Coverage Pointers - Volume XVIII, No. 17

Volume XVIII, No. 17 (No. 473)

Friday, February 10, 2017

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. 2017
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. 


Greetings from snowless Buffalo.  We send our sympathy to our downstate and east coast friends who are laboring under winter’s gifts.  We’re too far west to have even a flake from this miserable storm (although it did close our Melville office today).


We are pleased to welcome a new columnist, John R. Ewell and his first offering of “Ewell’s Universe”.  John will be reporting on coverage decisions from high courts from the other 49 states to keep you in the loop on developments around the country.  We have been asked by many to help them keep on top of developments in other jurisdictions.  In addition  to Jen Phillips’ column on federal decisions. Agnes’ Wide World and Brian Barnas on Bad Faith, we will now carry a column on out-of-state high court opinions.


Guest Columnists – Two Great Lawyers:


I want to thank my good friend David W. Zizik from the law firm of Sulloway & Hollis P.L.L.C. for crafting a guest column on a new Massachusetts Supreme Judicial Court decision on bad faith judgments.  You’ll find his review of the Anderson decision in Brian’s Bad Faith column.   The Sulloway firm has offices throughout New England and David is resident in the firm’s Providence office.  Thanks, Dave.


Equal thanks to the lawyer I consider the number one scholar on Uninsured/Underinsured motorists coverage law in New York State, Jonathan A. Dachs, of Shayne, Dachs Sauer & Dachs, LLP,, who was kind enough to accept my invitation to review a peculiar First Department decision in Varon v. County-Wide Insurance (which you will find in my column).  Jonathan is the author of recently released treatise – a must purchase for anyone who really wants to understand this area of law --, New York Uninsured and Underinsured Motorist Law & Practice that is available here.




As the US struggles with the tricky questions relating to immigrants and immigration, do not think for a second that this is a new issue.  Our final “Hundred Years Ago” story, which appears before my signature block below, speaks to the immigration bill that was enacted 100 years ago this week with the Congress overriding a Presidential veto.


Welcome to our Valentine’s issue of Coverage Pointers.


This is our pre- Valentine’s Day Edition so I send you these timely thoughts.  I know you will do the right thing this year and will show your Valentine the affection and appreciation that your wife/husband/partner/significant other deserves. You have a few days yet to prepare. Do you wonder why we celebrate (or some do, anyway) the holiday?


I first printed this historical gem back in 2008 and this is the third time I’ve dusted it off for republication.  I know Peiper loves it. For those, like me, that are traditionalists, this overview may give you an idea as to how you may yet provide the perfect holiday gift:


How will you celebrate Valentine's Day?  Do you do it the modern way and send cards, candy, flowers and gifts?  I would hope not. I thought a little history of the holiday would help you recreate a more traditional approach, steeped in history.


During the third century in Rome, Emperor Claudius II who was only emperor for two short years, by the way (August 268 to January 270) was preparing to fight the Goths.  [Editor's note:  who wouldn't fight the Goths, given the opportunity?]  Anyway, he decided that single men would be better soldiers than married ones so he outlawed marriage for young men.  However, one young priest, Valentine, believing that the Emperor's decree was unjust, continued to perform weddings.  Rumor had it that he had a financial interest in a chapel and later moved to Vegas.   Claudius learned of Valentine's defiance, and had him imprisoned.  While in jail, he fell in love with the jailer's daughter and it is said that before his death, he wrote her a love letter, which he signed "From your Valentine."


Valentine's feast day was set to commemorate his death in February 270, and that was also used to make it into a Christian holiday, the pagan Lupercalia Festival, which also celebrated the beginning of spring.  That Festival involved the sacrifice of a goat for fertility and a dog for purification.  The goat hide would be sliced into strips, dipped in sacrificial blood, and taken to the streets by young men who would slap women with the strips, apparently making the women more fertile.  Pope Gelasius, seeking to end the pagan holiday but continue the tradition, declared February 14 as St. Valentine's Day around 496 A.D. 


So there you go.  Forget the card, forget the candy, and forget the flowers.  Chase your sweetheart around the room and slap him or her with dried goat strips dipped in blood, and you'll be celebrating the holiday the right way.


We’ll give John Ewell top billing in the cover letter department today.


Ewell's Universe:


Dear Subscribers:


In our universe, the Earth is the third rock from the sun. On Earth, the United States is one of 196 countries. In our country, we have 50 states—each with a court of last resort considering and issuing decisions on groundbreaking insurance issues. In Ewell's Universe, I will report on noteworthy decisions from high courts outside of New York State, affectionately referred to as "the other 49." While these decisions are not binding on New York courts, courts often look to other jurisdictions to decide novel issues. More importantly, these decisions reflect broader trends of courts across the country affecting the insurance industry.


An example of both is a decision handed down last week by New Jersey's high court, which addresses the enforceability of anti-assignment clauses in insurance contracts. New Jersey's high court held that when an assignment is made after a covered loss, anti-assignment provisions are void as a matter of public policy. The New Jersey Supreme Court supported its decision by citing to recent decisions from the Kansas Supreme Court and the Kentucky Supreme Court. This has become the majority rule in a swelling number of jurisdictions, representing a broader trend of courts across the country. Although anti-assignment clauses are common in leases, insurance policies, construction contracts, and a variety of commercial contracts, courts are routinely singling out insurers and invalidating anti-assignment provisions in insurance contracts a matter of public policy.


These are the types of decisions I'll be keeping you informed about in Ewell's Universe, where we talk about "universal" insurance trends from across the country as well as noteworthy decisions from high courts other than New York. Looking forward to it.


‘Til next time,



John R. Ewell

[email protected]


100 Years Ago Stories:


For our new subscribers, we sprinkle interesting stories from a century ago today between our cover notes.  The issue itself, is attached.


For some, the 100 years ago stories are more fun than the issue!


It Was Just as Important to Read Your Policy 100 Year Ago:


The Evening World

New York, New York 

10 Feb 1917


This Man Failed to Read His

Insurance Policy


WILLIAM HARDWICK, Melville’s leading grocer, was a man of forethought.  He carried fire insurance both on his store and his residence.  The policy applying to his store he kept in his house, and that applying to his house and its contents he kept in his safe at the store.  Thus, in the event of a fire in either property the policy applying to it would escape the flames.


            One night William Hardwick’s slumbers were disturbed by the frantic ringing of the telephone.


            “Come right downtown,” urged an excited voice, “your store’s going up in smoke.”


            When Hardwick arrived the fire was under control and fifteen minutes later the “all out” signal was sounded.


“I should worry,” reflected the grocer, after a brief survey of the damage done, “there’s about $6,000 worth of insurance.” And leaving one of his clerks to watch the premises, Hardwick went back to bed.


“Now then, Mr. Hardwick,” said the adjuster two days later, “my estimate agrees with yours.  Six thousand dollars covers all the damage done.  That means that we owe you $4,500.”


 “What’s that!” demanded Hardwick, indignantly.  “you owe me $4,500? What bungo game is this? Why don’t you owe me $6,000, the face of my policy?”


 “Because of this 80 per cent co-insurance clause,” explained the adjusters, and he indicated a paragraph in the policy which the grocer had so carefully guarded.


“This clause provides that we shall be liable for no greater proportion of the loss than the sum insured bears to 80 per cent, of the case value of the property insured.  Your stock is, or was, worth $10,000.  Had you carried $8,000 insurance, we would have paid you your loss in full, that is up to $8,000.  But, as it is, I repeat that we owe you but $4,500.  If, however, the loss had been total, we would have had to pay you $6,000, the amount of your policy.  This misunderstanding has arisen, Mr. Hardwick, merely because you have never taken the time to thoroughly read and digest your policy. 


“Your carelessness in his regard has cost you $1,500, Mr. Hardwick.  I am sincerely sorry for this, but fail to see that you have any one but yourself to blame.”


Wilewicz’s Wide-World of Coverage:


Dear Readers,


So, I move my family clear across the Great State of New York in order to give my mini-me the full experience of seasons, and instead NYC is inundated with snow this winter and we have brownish green grasses here still. Figures. My kid loves snow, and now has started to lament the move (and is currently Skyping all of her Long Island friends who *gasp!* had a snow day and we didn’t!).


Now, this week in the Wide World, we cover some of our favorites – environmental coverage cases! Though, this time around we have one that we are loath to report upon for you. In Hardy v. Kulwicki, we have a truly perplexing one. Listen to this – what do you get when you have a lead liability exclusion in a homeowner’s policy, then get hit with a lead liability claim? The answer is coverage! Wait, what? Yes, my sentiments exactly. I’ll just leave it at that. (Full disclosure, I might have had a personal/professional stake in this decision and, yes, we are contemplating appeal.)


We also have another round of Second Circuit goodies for you. First, we have Travelers v. Northrop Grumman and Century. In that one, at issue was whether the defense contractor’s notice of extensive environmental cleanup claims was sufficient and timely. Long story short, the court felt not. First, the insured failed to notify the carriers directly, relying on its broker (i.e. its own agent). Since the carriers ultimately did not receive that notice, it was untimely and insufficient. Next, rather that issuing separate notice to each carrier, Grumman merely copied its other carrier. Also wrong. Each carrier is entitled to its own, separate notice of a claim for coverage. Without that, no coverage for you.


Next, we bring you Allstate v. Harvey, a short snip of a decision out of our own Second Circuit. There, various Allstate entities alleged that a group of medical providers had conspired and created an enterprise that received funds for fraudulent claims under New York’s No-Fault Law. Fairly early on in the case, the carriers sought a preliminary injunction that would have barred the doctors from proceeding with pending No-Fault reimbursement claims or filing new arbitration claims. The District Court denied that application, and the Second Circuit here agreed. The insurers failed to establish the requisite “irreparable harm” needed for an injunction. Since they could be made whole at the conclusion of the case, there was nothing necessitating such a remedy at this juncture.


