Back to Top

Coverage Pointers - Volume XVIII, No. 14

Volume XVIII, No. 14 (No. 470)

Friday, December 30, 2016

A Biweekly Electronic Newsletter

 

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874

                                           

Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

 

www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2016
All rights reserved
 

As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers. 

 

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

 

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.

 

You will find back issues of Coverage Pointers on the firm website listed above.

 

Dear Coverage Pointers Subscribers:

 

We ask you one last time in 2016:  Do you have a situation?  We love situations, truly we do.

 

Happy New Year to you and yours.  We hope you have the healthiest and most successful of New Years.

 

This issue comes to you from Scottsdale, AZ, where your editor just landed, anticipating a couple of weeks of rest and relaxation.  However, I’m here for you (cell number below) as are the great attorneys back home ably minding the shop.

 

Pardon the brevity of this letter, but this is crafted on Thursday, which is my travel time out west.

 

As the year winds down, we provide you with our annual summary. The CP team reported on  521 decisions as compared to 565 last year:  102 decisions appeared in my column,  145 in Rob’s Hints on Serious Injury, 88 in Tessa’s No Fault column, 68 in Steve’s Property and Potpourri, 50 in Agnes’ Wide World, 36 in Jen’s Gems, we introduced Brian Barnas on Bad Faith in our 01/29 edition and he contributed 61 summaries, Jen Phillips’ Philosophies started in the same issue and we offered  34. Howard Altman’s Administrative and Albany column was debuted on September 9 and he’s offered 8. We received three from Chris Potenza (our Asbestos maven) and another  26 articles from Earl and his Pearls.

 

A State of Good Faith. The Count Continues:

 

In June of 1998, Bill Clinton was President, Sex in the City had its debut, George Pataki was Governor of New York, the Oklahoma City bomber conspirator Terry Nichols was sentenced to life in prison and Microsoft released “Windows 98”.  My daughter was 16, and my son was 13 (they are now 34 and 31 respectively).

 

Why do I digress as I have for a number of years in the last cover?

 

That same month, in fact, on June 11, 1998, the highest court in the State, the Court of Appeals, handed down a decision in Smith v. General Accident, holding an insurer liable for bad faith.  That decision was the last time any appellate court in New York upheld a bad faith verdict against an insurer.  We report on this “count” every year.  It has been 18 years, 6 months and 19 days (or, if you prefer, 6777 days) since a New York appellate court found conduct egregious enough to constitute actionable bad faith.

 

Anyway, that’s all you get from me this issue, other than my cache of my 100 Years Ago stories and the kind words of my hardworking authors.

 

Best for the New Year.

 

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

 

We are delighted to announce the addition of Patrick Curran to our legal team, effective January 2nd.

 

Pat is an experienced medical malpractice defense counsel and a well-experienced trial lawyer and appellate attorney.  For decades, he has been defending matters involving medical malpractice and business litigation (ophthalmology, lasik surgery, neurosurgery, general surgery, ob-gyn, emergency room, and podiatry), trucking and motor vehicle accidents, product liability, municipal liability, construction accidents, nursing home claims, class actions, dental malpractice and general negligence litigation.  He has handled cases in 23 counties and served as lead counsel in more than 70 jury trials resulting in a verdict, with more than 90 percent of those verdicts in favor of his clients. 

 

Pat has served as chief trial counsel for a major hospital system in Western New York and co-lead trial counsel for leading nursing home providers in New York state.  He has represented the leading ophthalmologist in Western New York on many cases involving refractory outcomes.

 

As a well-respected trial advocate, he also participates in alternative dispute resolution and has served as an arbitrator on numerous occasions.  He has received Martindale-Hubbell’s preeminent AV Peer Review Rating, selected for inclusion in Best Lawyers in America in the field of Personal Injury Litigation: Defendants, and named in the upstate New York edition of New York Super Lawyers in the area of Personal Injury Defense: Medical Malpractice. He was also selected among the Legal Elite of Western New York in 2015 by Buffalo Business First and the Buffalo Law Journal.

 

Patrick was employed by the New York State Department of Health and served as chief legislative assistant to a member of the New York State Assembly.

As an adjunct faculty member of the University at Buffalo Law School, Patrick created a course titled, “Technology in the Courtroom.” He is a frequent lecturer for the University at Buffalo School of Medicine and School of Nursing, as well as numerous health professional and community groups,

 

Patrick is a national board member and was elected national secretary of the American Board of Trial Advocates (ABOTA), representing the Buffalo Chapter; he is the past president and a founding member of the chapter.  He is active in the Federation of Defense and Corporate Counsel (FDCC), Defense Research Institute (DRI), American Bar Association, New York State Bar Association, New York State Trial Lawyers Association, Defense Trial Lawyers of Western New York, Western New York Trial Lawyers Association, and the New York State Academy of Trial Lawyers.

 

Altman’s Administrative (and Legislative) Agenda  

 

Greetings and Happy New Year!  My Chanukah was filled with fried foods, gifts of bake ware and certificates for meals and cooking classes; in other words, perfect! I hope Santa and/or Chanukah Harry was as good to you and yours. 

 

Today, I bring you New York’s new, first-in-the nation regulation barring insurers from refusing to provide commercial crime insurance coverage to businesses in the state that employ people with criminal convictions in their history.

 

As I’m in a festive mood, here’s one more Altman Original holiday poem, with apologies to whoever wrote Auld Lang Syne (I’m sure Dan Kohane knows the answer).

 

Should old acquaintance be forgot, and never brought to mind?

Not to our dear friends and readers here at Hurwitz & Fine

May the New Year bring smiles to each of your faces,

May it bring us some interesting new coverage cases.

May it bring you delight in my silly old rhyme,

And insureds who will pay their premiums on time.

May it bring peace to all, and good will to men

And wins for our clients, again and again.

May you prosper, be healthy, and be of good cheer

May we be here to wish you the same come next year.

 

Howard

Howard B. Altman

[email protected]

 

How Do You Stop That Thing?  One Hundred Years Ago:

 

The New York Times

New York, New Yok

30 Dec 1916

 

500 Miles An Hour for Him

 

Professor Says Machine Will Make It – Stopping’s Another Matter

 

Professor Boris Petrovik Weinberg, who teaches mechanical engineering in the Imperial University of Petrograd, scoffs at aeroplanes as passenger vehicles because they go so slow.  So he told the members of the Section of Engineering of the Association for the Advancement of Science at Columbia University yesterday.  He would travel from Chicago to New York in two hours and then on to Petrograd in fourteen hours more.  That is his aspiration, and he is convinced that it can be done.  In fact, he had with him to prove it a working model of the apparatus which he says will carry passengers at such speed. 

 

Although some of the scientists, after looking at the model and hearing the explanation, acknowledged that they would rather let Professor Weinberg attempt the tour first, they listened patiently to his discussion of the traveler’s millenium.

 

The model of his invention looks at first glance like a piece of iron tube.  Then came the explanation.  In the tube exists a perfect vacuum and into the vacuum is introduced a cartridge-like car big enough to admit a passenger to lie at full length.  The carrier, which does not touch the sides of the tube, is held suspended in the vacuum by electro magnets.  As there would be no air resistance the professor had it figured out that the carrier would take the velocity of the slightest or swiftest push and maintain it until it was stopped at the other end.

 

How to stop it, of course, was another question, especially when it was going at 500 miles an hour, as the professor said was quite possible and the professor didn’t explain how he would do this.

