy time.


It may be that Boston will not go back, but three time winners are due to retrograde.


One cannot predict for Chicago, Jackson and E. Collins, the great pair, are slipping.  Yet Chicago’s pitching should be better in 1917 than in 1916.  Comiskey may acquire a new first baseman.  In that event Chicago may be stronger than in 1916. 


Detroit almost assuredly will be stronger.  Jennings has everything but pitchers.  He will get one or two good pitchers next year. 


New York already is strong enough to win the championship of the American league in 1917.  Only an unexampled run of bad luck, injuries to Baker, Maisel, High, Magee and Caldwell’s actions kept New York from being a keen contender in 1916. 


Nothing like predictions.


The Chicago White Sox, second place in 1916 won the pennant in 1917, with a record of 100- 54, nine games ahead of the Boston Red Sox. The Red Sox had come out on top of the American League in 1916.  Despite predictions of great success, the Yankees finished with a record of 71-82, 28 ½ games back.  The article concluded that “Philadelphia will be a more vigorous factor next year than they were this year, finished in the cellar, with a record of 55-98, a mere 44 ½ games off the lead.”  The writer was correct, because in 1916, the Philadelphia squad won only 36 contests and finished 54 ½ games out of first.  It was not until 1922, that the Philadelphia Athletics moved out of last place, into seventh and not until 1929, that the team won the pennant.  Philly led the league through the end of the 1931 season.  By 1936, they were back to the bottom of the American League.


Jen’s Gems:




Yesterday, Buffalo got its first shot of true snowfall this season.  With the over one-hour commute home, it was certainly a glimpse of what is to come.  It also reminded me that I owe my amazing neighbor, who enjoys plowing driveways and often does mine, a nice Christmas present.  


Besides that, if you are free today, Friday, and in the Buffalo area, I will be speaking at the NYSBA CLE Program Labor Law Claims, Coverage & Litigation about indemnification at the Adam's Mark Hotel, 120 Church Street, Buffalo, NY 14202, from 9:00 a.m. to 4:30 p.m.  Still time to register. 


Lastly, in terms of my column, I report on an interesting trial court decision out of Supreme Court, New York County.  The decision was issued by Judge Oing (who gets assigned many of the high profile cases in that jurisdiction).  The decision involves a multi-million dollar fire loss to a condominium complex.  At the time of the loss, the primary policy in place had a Protective Safeguards Endorsement, which provided a warranty regarding sprinkler coverage at the insured property and provided that the failure to maintain such systems could result in the loss of coverage.  Ultimately, the court found a question of fact as to the applicability of this exclusion based upon certain documentation which indicated that the primary carrier may have known about the condition of the property prior to issuing the policy.  A good read. 


Well, until next issue…



Jennifer A. Ehman

[email protected]


Tessa’s Tutelage:


I hope you are surviving the holiday season and checking off your shopping lists.  I am behind as always.  Interestingly, we have a matter which involves time this week.  The question before the civil court of Kings County was what happens when you uncover new information in an EUO that requires an EUO of a different party, not previously noticed??  The Civil Court followed the second department’s lead and concluded that an insurance provider was within its right to seek an additional EUO in the 15 days following the acquisition of the new information.  Pretty cool stuff.  Read on for more information on the time considerations involved.


Hope your weekend is full and productive!



Tessa R. Scott

[email protected]


For Sale, 100 Years Ago:


Middletown (NY) Times Press

December 16, 1916


“Political Facts” of all the parties, 10 cents. It gives the life history of each President.  At the Times-Press Business Office.


Editor’s note:  A bargain and half the price.


Peiper’s Prose:


We write, again, with a loss for words.  Indeed, how can anyone compete with this year’s new, and dare I say improved, Christmas poem?  I considered a Holiday Haiku to combat the poem, but, alas, Peter King has already cornered the market on Haikus, and frankly, I’ve never been able limit myself to seven syllables.  Perhaps in the spirit of giving, we concede title of creative master to the authors whose collaboration makes up this year’s poem.

Unfortunately, our column gives us no quarter either.  While we report on a decision discussing the preclusive impact (or lack thereof) of a Workers’ Compensation decision, the cupboard is otherwise fairly bare.  We hope for more upon which to write in the coming months.  In the meantime, Happy, Merry to all, and to all a good night!


Steven E. Peiper

[email protected]


Miscellaneous for Sale – A Century Ago:


Rochester Democrat and Chronicle

December 16, 1916


Have got two, have one use for one and will sell either one.  Apply 159 Caroline Street.


Editor’s note:  Not quite sure what they were selling, but it sounded quite ethereal.  I went over to Google Maps to see what is now located at 159 Caroline Street in Rochester.  It’s the Yoga DrishTi Community Wellness Center.  I think if you go there now, and ask them to sell you one, they’d understand.


Wilewicz’s Wide-World of Coverage:


Dear Readers,


Hope this finds you well. Here at the WWW, we are fresh off our firm party, and gearing up for the holidays. Personally, my house has been decked out since the minute the Thanksgiving turkey started to cool, and I made my family trudge through the late November mud to chop down our own fresh spruce. It’s been a huge pain watering it (sometimes twice a day), but my house has smelled like Christmas morning for weeks now. It is by far my favorite time of year, and I have not even complained once about the snow and frost (yet) since it really rounds out the scene. It can go away in January. Here’s hoping anyway.


In other news, last week’s DRI Insurance Coverage and Practice Symposium was phenomenal. As always, the speakers were engaging, informative, and inspiring. The various events provided a wonderful opportunity to meet with friends, new and old. It was so great to meet so many. If you were unable to make it down there this year, keep it on your radar for next. It really is a program not to be missed!


That said, I’ve been down in NYC four out of the last seven days. As such, I have not had opportunity to cull and digest the few cases that the Circuit Courts have issued in past days. I have them printed and at the ready – so be sure to check out next issue for all the latest.


Until then, Merry Christmas and Happy Holidays to all!