Until next time, stay warm!



Agnes A. Wilewicz

[email protected]


Insurance Fraud – A Century Ago:


Democrat and Chronicle

Rochester, New York

10 Feb 1917





Former Employee of

Metropolitan Co. in

Geneva, Arrested


Geneva, Feb. 9.—Patrolman Lawrence Kinney returned to-night from Split Rock with Eugene Seymour.  Seymour is charged with absconding with funds of the Metropolitan Insurance Company for which he worked in this city some time ago.  The amount of the shortage was not made known.


The company has been endeavoring to locate Seymour for several months and Chief of Police Kane located him about a week ago in Split Rock, where he is employed.


Attorney McGreevey, who had the claim against Seymour, is the complainant in the case, but as Mr. McGreevey is out of town to-night the facts in the case were not made public.  It is thought, however, that the matter will be settled and Seymour allowed to return to his employment. 


Peiper’s Parable:


Greetings to our friends buried on the East Coast.  We hope you stocked up on bread, milk, eggs and a nice single barrel rye.  We used to have snow days here in America’s snow belt, but the last two seasons have seen poor skiing and minimal Frosty sightings.  Oh how we envy you, Boston. 


A bit slow on the decisions this week, but we give a special shout out Coverage Pointer’s own, Jen Phillips, who’s keen writing carried the day in the Country-Wide v. Excelsior case.  We’re especially pleased that the guy who worked on the appeal with her managed to avoid messing it up. 


We recognize that in light of the conditions on the East Coast, any reference to spring might fall upon deaf ears.   That risk being acknowledged, we still remind you that pitchers and catchers report as early as next Monday.  The World Champion Cubs (still sounds weird) report on Valentine’s Day.   The start of Spring Training, and the return of Roll of Up To Win (see Tim Horton’s for the uninformed), also means the return of H&F’s Spring Training Road Trip.   Keep us in mind as you knock off rust from the Winter, and start looking for CE credits.


That’s it for now.  Stay safe, stay warm and stay hydrated.  Cheers.


P.S. – Our envy of Boston doesn’t extend to the Patriots…Nuff’ Said. 



Steven E. Peiper

[email protected]      

Editor’s Note:  Yesterday, I won a doughnut on “Roll Up To Win”.  I would have preferred the car..


Suicide, Vel Non?:


The Brooklyn Daily Eagle

Brooklyn, New York

10 Feb 1917




Court of Appeals Sustains

Insurance Verdict of $15,000


(Special to The Eagle)


Albany, February 10—James U. Dennis as executor of Richard D. Lankford has won his suit against the General Accident, Fire and Life Assurance Corporation of Perth, Scotland, the Court of Appeals having affirmed the judgment below in his favor for $15,000.  He sought to recover on a policy of $18,000 issued on the life of Lankford who was vice president of the Southern Railway Company and lived in Brooklyn.  He lived alone in his apartments and his body was found on the floor of the bathroom on January 15, 1914.  The gas was turned on and was escaping when the body was discovered. 


The policy had been issued months previously and the company refused to pay it on the ground that Lankford had committed suicide, thereby invalidating it.  It contended that there was no preparation for a bath, and that a pillow in the bathroom window and a towel at the bottom of the door indicated that he intended to take his life.


The plaintiff maintained that there was no reason for suicide, as Lankford left an unencumbered estate of $60,000, and the legal presumption was that death was due to an accident rather than suicide.


Tessa’s Tutelage:


Dear Readers,


This edition we have three cases from the Second Department considering whether an attorney (in this case the Defendant’s attorney) can submit an affidavit addressing the non-appearance of an injured party at an EUO.  For the purposes of brevity I did not summarize each case because I imagine your attention span on a Friday is rather limited. Attorneys have rules of professional conduct and ethics which are largely in place to protect our clients.  One such rule states, “A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness.” This rule makes a lot of sense because you wouldn’t want an attorney to get personally involved in the outcome of a case.  And yet, there are several exceptions to this rule, because sometimes this situation just cannot be helped. In the present case, Plaintiff cited this rule to disqualify Defendant’s attorney from the case because he/she was a “necessary witness” with regards to the injured party’s non-appearance at the EUO. The lower court rejected this argument and dismissed Plaintiff’s motion to disqualify Defendants.  The Second Department affirmed the holdings of the lower courts.  The Second Department  did not explain what factors it considered in making its decision, instead it pointed to some previous cases…which are not readily available.  This all reminds me of middle school math exams where your teacher wants you to “show your work.”   There, as here, we know the answer just not really the step by step process of how we got there. 



Tessa R. Scott

[email protected]


The Bible and Imbibing:


The Kingston Daily Freeman

Kingston, New York

10 Feb 1917





By Telegraph to The Freeman.


Washington, Feb. 10.—In their zeal to eradicate Demon Rum from the national life, the dry element in congress framed a bill so drastic that the Bible and other literary classics may be barred from use of the mails, according to those who oppose the bill.  Hearings are now in progress before the house postoffice committee on Senator Bankhead’s measure designed to bar from the mails “any publication of any kind” that contains “any advertisement of liquors.”  The question has been raised as to whether laudatory references to liquor do not constitute an “advertisement.”


This is the first Book of Timothy, Chapter Five, Verse 23.


“Be no longer a drinker of water, but use a little wine for thy stomach’s sake and thine often infirmities.”


Omar’s Ruhasyat also would fall under the ban, literally:


“A blessing, we should use it, should be not.”  And if a curse—why, then who set it here?”


Barnas on Bad Faith:


Hello again:


I’m still trying to recover from the nightmare finish to that Super Bowl.  At least Syracuse Basketball is on a five-game winning streak to ease my sports sorrows.  Congrats to Jim Boeheim on handing his opponents 1,001 career losses.  The NCAA may want to pretend that Syracuse did not win those 101 games, but the record books don’t take away the losses for the opponents, and we all know what happened.  I was lucky enough to witness win number 1,000 against Virginia at the Carrier Dome last Saturday; an unforgettable experience.


While last week was a tough one for insurers in this space, this week we feature a couple of well-reasoned, carrier-friendly decisions.  In Maniello, the insured waited ten years to commence an action for breach of contract and bad faith against State Farm after it denied her claim based on the policy’s earth movement exclusion.  The Court held that the claims were barred by the policy’s standard two-year suit limitation provision.  As a reminder, in New York, an insured must commence an action against a carrier under a property policy within two years of the date of loss.  This limitation period applies to claims for breach of contract and breach of the implied covenant of good faith and fair dealing alike.  Plaintiff’s novel argument that the suit limitation policy was unenforceable because a carrier could simply wait two years before denying the claim and thus prevent suit from being brought against it was rejected.  The court also correctly denied her claim for bad faith denial of insurance coverage because no such claim exists under New York law.


In Alexander, we have another installment in the group of collapse cases arising out of the use of defective concrete in Connecticut house foundations by JJ Mottes Concrete Company.  Plaintiffs discovered cracking in their basement walls in May of 2015.  As a result of the cracking, the home’s walls were in danger of falling down.  However, an abrupt falling down or caving in of a building was required to trigger the policy’s collapse coverage.  As the walls of Plaintiffs’ home were still standing there was no collapse and no coverage under the policy.


This week I am also lucky enough to feature a guest column from David Zizik of Sulloway & Hollis P.L.L.C.  David reports on an interesting decision from the Massachusetts Supreme Judicial Court about multiplying post-judgment interest on bad faith judgments.  Be sure to check it out and drop him a note at [email protected].


Happy Valentine’s Day to everyone out there and thanks for reading.


See you next time.


Signing off,



Brian D. Barnas

[email protected]


Subject:        Matrimony:


The Hays (Kansas) Free Press

February 10, 1917

Believes in Matrimony at 104


Lampasas Texas – J. A. Russell believes every young woman should commit matrimony. He set an example by marrying Mrs. Mary Bowers, 50 years old. He doesn’t believe disparity in ages will affect their happiness, however.


Object:           Matrimony


The Seattle Star

February 10, 1917


TWO REFINED YOUNG WIDOWS want to make acquaintance of responsible gentleman between ages of 32 and 45; object matrimony. No matrimonial agents need answer. Address Mrs. E.B. White, Gen. Del. Seattle.



Phillips Federal Philosophies:


Hello, All:


Well, we’re sitting pretty here in Buffalo, hanging out in our Hawaiian shirts and Bermuda shorts, drinking mai tais and watching – for once – snow fall everywhere but here.  If anyone sees our friends in our Melville office, let ‘em know hot chocolate and extra shovels are on its way.  


This week’s case comes out of the Eastern District of New York, where a plaintiff-insured showed up about eight years too late to the dance.  In Maniello v. State Farm Fire & Cas. Co., the district court rejected the notion of ‘better late than never,’ and dismissed the complaint against the insurer.


As always, thanks for reading. 



Jennifer J. Phillips

[email protected]


Auto Insurance Fraud Is Not a New Crime:


The New York Times

New York, New York

10 Feb 1917


Sentenced for Auto Insurance Fraud


Samuel Levy, a clothing salesman, of 316 East Seventh Street, who pleaded guilty to having defrauded insurance companies out of $6,600 by filing false claims for damages to automobiles, was sentenced yesterday by Judge Nott in General Sessions to an indeterminate term in Sing Sing.  The court took into consideration the fact that the defendant had made partial restitution. 