 

HEWITT’S HIGHLIGHTS:

 

Dear Subscribers:

                                

We had a Merry Christmas in my household as my two boys, age seven and six, are just the right age to add extra fun to the holidays.   I enjoyed watching them open presents and getting wrapping paper all over, and we spent the weekend playing games, eating great food, and watching holiday specials. I hope you enjoyed your holidays with your friends and family as well.   

 

On the serious threshold front, we have a few cases for you this edition as the appellate courts issued a handful of relevant opinions.  In one case, an ambulance company failed to win summary judgment on the issue of liability as it presented no evidence its lights and sirens were on, such that it could take advantage of the emergency vehicle exception. Further, defendant’s experts determination of no injury caused by the accident was deemed conclusory as he did not address the tear found on an MRI. Experts have to identify negative indications such as that and explain them, not ignore them. In a final case, the court reminded that when two experts disagree, summary judgment is an inappropriate place to resolve the battle of the experts.

 

I wish you all a very Happy New Year. With a new year comes new beginnings and possibilities.

 

Until next time,

 

Rob
Robert Hewitt
[email protected]  

 

If We Were Around 100 Years Ago, We’d be Out of Jail Cells:

 

New York Herald

New York, New York

30 Dec 1916

 

Libeled Geo. Washington

 

For Accusing Him of Drunkenness

Writer Must Go To Jail

 

Olympia, Wash., Dec. 29 – As a libeler of George Washington’s memory Paul Haffer of Tacoma must serve four months in the county jail, the Washington Supreme Court today upholding the conviction of Haffer in a criminal libel charge.

 

Haffer published as article accusing the first President of the United States of drunkenness and other irregularities.

Editor’s note:  Haffer spent three months in jail before being pardoned by the Washington State Governor. He was later convicted of failing to register for the draft.

 

Phillips Federal Philosophies:

 

Hello, All:

 

Here’s hoping your holidays are, were, and will be merry and bright.  As for me, I once again found myself being schooled by my nine-year old in Star Wars: Battlefront.  It should come as no surprise that he handily trounced his auntie whether playing as a Rebel or Imperialist.  I did, however, manage to figure out which buttons to push to throw a thermal imploder (although that might’ve actually been my helmet, but give me my little victories).  In any event, it was a good reminder that going into the New Year, as in all good things, we would be wise to follow in the footsteps of General Organa (she will be missed).

 

In a galaxy less far, far away, we have two cases today.  The first, a short one from the Eastern District, is a reminder that a remand back to state court following removal by a defendant is not just there for the asking.  In the second, the Southern District considers the myriad of ways one can read a contractual limitations period on commencing a suit against the insurer – although in this case, none of the roads lead the insured to success.

 

As always, thanks for reading. 

 

J.

Jennifer J. Phillips

[email protected]

 

Let’s End College Football, Once and For All – A Century Ago:

 

The New York Times

New York, New York

30 Dec 1916

 

Physical Director Assails Football

 

Dr. Anderson of Yale Tells College Body Game Has Ceased to be a Recreation

 

Declaring that college football had become a vocation instead of an avocation, and that it had ceased to be a recreation but had become a labor.  Dr. W. G. Anderson of Yale University told the Society of Directors of Physical Education in Colleges at the twentieth annual meeting yesterday at Columbia University that few football players have enough energy left at the close of each gridiron season to do justice to college studies.  Dr. Anderson’s address closed a day of speeches and discussions by leading gymnasium and athletic Directors who were seeking this year to devise standards for instruction in physical education.

 

Professor Charles V.P. Young of Cornell, President of the society, opened the session with an outline of “The Need of Standards and of Co-operation in Our Work.” and the day’s program included a thorough-going investigation into the best methods for standardizing the systems at American colleges.  The purpose was in general to clarify many of the methods in vogue for teaching gymnasium and outdoor athletic work, and to reconcile, if possible, the different plans which must necessarily be in vogue a the small college of 400 students and at the great universities of the East. 

 

Wilewicz’ Wide World of Coverage

 

Dear Readers,

 

Happy (almost) New Year! I sincerely hope that everyone’s days have been merry and bright lately. Mine have been filled with family and fun, and yes, insurance coverage. Can’t escape it, but wouldn’t want to! It’s what I get for being the daughter of a broker and a claims handler (no joke). Here’s to another jam-packed year of nuance, linguistic puzzles, heated debates over participles, and no ambiguities!

 

This time around in the Wide World, we highlight the Sixth Circuit Court of Appeals, with a couple of very interesting ones for your reading pleasure. First, in Stryker Corp v. National Union, the Court looked at an excess policy’s consent-to-settle provision. The only argument against its plain language was the dreaded – ambiguity. However, while the district court read between the lines and found an elusive differing of meanings, the Sixth Circuit deferred to the reasonable person. Since the policy required “written consent” of the excess carrier prior to settlement, and that did not happen, there was no coverage. Citing a seminal treatise on contract interpretation, the Court went so far as to note that actual linguistic ambiguities are rather rare. This comes up so frequently when desperate insureds try in vain to find coverage where there simply is none. Here’s a good case that walks them through the process.

 

Second, we have Continental Casualty v. Indian Head Industries, an asbestos coverage case – yay! This time, the Sixth Circuit tackles proration among various policies  covering the same risks over time. (For a fascinating article on recent developments in the law of asbestos/long-tail coverage proration in New York, see the latest edition of DRI’s Covered Events *cue shameless plug*, by yours truly and the estimable John Ewell – if you’re not a subscriber to the publication, shoot me a quick missive and I will forward you a copy.) In Indian Head, the Circuit court ultimately held that general allocation language in a policy mandated a pro rata method of allocating damages. Even though the policy included the terms “all sums”, what was meant was only those sums for which that insurance applied. Interesting stuff, as always.

 

Until next time, Happy Happy New Year!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

New York State Museum Formally Opens – A Century Ago:

 

Poughkeepsie Eagle-News

30 Dec 1916

 

Museum Opened

 

Dedicatory Exercises Held at Albany – Principal Address Delivered by Theo. Roosevelt

 

Albany, N.Y., Dec. 29. – The New York State Museum was formally opened today, the dedicatory exercises being held both in the afternoon and evening.  The ceremonies were under the direction of the regents of the University of the State of New York, and the principal address was delivered by Theodore Roosevelt, whose subject was “Productive Scientific Scholarship.”  Charles B. Alexander, chairman of the regents committee, for the state museum, presided at the afternoon session and Governor Whitman occupied the chair at the evening meeting.

 

Colonel Roosevelt, who as governor of New York, was a resident of Albany for two years, was given a warm reception. 

 

Tessa’s Tutelage

 

Dear Readers:

 

I hope you all have accomplished all you set out to do in 2016.  If, like me, you have quite a few things you didn’t get to, let’s all look to 2017 with optimism. 

 

This week we have a matter from the Second Department whereby they reverse a holding by the Supreme Court finding that the lower court should have considered a Declaratory Judgment Order, even though Defendant did not provide a notice of entry.  It is a quick read so it will give you extra time to consider your New Year’s Resolutions. I myself have not come up with a single one that I think I could stick to for a whole year.  It is hard enough to start writing 2017 instead of 2016.

 

Have a wonderful weekend!