Agnes A. Wilewicz
[email protected]



Highlights of this week’s issue, which is attached:


Dan D. Kohane
[email protected]


  • As Insureds Did Not Reside in Residence Premises on Day of Accident, No Coverage Available to Them for Accident Which Occurred There
  • In Pre-Prejudice Statute Case, Insured’s Two Month, Unexplained Delay in Giving Notice of Commencement of Personal Injury Action Constitutes Breach of Notice Requirements.
  • When One Leaves a Vehicle, Does a Non-Vehicle Related Chore and is Struck by Another Car When Returning, He or She is Not a Occupant of the Car when Struck and Thus Not Entitled to Underinsured Motorists Benefits
  • Where Policy Provided that Party would be an Additional Insured if a Written Contract Required It, There is No Need that the Contract be Signed
  • Court Limits E&O Claims Against Carrier and Brokers


Robert E.B. Hewitt III

[email protected]


  • Defendants Cannot Establish a Prima Facie Case When Their Own Expert Found Significant Limitations in the Range of Motion of the Left Knee
  • There Can be More Than One Proximate Cause of an Accident Such that Summary Judgment would be Inappropriate Where There Was an Issue of Fact as to Whether a Homeowner’s Vegetation Helped Cause the Accident and an Issue of Fact for the County That Had Not Established as a Matter of Law that Its Roadway Was Safe
  • Defendants’ Own Expert Submissions Revealed Significant Range of Motion Limitations Such that Summary Judgment Must Be Denied
  • Jury Could Give Credence to One Expert over Another When Finding Against Plaintiff on Serious Injury



Tessa R. Scott

[email protected]




  • If New Information Comes to Light in an EUO, an Insurer May Request another EUO



Steven E. Peiper

[email protected]


  • Ruling of WCB did not Preclude Owner from Re-Litigating “Employment Status” of Injured Party



Agnes A. Wilewicz

[email protected]


  • Next time, I promise.



Jennifer A. Ehman

[email protected]


  • Questions of Fact Found as to the Application of Protective Safeguards Endorsement in Fire Loss Claim



Brian D. Barnas

[email protected]


  • An Unsuccessful Claimant Cannot Maintain a Bad Faith Action against an Insurer for Failure to Settle
  • Bad Faith Trial Evidence: What’s in and What’s out?
  • Carrier did not Act in Bad Faith by Asking the Insured to Provide Medical Evidence and Explaining its Rationale for Applying a Claim Offset



Jennifer J. Phillips

[email protected]


  • Prior Knowledge of Potential Claim Leads to Loss of Coverage



Howard B. Altman

[email protected]


  • On the road this week.



Earl K. Cantwell
[email protected]


  • No CGL Coverage for Construction Defect


That’s all – Merry Christmas and Happy Chanukah to all who celebrate.


See you just before New Year’s.



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: 






Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York

Dan D. Kohane
[email protected]



Agnes A. Wilewicz

[email protected]



Jennifer A. Ehman

[email protected]


Dan D. Kohane, Chair
[email protected]


Steven E. Peiper, Co-Chair

[email protected]

Michael F. Perley

Audrey A. Seeley

Jennifer A. Ehman

Patricia A. Fay

Agnieszka A. Wilewicz

Jennifer J. Phillips

Brian D. Barnas

Howard B. Altman

Diane F. Bosse

Joel R. Appelbaum


Steven E. Peiper, Team Leader
[email protected]


Michael F. Perley

Robert E. Hewitt, III

Jennifer J. Phillips

Brian D. Barnas


Audrey A. Seeley, Team Leader
[email protected]


Jennifer A. Ehman

Patricia A. Fay


Jody E. Briandi, Team Leader
[email protected]


Jennifer J. Phillips

Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Altman’s Administrative (and Legislative) Agenda
Earl’s Pearls


Dan D. Kohane
[email protected]


12/15/16       Tower Insurance Co. v. Zaroom

Appellate Division, First Department

As Insureds Did Not Reside in Residence Premises on Day of Accident, No Coverage Available to Them for Accident Which Occurred There
Tower moved for summary judgment seeking an order that it had no obligation to defend their insureds, the Zarooms in an action brought by Wise.  Tower submitted an affidavit of its investigator stating that she met with Mrs. Zaroom and the insured admitted that she and her husband did not reside at the insured premises on the date of the Wise accident.


In opposition, the Zarooms confirmed that they did not live there but claimed their attorney claimed that Tower knew of that fact by continued to accept policy premiums.  An attorney’s affirmation is of no value in establishing facts to which the attorney knows only by hearsay.  It has no evidentiary value.


Wide contended, on appeal, that the term “reside” was ambiguous but the First Department disagreed.


12/15/16       Cruz v. Western Heritage Insurance Company

Appellate Division, First Department
In Pre-Prejudice Statute Case, Insured’s Two Month, Unexplained Delay in Giving Notice of Commencement of Personal Injury Action Constitutes Breach of Notice Requirements.
Plaintiff's unexplained delay of at least two months in notifying defendant of the underlying personal injury action against him constitutes late notice as a matter of law.  Since the insurance policy imposed on plaintiff the separate duties of providing timely notice of an occurrence or accident and providing timely notice of the commencement of an action, it is immaterial whether plaintiff had a good faith belief in nonliability at the time of the accident, in March 2009, so as to excuse late notice of occurrence. 


This case involved a policy issued before the Notice-Prejudice statute went into effect, it was a policy issued before January 17, 2009.

Editor’s Note:  an Atta Lawyer goes out to our friend Ann Odelson of Carroll, McNulty & Kull for her excellent legal work on this one.


12/14/16       J. Lawrence Const. Corp. v. Republic Franklin Ins. Co.

Appellate Division, Second Department

When One Leaves a Vehicle, Does a Non-Vehicle Related Chore and is Struck by Another Car When Returning, He or She is Not a Occupant of the Car when Struck and Thus Not Entitled to Underinsured Motorists Benefits

The injured plaintiff, Bosco, testified at his deposition that on the morning of December 5, 2011, he drove the insured vehicle leased by his employer, the J. Lawrence Construction Corp. (“JLC”), from his home to JLC's office on 17th Street, in Brooklyn. Bosco parked the “insured vehicle” across the street from JLC's office, exited the insured vehicle, and locked it. Bosco then went into JLC's office, retrieved from his desk certain documentation he needed for a 9:30 a.m. meeting in Manhattan, and proceeded back to the insured vehicle.