Hewitt’s Highlights: 


Dear Subscribers:


Welcome to a new edition of Coverage Pointers and my serious injury column. There is a blizzard today at our Melville office but neither snow nor rain nor heat nor gloom of night stays these columnists from the swift, or sometimes not so swift, completion of their appointed columns.   We may, however, have to have some words with our local groundhog who predicted an early spring. We have a few interesting cases today. Two of them remind us that an appellate court is not going to substitute its opinion for the jury’s opinion. When the jury is given two competing expert opinions that are based on qualitative and quantitative data in the medical records, the jury gets to pick between them and can credit all or part of either opinion. Another case indicates that sometimes a defendant can sabotage its own motion. A defendant submitting two IME reports, one which attributed the injuries to a degenerative condition and another which attributed to the accident. The defendant also submitted medical records some of which blamed the accident for the injuries. Therefore, the defendant had essentially defeated its own motion before the court even got to plaintiff’s opposition.


Hopefully you are not affected by the storm but if you are, stay safe. I hope you have a lovely Valentine’s Day as well.


Until next time,


Robert Hewitt

[email protected]



Immigration Bill Establishes Harsh Requirements – 100 Years Ago.  Some Things Never Change:


The Labor World

Duluth, Minnesota

10 Feb 1917




On Monday the Senate voted, 62 to 19, to pass the immigration bill over President Wilson’s veto.  The House overrode the veto last week by a vote of 287 to 106.  The long-fought literacy test provision is included in this bill.


This test provides for the exclusion from the United States of all aliens over 16 years of age physically capable of reading, who cannot read the English language or some other language or dialect including Hebrew or Yiddish.  It makes exemptions, however, that any citizen of this country may bring in or send for his father or grandfather, over 55 years of age, his wife, mother, grandmother, or unmarried or widowed daughter if otherwise admissible, regardless of whether such relatives can read.


Unrestricted immigration in the past has been responsible for many of the problems now confronting labor in this country.  Illiterate foreigners, because of their timid submission to exploitation, have set a lower standard of wages and living, with which American-born workmen had to compete.


A vivid illustration of unrestricted immigration was pointed out in Pittsburgh—a city whose citizens had been ardent advocates of this principle—recently, when it was shown by the Federal Bureau of Naturalization, to the chagrin and dismay of these same citizens, that the city had a population of 80,000 aliens who are over 21 years of age and 30,000 of whom are unable to speak English.  This condition had led to numerous “Americanizing” schemes, all of which have proven a failure.


The immigration bill with the literacy test has been vetoed by Presidents Cleveland and Taft, and twice by President Wilson.  Defenders of the literacy test have agreed that this system is far from acknowledging the immigration restriction is necessary, opponents of the literacy test have failed to even suggest a substitute for this plan.


Labor has long contended for this test, and has reason to feel elated over the adoption of the present measure. 


Altman’s Administrative (and Legislative) Agenda:  


Greetings! It's snowing here on Long Island, under a blizzard warning, so this is being written from the friendly confines of my sofa. 


There are no new laws or regulations to report on this week, so instead, I bring you a poem: 


Snow is piling up outside

Upstate, they say we run and hide

From any flurry on LI

So that is just the reason why

I'm writing you this little poem

Huddled up all safe at home 

So, reader, whether near or far

No matter where each of you are

Stay safe throughout this winter storm

And next week will be back to norm

With tales of laws and regulations

So forgive today's procrastination



Howard B. Altman

[email protected]



This Week’s Highlights from the Attached Issue:


Dan D. Kohane
[email protected]


  • Auto Exclusion Applies to Preclude Coverage for Injuries Arising from the Failure of a Lift Gate

  • “Capacity Exclusion” Dooms E&O Coverage for Lawyer and Law Firm

  • Federal Labor Standards Act Wage Loss Claims Fell within Employment-Related Exclusion of D&O Policy

  • Without a Contract Requiring a Contractor to Procure Insurance, There is No Sustainable Claim for Failing to Provide Insurance

  • Uninsured Motorists – Right Decision for the Wrong Reason

  • Still too Early to Determine Whether the Breach of Promise to Provide Coverage is Meaningful


Robert E.B. Hewitt III

[email protected]


  • Defendants Can Submit Competent Medical Evidence that Injuries Were Not Caused by an Accident to Meet Their Prima Facie Burden

  • Plaintiff Seeking Medical Treatment for Her Shoulder and MRIs Two Months after Accident Enough to Show Contemporaneous Treatment

  • Conflicting Medical Testimony and Evidence is for a Jury to Decide Between

  • Defendant Submitted IME Reports and Medical Records which Conflicted With Each Other as to Whether Plaintiff Had a Degenerative Injury or One Caused by the Accident

  • Jury Entitled to Choose Between Two Competing Expert Theories



Tessa R. Scott

[email protected]



  • Second Department Rejected the Rule 3.7 Ethics Argument from Plaintiff



Steven E. Peiper

[email protected]


  • Appellate Division Reverses Jury Decision Where no Rational Basis for Jury’s Finding of Negligence was Found in the Submitted Evidence



Agnes A. Wilewicz

[email protected]


  • Fourth Department Holds that One “Significant” Word Is Ambiguous, Finding Lead Paint Case Covered Under Policy With Lead Liability Exclusion

  • Second Circuit Holds Defense Contractor Not Entitled to Coverage for Environmental Claims Due to Inadequate or Late Notice (New York law)

  • Second Circuit Affirms Denial of Preliminary Injunction by Carriers Against Medical Providers, Despite RICO Allegations, As Insurers Failed to Establish Irreparable Harm (New York law)



Jennifer A. Ehman

[email protected]


  • Carrier Properly Denied Coverage under Homeowners Policy Where Named Insureds did Not Reside at the Premises



Brian D. Barnas

[email protected]


  • Plaintiff’s Bad Faith Claim was Not Recognized by New York Law and her Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing was Barred by the Two Year Suit Limitation Provision in her Homeowner’s Policy

  • Plaintiffs’ House did not Collapse as that Term was Defined in the Policy because the Walls of the House did not Fall Down

  • Massachusetts Not Interested in Multiplying Post-Judgment Interest on Bad Faith Judgments



Jennifer J. Phillips

[email protected]


  • For Whom the Statute Tolls? Not for Plaintiff.


John R. Ewell

[email protected]


  • New Jersey Supreme Court Adopts Majority Rule: When an Assignment is Made After a Covered Loss, Anti-Assignment Clause is Void as a Matter of Public Policy

  • Texas Supreme Court: A Fence is a "Dwelling" As a Matter of Law, Not "Other Structure"



Howard B. Altman

[email protected]


  • Snowed out.



Earl K. Cantwell
[email protected]


  • Contractual Liability Exclusion


All the best.  As I finish this letter, still at the office on Thursday at 7:15, I remember that I wanted to include my annual – often requested -- President’s Day list of Presidential Biographies.  The list is at home and the power has been out on my street at home for several hours.  Accordingly, no list for you until next issue.


All the best.




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]


Twitter:           @kohane




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

Jennifer A. Ehman

Patricia A. Fay

Agnieszka A. Wilewicz

Jennifer J. Phillips

Brian D. Barnas

Howard B. Altman

Brian F. Mark

John R. Ewell

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


Jennifer A. Ehman, Team Leader
[email protected]

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

Ewell’s Universe

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


Dan D. Kohane
[email protected]


02/02/17       Country-Wide Ins. Co. v Excelsior Ins. Co.

Appellate Division, First Department

Auto Exclusion Applies to Preclude Coverage for Injuries Arising from the Failure of a Lift Gate

Plaintiff was an employee of Truck Rite when he fell from a lift gate that was attached to a truck owned by R&L Trucking.  Plaintiff sued R&L who, in turn, commenced a third-party action for indemnity against Truck Rite.  As is relevant, Truck Rite was insured under a trucking policy issued by Country-Wide.  It also maintained CGL coverage through a policy issued by Excelsior.


Country-Wide defended, and ultimately resolved, the underlying bodily injury claim.  Thereafter, Country-Wide sought reimbursement from Excelsior on the theory that the loss involved the failure of the lift gate, and as such should fall within the CGL coverage.  As a second argument, Country-Wide argued that Truck Rite’s exposure was via a contractual indemnity claim which was not an auto accident.  Excelsior, nevertheless, denied and disclaimed coverage on the basis of the auto exclusion.


In modifying the trial court’s Order, the Appellate Division ruled that policy unambiguously excluded losses with “arise out of” the use of an auto.  That included the loading and unloading of items from an auto.  The Court then reiterated that “arising out of” language is broadly construed, and so long as there was “some causal relationship” between the injury and the risk insured, coverage was extinguished.  The test for applicability of an exclusion is usually distilled to a “but for” analysis wherein the provision will be deemed applicable if there would have been no loss “but for” the excluded event.  Here, “but for” the loading/unloading there would have been no loss, and as such the exclusion applying to loading/unloading was applicable.


02/02/17       Law Offices of Zachary R. Greenhill, P.C., v. Liberty Ins. UW
Appellate Division, First Department

“Capacity Exclusion” Dooms E&O Coverage for Lawyer and Law Firm

Plaintiffs are attorney and his law firm and they sought defense and indemnity under a lawyers errors and omissions policy for all defense costs incurred in connection with counterclaims asserted against the individual plaintiff (Greenhill) and his wife in the underlying contract action. In that action, the Greenhills sued the Dwight School (Dwight), its owner, and the Dwight School in China LLC (Dwight China) in connection with the Greenhills' involvement in setting up a venture in China to provide a Chinese-American joint high school curriculum and dual diploma program for students in Chinese high schools. The Greenhills alleged that they were "senior managers" of a program entered into between Dwight and a school in China in March 2008 and that Greenhill was president and chief operating officer of Dwight China, which was formed in May 2009. They sought to enforce a consulting agreement that they entered into with Dwight China.