 

Tessa

Tessa R. Scott

[email protected] 

 

A Fine New Year’s Resolution – A Century Ago:

 

The Patriot

Indiana, Pennsylvania

30 Dec 1916

 

Not Alone on New Year

 

Of course it is customary to make New Year’s day the day of new resolutions, but there is no particular reason why we should confine this work to this one day in the year.  In fact, the very best resolution we can make on New Year’s day is to resolve that during the coming year we will use every endeavor to make each day a day of self improvement; that not a single day shall pass upon which we have not attempted to speak a good word or do a kind deed for somebody; that not a day shall pass upon which we will not try to weed out some of the tares and brambles of character that now offend others or some of the bad habits that offend even ourselves.

 

Peiper’s Post

 

Sadly, we close out 2016 with some of the same confusions we harbored as we closed out 2015.  While my statement could be taken in any different number of ways (more than few involve the Buffalo Bills), I am referring to how, exactly, the meaning of “caused by acts or omissions” is actually defined.  You’ve heard our rants, our pleas and our prayers on the issue. 

 

Decisions?  We’ve received plenty. 

 

Consistency?  Ahhh….not so much. 

 

With this in mind, we invite you to review the Fourth Department’s most recent decision on “acts or omissions.”  This case, involving a snow plow contractor, refused to grant summary judgment against the contractor.  Why?  Because there was an insufficient showing that contractor was “culpable.”  Perhaps we are wrong, but we read culpability to mean “negligence.”  Indeed, it would be hard to find someone “culpable” without also establishing their negligence. 

 

Thus, does this decision hold that “caused by acts or omissions” require a showing of negligence?  We would submit that it should, and have argued the point over and over.  At least one court (there have been others), at least one time, appears to agree with us.

 

We also report on a subrogation claim in this week’s issue.  While not often referenced in Coverage Pointers, we have an interesting subrogation practice here.  That said, our reference of reported subrogation cases has been underwhelming in issues past.  That, in the coming year, is set to change.  We know there are several of you handling subrogation cases, and our potpourri column will endeavor to locate and report on issues and challenges which commonly arise in subrogated matters.  Stay tuned for more.

 

That’s it for now.  Signing off for 2016.  Happy New Year!

 

Steve

Steven E. Peiper

[email protected] 

 

Pneumatic Delivery?  100 Years Ago:

New York Herald

New York, New York

30 Dec 1916

 

Mayor Urges Mail Tubes

 

Protests Against Bill That Would Substitute Motor Trucks

 

In a letter last night to Champ Clark, Speaker of the House, Mayor Mitchel, on behalf of the city, officially protested against enactment of the bill now before Congress providing for the abolition of pneumatic mail tubes in New York and the substitution of motor trucks to transfer the mails.  To make such a substitution, the Mayor held, would materially increase already congested traffic conditions in the city and greatly add to the danger that now confronts pedestrians.

 

“I wish to impress upon you the incalculable harm that must inevitably be worked by such a measure in making more acute and dangerous traffic conditions, which already present a problem of alarming proportions,” said the Mayor.  “The adding of one avoidable mail truck to traffic conditions in New York is the creation of an unwarrantable additional hazard to life and limb.”

 

Barnas on Bad Faith:

 

Hello again:

 

Happy New Year.  I enjoy New Year’s Eve but I don’t have a go to plan.  Every year we seem to procrastinate deciding what we are going to do on New Year’s Eve until right before the day arrives.  This year is no exception.  I think it comes down to paralysis by analysis.  New Year’s Eve is a big night and calls for an outstanding plan.  You can’t just do anything on New Year’s Eve; you have to do something fun and extraordinary.  However, it’s not that easy to think of something worthy of the occasion and have everybody agree on it, and nobody in my circle of friends usually wants to formulate the plan ahead of time.  As such, we usually just end up scraping together some plan at the last minute.  It usually works out.  I guess for me it’s more about the people you spend New Year’s with rather than what you end up doing.

 

However, the NCAA, in its infinite wisdom, has decided to put the College Football Playoff semifinals on New Year’s Eve again.  As an initial matter, I love the College Football Playoff.  I think it is a fantastic idea, although I personally would prefer eight teams to four (I feel your pain Penn State fans).  That said, I can’t believe the NCAA is holding the semifinals on New Year’s Eve again.  You would think they would have learned last year when the ratings for the games went down 45% and 34.4% in viewership from the year before.  Apparently they have not because you will have to squeeze in watching Alabama-Washington and Ohio State-Clemson around your New Year’s Eve plans.  Here’s hoping the powers that be come to their senses and change it in the future.

 

I have two cases from two states that are not often featured in this space to round out 2016 in Barnas on Bad Faith.  In Dietz, we learn that a bad faith cause of action in Montana accrues on the date of settlement or when judgment is entered on the underlying claim.  Plaintiff’s causes of action against GEICO are thus untimely.  In Classico, the Court of Appeals of Kansas grants summary judgment in favor of the insurer on Plaintiff’s bad faith claim because Kansas does not recognize a cause of action for the tort of bad faith.  The Plaintiff there, who did not allege a breach of contract claim, is also out of luck on its claim for violation of the duty of good faith and fair dealing, which is merely a legal argument related to a breach of contract claim in Kansas.

 

I wish everyone happiness and health in 2017.  Thank you for reading this year.

 

 

See you next time.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Baseball and Buffalo:

Times Herald

Olean, New York

30 Dec 1916

 

Mayor Heads Buffalo Climb

 

Buffalo, Dec. 30 – Louis P. Fuhrmann, mayor of Buffalo, yesterday was elected President of the Buffalo International League baseball elite succeeding Gerhard Simon, who resigned.  Pat Donovan, who has pulled the Buffalo team to victory in two pennant races was signed to continue as manager.  James J. Lannim, former owner of the Boston Nationals, regained control of the Buffalo Climb.  John L. Kelley was elected secretary, succeeding James Austia, who resigned.

 

Headlines from Week’s Issue:

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

 

  • Exclusion in Title Policy for Losses Created by Insured Applied where Insured (Mortgagee) Designated the Borrower’s Attorney as it Settlement Agent and the Attorney Misappropriate the Funds

 

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

Robert E.B. Hewitt III

[email protected]

 

  • Conflicting Expert Opinions Cannot Be Resolved on Summary Judgment
  • Limited Range of Motion of at least 50% Along With Other Injuries Was Enough to Defeat Summary Judgment in the Significant Limitation of Use Category
  • Emergency Vehicle Exception Only Applies When There is Evidence the Ambulance Lights and Sirens Were On at the Time of Collision
  • Defendant Must Address All Claims in Plaintiff’s Bill of Particulars
  • Defendant’s Raised Issue of Fact as to Whether Plaintiff Sustained Serious Injury to Lumbar Region

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

Litigation

 

  • The Supreme Court Should Have Considered the Prior Declaratory Judgment Order Even Though Defendants Did Not Provide a Notice of Entry for That Order

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Lack of Negligence on Plumbing and Electrical Contractors, respectively, Results in Dismissal of Plaintiff’s Subrogation Claim
  • Question of Fact over Snowplow Contractor’s Culpability Precludes Summary Judgment even though the Contract only Requires Liability to Arise from Acts or Omissions of the Contractor for the Protection to Trigger

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Sixth Circuit Finds Pro Rata/Proportionate Allocation Method Appropriate for Asbestos Injury Claims Under Unambiguous Policy Provisions (Michigan Law)
  • Sixth Circuit Holds That Excess Policy’s “Consent-to-Settle” Provision Is Unambiguous, Overturning Insured’s $8.5million Lower Court Win (Michigan Law)

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • No Coverage Found for Insured under Homeowners Policy Where Affidavit Submitted in Underlying Action stated he lived Out-of-State at the Time of the Accident
  • New York Court Finds that N.Y. Ins. L. §3420(d)(2) does not apply to Risk Retention Groups

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Date Judgment was Entered was the date Bad Faith Cause of Action Accrued
  • Kansas Law does not Recognize a Cause of Action for Bad Faith or Violation of the Kansas Uniform Trade Practices Act

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

  • Remand Rejection
  • Barred Any Way You Try

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

  • Commercial Crime Insurance

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

  • CGL Coverage for Construction Defects – New Jersey Rules Against Insurers

 

 

Happy New Year!