As Bosco crossed the street, he remotely unlocked the insured vehicle with his key fob. When he was "half a step" away from the insured vehicle and reaching for door handle of the passenger door, he was struck by a vehicle driven by Pakula.


The insured vehicle was covered under a policy of insurance JLC had with Republic Franklin (“Republic”)). The policy contained a supplementary uninsured/underinsured motorist (“SUM”) endorsement, which provided coverage to any person who was "occupying" the insured vehicle. The term "occupying" was defined in the SUM endorsement as "in, upon, entering into, or exiting from a motor vehicle".


Bosco sought SUM benefits from Republic and Republic denied the claim, asserting that Bosco was not occupying the insured vehicle and was a pedestrian. JLC and Bosco commenced this action against Republic for a judgment declaring that Republic was obligated to pay SUM benefits to Bosco under the subject policy.


A person remains an occupant of a vehicle, even if that person is not in physical contact with the vehicle, "provided there has been no severance of connection with it, his [or her] departure is brief and he [or she] is still vehicle-oriented with the same vehicle".  A connection to a vehicle will be severed "upon alighting therefrom to perform a chore which was not vehicle-oriented”.


Moreover, there has to be more than a mere intent to occupy a vehicle . . . to alter the status of pedestrian to one of occupying it.  Approaching a vehicle is not occupying it.


Bosco’s leaving the car was not a temporary break in his journey such that he remained in the immediate vicinity of the insured vehicle.  He left the car, retrieved documents and was approaching the insured vehicle when he was struck.  Accordingly, he was a pedestrian.


12/08/16       Zurich American Ins. Co. v. Endurance Ins. Co.
Appellate Division, First Department

Where Policy Provided that Party would be an Additional Insured if a Written Contract Required It, There is No Need that the Contract be Signed

Zurich seeks a declaration that Newmark Knight Frank (and certain other entities) are additional insureds under a policy that defendant issued to Kras Interior. Endurance Policy’s provides that "the following are included as additional insureds: Any entity required by written contract . . . to be named as an insured" (emphasis added).


On October 11, 2012, Newmark sent a purchase order/agreement to Kras. It said, "THIS PURCHASE ORDER AND AGREEMENT IS A LEGAL AGREEMENT BETWEEN CONTRACTOR [i.e., Kras] AND NEWMARK . . ., AS AGENT FOR OWNER [41 West 34th Street, LLC, and/or 34th Street Commercial Properties, LLC]. BY ACCEPTING THE ORDER, VENDOR [i.e., Kras] HEREBY AGREES TO BECOME BOUND BY THE TERMS OF THIS AGREEMENT." This purchase order/agreement required Kras to obtain a policy naming the owner and the owner's property manager (i.e., Newmark) as additional insureds. The purchase order/agreement contained no signature lines and, accordingly, remained unsigned. Kras accepted Newmark's purchase order/agreement by beginning to perform the ordered work.


On November 12, 2012, a Kras employee was injured on the job; he eventually sued the owner. Plaintiff in the case at bar (Newmark's insurer) sought additional insured coverage for Newmark and the owner from defendant. When defendant refused, this action ensued.


Defendant contends that Newmark and the owner are not additional insureds because the purchase order/agreement was unsigned. However, defendant's policy merely requires a "written" contract, not a "signed" one. By contrast, in Cusumano v Extell Rock, LLC (86 AD3d 448 [1st Dept 2011]), the policy said, "The following are also an insured when you [Regions, the contractor in Kras' position] have agreed, in writing, in a contract or agreement that another person or organization be added as an additional insured on your policy, provided the injury or damage occurs subsequent to the execution of the contract or agreement" As the motion court in Cusumano found, the insurer analogous to defendant in the case at bar "expressly included the word executed' in[] its Policy, thereby requiring that any agreement by Regions to add a person/organization as an additional insured be memorialized in a signed contract" .


12/08/16       Maki v. The Travelers Companies

Appellate Division, Third Department

Court Limits E&O Claims Against Carrier and Brokers.

Maki agreed to lease his tractor truck and work as an independent contractor for a transportation company and agreed to purchase a commercial auto policy.  He reached out to Mang Insurance Agency, a retail insurance broker, who consulted with LoVullo, an insurance wholesaler. With those contacts, Make secured a policy with Northland Insurance Co. Maki was issued proof of insurance so that he could enter into the lease agreement, but was instructed to then provide Mang with a complete copy of the lease agreement and his vehicle registration.  The policy was to become effective on August 8, 2008.


Maki claimed to have provided Mang the documentation on August 28 but advised that it did not have a complete copy of the lease.  It was then advised that that it needed to have the full documentation by September 18, for the coverage to stay in place. Northland then sent a cancelation notice, advising that it intended to cancel the policy effective October 11.


Northland then gave written notice to plaintiff, as required by the insurance contract, that it intended to cancel the policy as of October 11, 2008. Plaintiff alleges that the missing pages of the lease agreement were provided to Mang prior to that date but that, despite assurances from employees of Mang that the problem had been resolved, Northland proceeded with the promised cancellation. In December 2008, plaintiff was involved in a motor vehicle accident that left him injured and his tractor truck damaged.  When Maki tried to make a claim, he learned that the policy was canceled.


Maki then sued Northland (and its parents Travelers), LoVullo and Mang and a number of individual employees of the various companies.


First of all, the individual claims were dismissed because they were sued as employees, not as individuals. Fraud claims against the defendants were also dismissed. The alleged fraud committed by Northland, Travelers and LoVullo, however, amounted to acting upon the purported misrepresentations made by Mang as to what documents had been provided by plaintiff instead of ferreting out any misdeeds on their own initiative. Inasmuch as that thin gruel does not constitute a sufficient allegation "that [those] defendants were aware of a fraud and intended to aid in the commission of the fraud," the fraud claims against them fail.