Dwight, its owner, and Dwight China asserted two counterclaims against Greenhill that were based on allegations that he had an attorney-client relationship with Dwight, its owner, and Dwight China. One alleged that Greenhill breached his fiduciary duty to Dwight, its owner, and Dwight China, particularly with respect to negotiation and enforcement of the consulting agreement; the other alleged that in the summer of 2009 Greenhill fraudulently misrepresented that he had provided legal services to Dwight in connection with its educational partnership in China.


As we observed in a prior appeal in this case, the lawyers professional liability insurance policy excluded coverage "where the attorney is serving two masters: his client and himself" (Law Offs. of Zachary R. Greenhill P.C. v Liberty Ins. Underwriters, Inc., 128 AD3d 556, 560 [1st Dept 2015]). Thus, coverage was excluded for any claims "arising out of" Greenhill's "services and/or capacity as . . . an officer, director, partner, . . . or employee of an organization other than that of the name insured" (the Capacity Exclusion) and for any claims that "result[ed] from" legal services that Greenhill provided to an organization (defined as "any . . . business]enterprise") in which he and his wife had an equity interest of 10% or more (the Equity Interests Exclusion).


The allegations in the counterclaims bring plaintiffs' claims under the policy "solely and entirely" within the Capacity Exclusion, since they arise out of Greenhill's capacity as the president and CEO of Dwight China and senior manager and partner in the program formed in China so no coverage is available.


02/01/17       Hansard v.  Federal Insurance Company
Appellate Division, Second Department

Federal Labor Standards Act Wage Loss Claims Fell within Employment- Related Exclusion of D&O Policy

This was a declaratory judgment action seeking a declaration that Federal was obligated to defend a Directors & Officers (“D&O”) Liability and Entity Liability Coverage Part with respect to an underlying action entitled Coley v Vannguard Urban Improvement Association (Vannguard).


Vannguard and its Board Chair, Hansard were sued in 2012.  It was claimed that that Vannguard and its officers violated the federal Fair Labor Standards Act (29 USC § 201 et seq.) and the New York Labor Law with respect to payment of wages and earned vacation benefits and later claims were added of retaliation for commencing the underlying lawsuit.


The D & O section of the policy contained an exclusion "for any employment-related Wrongful Act." The D & O section did not contain a definition of "employment-related," and that term was not defined elsewhere in the policy. The policy also contained an "Employment Practices Liability Coverage Section" (hereinafter the EPLC section). Hansard was an "insured" under both the D & O section and the EPLC section.  There was no ambiguity here.


Federal denied coverage under both coverages. Hanson seeks coverage only under the D&O section.


Federal made a pre-answer motion to dismiss the complaint under CPLR 3211(a)(1) and Hansard opposed the motion and requested that it be converted to one for summary judgment.


The D & O section of the policy did not define "employment-related" Wrongful Act. Nevertheless, giving "employment-related" its plain and ordinary meaning does not result in an ambiguity. The court looked at dictionary definitions of “employment” and concluded that the term meant "connected by reason of an established or discoverable relation to the act of employing or the state of being employed."


It then concluded that the ordinary meaning of the "employment-related Wrongful Act" exclusion unambiguously encompasses claims regarding violations of wage laws and retaliation for complaints about violations of wage laws.


02/07/17       Pantaleo v. Bellerose Senior Housing Develop. Fund
Appellate Division, Second Department

Without a Contract Requiring a Contractor to Procure Insurance, There is No Sustainable Claim for Failing to Provide Insurance
On November 11, 2011 plaintiff was walking on an outdoor walkway within the housing complex where she lived in Queens when she tripped and fell. She sued alleged owners of the premises (collectively, “Bellrose”).  The owners then commenced a third-party action against New York Windows and Doors, Inc. (“NYWD”), a contractor that was on the premises at the time of the accident to replace residents' windows, seeking contribution, common-law indemnification, and contractual indemnification, and alleging breach of contract to procure insurance. The plaintiff later named NYWD as an additional defendant.


NYWD then moved for summary judgment dismissing the amended complaint and all cross claims insofar as asserted against it, contending that the plaintiff tripped and fell as a result of a defect in the walkway. NYWD also argued that the cross claims alleging breach of contract to procure insurance and for contractual indemnification should be dismissed since there was no written contract between NYWD and Bellrose.


There was proof that NYWD may have had some control over the premises and thereby they could not get out of the case on summary judgment. 


However, NYWD established that there was no contract between it and the landlord defendants, much less one containing an indemnification provision or requirement to procure insurance.


Guest Columnist:  Jonathan Dachs, Shayne Dachs, Sauer & Dachs, LLP


01/31/17       Varon v. Country-Wide Insurance Company

Appellate Division, First Department

SUM Coverage – Right Decision for Wrong Reason

Most practicing attorneys are familiar with the adage "bad cases make bad law." After reading the decision and the appellate briefs in  Varon v. Country-Wide Ins. Co., 2017 NY Slip Op. 00583 (1st Dept. 2017), I would like to coin a new adage: "confusing arguments make confusing decisions."

Varon was a declaratory judgment action brought by the plaintiff for a declaration that the defendant insurer, Country-Wide, was obligated to tender the full amounts under two separate auto liability policies issued to the owner of the insured vehicle and to the driver of that vehicle (covering a different vehicle), before the plaintiff could pursue a first party claim against his own insurer for supplementary uninsured/underinsured (SUM) benefits.

The underlying action involved a two vehicle accident that took place when a 1999 Mercedes owned by Orlo Kolenovic and operated by Adria Reckovic struct of the plaintiffs 2000 Mercury vehicle. Country-Wide was, coincidentally, the insurer for both Kolenovic and Reckovic,  with separate policies each with liability limits of $25,000 per person/$50,000 per accident. Perhaps adding to the confusion was the fact that plaintiff's SUM policy was issued by High Point, a New Jersey insurer not authorized to do business in New York, and, thus, was a New Jersey policy, not subject to New York law. That policy contains a provision that stated "We will subtract from the amount otherwise payable under this part, the amount of damages paid or payable by or on behalf of anyone responsible for the bodily injury or property damage to uninsured or additional insured."

All parties agreed that the driver's policy was excess to the owner's. The question remained whether the driver's policy was also excess to the SUM policy, or vice versa. Country-Wide tendered the $25,000 policy limit for the owner's policy, but refused to similarly tender the $25,000 under the driver's policy.


Plaintiff contended that in order to trigger his right to recover SUM benefits from High Point, Country-Wide was required to tender both $25,000 limits. Countrywide, on the other hand, argued that the "other insurance" clause in the driver's policy, which provided that "any insurance we provide for a vehicle you do not own, including any vehicle while used as a temporary substitute for 'your covered auto' shall be excess over any other collectible insurance," made the policy access to the policy issued to the owner, as well as other collectible insurance, and was not required to be tendered in order to trigger the plaintiff's right to seek SUM coverage from High Point. 


Right off the bat, several questions jump out at me. As the trial judge, Justice Peter H. Moulton, astutely noted, it has long been the law that "an insured individual is not required to exhaust the liability coverage limit under a separate insurance policy for the operator of an offending vehicle (assuming that the owner of the vehicle is not the operator of the vehicle) prior to pursuing a claim for under-insured motorist benefits." Indeed, in Matter of Liberty Mutual Insurance Co. v.  Doherty, 13 AD3d 629 (2d Dept. 2004) ( a case cited by the trial court but not by any of the parties on the appeal), The court specifically held that the underinsured motorist coverage was triggered when the insured exhausted, via settlement, the bodily injury limits of the offending vehicle's policy, and pertinently stated that "the petitioner's insured was not also required to exhaust the liability coverage limits under a separate policy for the operator of the offending vehicle prior to pursuing a claim for underinsured motorist benefits." Similarly, in Hertz Claim Management Corp. v. Kulakowich, 53 AD3d 578 (2d Dept 2008), (not cited by either the court or the parties), the court stated, "The petitioner's insured was not required to exhaust the liability coverage limits under a separate insurance policy of the operator of the offending vehicle prior to pursuing a claim for underinsured motorist benefit from the petitioner [citing Liberty Mutual v. Doherty, supra]."


Why then, where these cases not determinative? Why, given the existing state of the law, didn't the plaintiff simply file a Demand for Arbitration with High Point after the primary limits of the owner's policy were tendered and permission was granted to accept the offer made on behalf of the owner, and thus put the burden on the SUM carrier, High Point, to seek a stay of arbitration rather than commencing and litigating the DJ action himself? On what basis did the plaintiff believe that he could, under any circumstances, compel Country-Wide to offer more than the $25,000 under its owner's policy to settle the plaintiffs claim?


In any event, upon plaintiff's motion for summary judgment and Country-Wide's cross-motion for summary judgment in the DJ action, Justice Moulton held that it is only the policy limit of "primary insurers" that must be tendered in order to trigger UIM benefits, that, therefore, it was only the owner's policy that was required to be tendered, but not the driver's policy because the latter was "excess" to the owner's policy and did not constitute a primary policy within the meaning of insurance law section 3420. Although I do not believe it was necessary or appropriate to do so, Justice Moulton went on to add that the driver's policy was also excess to the plaintiff's High Point SUM policy. Accordingly, he denied the plaintiff's motion for summary judgment and granted Country-Wide's cross-motion for summary judgment, declaring that the driver's policy "need not be tendered in order to trigger plaintiff's right to seek underinsured benefits from High Point."


On plaintiff's appeal from Justice Moulton's order, The Appellate Division, First Department unanimously affirmed. In it's very brief decision, the Court noted that "the excess coverage clause in the offending driver's policy states, in relevant part, that the driver's coverage 'shall be excess over any other collectible insurance.' The motion court correctly refused to interpret the phrase 'any other collectible insurance' to mean 'any other collectible primary insurance,' and correctly determined that the driver's coverage is 'excess' to High Point's insurance."