 

Dan

 

Dan D. Kohane

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

 

Office:            716.849.8942

Mobile:           716.445.2258

Fax:                716.855.0874

E-Mail:            [email protected]

Website:         www.hurwitzfine.com

Twitter:           @kohane

LinkedIn:       www.linkedin.com/in/kohane

 

 

 

 

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


NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

[email protected]

 

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Audrey A. Seeley

Jennifer A. Ehman

Patricia A. Fay

Agnieszka A. Wilewicz

Jennifer J. Phillips

Brian D. Barnas

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

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

 

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

 

12/28/16       Plaza Home Mortgage, Inc. v. Fidelity National Title Ins. Co.

Appellate Division, Second Department

Exclusion in Title Policy for Losses Created by Insured Applied where Insured (Mortgagee) Designated the Borrower’s Attorney as it Settlement Agent and the Attorney Misappropriate the Funds

The title insurance company established that coverage of the mortgagee's loss under the title insurance policy was properly denied based on the exclusion in the policy for any loss which was "created, suffered, assumed or agreed to by the Insured Claimant." In this case, the Plaza wired the funds for the mortgage loans to the escrow account of the attorney for the borrowers with closing instructions to perform certain duties on its behalf as the settlement agent, thereby designating that attorney as its agent.  Therefore, the act of the settlement agent in misappropriating the funds he had been directed to use to pay off a prior mortgage was properly imputed to the mortgage company, and therefore, the mortgage company created the loss at issue.

 

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

Robert E.B. Hewitt III

[email protected]

 

12/23/16       Hines v. Criden

Appellate Division, Fourth Department

Conflicting Expert Opinions Cannot Be Resolved on Summary Judgment

Plaintiff commenced this action seeking damages for injuries she allegedly sustained when the vehicle she was driving was rear-ended by a vehicle operated by defendant. In support of her motion, plaintiff submitted medical records, an independent medical examination report, and a physician's affidavit, which established that, as a result of the accident, plaintiff sustained a left wrist scaphoid fracture, which required surgery, and sustained significant losses of range of motion in her lumbar spine, together with a large traumatic annular tear at L4-5 in her lumbar spine, which also required surgery. The court thus concluded she met her burden to establish a prima facie entitlement to summary judgment. However, in opposition, defendant submitted affidavits from two physicians, one of whom is also an engineer specializing in the analysis of the response of the human body to forces resulting from events such as automobile collisions to determine how injuries are caused. Both of defendant's experts opined that the wrist fracture predated the accident; that the facts of the accident were inconsistent with the force needed to cause such a fracture, and that plaintiff's back injury was degenerative in nature and not caused by the accident. The court held conflicting expert opinions could not be resolved on summary judgment and denied plaintiff’s motion. 

 

12/23/16       McKeon v. Mclane Co. Inc.

Appellate Division, Fourth Department

Limited Range of Motion of at least 50% Along With Other Injuries Was Enough to Defeat Summary Judgment in the Significant Limitation of Use Category

Plaintiff commenced this action seeking damages for injuries that she allegedly sustained as the result of a motor vehicle collision. Contrary to defendants' contention, the Appellate Division concluded that Supreme Court properly denied their motion with respect to the 90/180-day category of serious injury. Defendants' own submissions establish that plaintiff sustained a medically determined injury or impairment of a non-permanent nature"  i.e., a lumbosacral myofascial sprain or strain and defendants' submission of plaintiff's deposition testimony failed to establish as a matter of law that plaintiff was not curtailed from performing her usual activities to a great extent rather than some slight curtailment.

 

Contrary to defendants' further contention, the Appellate Division concluded that the court properly denied their motion with respect to the significant limitation of use category. Even assuming, arguendo, that defendants made a prima facie showing that plaintiff's alleged injuries did not satisfy the serious injury threshold with respect to that category the Appellate Division concluded that plaintiff's submissions in opposition to the motion raised an issue of fact. Those submissions included an expert's finding of at least 50% loss of range of motion in plaintiff's lumbar spine along with an affirmation from plaintiff's physician opining within a reasonable degree of medical certainty that the motor vehicle accident caused her injuries, including a bulging disc, an annular tear, and other spinal conditions revealed by an imaging study, and ultimately resulted in her limited range of motion.

 

However, with respect to the permanent consequential limitation category, Defendants met their initial burden by submitting evidence that plaintiff had returned to work full time and recovered nearly full range of motion in her lumbar spine, along with the report of an independent medical examiner who concluded that plaintiff's injuries were not. In opposition, plaintiff failed to submit objective proof of a permanent injury

 

12/21/16       Bonafede v. Bonito

Appellate Division, Second Department

Emergency Vehicle Exception Only Applies When There is Evidence the Ambulance Lights and Sirens Were On at the Time of Collision

Plaintiff's decedent's vehicle collided with an ambulance driven by the defendant Anthony Bonito and owned by the defendant American Medical Response. Contrary to the defendants' contention, they failed to establish, prima facie, that they were entitled to judgment as a matter of law dismissing the complaint on the issue of no liability. The evidence submitted by the defendants failed to eliminate triable issues of fact as to whether the ambulance's sirens were activated at the time of the accident, so as to give rise to the privilege to proceed against a red signal light 

 

As to the serious injury threshold question, the defendants' expert's conclusory opinion that significantly diminished ranges of motion in the plaintiff's decedent's left knee and left shoulder were unrelated to the subject accident failed to address positive findings on MRIs taken approximately one month after the subject accident showing a linear meniscal tear in the left knee and a partial tear of the distal supraspinatus tendon in the left shoulder. 

 

12/21/16       Kim v. Park

Appellate Division, Second Department

Defendant Must Address All Claims in Plaintiff’s Bill of Particulars

A vehicle operated by the defendant Kim allegedly collided with a vehicle operated by the defendant Park. The plaintiff was a passenger in the defendant Kim's vehicle. Defendant Kim failed to meet her prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted in support of the cross motion failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendant Kim failed to meet her 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. No facts were given in the opinion.

 

12/21/16       Spann v. City of New York

Appellate Division, Second Department

Defendant’s Raised Issue of Fact as to Whether Plaintiff Sustained Serious Injury to Lumbar Region

The Appellate Division held papers submitted by the defendants failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Specifically, the defendants failed to demonstrate, prima facie, that the plaintiff was able to perform all or substantially all of her usual and customary activities during the statutory period. 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.

 

The Appellate Division also found that the plaintiff failed to establish, prima facie, that she sustained a serious injury to the cervical region of her spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), or that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Although the plaintiff did establish, prima facie, that she sustained a serious injury to the lumbar region of her spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), the defendants raised a triable issue of fact in opposition. No specific facts were given in the opinion.