The breach of contract claims against Travelers and LoVullo, neither had a contractual relationship with plaintiff, as Northland was the corporate entity that issued the insurance policy at issue. Plaintiff gave no reason to believe that LoVullo, an insurance wholesaler with which he had no direct dealings, could be held liable for a breach in the terms of an insurance policy issued to him by Northland. As for Travelers, plaintiff alleges that Northland is its "wholly owned subsidiary," but "[a] parent corporation may not be held liable for the contracts [and other acts] of its subsidiary solely because of stock ownership.


Robert E.B. Hewitt III

[email protected]


12/07/16       Cockburn v. Neal

Appellate Division, Second Department

Defendants Cannot Establish a Prima Facie Case When Their Own Expert Found Significant Limitations in the Range of Motion of the Left Knee

The defendants failed to meet their prima facie burdens of demonstrating that the plaintiff did not sustain a serious injury. The defendants failed to submit competent medical evidence establishing, prima facie, that the plaintiff did not sustain a serious injury to his left knee under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), as one of the experts relied upon by both of the defendants found significant limitations in the range of motion of the left knee   Since the defendants failed to meet their respective prima facie burdens, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.


12/07/16       Dutka v. Odierno

Appellate Division, Second Department

There Can be More Than One Proximate Cause of an Accident Such that Summary Judgment would be Inappropriate Where There Was an Issue of Fact as to Whether a Homeowner’s Vegetation Helped Cause the Accident and an Issue of Fact for the County That Had Not Established as a Matter of Law that Its Roadway Was Safe

The plaintiffs were passengers in a vehicle driven by the defendant Michael Dutka, which collided with a vehicle operated by the defendant Odierno. The plaintiffs allege that the accident occurred when Odierno, who was traveling eastbound on Beaumont Avenue, ran the stop sign facing her and turned left onto Park Boulevard in front of their southbound vehicle. The plaintiffs further allege, among other things, that the Herlich defendants, who own the property on the northwest corner of the subject intersection, were negligent in maintaining the hedges on their property in a dangerous fashion so as to obstruct the view of oncoming traffic and traffic devices at the intersection. Similarly, the plaintiffs alleged that the Village, the County, and the Town, despite prior complaints and actual notice of multiple prior accidents at the location, were negligent in failing to maintain the roadways and traffic control devices in a reasonably safe manner, and negligently permitting obstructions to remain at the location that interfered with clear lines of sight for drivers operating vehicles on Park Boulevard and Beaumont Avenue.


The case was dismissed against the Village defendant as a municipality that has adopted a prior written notice law cannot be held liable for a defect within the scope of the law absent the requisite written notice, unless an exception to the requirement applies. The only recognized exceptions to the statutory prior written notice requirement involve situations in which the municipality created the defect or hazard through an affirmative act of negligence, or where a special use confers a benefit upon the municipality.  The Village established its prima facie entitlement to judgment as a matter of law by demonstrating that it lacked prior written notice of the allegedly defective condition. Contrary to the plaintiffs' contention, a municipality's actual or constructive notice of the allegedly defective condition does not satisfy the prior written notice requirement.


The Village also established, prima facie, that the plaintiff Paula Dutka did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The Village established, through competent medical evidence, that the alleged injuries sustained by Paula Dutka did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). The Village also demonstrated, prima facie, that Paula Dutka, who admitted that the accident caused her to miss only one week of work, did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d). The plaintiffs did not oppose this branch of the Village's motion and, thus, failed to raise a triable issue of fact in opposition.


The Appellate court found the Supreme Court erred in granting that branch of the Herlich defendants' motion which was for summary judgment dismissing the complaint insofar as asserted against them by her. A homeowner has no duty under the common law to prevent vegetation from creating a visual obstruction to users of a public roadway, but a duty to such users may be created by statute or ordinance. Where a specific regulatory provision imposes upon property owners a duty to prevent vegetation from visually obstructing the roadway, proof of noncompliance with the regulatory provision may give rise to tort liability for any damages proximately caused thereby. Here, the Herlich defendants failed to establish their prima facie entitlement to judgment as a matter of law, as they failed to demonstrate that the hedge on their property did not constitute a visual obstruction in violation of Code of the Town of Oyster Bay chapter 246 § 246-4.4.4, and Code of the Village of Massapequa Park chapter 298, article I, § 298-2. Moreover, the Herlich defendants did not establish, prima facie, that Odierno's conduct was the sole proximate cause of the accident. There can be more than one proximate cause of an accident, and where varying inferences as to causation are possible, resolution of the issue of proximate cause is a question for the jury. As such, even a finding that Odierno violated the Vehicle and Traffic Law would not preclude a finding that negligence of the Herlich defendants contributed to the accident.


Likewise, the Supreme Court was held to have erred in granting that branch of the County's motion which was for summary judgment dismissing the complaint insofar as asserted against it by Brooke Dutka. It has long been established that a governmental body, be it the State, a county or a municipality, is under a nondelegable duty to maintain its roads and highways in a reasonably safe condition, and that liability will flow for injuries resulting from a breach of the duty.  Here, the County, which conceded that the section of Park Boulevard where the accident occurred was within its jurisdiction, failed to demonstrate, prima facie, that Park Boulevard was maintained in a reasonably safe condition with unobstructed sight lines, or that Odierno's conduct in failing to yield the right-of-way was the sole proximate cause of the accident. 


12/07/16       Ramos v. Baig

Appellate Division, Second Department

Defendants’ Own Expert Submissions Revealed Significant Range of Motion Limitations Such that Summary Judgment Must Be Denied

The defendants failed to make a prima facie 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' own submissions revealed significant limitations in the range of motion of the plaintiff's spine and right shoulder. Since the defendants did not sustain their prima facie burden, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.


12/07/16       Yun v. Geico Ins. Co.