As alluded to above, I do not believe that it was necessary--or correct--to find or state that the coverage on the driver's policy, which is excess to the coverage on the owner's policy, is also excess to the SUM coverage. Although it was, in my opinion, correct to hold that it was not necessary for the plaintiff to exhaust the limits of the driver's policy in order to proceed with his SUM claim, it is not for the reason that the driver's policy is excess to the SUM policy, but, rather, simply because the claimant has the right to proceed to his SUM claim after exhausting just the owner's policy. It remains, however, the claimant's obligation under the terms of the SUM endorsement and any Release and Trust Agreement that the SUM insurer will likely require the claimant to sign if/when he or she settles with the driver's insurer for any additional sums , to reimburse the SUM carrier to the extent of such payment. In the alternative, since the claimant will have a little incentive to proceed to such a settlement which will not benefit him or her, the SUM carrier maintains the right to recover the driver's coverage in a subrogation claim.


Jonathan A. Dachs

Shayn, Dachs, Sauer & Dachs, LLP

[email protected]


01/31/17       Mt. Hawley Insurance Co.  v. American States Insurance Co.

Appellate Division, First Department

Still too Early to Determine Whether the Breach of Promise to Provide Coverage is Meaningful

In a previous appeal, reported below, the court upheld the default judgment against defendant J & R Glassworks, Inc., as reported in Vol. XVII, No. 24.


American States now sought declaratory relief in its favor on its cross motion for summary judgment. However, the default judgment merely determined that “in the event of a default by a defendant, that defendant admits to the allegations against it in the complaint”.  However, the amended complaint states that "if" plaintiffs 537 West 27th Street Owners, LLC and Chatsworth Builders, LLC are not covered by the insurance policy issued by American States, "then" J & R breached its agreement with plaintiffs.


Until there is a determination of that coverage does not exist, J & R cannot challenge whether that amounts to a breach of the agreement.  That has not yet happened.


05/12/16       Mt. Hawley Ins. Co. v. American States Ins. Company

Appellate Division, First Department
An Agreement to Procure Insurance is Separate and Distinct from a Contractual Obligation to Hold Harmless and Indemnify

Chatsworth Builders, LLC (“Chatsworth”) was the general contractor for a construction project.  It subcontracted with J & R Glassworks, Inc. (“J & R”) to perform certain glasswork. A construction worker, Mejia, was hurt while performing the glasswork. Mejia sued the property owner, 537 West 27th Street Owners, LLC (“537”) and Chatsworth, among others (“Mejia Action”). Chatsworth and 537 commenced a third-party action against J & R and Walsh Glass & Metal, Inc. (“Walsh”), another glass-work subcontractor on the project, asserting causes of action for contractual and common-law indemnification and breach of contract for failure to procure insurance.


While the Mejia action was pending, Chatsworth and 537 commenced this action seeking a declaratory judgment that J & R breached its obligation to purchase insurance. J & R failed to respond to plaintiffs' summons and complaint in this action, and plaintiffs moved for default judgment, which was granted.


J & R then moved to vacate the default which the lower court refused to allow and the First Department affirmed that denial.  J & R argued that the lower court, in addition to denying J & R's motion to vacate the default, improperly granted the owner and GC damages related to contractual indemnification, which J & R asserts plaintiff did not seek in its amended complaint.


In fact, the lower court had not ruled on contractual indemnity issues.  The lower court determined only that J & R failed to procure the promised coverage for 537 and Chatsworth.


Robert E.B. Hewitt III

[email protected]


02/08/17       White v. D’Angelo Corp.

Appellate Division, Second Department

Defendants Can Submit Competent Medical Evidence that Injuries Were Not Caused by an Accident to Meet Their Prima Facie Burden

No facts are given in this brief opinion. The Appellate Division held defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the plaintiff's right knee was not caused by the subject accident. In opposition, however, the plaintiff raised a triable issue of fact as to whether the alleged injury to her right knee was caused by the accident. How this was done is not known.


02/07/17       Bonilla v. Vargas-Nunez

Appellate Division, First Department

Plaintiff Seeking Medical Treatment for Her Shoulder and MRIs Two Months after Accident Enough to Show Contemporaneous Treatment

Plaintiff raised a triable issue of fact as to whether she sustained a permanent consequential or significant limitation to her left shoulder causally related to the parties' motor vehicle accident. Plaintiff submitted evidence that she sought medical treatment for her shoulder shortly after the accident and that she received MRI testing on the shoulder approximately two months later, which is sufficient to show contemporaneous treatment. The MRI revealed tears in the shoulder, and plaintiff's expert's examination revealed that, several years after the accident, plaintiff had limitations of motion in the shoulder, which the expert causally related to the accident.


02/03/17       Girogione v. Gibaud

Appellate Division, Fourth Department

Conflicting Medical Testimony and Evidence is for a Jury to Decide Between

Plaintiff commenced this action seeking damages for injuries he sustained when the vehicle he was driving was rear-ended. Specifically, plaintiff sought recovery under three categories of serious injury, i.e., the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories. After a trial, a jury found no serious injury. Plaintiff appealed but abandoned the 90/180-day claim.   The Appellate Court found that given the conflicting testimony of plaintiff’s experts and defendants' expert both on the issues of serious injury and causation, that this was not an instance in which plaintiff is entitled to judgment as a matter of law.  Although plaintiff adduced evidence to the contrary, a physician who examined plaintiff on defendants' behalf testified that plaintiff had a preexisting degenerative condition and did not sustain a serious injury in the accident. Thus, contrary to plaintiff's contention, it could not be said that there was simply no valid line of reasoning and permissible inferences which could possibly lead rational persons to the conclusion reached by the jury on the basis of the evidence presented at trial.


02/03/17       Lake v Safeco Ins. Co. of America

Appellate Division, Fourth Department

Defendant Submitted IME Reports and Medical Records which Conflicted With Each Other as to Whether Plaintiff Had a Degenerative Injury or One Caused by the Accident

Plaintiff allegedly sustained injuries when she was involved in a rear-end motor vehicle accident. Following the settlement of their claims against the other driver involved in the accident, plaintiffs commenced this action to recover supplementary uninsured motorist benefits under a provision of the automobile insurance policy issued to them by defendant. Defendant moved for summary judgment dismissing the complaint on the grounds that plaintiff did not sustain a serious injury, i.e., a permanent consequential limitation of use and significant limitation of use, within the meaning of Insurance Law § 5102 (d), and that she did not sustain economic loss in excess of basic economic loss. The Appellate Division agreed with plaintiff that the court properly denied the motion with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury. Defendant failed to establish as a matter of law that plaintiff did not sustain a qualifying injury as a result of the motor vehicle accident.


Although defendant submitted an independent medical examination (IME) report/affirmation establishing that plaintiff had preexisting degenerative changes to her cervical spine and further establishing that all of plaintiff's mobility limitations were attributable to such degenerative changes or to a subsequent motor vehicle accident, defendant also submitted a second IME report/affirmation tending to establish that plaintiff had sustained a qualifying injury as a result of the subject motor vehicle accident. Moreover, defendant submitted records and reports of plaintiff's treating physicians and chiropractors, and some of those documents, which predate the subsequent accident, recite that plaintiff's cervical injuries were the result of the subject accident. Some of those contemporaneous records and reports also set forth qualitative or quantative assessments of plaintiff's limited range of motion in her neck. Thus, defendant failed to eliminate all issues of fact concerning whether plaintiff sustained a permanent consequential limitation of use or a significant limitation of use of her cervical spine as a result of the subject accident.


01/31/17       Cozier v. Baah

Appellate Division, First Department

Jury Entitled to Choose Between Two Competing Expert Theories

The jury's finding that plaintiff did not sustain a serious injury to her cervical or lumbar spine within the meaning of Insurance Law § 5102(d) as a result of the motor vehicle accident was based upon a fair interpretation of the evidence. There was conflicting expert testimony as to whether plaintiff's injuries resulted from the accident or were preexisting chronic or congenital conditions unrelated to the accident, and the jury was entitled to accept or reject the testimony of plaintiff's experts in whole or in part.



Tessa R. Scott

[email protected]




02/03/17       NY Infinity Health Care as Assignee of Schnaya Monroe v State Farm; New York Infinity Health Care, LCSW, P.C. v State Farm Fire & Cas. Co; & Renelique Med. Servs., P.C. v State Farm Fire & Cas. Co

Appellate Term, Second Department

Second Department Rejected the Rule 3.7 Ethics Argument from Plaintiff

The Second Department heard three cases wherein New York Infinity Health Care, acting as an assignee, brought and action against State Farm Cas. & Co for reimbursement for services rendered. They all concern the similar factual and legal arguments, so we will look at just one which had the fullest factual and legal analysis.


In the action by American Tr. Ins. as assignee of Schnaya Monroe, Plaintiff sought to recover assigned first-party no-fault benefits. Defendant moved for summary judgment dismissing the complaint on the ground that plaintiff had failed to appear for duly scheduled examinations under oath (EUOs). The motion was supported by an affirmation from a partner in the law firm representing defendant, attesting, based on her personal knowledge, to plaintiff's failure to appear.


As in the other two cases, Plaintiff cross-moved to disqualify the law firm representing defendant, pursuant to Rule 3.7 of the Rules of Professional Conduct, on the ground that a member of the firm was a necessary witness in this case. Rule 3.7 disqualifies an attorney from acting as an advocate at trial in which she is likely to be a necessary party.  There are a number of exceptions to this rule, so it is by no way a hard and fast application.  Nonetheless, the lower court granted defendant's motion and denied plaintiff's cross motion for disqualification.


The Second Department, in all three cases affirmed the holdings of the lower court. Unfortunately, the Second Department does not expound on its reasoning for affirming the lower court.  It but merely cites to cases which are not yet reported. All my efforts to locate the cited decisions have been fruitless.  However, although it is not exactly clear why the Second Department decided to affirm the lower court’s holding, we can deduce that Plaintiff’s arguments regarding Rule 3.7 were not effective.



Steven E. Peiper

[email protected]


02/08/17       Gonsalves v 35 W. 54 Realty Corp.

Appellate Division, Second Department

Appellate Division Reverses Jury Decision Where no Rational Basis for Jury’s Finding of Negligence was Found in the Submitted Evidence

Plaintiff was injured when the sidewalk bridge upon which he was standing collapsed. At the time of the incident, plaintiff was attempting to lower a power washer from the bridge to the ground below.  Plaintiff sued Realty Corp. and Perimeter (as the entity who constructed the sidewalk bridge) under Labor Law § 240(1).  Realty commenced a third-party action against Geiger Construction under common law indemnity principles.   


 Not surprisingly, plaintiff was successful on his summary judgment application.  At a subsequent trial to apportion damages, Geiger argued that Gonsalves was its special employee.  With no grave injury, and employment status, Geiger reasoned that the third-party common law indemnity claim should be barred by Worker Compensation Law § 11. 


The jury returned a verdict that Gonsalves was not a special employee, and that Geiger was negligent.  Geiger moved to set aside the verdict, and this appeal ensued.  Initially, the Court noted that a “rational” jury could have concluded that Gonsalves was not a special employee of Geiger, and thus permitted the indemnity claim to proceed.  However, the Court also found that the jury had no basis to conclude that Geiger was negligent where Realty Corp., nor anyone else, introduced any evidence which pointed to Geiger.  Finding that the jury engaged in “impermissible speculation,” the Court reversed the Trial Court and ruled that Geiger was entitled to judgment notwithstanding the early trial verdict.



Agnes A. Wilewicz

[email protected]


02/03/17       Brandi Hardy v. Kulwicki, Madonia

Appellate Division, Fourth Department

Fourth Department Holds that One “Significant” Word Is Ambiguous, Finding Lead Paint Case Covered Under Policy with Lead Liability Exclusion

In this case, the Madonias owned a residential apartment building, which they insured through Harleysville. One day, a former tenant sued them for lead paint exposure, allegedly during their time residing at the property.


The commercial homeowners’ policy at issue contained the standard provisions. These included a separate lead liability exclusion. The stuffer that came with the policy explained some of its terms. Indeed, the stuffer that explained the lead liability exclusion specifically stated that that endorsement “applies to any owned locations containing habitational units constructed prior to 1980, which have a significant potential lead loss exposure and have not undergone lead abatement procedures”.


In analyzing the endorsement, the Fourth Department focused on one word – “significant”. Without really explaining the rationale or detailing their argument, they found that term to be ambiguous. They said: “Here, there is a ‘reasonable basis for a difference of opinion’ whether the property’s potential lead loss exposure is significant and is therefore subject to the exclusion”. This was enough to render the entire provision inoperative and construed the entire provision against the insured.

Assoc. Editor’s Note (Agnes): This decision is flat out wrong. It is not “reasonable” for a policyholder to think that there is coverage for lead paint claims while his policy has a lead liability exclusion. The fact that one word, contained not in the operative text of the endorsement but in the stuffer that came with the policy, should knock the whole provision out the window... It’s just wrong. Just because a single word might have two (unreasonable) meanings does not an ambiguity make.


01/27/17       Travelers Indemnity Company v. Northrup Grumman Corp.

United States Court of Appeals, Second Circuit

Second Circuit Holds Defense Contractor Not Entitled to Coverage for Environmental Claims Due to Inadequate or Late Notice (New York law)

Northrup Grumman operated a 600-acre naval aircraft manufacturing and testing facility in Bethpage, New York, starting in the 1930s. In the 1960s, it donated the land upon which that site sat to the town, which eventually became Bethpage Community Park. That Park now sits on what used to be called the “sledge drying beds”, where Grumman had placed wastewater treatment sludge generated from its plants. In connection with that plant, Grumman used and stored contaminants such as trichloroethylene (“TCE”), which is a liquid used as a degreaser for metal parts, but which is also “toxic by inhalation, by prolonged or repeated contact with the skin or mucous membrane, or when taken by mouth.” Eventually, a large plume of contaminants developed in the groundwater under the park and Grumman was sued relative to the cleanup.


Clean up began, and Grumman made claims under its various insurance policies, going back years. These included many years’ of coverage with Travelers, and about two decades of coverage with Century. Litigation ensued.


First, the issue of waiver. Grumman asserted that the carriers had waived their late notice defenses because they did not expressly address some of the peripheral claims, such as those by the water district and other entities. The court rejected that, since the carriers did not intend to waive those arguments, and they were rightly addressed when the facts arose sufficient to assert them.


Next, as to the late notice defenses themselves, the court was persuaded by the carriers. Detailing New York precedent at length, the Second Circuit found that Grumman had not sufficiently provided notice of the clean up to the insurers. To Travelers, Grumman had only submitted the claim information (including DEC PRP or “potentially responsible party” letters) to its broker in 1984. It did not independently submit the documentation to the carrier, nor did the broker. Since that was an agent of the insured and not the insurer, notice was insufficient. As for Century, Grumman had merely copied Century on the 1984 package. Since independent, separate notice to each carrier was required, that notice was also insufficient.


01/27/17       Allstate Insurance Co. v. Harvey Family Chiropractic

United States Court of Appeals, Second Circuit

Second Circuit Affirms Denial of Preliminary Injunction by Carriers against Medical Providers, Despite RICO Allegations, As Insurers Failed to Establish Irreparable Harm (New York law)

In this brief decision, the Second Circuit considered whether it was appropriate to deny a carrier’s request for preliminary injunction that would have enjoined medical providers from proceeding with No-Fault reimbursement claims and from filing any new arbitrations. Here, Allstate, et al. allege that the various defendants violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by “presiding over an enterprise that received funds from fraudulent claims for chiropractic, acupuncture, and physical therapy services under New York state’s No-Fault Law. The plaintiffs seek monetary damages and declaratory relief ‘declaring that Allstate is under no obligation to pay any of [defendants’] No-Fault claims because of its illegal organization.”


While the insurers had argued that the District Court had authority to issue such a preliminary injunction, and that it otherwise erred by not doing so, the Second Circuit was not convinced. Rather than even reaching the merits, however, the court declined to change the ruling because plaintiffs had not demonstrated “irreparable harm”. Such a showing was necessary in the first instance. The court went on to state:


“There is no evidence in the record that, upon the conclusion of this matter, the plaintiffs cannot be fully compensated through money damages for the alleged harm suffered from the defendants’ fraudulent claims. Even if the defendants obtain other No-Fault reimbursements in state court and arbitrations while this case is pending, the plaintiffs are free to recover those payments should they prevail on their RICO claim. Moreover, the ‘mere injuries ... in terms of money, time and energy necessarily expended’ absent a stay of ongoing state court and arbitration proceedings ‘are not enough’ to establish irreparable harm. Jayaraj v. Scappini, 66 F.3d 36, 39 (2d Cir. 1995) (internal quotation marks omitted). Nor is the declaratory relief sought by the plaintiffs threatened by the other proceedings.”



Jennifer A. Ehman

[email protected]


01/09/17       Tower Ins. Co. of NY v. Seto

Supreme Court, New York County

Carrier Properly Denied Coverage under Homeowners Policy Where Named Insureds did Not Reside at the Premises

Tower brought this declaratory judgment action seeking a declaration that it was under no obligation to defend or indemnify Chung Fat Seto and Shi Qun Lei relative to a slip and fall on an exterior stairwell at 151 Hemlock Street, Brooklyn.  Tower issued a homeowners policy to Seto and Lei listing this address. 


Following the report of the incident, the Tower claims adjuster spoke with Seto by telephone and the latter admitted that he and his family did not live at 151 Hemlock Street on the date of the alleged incident.  Based on this information, Tower disclaimed coverage on the ground, inter alia, that since Seto and Lei did not live at the premises on the date of loss, it did not qualify as an “insured location.”  


Tower also hired an investigator who spoke with Seto, speaking through his daughter, who translated for him, and advised the investigator that Seto did not live at the premises on the date of the alleged incident and that he and his family last lived there in 2005 or 2006.  The investigator then reduced this statement to writing.     


Tower brought this declaratory judgment action and moved for summary judgment.  In support of its motion, Tower submitted the written statement of Seto along with the investigators affidavit attesting that it accurately reflected what he had been told by Seto.  Tower also included a notice to admit which asked that Seto and Lei admit that they did not reside at 151 Hemlock Street on the date of loss, and the response, which failed to respond to these items.


In considering the arguments, the court held that Tower made a prima facie showing of entitlement to summary judgment.  While Seto’s statement was unsworn, it was attached to the investigator’s affidavit wherein he attests to the admission and that it was made in his presence.  The court noted that it is well-settled that an admission by a party of a material fact to the litigation constitutes competent evidence against a party.  The court also noted the failure to respond to the notice to admit constituted an admission of their living arrangements.  Accordingly, summary judgment was granted. 


Of note, this ruling was made despite the fact that Tower had not responded to outstanding discovery severed by defendants.  The court noted that defendants failed to explain how any of the discovery which they claimed outstanding was relevant. 