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

Litigation

 

12/15/16       Active Care Med. Supply Corp. v American Commerce Ins. Co

Appellate Term, Second Department

The Supreme Court Should Have Considered the Prior Declaratory Judgment Order Even Though Defendants Did Not Provide a Notice of Entry for That Order

In this action to recover assigned first-party no-fault benefits, plaintiff seeks to recover for supplies it provided to its assignor for injuries he had sustained in a motor vehicle accident on February 27, 2012, to which claim defendant assigned claim number 1126518.

 

Prior to the commencement of this action, defendant instituted a declaratory judgment action in the Supreme Court, New York County, against plaintiff's assignor and various medical providers, including plaintiff herein. In an order dated April 25, 2014, the Supreme Court granted, on default, the motion therein for a declaratory judgment, which order stated, [American Commerce Insurance Company] is not obligated to pay for claims seeking no-fault benefits for services or goods provided to GABRIEL SANFORD under this claim number.

In July 2014, defendant, among other things, moved in the Civil Court for summary judgment dismissing the complaint on the ground that the April 25, 2014, Supreme Court order in the declaratory judgment action barred the instant action pursuant to the doctrines of res judicata and collateral estoppel. By order entered February 25, 2015, the Civil Court denied defendant's motion without prejudice to renewal upon proper papers. The court found that it could not consider the Supreme Court declaratory judgment order annexed to the moving papers because defendant had not included a notice of entry for that order.

 

Contrary to the determination of the Civil Court, it should have reviewed and considered the Supreme Court declaratory judgment order even though defendant did not provide a notice of entry for it "in view of the binding and conclusive effect of the order". A review of the record establishes that the instant action is barred under the doctrine of res judicata by virtue of the Supreme Court order dated April 25, 2014. To hold otherwise could result in a judgment in this action which would destroy or impair rights established by the order issued by the Supreme Court in the declaratory judgment action. Moreover, the Supreme Court's order is a conclusive final determination notwithstanding that it was entered on default, and res judicata applies to an order or judgment taken by default which has not been vacated.

 

Accordingly, the order is reversed and defendant's motion for summary judgment dismissing the complaint is granted.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

12/28/16       Utica First Ins. Co. v Gristmill Earth Realty Corp.

Appellate Division, Second Department

Lack of Negligence on Plumbing and Electrical Contractors, respectively, Results in Dismissal of Plaintiff’s Subrogation Claim

Plaintiff commenced the instant subrogation action after it paid a sizable fire loss.  The fire occurred at a unit that sat adjacent to the insured location, and was caused by a faulty orange extension cord.  The cord which started the fire was apparently plugged into a sump pump.

 

Upon paying the adjusted loss, Utica commenced a negligence claim against the owner of the premises, Gristmill.  In addition, Gristmill had recently retained Island Contracting to perform renovations at the premises.  As such, Utica also named Island, as well as its plumbing contractor (Rebmann) and electrical contractor (Aiello). 

 

Rebmann moved for summary judgment arguing that while it installed the sump pump, it did not install the orange extension cord.  In fact, Rebmann testified that it left the pump unplugged when it completed its work and left the property.  On those facts, the Court agreed and dismissed any and all claims against Rebmann.

 

Aiello argued that the fire inspector’s report established the loss arose from a faulty extension cord, and not from any electrical work it had performed over the preceding year.  As such, the Court agreed that Aiello was not responsible for the fire loss. 

 

However, unable to establish that either Rebmann or Aiello were at fault, a question of fact existed as to whether Island and/or Gristmill were responsible for the use of the orange extension cord.  Accordingly, their respective motions for summary judgment were denied.

 

12/23/16       Tully v Transitown South Assocs., LLC.

Appellate Division, Fourth Department

Question of Fact over Snowplow Contractor’s Culpability Precludes Summary Judgment even though the Contract only Requires Liability to Arise from Acts or Omissions of the Contractor for the Protection to Trigger

The underlying action apparently involved a slip and fall incident in a parking lot.  The owner, Transitown, commenced a third-party action against Tiger Stripe seeking contractual indemnity.  The contract applied for losses “arising out of or resulting from the performance of [Tiger Stripe’s] services” so long as the losses was “caused in whole or in part by acts or omissions” of Tiger Stripe. 

 

Here, the Court ruled that Transitown had not established Tiger Stripe’s “culpability,” and, as such, it had not met its burden on the motion for summary judgment. 

 

Peiper’s Point  - Interesting decision.  The Court appears to be suggesting that Tiger Stripe must have some level of negligence attributable to it.  Apparently, simply having responsibility to remove snow from a parking lot is not enough to trigger “acts or omissions” language.   As readers surely know, the interpretation of “acts or omissions” language is a continually evolving term. 

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

12/16/16       Continental Casualty Co. v. Indian Head Industries, Inc.

United States Court of Appeals, Sixth Circuit

Sixth Circuit Finds Pro Rata/Proportionate Allocation Method Appropriate for Asbestos Injury Claims Under Unambiguous Policy Provisions (Michigan Law)

Indian Head Industries bought a gasket manufacturing company in 1984. Pursuant to their agreement, Indian Head assumed all liabilities and obligations, including products liability, arising out of the business. Indian Head then purchased successive insurance policies from 1984 to 1987. During that time, it operated the gasket company and manufactured and sold automotive gaskets containing asbestos. After numerous people fell ill (from exposure to the predecessor company’s products), Indian Head began submitting claims to its carrier, Continental. The insurer at first paid out on tens of thousands of lawsuits against the insured. However, in 2005, it finally decided to assert its rights under its policy and claimed it only was obligated to pay its pro rata share. As so often happens, litigation ensued.

 

At the Circuit Court level, the main issue was whether indeed pro rata allocation should be applied. That is, either “all sums” / “joint and several liability” (i.e. each policy triggered applies to the entire potential loss) or “time-on-the-risk” / “pro rata” allocation (i.e. assigning among insurers for the triggered policies based upon the proportion of each policy) applies in assigning a share of the loss.

 

Looking at the policy language, the Sixth Circuit held that pro rata should apply. Here, the policy stated that Continental was liable for “all sums” for “damages because of ... bodily injury ... to which this insurance applies, caused by an occurrence.” Thus, which bodily injuries were covered? While the policy used the terms “all sums”, it was qualified by only “to which this insurance applies”. The Court thus read this to mean that only a prorated portion was meant. Looking at courts throughout Michigan, the Circuit justified its decision by stating that the use of the term “all sums” did not mean a broader approach was meant. Rather, the trend was to allocate damages by a pro rata method.

 

11/18/16       Stryker Corporation v. National Union Fire Insurance Company

United States Court of Appeals, Sixth Circuit

Sixth Circuit Holds That Excess Policy’s “Consent-to-Settle” Provision Is Unambiguous, Overturning Insured’s $8.5million Lower Court Win (Michigan Law)

Stryker Corp. is a medical technologies firm. In the 1990s, they purchased a subsidiary of Pfizer that made and sold orthopedic products. One of those products was an artificial knee joint that turned out to be defective. Fast forward a few years, and an inventory oversight that put dozens of the products on the shelves nevertheless, and Stryker is subject to over 70 individual product liability claims.