Appellate Division, Second Department

Jury Could Give Credence to One Expert over Another When Finding Against Plaintiff on Serious Injury

The Appellate Division found a jury verdict in favor of the defendants and plaintiff moved to set aside the verdict. Plaintiff was involved in a motor vehicle collision in 2009.  The defendant conceded the issue of liability, and the matter proceeded to a trial on damages. At the trial, the plaintiff presented the testimony of his treating orthopedic surgeon, who testified that he performed arthroscopic surgery on the plaintiff's left shoulder less than three months after the accident. The plaintiff's orthopedic surgeon further testified that he examined the plaintiff's shoulder again in January 2013. He found that for elevation and abduction, the plaintiff's shoulder had a range of motion limitation that was "minimal but perceptible," and for internal rotation, the shoulder's range of motion was "almost too normal, but not quite." The defendant presented the testimony of an orthopedic surgeon who examined the plaintiff's left shoulder in April of 2012, and found that its range of motion was "within normal limits." The jury found that the plaintiff did not sustain a serious injury under either the significant limitation of use or the permanent consequential limitation of use categories of Insurance Law § 5102(d).


The Appellate Court held that a jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached its verdict on any fair interpretation of the evidence. Where conflicting expert testimony is presented, the jury is entitled to accept one expert's opinion and reject that of another expert. The Appellate Court found the jury’s verdict to be based on a fair interpretation of the evidence.



Tessa R. Scott

[email protected]




12/08/16       Sure Way NY, Inc. v Travelers Ins. Co

Civil Court of the City of New York

If New Information Comes to Light in an EUO, an Insurer May Request another EUO within Days

The issue here is whether a no fault insurer must request examinations under oath ("EUOs") of all conceivable entities within 15 calendar days of receipt of a written notice of claim, as provided in forth in 11 NYCRR 65-3.5 (b), or whether its 15 days in which to request an EUO starts anew after it completes one EUO and discovers the need for an additional EUO of another entity.

Plaintiff, Sure Way NY, Inc., sought to recover from defendant Travelers Insurance Co. no-fault benefits for services and medical equipment it provided to its assignor. Defendant received plaintiff's two bills on September 16, 2013 ("first bill"), and October 2, 2013 ("second bill"), respectively, and made two successive verification requests for each bill. Defendant made verification requests on the two bills between September and November 2013. Petitioner did not challenge the timeliness of these requests.


On December 19, 2013, while the requested verification remained outstanding, defendant conducted an EUO of the assignor, which was timely. The assignor's testimony raised questions regarding the accuracy of the billing and coding associated with the claims submissions, and the legal relationship between the plaintiff's corporation and the individuals who performed the services. As a result, on January 9, 2014, defendant sent a letter to plaintiff requesting that it appear for an EUO scheduled for January 29, 2014. After plaintiff failed to appear for the EUO, defendant sent a second scheduling letter to plaintiff dated January 31, 2014, requesting that plaintiff appear for an EUO on February 18, 2014. Plaintiff again failed to appear.


Based upon plaintiff's failure to respond to the verification requests and failure to appear for the two scheduled EUOS, defendant issued a denial of plaintiff's claims on February 20, 2014. Plaintiff does not dispute that it failed to respond to the verification requests or that it failed to appear for the EUOS.

Thus, Defendant moved for summary judgment on the grounds that plaintiff breached a condition precedent to coverage by failing to attend the EUOs. Plaintiff cross-moved for summary judgment on the ground that defendant did not timely mail a request for an EUO within 15 days of its receipt of plaintiff's claim.


This Court previously held that when an insurer obtains new information from an EUO of the assignor, which gives it reason to conduct an EUO of the assignee provider, the insurer must send the EUO request to the assignee within 15 business days of the date the EUO of the assignor was held.  If a request for an additional EUO that was not made within the 15 days prescribed in the regulations, the Civil Court adopted the decision of the Second Department.  The Second Department held that when an insurer is late in requesting additional verification beyond the 15-day time period, the insurer's time to either pay or deny the claim is reduced.


In application to this matter the Civil Court explained the following: Defendant insurer sent a letter requesting an EUO of the provider on January 9, 2014, some 21 days after the EUO was conducted of the assignor on December 19, 2014. It therefore had to subtract six days from the 30 days it had in which to issue a denial after the provider failed to appear for its EUO on February 18, 2014. Since defendant issued its denial on February 20, 2014, only two days after the EUO no show, its denial was timely. Defendant also properly established that it properly generated and mailed the two EUO notification letters, and that the insurer failed to appear for the EUO. 


Accordingly, the defendant's motion for summary judgment was granted and the plaintiff's cross-motion for summary judgment was denied.



Steven E. Peiper

[email protected]


12/08/16       Netzahuall v All Will, LLC

Appellate Division, First Department  

Ruling of WCB did not Preclude Owner from Re-Litigating “Employment Status” of Injured Party

Plaintiff sustained injury while the course of his employment at construction site.  Both plaintiff, and Lime Light, agreed that plaintiff was engaged as employee of Lime Light at the time of his injury.  Based upon this agreement, the Workers Compensation Board awarded benefits to plaintiff under Lime Light’s policy. 


In a subsequent bodily injury action, the owner of the construction site, All Will, argued that Mr. Vera was not an employee of Lime Light.  Lime Light argued that the decision of the Workers Compensation Board to award benefits collaterally estopped the “re-litigation” of Vera’s employment status.  However, as All Will was not a party to the Workers Compensation proceeding, it followed that it did not have a “full and fair opportunity” to litigate the issue.  As “full and fair” is a hallmark of a collateral estoppel, it followed that the previous ruling did not have preclusive effect on All Will’s arguments.



Agnes A. Wilewicz

[email protected]


Next time, I promise.



Jennifer A. Ehman

[email protected]


12/09/16       Illinois Union Ins. Co. v. Grandview Palace Condominiums Assn. Corp.

Supreme Court, New York County

Hon. Jeffrey K. Oing, J.S.C.

Questions of Fact Found as to the Application of Protective Safeguards Endorsement in Fire Loss Claim

This decision arises out of a fire that occurred on April 14, 2012, causing the near-complete destruction of the approximately 400-unit Grandview Palace condominium complex in Liberty, New York (“Grandview Palace”) owned by defendant Grandview Palace Condominiums Association, Inc. (“Grandview”).  The fire originated in the old boiler room in the basement of the partially sprinkled “C” building within the Grandview Palace and rapidly spread, eventually causing damage to every building within the property. 