Brian D. Barnas

[email protected]


02/06/17       Maniello v. State Farm Fire and Casualty Company

United States District Court, Eastern District of New York

Plaintiff’s Bad Faith Claim was Not Recognized by New York Law and her Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing was Barred by the Two Year Suit Limitation Provision in her Homeowner’s Policy

Plaintiff brought this action for declaratory judgment, breach of contract, and bad faith against State Farm.  Plaintiff's claims stem from denial of insurance coverage for damage to plaintiff's property in Whitestone, New York, for which plaintiff had purchased a homeowner's insurance policy from State Farm.  The policy provided that no action shall be brought unless there has been compliance with the policy provisions and the action is started within two years after the occurrence causing the loss of damage.


In or around April 2006, the retaining wall of the property was damaged.  Plaintiff submitted a claim to State Farm for that damage that month.  On May 8, 2006, State Farm disclaimed coverage for plaintiff's claim, informing plaintiff that the damage was excluded from her coverage under the policy.  Specifically, State Farm explained that plaintiff's policy did not cover damage from earth movement and that all the damage to plaintiff's property had resulted from earth movement that had caused soil retained by the seawall to become misplaced.  State Farm's letter disclaiming coverage noted that an inspection showed that this earth movement had been caused by excavation and construction on an adjacent property.


Believing she did not have coverage under the policy, plaintiff sued her neighbors claiming that they caused the damage.  Almost ten years later, in 2016 Plaintiff sued State Farm and the neighbors.  State Farm moved to dismiss arguing that the suit was time-barred by the policy’s suit limitation provision.


The Court held that the suit limitations period applied.  It rejected Plaintiff’s argument that the suit limitations provision should not be enforced because it runs from the date of loss.  Plaintiff argued that if the suit limitation was enforceable, insurance companies could simply wait two years after the loss to deny a claim and thus be immune from suit.  Unfortunately for Plaintiff, her suit was untimely whether the two years was calculated from the date of the loss or the date of the denial.


The Court also rejected Plaintiff’s argument that the limitations period should be tolled.  Plaintiff argued that State Farm should have informed the neighbors of the denial so that they could contest the denial.  However, State Farm had no duty to advise the neighbor of the denial.  Even if it did, there was no basis for concluding that the failure to inform the neighbors would toll a claim by Plaintiff rather than by the neighbors.


Plaintiff’s claim for bad faith was dismissed.  The Court stated that “Plaintiff’s claim for bad faith is not recognized by New York law.  Even if the bad faith claim was interpreted as a claim for breach of the covenant of good faith and fair dealing, it did not constitute a distinct claim where it was premised on the same facts as her claim for breach of contract.  Further, any claims for breach of the implied covenant of good faith and fair dealing are barred by the same contractual statute of limitations.


01/17/17       Alexander v. General Insurance Company of America

United States District Court, District of Connecticut

Plaintiffs’ House did not Collapse as that Term was Defined in the Policy because the Walls of the House did not Fall Down

April M. Alexander and Joseph Walker own and occupy the residential property in Ellington, Connecticut.  The residence was constructed in 1984 and has been insured by General Insurance since Alexander purchased the property in July 2013.


In May of 2015, plaintiffs discovered—through their realtor—a series of horizontal and vertical cracks in their basement walls.  Upon further inquiry, plaintiffs discovered that the form of pattern cracking found in the basement walls of their home was caused by a chemical compound found in walls constructed in the late 1980s and the early 1990s with concrete most likely from the J.J. Mottes Concrete Company.  The result of the condition is that the home's walls are in danger of falling in, which would then cause the entire home to fall into the basement.


In June 2015, plaintiffs notified General Insurance of the defect in their basement walls and made a claim for coverage in accordance with the terms of their insurance policy.  That same month, General Insurance denied plaintiffs' claim for coverage.


The parties agree that the policy would only cover the condition if it put the home in a state of “collapse,” as defined by the policy.  Under the policy's definition, a

“collapse” is “an abrupt falling down or caving in of a building or any part of a building.  Furthermore, the policy states that a “building or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.”


Plaintiffs commenced an action against General alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair and deceptive practices in violation of the Connecticut Unfair Insurance Practice Act and the Connecticut Unfair Trade Practices Act.  General filed a motion to dismiss, which was granted because the policy excluded coverage for cracking in the basement walls.  The policy’s definition of collapse was unambiguous and expressly did not cover the alleged cracking and/or bulging of the basement walls.  Plaintiffs filed a motion for reconsideration.


The Court again found in favor of the insureds.  Plaintiffs failed to allege in their complaint that either a falling down or caving in had occurred as required to trigger collapse coverage.  Plaintiffs could not avoid the fact that their basement walls are still standing.  Thus, no collapse occurred.  The only allegations of impairment to the structural integrity of the walls were allegations that the walls were cracking or bulging.  Both conditions were expressly excluded under the collapse definition in the policy.



Guest Columnist – David Zizik, Sulloway & Hollis P.L.L.C.:


02/03/17       Anderson v. National Union Fire Ins. Co. of Pittsburgh, PA

Massachusetts Supreme Judicial Court

Massachusetts Not Interested in Multiplying Post-Judgment Interest on Bad Faith Judgments

In Massachusetts, aggrieved claimants may sue a tortfeasor’s liability insurer directly for third-party “bad faith” pursuant to Massachusetts’ version of the Unfair Claims Settlement Practices Act, Mass. Gen. Laws Chapter 176D, § 3.  For “willful and knowing” violations, the court may award double or treble damages pursuant to Massachusetts’ consumer protection statute, Mass. Gen. Laws Chapter 93A, § 9 (3).  In addition to multiplying the amount of the judgment itself, interest added to the judgment (prejudgment interest) is also subject to being doubled or trebled.


But what about post judgment interest – i.e., interest that accumulates on a judgment from the time the judgment enters until it is satisfied?  Should post judgment interest be doubled or trebled, as well?  In the case of Anderson, et al. v. National Union Fire Insurance Company of Pittsburgh PA, et al., decided on February 2, 2017, the Massachusetts Supreme Judicial Court (SJC) answered “no” to the question.


It is not difficult to understand why the SJC took a keen interest in answering the question:  The trial court judge had awarded the Anderson plaintiffs $10,985,987.80 in punitive damages.  Of that amount, approximately $4.2 million was attributable to the trebling of approximately $1.4 million in post judgment interest


The plaintiff, Odin Anderson, had recovered $2,961,000 in damages from the tortfeasor for injuries he sustained when struck by bus.  Odin’s wife and daughter were awarded $110,000 each on their loss of consortium claims.  At a subsequent, jury­-waived trial, a different Superior Court judge found that the tortfeasor’s insurers and claims representatives violated Mass. Gen. Laws Chapters 93A and 176D by their “egregious,” “deliberate or callously indifferent” actions, “designed to conceal the truth, improperly skew the legal system and deprive the Andersons of fair compensation for their injuries for almost a decade.”  The judge awarded the plaintiffs treble damages, using as the “amount of the judgment” to be multiplied the combined amount of the underlying tort judgment and the accrued post judgment interest on that judgment


The SJC reversed the trial judge’s decision on appeal.  Although the language of Mass. Gen. Laws Chapter 93A does not clarify whether the “judgment” to be multiplied for willful or knowing misconduct includes post judgment interest, the Court looked to the reasons for the statute’s enactment.  “In sum,” the Court wrote, “the plaintiffs have advanced no reason other than further punishing a defendant whose violation was willful or knowing to suggest that, in enacting [Mass. Gen. Laws Chapter] 93A, the Legislature intended a departure from the treatment of post judgment interest in other contexts.  We therefore decline to read into the statute an additional measure of punishment that the Legislature did not set forth explicitly.”


David W. Zizik

Sulloway & Hollis P.L.L.C.

[email protected]



Jennifer J. Phillips

[email protected]


02/06/17       Maniello v. State Farm Fire & Cas. Co.

United States District Court, Eastern District of New York

For Whom the Statute Tolls? Not for Plaintiff.

In this insurance coverage dispute, the plaintiff insured originally made a claim in April 2006 under a homeowner’s policy issued by State Farm for damage to the retaining wall of her property.  Less than one month later, State Farm disclaimed coverage on the ground that the policy “did not cover damage from earth movement and that all the damage to plaintiff's property had resulted from earth movement that had caused ‘soil retained by the seawall [to become] misplaced.’ State Farm's letter disclaiming coverage noted that an inspection showed that this earth movement had been caused by excavation and construction on an adjacent property.”  As a result, Plaintiff commenced an action against her neighbors for causing the collapse of her retaining wall. 


In 2016, prior to resolution of the action against the neighbors, Plaintiff commenced the instant action against State Farm seeking declaratory relief and alleging breach of contract and bad faith.  Plaintiff additionally named her neighbors as “nominal Defendants in order to provide them with notice of the action.”  State Farm moved to dismiss the complaint against it on the ground that the claims are time-barred.


The court agreed, noting that the policy contained a contractual two-year limitations period, accruing from the date of the “occurrence causing loss or damage.”  Plaintiff argued that this limitation should not be enforced because it runs from the date of the occurrence underlying a claim, and not the date of the denial of that claim, arguing … that if such a provision were enforceable, insurance companies would simply wait two years before denying any claim, and thereby make themselves immune from suit.”  As recognized by the court, however, “[c]ontractual statutes of limitations are enforceable unless the contract imposes a condition precedent on a suit that cannot be met within the limitations period.”  Here, the policy contained no such condition precedent.  In any event, whether calculated from the occurrence or the denial, plaintiff’s action against State Farm was untimely.


The court also rejected plaintiff’s argument that any statute of limitations should be tolled because State Farm should have known about plaintiff’s action against the neighbors and should have informed the neighbors of the disclaimer of coverage so that the neighbors could contest that denial.  “That the [neighbors] may have had an interest in whether or not plaintiff was insured—insofar as they had an interest in avoiding plaintiff's suit against them—does not create a duty on State Farm's behalf to advise the [neighbors] of the denial of coverage. Plaintiff identifies no facts or law to the contrary. Furthermore, even if State Farm somehow had been obligated to inform the [neighbors] of the denial of plaintiff's claim, there is nothing in the complaint or integral documents that suggests State Farm's alleged failure to do so would toll a claim by plaintiff, rather than by the [neighbors].” 


Plaintiff’s last argument also failed to persuade the court to toll the statute of limitations.  Plaintiff argued that the original claim was for damage to the sea wall “and other property,” and State Farm’s denial letter referenced only the sea wall.  The court found that plaintiff failed to plausibly plead facts which would establish a potential breach of the policy for any other property, but instead had filed “a single claim with State Farm, for which coverage was completely disclaimed.”


Finally, the court found plaintiff’s claim for retaliatory relief and bad faith duplicative of the breach of contract claim and therefore similarly time-barred. “Even if her bad faith claim is interpreted as a cognizable claim for a breach of the covenant of good faith and fair dealing implicit in contracts, it does not constitute a distinct claim where it is premised on the same facts as a claim for breach of contract.  Furthermore, any claims for breach of this implicit covenant are barred by the same contractual statute of limitations as plaintiff's contract claims.”  The court therefore dismissed the complaint as against State Farm with prejudice.


John R. Ewell

[email protected]


02/01/17       Givaudan Fragrances Corp. v. Aetna Cas. & Sur. Co.

New Jersey Supreme Court

New Jersey Supreme Court Adopts Majority Rule: When an Assignment is Made after a Covered Loss, Anti-Assignment Clause is Void as a Matter of Public Policy

The New Jersey Supreme Court considered whether New Jersey would adopt the rule that an anti-assignment clause in an insurance policy may not bar the assignment of a post-loss claim even though the claim has not been reduced to a money judgment.


Givaudan Fragrances Corporation (Fragrances) faced liability as a result of environmental contamination from a manufacturing site that a related corporate entity operated. Fragrances claimed that the insurers wrote liability policies for Givaudan Corporation during those relevant years. Fragrances argued that it is entitled, either as an affiliate of Givaudan Corporation or by operation of an assignment of rights, to have the insurers provide it with coverage for that environmental liability. The insurers claimed that they insured Givaudan Corporation as their named insured, not Fragrances, and that any assignment to Fragrances is invalid because they did not consent to the assignment, as was required for a valid assignment according to the language of the insurance policies. Collectively, the insurers refused to honor Fragrances’ right to bring insurance contract claims against them.


The court adopted the rule that a provision that prohibits the assignment of an insurance policy, or that requires the insurer’s consent to such an assignment, is void as applied to an assignment made after a loss covered by the policy has occurred. This rule is an exception to the general principle that parties to a contract may freely limit assignment of their contractual rights. The court explained that, the "principle underlying the rule is a deeply rooted public policy against allowing restraints on alienation of choses in action." The court further supported its decision stating that an assignment of the policyholder’s rights regarding that loss in no way materially increases the risk to the insurer.


Going forward in New Jersey, once an insured loss has occurred, an anti-assignment clause in an occurrence policy may not provide a basis for an insurer’s declination of coverage based on the insured’s assignment of the right to invoke policy coverage for that loss. Since the assignment at issue in this case was a post-loss claim assignment, the rule voiding application of anti-assignment clauses to such assignments applied.


01/27/17       Nassar v. Liberty Mutual Fire Ins. Co. at al.

Texas Supreme Court

Texas Supreme Court: A Fence is a "Dwelling" As a Matter of Law, Not "Other Structure"

The Texas Supreme Court recently considered whether the particular language of a homeowner’s insurance policy affords coverage for fencing under the policy's “dwelling” provision or under the “other structures” provision.

The Nassars filed a claim with Liberty Mutual under their homeowners when their property was damaged by Hurricane Ike. The Nassars' homeowner’s policy provided $247,200 in coverage under the policy's “dwelling” provision and $24,720 in coverage under the “other structures” provision.  This appeal concerned which part of the Liberty Mutual insurance policy covered the Nassars’ damaged fencing. The Nassars' property contains a system of fencing spanning over 4,000 linear feet—including a white picket fence, an ornamental iron fence, "garden fences and pens," and a wooden post-and-rail perimeter fence. The damage to the fencing was over $58,000. Liberty Mutual considered the fencing an “other structure” under the policy, and thus, paid the policy limit for the “other structures” coverage.


The policyholders filed suit seeking coverage for the fence under the policy's "dwelling" provision seeking coverage for the remaining $33,000. Although the policy contained an insuring grant for "other structures," the "dwelling" insuring grant afforded coverage for the "dwelling… including structures attached to the dwelling." The policyholders argued that, under the plain language of the policy, their fencing, which is attached to their house at four separate points, is a “structure[ ] attached to the dwelling” and therefore covered under the higher limits of the "dwelling" provision." Liberty Mutual argued that simply connecting 4,000 feet of fencing to the dwelling by "four bolts" does not attach the fencing to the dwelling. The Texas Supreme Court found that the Nassar's policy interpretation was reasonable, and held that the fence is covered under the “dwelling” insuring grant as a matter of law. The Supreme Court remanded the case to the trial court to determine whether "some of the 4,000 feet of fencing constructed of different materials and spanning six acres of the property is not part of the 'structure attached to the dwelling.'"



Howard B. Altman

[email protected]


Snowed out.



Earl K. Cantwell
[email protected]


07/22/16       Ironshore Specialty Insurance Company v. 23andMe, Inc.
Northern District of California
Contractual Liability Exclusion

Legal actions were commenced against 23andMe with respect to alleged information and representations regarding consumers’ risks for certain medical conditions and assessments for drug responses.  The State of Washington also issued a Civil Investigative Demand (“CID”) to 23andMe.  The actions generally alleged that 23andMe falsely represented that its personal genome service would give consumers certain knowledge and information about their health conditions.


23andMe tendered defense of the actions to Ironshore which ultimately brought a declaratory judgment lawsuit which, for purposes of this opinion, focused on a policy exclusion for contractual liability, and whether the CID from the State of Washington qualified as a covered claim.  The Federal District Court held against the insurance company on the contractual liability exclusion, but in favor of Ironshore on the CID on the covered claim issue.


The Court first noted that, under California Law, interpretation of an insurance policy follows general rules of contract interpretation.  The contractual liability exclusion pertained to “Your Assumption of Liability or Obligations in a Contract or Agreement.”  Ironshore argued that this language excluded coverage for all of the claims since they all arose essentially out of contracts entered into by 23andMe.  The insured in response argued that the exclusion had no application to liabilities arising from 23andMe’s own contracts, but would only apply to obligations that were originally those of another third party but were subsequently assumed by 23andMe, such as for indemnification.


The Federal District Court did not find any controlling law from the California Supreme Court, or even appellate courts, addressing the precise language at issue here.  They did note that California, like most states, holds that insurance exclusions are generally interpreted narrowly against the insurer, and that the insurer generally has the burden of establishing that a claim falls within a policy exclusion.


The parties each pointed to numerous court decisions in other states to support their argument.  Ironshore asserted that several courts have interpreted that policy language as encompassing obligations incurred via any contract, not only by assumption of liabilities from a third party.  The insured countered with many citations to court decisions limiting similar policy exclusions to contracts that assume obligations from third parties.


The “assumption” language implies something other than a direct contract breach.  “Assuming” a liability of another party via contract (typically an indemnification agreement) is also something that an insurer’s underwriting and risk control departments would have difficulty researching and controlling.  However, there is also legal and business support for the concept that liability insurance is intended to cover unintended accidents, not breach of business agreements.  In this case, Ironshore cited to cases applying that concept to exclude coverage for any contractual liability, not merely indemnity or assumed liabilities.


The District Court held that it was more likely that the California Courts would adopt the cases cited by the insured limiting the policy exclusion to contractual liabilities that are somehow assumed from third parties.  The Court believed that these cases appeared to represent a “majority view” on the exclusion.  The Court also stressed the “assumption of liability” language, which would be odd if not useless unless that was a reference to an underlying obligation of a third party.  Therefore, Ironshore’s construction of that exclusion was rejected, and its motion for summary judgment based on that contractual liability exclusion was denied. 


With respect to the CID, the issue was whether it qualified as a “claim” under the policy.  A claim was essentially defined as an obligation to pay damages that the insured legally becomes obligated to pay because of a claim of a wrongful act.  The Court ruled that Ironshore was not obligated to defend or indemnify 23andMe with respect to the CID because the duty to defend arises when the insured tenders defense of a third party lawsuit to the insurer.  Prior to the filing of a complaint, there is nothing for the insured to tender the defense of, and no duty to defend arises.  While in the future the State of Washington might file a claim which might be covered under the policy, in the present circumstance with only the CID having been issued, there was no pending claim to be tendered for insurance coverage.  Therefore, Ironshore’s motion for summary judgment that it had no duty to defend or indemnify 23andMe with the respect to the CID was granted.


This case again notes the axiom that insurance policy exclusions generally will be narrowly interpreted against the insurance carrier.  The case can be also viewed generally as supporting a proposition that liability insurance coverage is not intended to cover an insured’s assumption of risks or liabilities for other third parties (which the insurance company would argue were never part of an underwriting review or process). 


This case also notes that, with respect to the same or similar policy language, there appears to be some difference of opinion on the extent of coverage and applicability of this exclusion on a nationwide basis.  In light of this uncertainty, the Federal District Court hewed to its obligation to attempt to “predict” what the law would be in the State of California if state courts would be called upon to decide the question. 


It is notable that in similar circumstances some federal courts may “certify” the question directly over to the highest court of the state and let that court make the ruling and advise the Federal Court of its decision.  That apparently was not done in this case, and the District Court proceeded to make a ruling based upon its best analysis and prediction.

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