 

Stryker was insured primarily by National Casualty. The layers above that included a commercial umbrella issued by XL and an excess policy issued by TIG above that. At first, XL disclaimed outright and TIG waited in the wings, “hoping that its excess layer would not be implicated at all”. After years of both underlying and coverage litigation, XL was found obligated to provide coverage after all. With this decision in hand, they decided to cover the losses, now quantifiable, and XL paid some considerable sums to the larger of the judgments. By so doing, they also exhausted their limits. Then, everyone turned to TIG.

 

TIG, however, had an ace up its sleeves. Its excess policy contained a consent-to-settle provision, one that obligated the insured to obtain “written consent” from its excess carrier at the time settlements were made. At issue, however, was whether that provision was ambiguous (i.e. read against the drafting insurer) or not. It was TIG’s position that that provision, kicked in for “ultimate net loss” – defined in the policy as “the amount of the principal sum, award or verdict actually paid or payable in cash in the settlement of satisfaction of claims for which the insured is liable, either by adjudication or compromise with the written consent of [TIG], after making proper deduction for all recoveries and salvages”.

 

While the district court initially found the language ambiguous, holding that the word “claims” was open to more than one interpretation, the Sixth Circuit (correctly?) disagreed. Citing Farmsworth’s “Meaning” in the Law of Contracts, the court said that “True linguistic ambiguities are rather ‘rare in contract cases’”. A reasonable person reading the insurance contract would have read it to mean that written consent was required of the excess carrier, end of story. Moreover, the Circuit Court rejected the insured’s argument that there was a “latent ambiguity” in the policy. Rather, it was fairly clear. Here, no consent was obtained, written or otherwise. Thus, there was no coverage in the excess layers.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

12/21/16       Castlepoint Ins. Co. v. Cantos

Supreme Court, New York County

No Coverage Found for Insured under Homeowners Policy Where Affidavit Submitted in Underlying Action stated he lived Out-of-State at the Time of the Accident

This decision arises out of an injury on property.  Roberta Davis rented a studio apartment located at 60-59 54th Street, Maspeth, New York where she sustained injury.  Davis brought an action against the alleged property owners Gonzalo and Rosanna Cantos. 

 

At the time of the incident, Mr. Cantos was insured under a homeowners policy issued by plaintiff Castlepoint.  The Maspeth address was listed as the residence premises. 

 

The issue centered on an affidavit submitted by Mr. Cantos in the underlying action wherein he attested that he moved to Virginia in 2004 and resided there ever since. 

 

Pursuant to the terms of the policy, coverage was excluded for bodily injury arising out of a premises owned or rented by an insured that was not an “insured location.”  “Insured location” was defined, in relevant part, as the “residence premises” meaning “[t]he one family dwelling, other structures, and grounds; or…[t]hat part of any other building”  where you reside and which is shown as the “residence premises” in the Declarations.

 

There was no dispute that the location of the loss was identified as the residence premises on the policy; instead, the issue was whether Mr. Cantos resided at this location. 

 

In support of Castlepoint’s motion for summary judgment, it relied upon an affidavit submitted by Mr. Cantos in the underlying action along with a statement from Ms. Cantos taken during the course of its investigation wherein she stated that she and Mr. Cantos divorced in 2009, and that Mr. Cantos permanently moved to Virginia after their separation.  

 

In opposition, Mr. Cantos’ counsel sought to challenge the affidavits submitted by Castlepoint based on, among other things, authority of the notary, hearsay and lack of a proper certification.   The court dismissed these arguments highlighting the fact that Mr. Cantos never argued that he in fact resided at the premises on the date of the underlying loss.  The court likewise noted that by taking the position in the underlying action that he did not reside at the premises on the date of the loss, he was judicially estopped from making a different argument in this matter. 

 

Lastly, the court found that the timeliness of Castlepoint’s denial was not an issue. 

 

Summary judgment was granted in favor of Castlepoint and a default was entered against Ms. Cantos.

Editor’s Note:  Kuddos to our own Brian Barnas who skillfully handled this matter on behalf of Castlepoint.

 

12/01/16       PCIC v. Arumdaun Construction Inc. et al

Supreme Court, Queens County

New York Court Finds that N.Y. Ins. L. §3420(d)(2) does not apply to Risk Retention Groups
New York insurance lawyers are intimately familiar with the draconian time constraints imposed upon insurers attempting to disclaim coverage based on a policy exclusion or condition under N.Y. Ins. L. §3420(d)(2).  In PCIC v. Arumdaun Construction Inc. et al., Index No. 7534/2015, Preferred Contractors Insurance Company, Risk Retention Group (“PCIC”) established that federal risk retention groups organized under the federal Liability Risk Retention Act of 1986, 15 U.S.C. § 3900, et seq. (the “LRRA”) are not subject to N.Y. Ins. L. §3420(d)(2).

 

The LRRA was enacted to address a national crisis in the availability and affordability of commercial liability insurance.  In order to reduce the cost of insurance, the LRRA contains broad preemption language to enable the risk retention to operate on a multi-state, national basis unfettered by the prohibitive costs associated with tailoring its policies and operations to comply with the insurance laws, rules, regulations, and orders of all fifty states.  Section 3902 of the LRRA provides, in pertinent part,

 

(a)    Exemptions from State laws, rules, regulations, or orders

Except as provided in this section, a risk retention group is exempt from any State law, rule, regulation, or order to the extent that such law, rule, regulation, or order would –

 

  1. Make unlawful, or regulate, directly or indirectly, the operation of a risk retention group except that the jurisdiction in which it is chartered may regulate the formation of such a group…
  2.  

(Emphasis added) 15 U.S.C. § 3902.

 

Section 3902 provides that non-chartering states may require non-domiciliary risk retention groups to comply with certain basic registration, capitalization, and taxing requirements as well as certain unfair claim settlement and fraudulent practice laws. Id.

 

New York Insurance Law § 5904 sets forth the New York regulations governing non-domiciliary risk retention groups.  In compliance with the specific limitations of the LRRA, § 5904 requires only that non-domiciliary risk retention groups comply with certain basic registration, capitalization, and taxing requirements as well as certain unfair claim settlement and fraudulent practice laws.   

PCIC argued that 3420(d)(2) is preempted by the LRRA because it regulates PCIC’s operations in a manner that fetters its ability to operate in a uniform manner throughout the fifty states.  The court agreed, finding that §3420(d)(2) "regulate[s), directly or indirectly, the operation of a risk retention group." The court acknowledged the complexity of §3420 and its imposition of significant restrictions upon insurers, which undeniably impacts the relationship of the insurers to insureds and third parties.

 

The opposition noted that New York retains the right under the LRRA to force an insurer to comply with New York’s Unfair Claims Practices Act, N.Y. Ins. L. § 2601 (the “UCPA”).  Based on this, the opposition argued that the failure to comply with §3420(d)(2) qualifies as an unfair claims settlement practice within the meaning of § 2601(a)(6).  Section 2601(a)(6) establishes as an unfair practice the failure to “promptly disclose coverage pursuant to subsection (d) or subparagraph (A) of paragraph two of subsection (f) of section three thousand four hundred twenty of this chapter.”

 

The court held that PCIC “quickly dispelled” this argument by clearly demonstrating through the legislative history of both statutes that an insurer's obligation to disclose under §3420(d) does not include the obligation to timely disclaim under §3420(d), and that the two obligations are separate and distinct.

PCIC relied on the decision in Wadsworth v. Allied Professionals Insurance Co., 748 F.3d 100 (2d Cir. 2014) where the Second Circuit held that N.Y. Ins. L. § 3420(a)(2)(New York’s direct action statute) is preempted by the LRRA. 