Plaintiff insurers’ refused to pay the claim alleging, among other things, that Grandview breached a Protective Safeguards Endorsement (the “PSE”), which provides a warranty regarding sprinkler coverage. The PSE was contained in the policy issued by plaintiff Illinois Union Insurance Company (“Illinois Union”) to Grandview that was in effect at the time of the fire.  The excess policy issued by Great American then incorporated those terms. 


Interestingly, that twist in this case, is that Illinois Union had issued an earlier policy to Grandview, which was in effect from May 21, 2010 to May 21, 2011.  The original quote on that policy included the PSE.  However, when pressed by Grandview’s broker, Illinois Union agreed to waive the PSE.  Upon the expiration of that policy, it was replaced with a policy issued by Aspen American Insurance Company, which did not contain a PSE.  When Aspen cancelled mid-term, Illinois Union issued a replacement policy with the PSE.  No change was made to the Great American excess policy beyond issuing a new endorsement identifying the underlying policy. 


Following the fire, Illinois Union and Great American brought a declaratory judgment action, with was eventually consolidated with other such actions, claiming coverage was barred by application of the PSE.  By its plain language, the PSE required Grandview to maintain an Automatic Sprinkler System, including related supervisory services, in “ALL” buildings.  In addition, the PSE amended the Exclusions section of the policy to bar coverage for loss by fire if Grandview either:  (1) failed to maintain an Automatic Sprinkler System over which it had control “in complete working order;” or (2) knew the system was impaired but failed to notify the Insurers.


The record demonstrates that several of the interconnected buildings in Grandview Palace lacked any sprinkler system whatsoever at the time of loss.


In considering the arguments made, the court rejected Grandview’s initial claim that the PSE violated New York Insurance Law § 3404, which mandates that any property insurance policy covering the peril of fire must provide for at least as much coverage as the New York State standard fire policy.


Contrary to Grandview’s argument, the court found that the inclusion of the PSE did not provide less than the mandated coverage under Insurance Law § 3404. Grandview’s argument was based on the absence of language authorizing insurers to require such a warranty as a condition of coverage.  The court found no case law to that effect.  And, in its opinion, if that argument were accepted, insurers would then either charge substantially higher premiums of insureds like plaintiff who pose a substantially higher risk of fire due to the construction or decline coverage.  Thus, although the result Grandview advocated would benefit it in this instance, that position would produce a detrimental result for insureds as a whole, which would be at odds with what the Standard Fire Policy was enacted to accomplish.


Next, the court considered the applicability of the PSE.  The carriers submitted evidence that Grandview breached the PSE in that all of the insured buildings of the Grandview were not 100% covered by sprinklers, as allegedly warranted; that there were inoperable fire sprinklers, non-functioning fire alarms, fire and safety code violations, buildings without 100% sprinkler coverage, and buildings without any sprinklers; and that there was no central fire monitoring.  In opposition, Grandview submitted the March 9, 2011 ACORD application, which advised that a 16,048 square foot building to be insured was of frame construction and had zero percent sprinkler coverage.  In the court’s view, this document raised an issue of fact as to whether Illinois Union tendered the policy with knowledge that at least one of the buildings was not sprinklered.  Issues of fact were also found as to whether Illinois Union had knowledge of the defects in the sprinkler coverage prior to the fire and/or should have inspected the property to ascertain its condition.  


Lastly, with respect to the excess policy with Great American, an additional factual issue was found as to whether Grandview violated the PSE contained in the primary Illinois Union policy. The Great American policy was initially an excess policy to the Aspen policy, which contained no PSE requiring automatic sprinkler coverage. When the Aspen policy was replaced mid-term by the Illinois Union policy, Great American simply issued a new endorsement without notifying Grandview of the change in the scope of coverage and without any reduction in premiums despite the reduction in the scope of coverage.  Thus, all motions were denied.



Brian D. Barnas

[email protected]


12/12/16       LeBoon v. Zurich American Insurance Company

United States Court of Appeals, Third Circuit

An Unsuccessful Claimant Cannot Maintain a Bad Faith Action against an Insurer for Failure to Settle

LeBoon was hired by the Alan McIlvain Company (“AMC”) in September 2008, and terminated from his position there as Human Resources Manager on May 8, 2009.  On May 9, 2012, he filed a pro se lawsuit against AMC, alleging violations of the Americans with Disabilities Act and the Pennsylvania Human Relations Act in that he was terminated just after he had suffered a workplace injury.  The parties' motions for summary judgment were denied and the case was set for trial.  On the second day of trial, LeBoon called to explain that he was having car trouble and could not get to court that day.  The District Judge assigned to the case declared a mistrial and ordered LeBoon to show cause why his case should not be dismissed for failure to prosecute.  Specifically, the District Judge ordered LeBoon to provide proof of his car troubles.  After reviewing LeBoon's response, the District Judge found that his claims of car trouble were unsubstantiated and that he could have taken public transportation to court.  LeBoon's case was dismissed for failure to prosecute.


On October 29, 2015, LeBoon filed a pro se complaint against Zurich, AMC's liability insurer, alleging bad faith in connection with his employment discrimination action.  LeBoon's allegations were premised on Zurich's conduct while defending AMC.  Specifically, he claimed that Zurich failed to make any good faith offers to settle the employment litigation and thus breached a duty owed to him.


Zurich filed a motion to dismiss.  It argued that its only obligation under the liability policy was to defend and indemnify AMC, an obligation it executed successfully, and that, because LeBoon had no basis for arguing that he was an Insured under the policy, he had no basis for maintaining a civil action against Zurich.


The court agreed and granted Zurich’s motion.  In that LeBoon plainly is not an Insured under the liability policy, he failed to state a plausible claim for relief on his allegations of bad faith. Under the unambiguous terms of the liability policy, Zurich's only obligation was to provide for the defense and indemnity of covered claims against AMC.  It had no obligation to LeBoon, as AMC's adversary, to settle the employment litigation, and thus LeBoon’s bad faith claims did not survive Zurich's motion to dismiss.


12/08/16       Gonzalez v. Geico General Insurance Company

United States District Court, Middle District of Florida

Bad Faith Trial Evidence: what’s in and what’s out?

This is a third-party insurance bad faith action that stems from an automobile accident that occurred on February 23, 2009, between Plaintiff Ishmael Ramjohn and Lisa Anderson.  At that time, Ramjohn was insured by Defendant GEICO under an automobile policy providing bodily injury coverage in the amount of $100,000 per person, and $300,000 per occurrence.  It is undisputed that Ramjohn was at fault for the accident and that the accident injured Anderson.

Anderson initially offered to settle her claim for the $100,000 policy limits but GEICO rejected her initial offer.  By the time that GEICO offered Anderson the full $100,000 policy limit, she was unwilling to settle for that amount.  Subsequently, following a jury trial, a verdict was returned in favor of Anderson and a Final Judgment was entered in her favor in the amount of $398,097.82.  On February 4, 2015, the insureds filed this bad faith lawsuit against GEICO.  The case was set for trial, and GEICO filed a motion in limine to exclude certain evidence from being admitted during the trial.


GEICO sought to prohibit Plaintiffs from presenting evidence involving personal opinions of insurance companies in general and GEICO specifically.  The court denied GEICO’s request as overly broad, but GEICO was permitted to raise an appropriate and specific objection during trial.


GEICO also sought to preclude any reference to its advertising campaigns.  However, the court noted that a jury could find that GEICO’s main concern in not settling was to avoid raising its Average Loss Payments (“ALP”) performance metric.  While evidence regarding GEICO’s general advertising materials may be irrelevant and cumulative, the court denied the motion with respect to GEICO’s ALP metric.


However, the Court did grant GEICO’s motion to preclude discussion of whether Plaintiffs paid their policy premiums.  Premium payment evidence was deemed irrelevant because the validity of the insurance contract was not at issue.  The Court also precluded Plaintiff’s from eliciting opinions from lay witnesses regarding the standards for bad faith under Florida law.


GEICO’s request to preclude use of its claim handling manual and training materials was denied without prejudice to GEICO to raise a specific objection at trial.  In addition, the court denied GEICO’s request to exclude the introduction of all personnel materials pertaining to GEICO employees.  The court reasoned that these records were the primary source of evidence regarding Average Loss Payments and GEICO’s incentive practices.


12/08/16       Kelly v. State Farm Mutual Automobile Insurance Company

United States District Court, District of Nevada

Carrier did not Act in Bad Faith by Asking the Insured to Provide Medical Evidence and Explaining its Rationale for Applying a Claim Offset

On July 7, 2014, Plaintiff Kenya Kelly (“Kelly”) was traveling as a passenger in a vehicle owned and operated by coworker and supervisor Faizah Elliot (“Elliot”).  While stopped due to traffic congestion, Kelly and Elliot were rear-ended by an unidentified driver who immediately fled the scene in his or her car.  At the time of the accident, Elliot had a State Farm auto policy that included uninsured motorist (“UM”) coverage of $15,000 per person and $30,000 per accident.  Kelly also had a State Farm auto policy, in the name of her husband Jermaine Kelly that also included UM coverage of $15,000 per person and $30,000 per accident.


Following the accident, Kelly made a claim with State Farm under the UM provisions of both policies and demanded the policy limits.  On July 16, 2014, State Farm responded to Kelly's counsel, acknowledging her claim, providing general coverage information, and requesting documents.  On October 15, 2014, having received no response from Kelly's counsel in three months, State Farm sent another letter requesting medical information.  Yet another month later, State Farm sent a final information request to Kelly's counsel, referencing the policy contract and the requirement that Kelly provide State Farm with information necessary to process the claim.


On November 26, 2014, Kelly's counsel replied to State Farm's requests, providing a signed Authorization and a list of health care providers.  On December 2, 2014, State Farm sent requests for medical records to the three hospitals Kelly identified in her list of health care providers.  The next correspondence between Kelly and State Farm was sent three months later on March 4, 2015, when Kelly's counsel provided the itemized bills for Kelly's accident-related treatment, and asserted medical special damages of $19,512.02.  In the same letter, Kelly's counsel demanded payment of policy limits and imposed a response deadline of March 20, 2015.  State Farm offered $3,500 to settle Kelly's claim and expressed concerns regarding the treatments received and whether they were related to pre-existing conditions.  State Farm requested five years of prior medical history for Kelly in order to determine the extent of any pre-existing injuries.


Kelly did not respond to State Farm's offer of $3,500, so State Farm reiterated the offer in another letter dated June 1, 2015.  On June 2, 2015, Kelly's counsel requested (1) a written explanation of how State Farm determined the value of Kelly's claim; (2) the name of any doctor or health care provider consulted by State Farm in evaluating the claim; (3) identification of any specific pre-existing conditions in Kelly's records that are the basis for State Farm's concerns; and (4) specification of any information in Kelly's records forming basis for State Farm's request for five years of Kelly's medical history.  State Farm replied the next day and explained that it had applied an offset to Kelly's claim in the amount of $13,720.62, based on worker's compensation benefits Kelly received following the accident, among answers to counsel’s other questions.


On July 7, 2015, Kelly's counsel replied, expressing dissatisfaction with the information provided in State Farm's.  Kelly's counsel also provided Kelly's prior medical records and asserted that her accident-related injuries had nothing to do with any pre-existing conditions.  After another series of letters, State Farm sent a follow-up letter on August 18, 2015 including payment of $3,500.


On October 14, 2015, based on the foregoing, Kelly sued State Farm for inter alia, breach of contract, bad faith, and breach of the implied covenant of good faith and fair dealing.


State Farm was granted summary judgment on the bad faith claim.  State Farm demonstrated a genuine dispute as to coverage.  State Farm asserted it applied an offset based on the amount of worker's compensation benefits already received by Kelly, which benefits covered the full amount of Kelly's medical special damages.  Accordingly, the $3,500 offer from State Farm covered only Kelly's estimated pain and suffering.  Kelly offered no evidence in response.  Therefore, there was no evidence to support a finding that State Farm lacked a reasonable basis to deny coverage, or that State Farm knew it lacked a reasonable basis to deny coverage.


The Court also granted summary judgment in favor of State Farm on Kelly's third cause of action for breach of the implied covenant of good faith and fair dealing.  Kelly failed to present any evidence of delay, unreasonableness, or bad faith, and there was no evidence that State Farm deliberately contravened the intention or spirit of the insurance contract.  Indeed, State Farm directed Kelly to specific provisions of the policy contract that gave State Farm the right to apply the contested offset.



Jennifer J. Phillips

[email protected]


12/08/16       The University of Pittsburgh v. AXIS Insurance Co.

United States District Court, Southern District of New York

Prior Knowledge of Potential Claim Leads to Loss of Coverage

This coverage dispute resulted from a notice of claim submitted by the insured on the last day of the coverage period of a claims-made policy with Lexington Insurance Company. When Lexington disclaimed, the insured submitted to AXIS under the insured’s new policy with that company. However, AXIS also disclaimed because the insured had knowledge of a situation that reasonably could be expected to result in a claim prior to the policy’s effective date.  The district court previously granted summary judgment to Lexington Insurance, and in this decision considered AXIS’ motion for the same relief.


The court began by noting the nature of a claims-made policy, which is that it protects the insured for claims made against it and reported to the insurer within the policy period or, if applicable, the extended reporting period.  It then considered the argument of the University (standing in the shoes of the insured) that that, if the insured’s earlier submission was insufficient to trigger coverage by Lexington, as previously determined by the court, then it must also be insufficient to preclude coverage by AXIS: “one of the two insurance carriers must have a coverage obligation.”


The district court disagreed. “[The University] is incorrect in its fundamental premise that one of the two insurance carriers must have a coverage obligation. It is certainly possible—and occurred here—that a party could fail to adequately comply with notice provisions required for one policy (here, the Lexington policy), and yet, because of the circumstances, not be covered under a second, subsequent policy (here, the AXIS policy).”  “[T]he AXIS policy did not provide coverage if, prior to its effective date of February 1, 2012, a principal of the insured ‘had knowledge of any act, error, omission, situation, or event that could reasonably be expected to result in a Claim.’”  Based on the evidence presented by AXIS is support of its motion and the unambiguous language of the policy provision at issue, the district court agreed “that, on the facts here, any reasonable juror would have to conclude that a principal of [the insured] had a reasonable expectation of liability prior to February 1, 2012. This determination is sufficient to deny coverage under the AXIS Policy.” 


The court stressed the importance of complying with an insurance policy’s terms, commenting that the University’s “fundamental problem is that, on the facts before the Court on the Lexington and AXIS motions, [the insured] did not respond to its knowledge of potential liability with the care and promptness required by terms of its insurance contracts. The result of [the insured’s] failure to comply with the policy terms is that [the University] cannot shift its loss to either carrier. The Court's decision does not, as [the University] alleges, create an unfair forfeiture—Ballinger was never entitled to unconditional indemnification, even if it purchased two back-to-back policies. It must always comply with the policy's requirements. Here, it did not.”


In opposition, the University failed to raise a triable issue of fact as required to survive summary judgment.  The district court therefore granted summary judgment to AXIS and closed the case.

Editor’s Note:        The Hurwitz & Fine Coverage Team represented AXIS in this victory.



Howard B. Altman

[email protected]


On the road this week.



Earl K. Cantwell
[email protected]


09/27/16       Swiss Re International SE v. Comac Investments, Inc.

United States District Court, Northern District of California

No CGL Coverage for Construction Defect

Cases keep coming down from courts in various states on whether and when there is CGL coverage for claims of defective construction.  In this case, Swiss Re brought a declaratory judgment action concerning its duty to defend and indemnify Comac Investments under four CGL policies issued from 1998 – 2002.  In the underlying action, a Homeowners’ Association sought several million dollars in damages for alleged construction defects at a development of 23 housing units and 7 townhouses.  Swiss Re represented Comac in the underlying action subject to a complete reservation of rights, and then the subsequently filed declaratory judgment action.  The insurance company made a motion for summary judgment for a declaration of no coverage, and the Court granted that motion. 


The Court first ruled that, under California law, the allegations of defective construction did not constitute a defined or covered “accident”.  This is because, although the construction was allegedly defective, the act of so doing was a deliberate, intentional act and not “unexpected” or “unforeseen”.  For example, the Court cited to cases holding that the term “accident” does not apply where an intentional act results in unintended harm. 


There was also an exclusion in the policy denying coverage for damages “expected or intended from the standpoint of the insured” which paralleled a California state statute prohibiting indemnification for “willful acts’” of an insured.  The Court held that, again, the allegations of construction defect fell within the “intentional acts” exclusion as well as the California statutory prohibition, and that allegations of construction defect were within the exclusion.  An interesting issue which the Court did not address was whether the construction defect claims were barred by the California ten year statute of repose which commences upon substantial completion of construction since construction of the underlying real estate development was completed in 1996. 


This case represents a fairly standard analysis, but one on which the courts have differed over the past several years as to whether and when a construction defect can be deemed an “accident” or a covered “occurrence”.  Several courts have essentially adhered to the reasoning of this case that, even if unintended harm and consequences result, installing defective construction is not an “accident” because it is a deliberate albeit “misguided” act. 


Likewise, construction defects may not be covered under a CGL policy based on several common policy exclusions, such as the one in this case for intentional or deliberate acts.  Other common “exclusions” that may come into play in these cases are those dealing with work in place, completed operations, and claims incurred by reason of a contractual agreement. 


Although not covered in this case specifically, another common issue in these cases is whether the damages claimed fall within the policy definition of damages or a covered loss.  For example, some courts have parsed the issue and held that loss or damage to the actual construction is not covered, but if there is residual or secondary damage to existing or pre-existing building elements that damage might be within the scope of covered damages. 


Overall, this issue has risen numerous and conflicting cases across the country, and even within states.  Sometimes it is difficult for a Federal court such as this one to actually determine and correctly apply what the given law is in a given state at a given time.  Some states have had to address this issue by statute and/or insurance regulation in order to bring some clarity and finality. 


The courts which have resisted allowing coverage for construction defects under a CGL policy have, ultimately, approached the issue from a perspective that the CGL policy is intended to be a liability insurance policy, and not a “performance bond” or a warranty of the construction. 


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