Editor’s Note:  Our thanks to our friend Diane Bucci, a partner in the New York firm of Zelle, McDonough & Cohen LLP who successfully represented PCIC in this matter and authored this summary.  To obtain a copy of this decision, which is not yet available online, contact Diane at [email protected].

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

12/20/16       Dietz v. GEICO General Insurance Company

United States District Court, District of Montana

Date Judgment was Entered was the date Bad Faith Cause of Action Accrued

This case arises from a 2009 traffic accident wherein Plaintiff Rocky Dietz was struck by GEICO's insured, Hillary Bouldin.  Bouldin accepted liability for the accident, but GEICO denied and delayed payment of Dietz's medical expenses.  In 2013, a jury verdict favored Dietz and set the amount of his damages at $15,000.  A clerk's judgment was filed on April 18, 2013.  Dietz appealed from this judgment, which was affirmed by the Ninth Circuit Court of Appeals.  On Dietz's petition for certiorari, the U.S. Supreme Court also affirmed. 

 

Following the Supreme Court's decision, the instant bad faith insurance litigation was commenced in state court on July 18, 2016, and removed to federal district court on August 8, 2016.  Dietz made a statutory bad faith and a common law bad faith claim against GEICO.  GEICO moved to dismiss arguing that the statute of limitations had run on both claims.  Under Montana law, a statutory bad faith claim is subject to a 1 year statute of limitations from the date of settlement or entry of judgment in the underlying claim.  A common law bad faith claim has a three year statute of limitations.

 

The court ruled that the bad faith claim accrued on April 18, 2013, the date of the judgment.  Thus, both bad faith claims were untimely.  Plaintiff’s arguments that the bad faith claim did not accrue until the Supreme Court denied certiorari was rejected.  Plaintiff’s argument that GEICO's bad faith continued throughout the appellate period was also rejected.

 

12/16/16       Classico, LLC v. United Fire and Casualty Company

Court of Appeals of Kansas

Kansas Law does not Recognize a Cause of Action for Bad Faith or Violation of the Kansas Uniform Trade Practices Act

In August 2012, a fire broke out at one of Classico, LLC's properties, causing water, fire, and smoke damage.  Classico had an insurance policy with United Fire and Casualty Company.  Classico filed a lawsuit against United Fire and its employee, Kevin Smith, claiming (1) that United Fire had violated certain insurance statutes and had acted in bad faith and (2) that Smith had misrepresented certain facts, made false statements about Classico, and intentionally damaged Classico's business relationships with others.

 

Summary judgment was granted dismissing Classico’s bad faith claim.  Kansas law does not recognize a tort of bad faith as a valid reason to bring a lawsuit.  Classico tried to shift its argument to assert that United Fire violated the duty of good faith and fair dealing, but the court concluded that there is no separate claim for breach of the duty of good faith and fair dealing; it is merely a legal argument related to a breach-of-contract claim, a claim Classico never made.

 

Classico’s claim for violation of the Kansas Uniform Trade Practices Act was also dismissed on summary judgment because Kansas law does not create a private right of action for violations the statute.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

12/22/16       Gissim, Inc. v. Scottsdale Insurance Co.

United States District Court, Eastern District of New York

Remand Rejection

This coverage dispute over a duty to defend had been removed from state to federal court by the insurer.  As issue before the district court was the insured’s request to remand the matter back to state court, despite there being no real dispute that diversity jurisdiction in federal court was proper (the court noted that the preponderance of the evidence supported the conclusion that the ultimate value to the insured of the declaratory judgment in its favor would exceed the monetary threshold).

 

Instead, the insured attempted to rely on the discretion found in 28 USC § 1447(e) to argue that the court should nonetheless remand the matter back to the state court.  However, that provision states: “[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.”  As the district court noted, however, the insured was not seeking to join a non-diverse defendant, nor was it looking to join the declaratory judgment action with the underlying action (a joinder that would generally be seen as inappropriate under New York law).  Accordingly, the court did not have discretion under 1447(e) to remand the action, and doing so would not serve judicial economy in any event.  The insured’s motion was therefore denied.

 

12/14/16       T.N. Metro Holdings, I, LLC v. Commonwealth Ins. Co.

United States District Court, Southern District of New York

Barred Any Way You Try

This insurance coverage dispute results from claims for property damage and lost income and profits following damage to rental properties from an April 24, 2007 hailstorm.  On the same day as the storm, the original insured signed a sales agreement transferring the properties to the Plaintiffs in this breach of contract and unjust enrichment action against the insurer, Commonwealth Insurance.  At issue before the district court was Commonwealth’s summary judgment motion seeking dismissal of the complaint based on the expiration of the statute of limitations.

 

Plaintiffs commenced this action on August 30, 2011, more than four years after the relevant hailstorm.  Commonwealth relied on the contractual limitations period contained in the policy, which provided: “No suit, action or proceeding for the recovery of any claim under this Policy shall be sustainable in any court of law or equity unless the same be commenced within Twelve (12) months next after the Occurrence which gives rise to the claim.”  The district court acknowledged the viability of the contractually limited statute of limitations (without which Plaintiffs would have had six years to commence their action), but questioned whether the policy limited the time to sue at either 12 months from the date of the disaster or casualty, i.e. the April 24, 2007 hailstorm, or at the outer limit, 12 months from the final date when Plaintiffs could be compensated for covered losses, in this case, the lost rental income on the properties. “Under the first of the two circumstances, Plaintiffs would have had to file their Action by April 24, 2008, 12 months after the hailstorm. Under the latter interpretation, Plaintiffs would have had to bring suit by April 24, 2009, one year after ‘a period of twelve (12) consecutive months from the date of such destruction or damage’ to recover for lost rent or rental value.”

 

Although Plaintiffs untimely filed under either theory, the district court held that under the binding Second Circuit case of Fabozzi v. Lexington Insurance (601 F3d 88), the correct interpretation of New York law required finding that the references to “loss” or a “series of losses” was generic or ambiguous enough to require resolving the issue in favor of the insureds.  “[T]he language in the suit limitation provision does not use the magic phrase ‘inception of the loss,’ or the phrase ‘the date on which the direct physical loss or damage occurred,’ which one court has held to be its equivalent.”

 

The district court also considered Plaintiffs’ alternative theory that the breach of contract claim was not barred because such a claim did not accrue until Commonwealth disclaimed – and the insurer never had.  However, the district court found that Commonwealth’s evidence that it notified Plaintiffs on August 21, 2009 that it was closing the file following Plaintiffs’ failure to produce proof of the assignment of the policy from the original insured constituted a sufficient disclaimer.  Having failed to commence the action within the requisite contractual time period from that date, Plaintiffs’ action was still untimely.

 

Finally, the district court considered Plaintiffs’ argument that Commonwealth should be equitably estopped from asserting a statute of limitations defense based on partial payments made by a third party purported to be an agent of Commonwealth’s.  In addition to finding that Plaintiffs failed to offer any evidence to support this theory, the district court noted that because plaintiffs waited an additional 18 months from the last alleged communication with this third party to commence the action, equitable estoppel was not available to save the action.

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

A new, first-in-nation  regulation in New York State prohibit insurance companies from refusing to provide commercial crime insurance coverage to businesses in the State that employ people with criminal convictions in their history.

The regulation, 11 NYCRR 76 (Insurance Regulation 209)  was signed on December 6, 2016, and can be found at http://www.dfs.ny.gov/insurance/r_finala/2016/rf209txt.pdf. The Governor’s press release regarding the regulation can be found at http://www.dfs.ny.gov/about/press/pr1612212.htm.

 

With 2.3 million people in New York with a criminal conviction on their record, this new regulation ensures employers are able to obtain this coverage, provided that they considered a set of factors outlined in New York State law governing the hiring of people with criminal convictions. These factors include whether the offense is related to the duties that the employee will perform, the time that has passed since the conviction, and evidence of good conduct by the applicant.

Prior to the regulation, businesses in New York that sought to hire individuals with criminal convictions often found that they could not obtain the required insurance coverage for such loss or damage. Without access to coverage, employers were discouraged from hiring these potential employees regardless of their set of job qualifications, and thus creating an unfair barrier to those seeking employment.

 

The regulation is designed to make it easier for businesses across the state to hire formerly incarcerated individuals upon reentry, and helping the businesses them obtain the necessary coverage for any loss or damage caused by an employee with a criminal record.  The regulation was spurred by calls from business owners repeatedly about not having access to loss or damage insurance coverage for this group of employees. In many cases, not obtaining insurance coverage factors into employers’ decision-making process and may deter hiring these individuals altogether.

 

The regulation provides, in pertinent part:

 

Section 76.2 Prior convictions
 

No policy issued, renewed or delivered in this state that provides commercial crime coverage may exclude or limit coverage for loss or damage caused by an employee on the basis that the employee was convicted of one or more criminal offenses in this state or any other jurisdiction prior to being employed by the employer, if, after learning about an employee’s past criminal conviction or convictions, the employer made a determination to hire or retain the employee utilizing the factors set out in Correction Law Article 23-A.

 

Section 76.3 Determined violation
 

A contravention of this Part shall be deemed to be an unfair method of competition or an unfair or deceptive act and practice in the conduct of the business of insurance in this state, and shall be deemed to be a trade practice constituting a determined violation, as defined in section 2402(c) of the Insurance Law, in violation of section 2403 of such law.

 

The latter provision, making an violation of the regulation an “unfair or deceptive practice”, could leave carriers that seek to bar coverage “for loss or damage caused by an employee on the basis that the employee was convicted of one or more criminal offenses” subject to a GBL 349 claim (deceptive trade practices).   However, it is noteworthy that the regulation does not require carriers to offer commercial crime coverage in the first instance: instead, the regulation applies only to policies that do afford such coverage.   Thus, carriers seeking protection against claims based upon the criminal history of its insured’s employees can still seek to base insurance premiums based upon the risk (underwriting), or simply offer the insured the option to decline commercial crime coverage altogether.

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

08/04/16       Cypress Point Condominium Assoc., Inc. v. Adria Towers, Supreme Court of New Jersey

CGL Coverage for Construction Defects – New Jersey Rules Against Insurers

In this case, the Condominium Association brought an action against the General Contractor, the contractor’s insurers, and various subcontractors, seeking coverage under CGL policies for consequential damages caused by the subcontractors’ defective work.  The Trial Court granted summary judgment in favor of the insurance companies, however a first Appellate Court reversed.  The case then went on to the Supreme Court of New Jersey, which affirmed the decision of the Appellate Court.  One of the essential arguments in the case was whether rainwater damage caused by faulty workmanship constituted “property damage” and an “occurrence” covered under CGL policies.  The Trial Court granted summary judgment to the insurance companies on the essential basis that there was no property damage or “occurrence”, as defined by the policies, to trigger coverage.  The Appellate Courts held that the damages caused by the faulty workmanship did constitute “property damage” which was an “occurrence” within the covering language of the CGL policies.

 

The essential claims of construction defect were roof leaks and water infiltration at interior window jambs and sills of the residential units.  The insurers made cogent arguments that such construction defects are not a covered accident or occurrence, and also cited cases and arguments that, at most, CGL policies might only provide coverage for damage to other property not part of the construction itself.  The insurance companies further argued that the Appellate Courts failed to apply a correct definition of “accident” as it relates to a covered “occurrence” under the policies.  The New Jersey Supreme Court held that the alleged water infiltration caused by faulty workmanship constituted property damage caused by an occurrence where the policy defined an occurrence as an “accident”, and there was no allegation that the subcontractor “intentionally” performed faulty work. 

 

A second issue in the case was whether an exclusion in the CGL policies eliminating coverage for the cost of repairing damage to the contractor’s own work (commonly known as the “your work” exclusion) precluded coverage.  However, this argument was rejected as well because the exclusion expressly stated it did not apply if the damages arose out of work performed by a subcontractor.

 

The Appellate Courts accepted the argument that consequential harm caused by defective construction work is an “accident”, essentially ruling that CGL policies provide coverage for “faulty workmanship” and construction defects that cause “accidental” harm or “unintended” damage. 

 

It should first be noted that the analysis of the terms “accident” and “occurrence” in this case is different from that undertaken by other courts confronted with this issue.  The New Jersey courts seemed to focus upon the outcome of allegedly defective work, and if a poor outcome was not expected or intended, i.e. an accident, it would be covered under the CGL policies.  Other courts have emphasized the actual acts involved, and held that, regardless of the consequences, defective construction is not an accident since the construction itself is an intentional, directed act, albeit misguided, resulting in unfortunate consequences.  These other courts essentially review the argument under a traditional analysis that unintended consequences of intentional acts are not a covered accident or occurrence.  This case focuses on the outcome and damages; i.e., unintended consequences, is defining an “accidental occurrence”.

 

It should also be noted that this case, although from a major commercial jurisdiction, may be a minority view.  Many other courts have held that there is no coverage for construction defects under CGL policies, or have limited any such recovery to damages caused to pre-existing or other construction which were not part of the actual construction project.  Courts have essentially taken the position that a CGL policy is not intended to be a performance bond or warranty of work.  Many of these courts take the position that defective construction is not an “accident” or “occurrence” since it is an intentional act and not something done by a mistake. 

 

Another issue in these cases is whether the property damage involved is covered, and again, the New Jersey case may be somewhat a minority view.  Many courts have held that CGL coverage does not apply to damage caused to the actual construction work itself, and at most, there may arguably be coverage for damage to other or pre-existing property separate and apart from the construction work itself.  This case is at odds with such holdings since the water infiltration was in the new construction work itself.  Here, no such distinction was made or apparently seriously argued.

 

It is important to note that there were several parties who filed amicus curiae briefs with the New Jersey Supreme Court given the importance of this issue.  Almost all of them were on behalf of groups supporting the policyholders, builders, and general contractors who would normally be seeking to impose or cram down CGL coverage onto their subcontractors’ CGL insurance coverage.  It is worth noting, and perhaps unfortunate, that there was no similar effort by insurance companies or associations to brief this issue to the Supreme Court to push back on these points. 

 

This debate is also complicated by various other exclusions that commonly appear in CGL policies, as in this case the “your work” exclusion was held not to apply because it specifically did not apply to alleged damage caused by subcontractors.  However, other exclusions such as the “your work” exclusion, “completed operations” exclusions or limitations, and exclusions for liability assumed under or by virtue of a contract have also been applied in these cases as part of an analysis potentially denying CGL liability coverage for construction defects.  The “your work” exclusion was the only one apparently cited or pursued by the insurance companies in this case.

 

Newsletter Sign-up

Fill in the form to register to receive any of our free electronic newsletters: