Coverage Pointers - Volume XVIII, No. 20

Volume XVIII, No. 20 (No. 476)

Friday, March 24, 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. 


Best training short that I’ve heard in a while:


Dance like nobody’s watching

E-mail like it may be read aloud in a deposition.


Greetings from our first issue of spring, which is a wonderful mile-marker on the way to warmer weather.  Lake Erie is ice-free, the last vestiges of a recent dusting of 19 inches of snow are melting (we call that “snow flurries”) and the heat from Washington can be felt as far away as Western New York. 


We really appreciate the feedback we receive from our loyal readers.  We read every email, and we respond to every comment, that crosses our desks.  Please keep those cards and letters coming in because we know when we receive them, that you find the publication worthwhile. 


Off The Mark:


We are pleased to include a new column from a new columnist, our eleventh.  


Brian Mark, a well-experienced coverage lawyer, is resident in our Long Island office, having joined our team a few months back.  He will be writing about Construction Defect litigation, with a national perspective.  We handle a good deal of CD litigation, primarily in the Greater New York area.  Please feel free to reach out to Brian at  [email protected].  His first column is in this issue and is highlighting two older but baseline decisions, one each from NY and NJ.


This Issue:


There are several very interesting cases in this issue worth considering.


Breadth of Tenant’s Additional Insured Coverage for Landlord:


One of the “regular” questions we get here involves the scope of additional insured coverage for property owners. You know the drill. A lease exists between a property owner and a tenant with a tenant promising to provide additional insured protection to cover the landlord for accidents arising out of the “leased premises”. A customer is approaching the tenant’s leasehold when he or she falls in a common area - perhaps the parking lot, the stairwell being used to reach the tenant’s leased space or perhaps even the foyer right in front of the entrance way.


The landlord is sued and seeks additional insured status under the tenant’s policy claiming that the accident arose from the leased premises. Is there coverage? There is a split in the Departments on this issue. We offer a decision released on March 22 in Chappaqua Central School District vs. Philadelphia Indemnity Insurance Company where the Second Department narrowly construed the AI endorsement. The property owner was not afforded additional insured protection when a tenant’s customer fell on a stairway that was taking the customer to the tenancy.  Following the summary, we offer a somewhat lengthy discussion of other cases where a broader view of the endorsement has been embraced. 


We do not necessarily disagree with the decision but it must be examined in context with other appellate opinions considering the same coverages.


Attorney-Client Privilege:


Regular readers know that we are paying particular attention to the case law that impacts on the right of insurers to seek confidential legal advice from coverage counsel, without the fear that the communications will be subject to discovery. In 570 Smith Street vs. Seneca Insurance Company, the First Department issued an opinion supportive of protecting the privilege.  Ken Maguire of Ken Maguire Associates PLLC was the successful carrier’s counsel in that case and we congratulate him.


For Want of a Stamp:


Anyone who has heard my presentations on New York coverage disclaimers and the special rules that apply in this state will recall that I include a slide showing postage stamps. I have made the point, time and again, that the failure to copy all of the parties necessary under Insurance Law Section 3420 (d) (2) can be fatal to a proper and effective New York disclaimer (or what civilized jurisdictions might consider a Reservation of Rights).  The Second Department’s decision in Harco Construction vs. First Mercury was, at the end of the day, one of those situations where the lack of a postage stamp compelled an adverse result on a coverage denial. 


The Oxford Comma:


What is it?


Ox·ford com·ma


  1. a comma used after the penultimate item in a list of three or more items, before ‘and’ or ‘or’ (e.g. an Italian painter, sculptor, and architect ).


Why do we care?  See Agnes’ column and her discussion of a decision in Maine that considered its importance.


Coverage Mediation:


One of our favorite things we do is participate in coverage mediation. Clients call upon us to represent them in bodily injury or property damage mediation sessions where we appear on behalf of the insurer’s interest. Having coverage counsel present protects defense counsel from being subject to claims of conflict of interest.  We often helicopter in – at the last minute – for these mediations.  Let us know if we can help.


I also serve as a Coverage Mediator.  If there are two or more carriers that have a dispute that would benefit from experienced coverage counsel assisting in resolution, contact me at [email protected] or 716-849-8942.




Steve Peiper and I are heading to Boston for the PLRB Claims Conference, each of us speaking on subjects of interest.  Look for us there!


First Department on Asbestos:


I send a belated thank you to our asbestos guru, Chris Potenza, for his submission for our most recent issue.  Simply stated, I forgot to include the summary.   Chris handles asbestos matters throughout New York State and keeps his fingers on the pulse of asbestos decisions.  He offers you a summary and link to this recent and important decision:


02/28/17         Juni v. Ford Motor Company

Appellate Division, First Department

First Department Sends Shockwave throughout New York Asbestos litigation with Rejection of Plaintiffs’ “Each and Every Exposure” Theory

The decent plaintiff had been awarded $11 million from a New York County jury.  Trial defendant Ford was successful in its post-trial motion to strike plaintiff’s expert testimony and set aside the jury’s verdict.  The trial court ruled that plaintiff was obliged to prove not only that plaintiff’s mesothelioma was caused by exposure to asbestos, but that he was exposed to sufficient levels of the toxin from his work on brakes, clutches, or gaskets, sold or distributed by defendant, to have caused his illness.  The trial court explicitly rejected plaintiff’s expert’s opinion that “each and every exposure” can be treated as a contributing factor to causation of an asbestos related disease.


On appeal, the First Department affirmed, holding that the fact that asbestos, or chrysotile, has been linked to mesothelioma, is not enough for a determination of liability against a particular defendant; a causation expert must still establish that the plaintiff was exposed to sufficient levels of the toxin from the defendant's products to have caused his disease. Even if it is not possible to quantify a plaintiff's exposure, causation from exposure to toxins in a defendant's product must be established through some scientific method, such as mathematical modeling based on a plaintiff's work history, or comparing the plaintiff's exposure with that of subjects of reported studies. The evidence presented by plaintiff here was insufficient because it failed to establish that the decedent's mesothelioma was a result of his exposure to a sufficient quantity of asbestos in friction products sold or distributed by defendant Ford Motor Company.


Plaintiff's experts effectively testified only in terms of an increased risk and association between asbestos and mesothelioma, but failed to either quantify the decedent's exposure levels or otherwise provide any scientific expression of his exposure level with respect to Ford's products.


The Court further explicitly rejected the contention raised by dissenting Justice Feinman that the proof in asbestos cases need not be analyzed using the same criteria as those used to analyze exposure in other toxic tort cases, namely, the quantification or other "scientific expression of exposure" as it would set an insurmountable standard for plaintiffs in asbestos claims. The First Department has held that there is no valid distinction to be made between the difficulty of establishing exposure to, say, benzene in gasoline and exposure to asbestos. In each type of matter, a foundation must be made to support an expert's conclusion regarding causation.



Poor Ben – a Century Ago:



The Ithaca Journal

Ithaca, New York

24 Mar 1917




            My wife, Iva Worsell, having left my home and board without just cause or provocation, I hereby forbid anyone to trust or harbor her on my account.  March 23, 1917.  Benjamin F. Worsell.


Editor’s Note: Curious that I was, I found out that Benjamin Franklin Worsell married Iva Gertrude Barger on November 19, 1914, so this marriage did not last very long.  He was 22 and Iva was 16.  They lived with her dad, Keney Worsell in Lansingville, Tompkins County. After he and Iva went their separate ways, he registered for the draft in 1917 noting he employment as a farmer, settled down with his second wife, Julia, her three children and by 1925, they had a little Worsell between them.  Another child of the marriage died in infancy in 1921.  He registered for the draft again 1942 at age 50.  Ben died in 1968 (we read his obit in the 8/9/68 Ithaca Journal), Julia in 1978 and they are buried in Lansingville Cemetery. Best we can tell, his son John still lives in Lansingville and his grandson, Benjamin was on the 2015 Dean’s List at Tompkins-Cortland Community College.  We don’t know what happened to Iva.


Jen’s Gems:




Hope all is well.  We signed my daughter, Ella, up for kindergarten this week.  She will be attending a small catholic school near our house.  As my husband and I took the tour a few weeks ago, I just kept thinking:  “I am not emotionally ready for this.”  She, on the other hand, is very excited. 


In two weeks, I will be heading out to Chicago, Illinois, for DRI’s Insurance Coverage and Claims Institute, taking place April 5-7, 2017, at the Loews Chicago Hotel.  ICCI is certainly one of the premiere events for insurance coverage lawyers and claim professionals to learn and network.  And this year’s conference offers terrific, timely programs and unparalleled networking opportunities.  As always, this year’s line-up of presenters includes attorneys and industry representatives from across the country speaking on those ever-evolving considerations impacting insurance law practitioners today, including:


  • Ethical Considerations Involving the Right and Duty to Investigate; 

  • Cyber Liability;

  • Class Actions;

  • The Duty to Defend - Trends and Diversions.


ICCI also offers a special program geared solely to in-house and claims professionals, to delve into the issues they face:  managing the tripartite relationship, professional liability and more.


Hope to see many of you there.


Until next issue …



Jennifer A. Ehman

[email protected]



Boxing Challenged

The Des Moines Register

Des Moines, Iowa

24 Mar 1917




Broxam Boxing Bill Is Killed

in Senate Committee.


Boxing in Iowa will not have benefited legislatively when the present General Assembly adjourns.  The Broxam bill to legalize certain forms of athletic clubs before which boxing matches may be held will be reported for indefinite postponement by the Senate Judiciary committee today.  The Lake bill in the House was also killed in the committee.


The committee also voted yesterday to recommend for indefinite postponement the Lytle bill making it a felony to desert a wife or dependent child or for a child to desert dependent parents.


Tessa’s Tutelage:


Dear Readers,


This weekend I am traveling back to Ohio, where I went to law school, for the wedding of a very dear friend.  I haven’t been back to the Buckeye state since I graduated so I am somewhat excited to hit the road for a visit.  People in Buffalo have been asking me what food item I miss the most from my time in Ohio, and I can’t say I have been able to think of a single one.  This has led to some serious head scratching for my inquisitive Buffalonian friends.  It is simply inconceivable to Buffalo Natives that an area does not have a particular food to wax nostalgic about. Buffalo is one of the few places where everyone is a bit of a foodie.


This week we have two cases.  One makes me eat crow a little (it is another case which upsets the finding of a Master Arbitrator), the other involves the appropriateness of severing a case.  The latter case is so short I probably could have just tweeted it.


Have a wonderful weekend,



Tessa R. Scott

[email protected]


Ewell's Universe:


Dear Subscribers:


I have always enjoyed reading opinions that make sense. It's much preferable to the alternative. Well this week, the stars have aligned in Ewell's Universe and common sense prevails in today's featured cases. The Supreme Court of Delaware dropped a bad faith claim after the insureds produced absolutely no evidence to support their claim of bad faith. At trial, the insureds offered evidence of damage to their condominium only, and offered no evidence of bad faith by the insurer. The attorney for the insureds chose not to call the claims adjuster to testify, and in fact, point-blank told the trial judge he did not want the adjuster to testify because he was afraid she might provide a reasonable explanation for the insurer's denial. What remains to be seen is how this case ever made it to Delaware's highest court.


The Supreme Court of Maine considered a title insurance case where the insured argued, in essence, someone down the road might sue me and I'd like coverage now. The wrinkle though was he couldn't actually identify anyone down his road that would bring the claim, and no claim had actually been made. Thus, Maine's high court ruled that the title insurer had no obligation to indemnify the insured for claims that were merely "hypothetical."


On a personal note, this upcoming weekend is Maple Weekend across Western New York State. I'll be driving out to the country and visiting a few local maple farms. If you're in Western New York, it's interesting to see how real maple syrup is made, and the many gallons of sap boiled down to make one bottle of maple syrup. The maple sugar candies are delicious and I strongly recommend them, even if your dentist probably won't.





John R. Ewell

[email protected]


Suicide to Recover Life Insurance Proceeds, or Not?


The Evening World

New York, New York

24 Mar 1917





Suicide Theory Disclosed in

Suit of Widow for $5,000

on Park Victim’s Policy.


The first suggestion that Dwight P. Dilworth, the lawyer mysteriously shot to death in Van Cortlandt Park last September, committed suicide was officially made in the Supreme Court do-day when Mrs. Grace D. Dilworth, the widow, filed suit to collect a $5,000 life insurance policy taken out by her husband.


It is revealed that on June 12,1916, Dilworth took out a policy in the Penn Mutual Life Insurance Company of Philadelphia.  He paid the first premium, naming his administrator, the Astor Trust company, as beneficiary.


The second premium was due Sept. 8, 1916.  It was five days before this that Dilworth was killed while he was riding with Miss Mary McNiff of No. 102 West Seventy-fifth Street.  Miss McNiff declared to the police that two highwaymen jumped out of the bushes near the Golf Links road and shot the lawyer. 


From George A. Grabow, a lawyer in the office of George B. Hayes, counsel for Mrs. Dilworth, it was learned that, when Mrs. Dilworth demanded payment of the insurance she was met with a refusal and the suggestion of suicide.


 “The answer of the insurance company is not on file, Mr. Grabow told an Evening World reporter.  “The company has, however, suggested in correspondence that it relied upon a suicide clause in the policy in refusing to pay.”

Editor’s Note:  We could not find the results of this litigation, and we tried.


Phillips Federal Philosophies:


Hello, All:


Happy Spring, everyone.  Although there are still piles of snow on the ground, at least there’s sunshine in the air.  And celebration – this month marks my father’s 70th birthday (happy birthday, Dad!), begging the question, what does one add to a beer gift basket to make it extra special?


This week we have a case from the Western District of New York in which the plaintiff insured asserted a multitude of claims that purportedly stemmed from an early conversation with his homeowners claims representative and subsequent denial of a property damage claim.  In Kraatz v. USAA Casualty Ins. Co., the district court considered everything but the alleged breach of contract, including fraud, constructive fraud, negligent misrepresentation, and violation of New York General Business Law § 349.


As always, thanks for reading. 



Jennifer J. Phillips

[email protected]


United States Prepares to Enter WW I:


The Ithaca Journal

Ithaca, New York

24 Mar 1917


Prepare for Aggression


Washington, March 24.—The United States government in getting ready to put into effect measures of the most far-reaching and aggressive character in the event of war with Germany.  It will not be satisfied with mere attempts to protect American merchant vessels.  Its preparations will be designed to meet any eventually, a long war, if necessary.  There will be no half way measures. 


This program was agreed upon at a long cabinet meeting yesterday and it guided the Council of National Defense when it met today with its advisory committee.  The program decided on includes military, naval, industrial and financial measures.


The question of sending an army abroad will be left for future consideration.



Hewitt’s Highlights: 


Dear Subscribers:


This edition involves several decisions involving the 90/180-day category of serious injury. The Appellate Courts held in two cases that evidence that showed that plaintiff missed no days of work and one day of work, respectively, was enough for a prima facie showing that no serious injury was suffered. One court also noted that a tear in the shoulder alone without any evidence of limitations is insufficient to raise a triable issue of fact.  In a decision by the Second Department Sul-Lowe v. Hunter, in an issue involving a concussion, the Second Department rejected the kind of subjective evidence of serious injury that the Third-Department seemed to accept a few columns back in Rodman v. Deangeles a decision from February 16, 2017 in which the Third Department relied more heavily on subjective complaints by the plaintiff in finding serious injury.


Well the snow has melted on Long Island and spring is here. I hope you get to enjoy the warmer weather (it is coming, I presume).


Until next time,


Robert Hewitt

[email protected]


Insurance on the Brink of the U.S. Entering WW I:



New-York Tribune

New York, New York

24 Mar 1917


Bombardment Insurance

for Buildings Here


Policies for $10,000,000 Are

Taken Out by Owners with

Lloyds of London


 Local insurance brokers said yesterday that millions of dollars’ worth of “bombardment” insurance had been placed in the metropolitan district within the last few days, in anticipation of open hostilities with Germany.


 A conservative estimate put the total of such risks at more than $10,000,000.  Practically all of the insurance was placed through New York brokers with the Lloyds of London.  Insurance laws in most of the states of the Union prevent American companies from assuming such risks, and as a result, London is about the only market where such insurance can be obtained. 


 While a large portion of the insurance written has been placed on office buildings, merchandise stores and warehouses, brokers said that among the largest risks taken had been those placed on steel plants and metal working factories.  Outside the metropolitan district, especially in Connecticut, New Jersey and Pennsylvania, several large risks have been written on munition plants.


Policies of this type cover the holders against practically all war loss, and include insurrection, civil uprisings, bombardments, explosions, strikes and invasions.  Under bombardment is included attacks by air, land and water.  In London they have been calling it “Zepp” insurance since the war began. 


Off the Mark:


Dear Readers,


After two months of working here, I feel like I’m settling in.  Of course, after spending 15 years at one establishment, it takes time to get used to everything that is new and there is a lot of new.  Although it has only been two months, I’ve learned that the firm is made up of not only great legal minds, but of great people.  The firm truly works as a team in all aspects and I’m proud to be part of it. 


Okay, enough about me.  On with the law and hopefully on with spring.  I’ve had enough of the crazy temperature swings.  In Off the Mark, I will report on construction defect cases (where the work was off the mark) across the country.  As I live in New York, I’ll start there.


While I understand that this newsletter generally includes only the most recent cases, I thought I’d start with some baseline case law from both New York and New Jersey.


In New York, the case of George A. Fuller Co. v. United States Fid. & Guar. Co. continues to be the instructive case regarding construction defect coverage.  Based on Fuller and the numerous cases since, construction defects such as faulty design, fabrication or installation, do not constitute “occurrences” under commercial general liability insurance policies.  The general rule is that a commercial general liability insurance policy does not provide coverage for claims sounding in breach of contract, breach of fiduciary duty, or breach of warranty.  Rather, commercial general liability insurance policies only provide coverage for bodily injury and property damage claims.   


Turning to our neighbor: New Jersey courts, in contrast to Fuller, have held that consequential damages due to faulty workmanship constitute “property damage” and the event resulting in that damage is an “occurrence” under commercial general liability insurance policies.  In Cypress Point Condominium Ass’n, Inc. v. Adria Towers, L.L.C., the court held that consequential harm caused by negligent work is an “accident” and, therefore, is an “occurrence”, which is covered.   


I will continue to report on noteworthy cases across the country.  Until then …



Brian F. Mark
[email protected]


Loss of Hens Leads to Loss of Life – 100 Years Ago:


Dunkirk Evening Observer

Dunkirk, New York

24 Mar 1917




Owner Upon Discovering

Loss Hangs Himself.


Candor, Pa., March 24. – Wilson Merckle, a young poultryman, hanged himself in his chicken cooper a few minutes after had discovered that 18 of his best White Wyandotte pullets had been killed by a weasel.


Merckle, according to his mother, on hearing a noise among his chickens at daylight, arose and went to the coop.  When he failed to return in a half hour Mrs. Merckle investigated and found him hanging from a rafter.  Merckle had recently refused several hundred dollars for some of the birds. 


Wilewicz’ Wide World of Coverage:


Dear Readers,


This week, I’m still recovering from a weekend-long birthday bash that was mighty fun and all out lovely. I have no compunction in admitting that I love my birthday and look forward to it each year like a national holiday. Granted, it does indicate the inevitable passage of time, but since it is indeed inevitable, why not enjoy it?


Anyway, in this edition of the Wide World, we bring you a case that is not exactly coverage related, but is of great interest to some of us word nerds and coveragers (an apt neologism, credit going to our own Brian Barnas).


Out of the First Circuit, we have O’Connor v. Oakhurst Dairy. You might have heard about it on the news lately, where the use of a comma (or the lack thereof in this case), resulted in upwards of $10 million in costs for one Maine dairy. At issue were the state’s wage and hour law, and whether the lack of a serial – a.k.a. an Oxford – comma created an ambiguity that could be read against the drafter or employer. This is not the first case in which an otherwise innocuous comma cost someone millions of dollars, and it likely will not be the last. Thus, the grammar lesson of the week remains – just use the Oxford comma!


Until, next, time,



Agnes A. Wilewicz

[email protected]


Object Matrimony – a Century Ago:


The Washington Post

Washington, District of Columbia

24 Mar 1917


WIDOW of refinement would like to meet a gentleman of culture, not under forty yrs., of age; object matrimony.  Box 129, this office. 


Barnas on Bad Faith:


Hello again:


Clearly, I jinxed myself in my last letter by stating that I had not used my snow blower since December.  During the winter storm last Tuesday and Wednesday, I used my snow blower more times (5) than I had all year.  That’s what I get for messing with winter.


Syracuse did not make the NCAA Tournament and my bracket is busted (thanks Duke), so now I turn my attention to my favorite day of the year: MLB Opening Day.  This year we got a nice appetizer for baseball season with the World Baseball Classic.  I have been pretty skeptical about the WBC in the past, although I did have the opportunity to see the USA play Canada in the 2009 WBC in Toronto.  However, this year I was completely into the tournament.  Maybe it was the energy and passion of the players and fans from countries like the Dominican Republic and Puerto Rico that got me excited.  I was particularly pleased with the USA taking home the title because Blue Jays starting pitcher Marcus Stroman picked up the win in the final game and tournament MVP honors.  I’m already looking forward to the WBC coming back in four years, and am hoping that after such a great tournament we see more of the USA’s best players come out to try to defend the title.


I have three cases in my column today.  Courteau is yet another installment in the line of collapse cases out of Connecticut based on defective concrete used in houses.  Here the court concludes that the Plaintiffs stated a cause of action for breach of the covenant of good faith and fair dealing by alleging that the insurer ignored relevant law and intentionally cited inapplicable policy provisions.  MVB Collision reminds us that there is no private cause of action in New York for violation of the Unfair Claim Settlement Practices law.  Finally, Key Fat Corp. is a bad faith case from Queens County, which reminds us that a party must be in privity with the insurer to have standing to bring a bad faith cause of action.  Here, even if the plaintiffs had standing, the court concluded that Rutgers did not act in bad faith by relying on an otherwise valid policy exclusion that was later deemed waived pursuant to Insurance Law 3420.


Signing off,



Brian D. Barnas

[email protected]



Do Not Insult My Horrible Husband!  A Century Ago:


Dunkirk Evening Observer

Dunkirk, New York

24 Mar 1917


So Sensitive!


An attorney was consulted by a woman desirous of bringing action against her husband for a divorce.


She related a harrowing tale of the ill treatment she had received at his hands.  So impressive was her recital that the lawyer, for a moment, was startled out of his usual professional composure.


“From what you say this man must be a brute of the worst type!” he exclaimed.


The applicant for divorce arose and with severe dignity announced:


“Sir, I shall consult another lawyer.  I came here to get advice as to a divorce, not to hear my husband abused!”



Altman’s Administrative (and Legislative) Agenda:  


Greetings, Dear Readers.  We all wait with baited breath to learn whether Congress will vote yea or nay to adopt ‘TrumpCare’, and wait to learn exactly what changes TrumpCare will entail.  Until then, there’s nothing new to report on the administrative or legislative front, so I bring to you a poem.


While we wait on word from Trump

On healthcare laws to keep or dump

Let us turn to warmer feats

Like Easter eggs and Pesach treats

Where all well-behaving goys

Have the edge o’er Jewish boys

While chocolate bunnies fill your heads

We just eat unleavened bread

Mallow peeps for those who wish

While we eat gefilte fish.

So while you eat your Easter cake

I’ll have a matzo belly ache.


May your holidays be festive and feast-filled.



Howard B. Altman

[email protected]


Highlights of this week’s issue, attached:


Dan D. Kohane
[email protected]


  • Where Cafeteria is Leased, Accident on Non-Leased Stairway that Allows Access to Cafeteria Does Not Provide Landlord with Coverage as AI under "Managers, Landlords, or Lessors of Premises" Endorsement.  Thousands Ponder.

  • Protecting the Privilege

  • Needs to be Jurisdiction over Offending Motorists Carrier in Application to Stay Uninsured Motorists Arbitration

  • Framed Issue Credibility Determination Reversed on Appeal

  • This One’s a Good Read on Additional Insured Coverage and the Obligation of a NY Carrier to Deny Coverage Properly Where Tender of Coverage Made by Owner and General Contractor’s Carrier:

  • Owner, Not in Privity with Subcontractor, Does Not Attain Additional Insured Status, Even if Subcontractor’s Carrier Fails to Deny Coverage to Them (Cannot Create Coverage where None Exists);
  • General Contractor is an Additional Insured and since it did Not Receive Disclaimer Letter Based on Policy Exclusion, Subcontractor’s Carrier Loses Right to Rely upon Exclusion.  Disclaimer Letter Sent to GC’s Carrier Does Not Meet Statutory Obligation


Robert E.B. Hewitt III

[email protected]


  • Plaintiff Could Not Establish a 90/180-Day Category Claim Where Plaintiff Did Not Miss Any Work

  • Defendant Failed to Meet Its Burden to Show Plaintiff Did Not Suffer a 90/180-Day Category Injury

  • Missing One Day of Work Not Sufficient to Sustain a Serious Injury under 90/180-Day Category

  • Plaintiff’s Physician Affidavit Was Insufficient as It Was Based Solely on Plaintiff’s Report of Subjective Concussion Symptoms and Ignored Evidence of a Preexisting Condition



Tessa R. Scott

[email protected]


  • Checking Box 18 Preserves a Petitioner’s Fee Schedule Defense

  • It Is Proper To Sever No Fault Claims with Unrelated Breach of Contract Claims



Steven E. Peiper

[email protected]


  • Business Interruption Coverage Triggered, but Questions of Fact Abound

  • Appraisal Award Does Not Extinguish Fundamental Coverage Arguments/Defenses

  • Subrogation Action Fails Where Not-For-Profit Defendant did not have  Duty to Prevent  From Tenants from Smoking in Rental Units

  • Workers’ Compensation Board’s Award of Benefits Precludes Direct Action against Employer; Tree Cutting Not an Enumerated Activity Under Labor Law

  • Just another GOL 5-331 Decision Holding Negligence DOES NOT Void Indemnity Clauses



Agnes A. Wilewicz

[email protected]


  • “For Want of a Comma”, First Circuit Holds Lack of Serial or Oxford Comma in a List Created Ambiguity in Interpretation



Jennifer A. Ehman

[email protected]


  • Question of Fact as to Residency Where Homeowners Lived with Wife’s Ailing Mother for Two Years Prior to the Fire



Brian D. Barnas

[email protected]


  • Allegation that Insurer Ignored Relevant Law and Intentionally Cited Inapplicable Policy Language was Sufficient to State a Cause of Action for Breach of the Covenant of Good Faith and Fair Dealing

  • New York does not Recognize a Cause of Action for Violation of the New York Unfair Claim Settlement Practices law

  • Insurer did not Act in Bad Faith by Relying on Policy Exclusion Eventually Deemed Waived based on Insurance Law 3420



Jennifer J. Phillips

[email protected]


  • Everything but the Breach

John R. Ewell

[email protected]


  • Delaware Supreme Court Drops Bad Faith Claim after Insureds Produced No Evidence to Support Bad Faith Claim

  • Maine's High Court Rules That Title Insurer Has No Obligation to Preemptively Indemnify Insured for Future Possible Claims



Howard B. Altman

[email protected]


  • Nothing new this week.  Poetic offerings in cover note.



Earl K. Cantwell
[email protected]


  • No CGL Coverage for Construction Defect


Hope to see some of you in Boston.






Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202    

Office: 716.849.8942

Cell:     716.445.2258
Fax:      716.855.0874

E-Mail:  [email protected]
H&F Website:




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

Dan D. Kohane
[email protected]



Agnes A. Wilewicz

[email protected]



Jennifer A. Ehman

[email protected]


Dan D. Kohane, Chair
[email protected]


Steven E. Peiper, Co-Chair

[email protected]

Michael F. Perley

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
Off the Mark

Earl’s Pearls


Dan D. Kohane
[email protected]


03/22/17       Chappaqua Central School Dist. v. Philadelphia Indem. Ins. Co.

Appellate Division, Second Department
Where Cafeteria is Leased, Accident on Non-Leased Stairway that Allows Access to Cafeteria Does Not Provide Landlord with Coverage as AI under "Managers, Landlords, or Lessors of Premises" Endorsement.  Thousands Ponder.
Brunsting was employed by the Chappaqua Children's Workshop, Inc. (“CCW”), which operated a children's after-school program in the cafeteria of the Robert E. Bell Middle School building (“school”), which was owned by the plaintiff Chappaqua Central School District (“CCSD”). CCSD leased the cafeteria to CCW for its after-school program pursuant to a written agreement. In January 2011, Brunsting allegedly was injured when she tripped and fell while descending an exterior staircase that led from the school down to its parking lot.


CCW was insured with Philadelphia Indemnity Insurance Company (“PIIC policy”) and CCSD had a liability insurance policy in effect with the New York Schools Insurance Reciprocal (“NYSIR policy”). Brunsting sued CCSD to recover damages for personal injuries (“underlying action”). NYSIR settled the underlying action for $200,000.


PIIC was timely notified of the underlying action in which the CCSD claim additional insured (“AI” status), but disclaimed coverage to CCSD as an additional insured on the grounds that Brunsting was not injured on the leased premises and because CCW was not responsible for maintaining or repairing the staircase. NYSIR and CCSD commenced this action seeking a declaration that PIIC is obligated to provide defense and indemnification in the underlying action.


The PIIC policy had an AI provision providing coverage for "Managers, Landlords, or Lessors of Premises" for "liability arising out of the ownership, maintenance or use of that part of the premises leased or rented to you".


Did the accident involving the staircase, not part of the leased premises, arises out of the use of the premises leased to CCW?


The phrase "arising out of" requires "only that there be some causal relationship between the injury and the risk for which coverage is provided".


PIIC established, prima facie, that it was entitled to summary judgment declaring that it is not obligated to defend and indemnify the plaintiffs in the underlying action. The additional insured provision unambiguously provided that CCSD was an additional insured, as a "Lessor," for liability "arising out of" the "ownership, maintenance or use" of the "premises leased" to CCW, namely, the cafeteria. It is undisputed that CCW leased only the cafeteria from CCSD, and that CCW had no duty to maintain or repair the staircase where the accident occurred. There was no causal relationship between the injury and the risk for which coverage is provided.
Editor’s Note:  A close one, indeed.  There appears a split in the Departments on this issue.


The Court of Appeals looked at this issue in ZKZ Associates LP v. CNA Ins. Co., 89 NY2d 990 (1997).  There, CNA issued a policy to Guardian Pearl Street Garage.  The CNA policy contained a similar endorsement which provided the owner coverage “only for liability arising out of the ownership, maintenance and use of that part of the described premises which is leased to [Guardian]”.  


The court determined the owner was entitled to a defense for a claim by a pedestrian who allegedly tripped and fell on the sidewalk outside its building.  The court noted that “[t]he part of the sidewalk where the accident occurred was necessarily used for access in and out of the garage Guardian operated and was thus, by implication, ‘part of the…premises’ that Guardian was licensed to use under the parties’ agreement.” 


Relying on ZKZ, the Second Department in Mack-Cali Realty Corp. v. NGM Ins. Co., 119 AD3d 905 (2nd Dept. 2014), made a similar finding.  Plaintiff leased property to Westchester County Electric (“WCE”).  WCE was insured under a CGL policy issued by NGM.  Thereafter, a UPS worker allegedly sustained injury when he fell while climbing onto the loading dock of the premises to deliver packages to WCE.  Examining the same additional insured endorsement, the court began with the basic premises that “arising out of” means “originating from, incident to, or having connection with” and requires “only that there be some causal relationship between the injury and the risk for which coverage is provided.”    The court found such a causal relationship noting that “[s]ince the UPS worker was delivering packages to the subject premises that were intended for WCE, the accident occurred in the course of an activity necessarily incidental to the operation of the leased space.”   It went on to find that the loading dock where the accident occurred was necessarily used for loading and unloading deliveries intended for WCE.  Thus, by implication, it was part of the premises that WEC was licensed to use under the lease, and a defense was owned.    


The same result occurred in Tower Ins. Co. of New York v. Leading Ins. Group Ins. Co., 134 AD3d 510 (1st Dept. 2015).  The court found that it was clear from the lease agreement that the use of the sidewalk was included in the scope of the demised premises.  “Even if the lease did not address the sidewalk explicitly, the additional insured endorsement would give the landlords coverage for accident occurring outside the demised premises, including on abutting public sidewalks.” 


Same result occurred in Maldondo v. Kissm Realty Corp., 18 AD3d 627 (2nd Dept. 2005).  The underlying plaintiff was injured while preforming maintenance on an HVAC unit on the building’s roof which the tenant had exclusive use of and which was done at the request of the tenant.  The court emphasized that although the roof was not technically part of the premises demised to the tenant “the perimeters of coverage afforded under the policy must be viewed not in strictly territorial terms but rather in operational terms covering the extent of control over the premises…” 


With regard to decisions that go the other way, there are a few.  We identified Christ the King Regional High School v. Zurich Ins. Co. of North America, 91 AD3d 806 (2nd Dept. 2012).  There, All American Talent rented the auditorium and three classrooms in the plaintiff’s school for a two day dance competition.  On the way in to attend the competition, the underlying plaintiff fell allegedly due to a sidewalk defect.  Considering the additional insured endorsement, the court found that All American’s operations consisted of conducting a dance competition in the school auditorium and three classrooms.  Bodily injury which occurred outside the leased premises, in an area which All American had no responsibility to maintain or repair, was not a bargained for risk.  In reaching this result, the court relied on the Worth v. Farm Family decision [finding that where the insured’s work is merely the situs of the accident, no additional insured coverage is owed].


03/21/17       570 Smith Street Corp. v. Seneca Ins. Company, Inc.

Appellate Division, First Department

Protecting the Privilege

Policyholder’s counsel wanted to invade the attorney-client privilege that exists between the insurer and its counsel, seeking to discover counsel’s coverage opinion and response.  We have learned from Attorney Ken Maguire, Seneca’s counsel, that the documents sought for discovery were counsel’s initial coverage opinion and a responsive e-mail from the VP of Claims.


“No,” responds the First Department, after an in camera inspection of the documents.  The documents are protected by the attorney-client privilege, as the correspondence is predominantly of a legal character.
Editor’s Note: 
This is a topic about which we have written on a number of occasions.  See our discussion of Lalka at this link.


The industry must always fight to protect the privilege.  We award a coveted “atta-lawyer” to Ken Maguire of Ken Maguire Associates PLLC, who understands that “this case will hopefully provide assistance to insurers in seeking a more even playing field and in protecting the insurers' rights as to what is classically attorney/client protected communications and protected work product of counsel.”


03/16/17       AutoOne Insurance Company v. Negron

Appellate Division, First Department

Needs to be Jurisdiction over Offending Motorists Carrier in Application to Stay Uninsured Motorists Arbitration

Negron allegedly injured when a truck owned by New Market backed into a double-parked vehicle in which Negron was a passenger. New Market's insurer, AMIC, disclaimed coverage on the ground that New Market failed to cooperate in AMIC's investigation of the accident. Since Negron had no liability coverage available, he demanded uninsured motorist (UM) arbitration from his own carrier, AutoOne. AutoOne sought a permanent stay of the arbitration, on the ground that the offending vehicle was insured. AMIC opposed the part of the petition that sought to add AMIC as a respondent, arguing that the court lacked personal jurisdiction over it. Without resolving the jurisdictional issue, the motion court determined that AMIC had validly disclaimed coverage.


AMIC's letters to petitioner raise issues of fact whether AMIC validly disclaimed coverage on the ground of noncooperation.  AMIC properly raises the jurisdictional issue as an alternate ground for affirmance of the portion of the order that denied petitioner's request to add AMIC as a respondent. AMIC demonstrated that the court lacks personal jurisdiction over it, as it is a New Jersey corporation that does not transact any business in New York.


Neither petitioner nor Negron had an opportunity to rebut AMIC's showing, because AMIC's opposition papers were submitted after petitioner had submitted its reply. Accordingly, the issue cannot be determined on the record. Since AMIC is a necessary party to the hearing on the issue of the validity of its disclaimer, the jurisdictional issue must be resolved before any hearing on the issue of its disclaimer can be held.


03/16/17       Ameriprise Auto & Home Insurance Co. v. Li Cao
Appellate Division, First Department

Framed Issue Credibility Determination Reversed on Appeal
Li Cao alleges that, on February 7, 2012, she was knocked down by a bicyclist in Manhattan and then struck by a car owned by Avis-Budget and operated by Dixon. After settling her claims against Avis and Dixon, Cao sought SUM benefits under her own policy with Ameriprise Auto & Home Insurance Company, and demanded arbitration. The Ameriprise policy provides SUM benefits, in relevant part, when the insured suffers bodily injury as a passenger in a vehicle or "as a pedestrian as a result of having been struck by an uninsured ... or an underinsured motor vehicle."


Ameriprise commenced a petition seeking a permanent stay of the SUM arbitration requested by Cao, arguing that the policy did not apply because the vehicle driven by Dixon did not come into "contact" with respondent within the meaning of the coverage.

The court found that Li Cao had not suffered injuries as a pedestrian struck by the motor vehicle operated by Dixon, and permanently stayed the underinsured motorist's arbitration. Although the court found a nonparty witness who appeared on behalf of petitioner to be "very credible," the court discounted his testimony that respondent was a pedestrian crossing the intersection. Instead, the court credited the irreconcilable testimony of Dixon, whom the court found "forthcoming, if to some degree inconsistent," that Li Cao was not a pedestrian but a rider on a delivery bicycle who hit his vehicle's right fender.


The hearing court's determination that there was no direct contact between respondent and Dixon's car was not supported by a fair interpretation of the evidence. The nonparty witness, whom the hearing court found to be "very credible," testified that respondent pedestrian was struck by a food delivery bicyclist while crossing Madison Avenue from west to east at Forty-third Street.


Generally issues of credibility are left in place by appellate courts.  Not this time.  Here, the First Department found that Justice Edmead’s rejection of the testimony of the very credible independent witness and other findings were simply unsupportable.  Accordingly, the appellate court concluded that Li Cao and the vehicle came into contact and thus a UIM claim could proceed.


03/15/17       Harco Construction, LLC v. First Mercury Insurance Company

Appellate Division, Second Department

This One’s a Good Read on Additional Insured Coverage and the Obligation of a NY Carrier to Deny Coverage Properly Where Tender of Coverage Made by Owner and General Contractor’s Carrier:

  • Owner, Not in Privity with Subcontractor, Does Not Attain Additional Insured Status, Even if Subcontractor’s Carrier Fails to Deny Coverage to Them (Cannot Create Coverage where None Exists);
  • General Contractor is an Additional Insured and since it did Not Receive Disclaimer Letter Based on Policy Exclusion, Subcontractor’s Carrier Loses Right to Rely upon Exclusion.  Disclaimer Letter Sent to GC’s Carrier Does Not Meet Statutory Obligation

The general contractor, Harco Construction (“GC Harco”) entered into a contract with 301-303 West 125th, LLC (“owner”), to perform construction services on 301-303's premises. GC Harco then entered into a demolition subcontract with Disano Demolition Co. (“Disano”), Disano was required to procure and maintain a commercial general liability insurance policy naming the owner and GC Harco as additional insureds. First Mercury Insurance Company (hereinafter FMIC) issued a policy to Disano which included an endorsement entitled "Additional Insured— Owners, Lessees or Contractors—Automatic Status When Required In Construction Agreement With You," specifying that "Who is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy."


GC Harco also was a named insured under a liability insurance policy issued by nonparty Mt. Hawley Insurance Company (“Mt. Hawley”).


On September 20, 2011, a partially demolished five-story building on the owner’s premises collapsed causing debris to fall onto the street and a New York City bus. On September 23, 2011, Mt. Hawley sent a letter to FMIC on behalf of the plaintiffs to provide notice of the incident and demand that FMIC defend and indemnify the owner and GC Harco, "in connection with any claims and suits that arise from the accident." Mt. Hawley also requested that FMIC confirm whether they were additional insureds under the policy that FMIC had issued to Disano.


No actions had yet been commenced arising out of the incident.


On October 21, 2011, FMIC sent a letter to Mt. Hawley (not sending copies to the owner or GC Harco) disclaiming any duty to defend or indemnify Harco. FMIC contended that the occurrence fell within an exclusion endorsement for "all work over 1 story in height." FMIC did not disclaim coverage as to the owner and did not send notice of its disclaimer directly to either of the plaintiffs. Later, numerous personal injury actions were commenced against, among the owner and GC Harco.


Does FMIC owe a duty to defend (a) owner and/or (b) GC Harco?  And, with respect to the owner, does the failure to disclaim promptly bar FMIC from disclaiming later.


The owner was not an additional insured.  Under that endorsement, since there was no privity between owner and Disano, the owner does not qualify as an additional insured. Therefore, the failure to disclaim is of no consequence.  One cannot create coverage where none otherwise exists.


Contrary to the owner’s contention, the certificate of insurance issued by Disano's insurance broker to the owner was insufficient to raise an issue of fact as to whether 301-303 qualified as an additional insured under the terms of the policy issued by FMIC to Disano.


As to GC Harco, the lower court held that FMIC was not required to send written notice of its disclaimer directly to Harco. "Pursuant to Insurance Law § 3420(d), an insurance carrier is required to provide its insured and any other claimant with timely notice of its disclaimer or denial of coverage on the basis of a policy exclusion, and will be estopped from disclaiming liability or denying coverage if it fails to do so".


Although Mt. Hawley was acting on behalf of the plaintiffs when it sent notice of the occurrence to FMIC and demanded that FMIC assume the plaintiffs' defense and indemnification in connection with any lawsuits arising from the incident, that did not make Mt. Hawley the plaintiffs' agent for all purposes, or for the specific purpose that is relevant here: receipt of a notice of disclaimer.


Since FMIC failed to provide timely notice of its denial of coverage on the basis of the “height” policy exclusion to Harco, it is estopped from disclaiming insurance coverage on that ground.

Editor’s Note:  FMIC saved 49 cents on a first class stamp and lost its right to rely upon an otherwise effective policy exclusion; harsh penalty indeed. 


Robert E.B. Hewitt III

[email protected]


03/21/17       Corporan v. Ehrichson

Appellate Division, First Department

Plaintiff Could Not Establish a 90/180-Day Category Claim Where Plaintiff Did Not Miss Any Work

Defendants made a prima facie showing that plaintiff did not suffer any permanent consequential limitation or significant limitations of use in his shoulder or spine, by submitting the affirmed reports of their experts, who found no limitations in those body parts, and who concluded that plaintiff's cervical and lumbar spine injuries were degenerative, and not causally related to the accident. Plaintiff failed to raise any triable issues of fact. A tear in the shoulder, without any evidence of limitations, is insufficient to raise a triable issue of fact. Although plaintiff's expert measured significant limitations in his cervical spine shortly after the accident, plaintiff submitted no evidence that he continued to have range of motion deficits or qualitative limitations. Plaintiff's expert did not make any qualitative assessments or observations of limitations of plaintiff's lumbar spine until almost two years after the accident, which is insufficient to raise an issue of fact as to causation.  Defendants made a prima facie showing that plaintiff did not suffer a serious injury under the 90/180-day category by submitting evidence that plaintiff did not miss any work as a result of the accident and that plaintiff's cervical and lumbar spine injuries were not causally related to the accident.  Given that plaintiff did not miss any work, plaintiff's affidavit and his expert's affidavit were insufficient to raise a triable issue of fact


03/21/17       Sanon v. Johnson

Appellate Division, Second Department

Defendant Failed to Meet Its Burden to Show Plaintiff Did Not Suffer a 90/180-Day Category Injury

The lower court denied the defendant's motion for summary judgment dismissing the complaint solely on the ground that the electronic signature of the defendant's expert on his report was in impermissible form. The Appellate Court affirmed but on a different ground. Punting on the issue of the signature, the court held that the defendant failed to meet his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the defendant failed to adequately address the plaintiff's claim, set forth in his bill of particulars, that he sustained a medically determined injury or impairment of a nonpermanent nature which prevented him from performing substantially all of the material acts which constituted his usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident. Since the defendant failed to meet his prima facie burden, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.


03/15/17       Small v. City of New York

Appellate Division, Second Department

Missing One Day of Work Not Sufficient to Sustain a Serious Injury under 90/180-Day Category

The defendants met their prima facie burden of showing that the appellant did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The moving defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the appellant's spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In addition, the moving defendants established, prima facie, that the appellant did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d) by submitting a transcript of the appellant's deposition testimony, which demonstrated that she missed only one day of work following the accident. In opposition, the appellant failed to raise a triable issue of fact.


03/09/17       Sul-Lowe v. Hunter

Appellate Division, Second Department

Plaintiff’s Physician Affidavit Was Insufficient as It Was Based Solely on Plaintiff’s Report of Subjective Concussion Symptoms and Ignored Evidence of a Preexisting Condition

On August 12, 2006, while driving southbound on State Route 9 in the Town of Bolton, Warren County, plaintiff stopped as pedestrians began to cross the highway and defendant, who was following behind her, hit the rear end of her vehicle. Plaintiff alleged that, at impact, she felt her head hit the back of the seat's headrest, but she did not believe that it was necessary to seek immediate medical attention. In July 2009, plaintiff commenced this action alleging that, as a result of the accident, she suffered a serious injury as defined in Insurance Law § 5102. In her bill of particulars, she claimed that she suffered from, among other things, traumatic brain injury, concussion, post-concussive syndrome, headaches, difficulty sleeping and depression. After discovery, defendant moved for summary judgment dismissing the complaint on the grounds that plaintiff did not sustain a serious injury, that plaintiff's injuries were not caused by the accident and that defendant was not liable for the accident pursuant to the emergency doctrine. Plaintiff opposed the motion only insofar as it related to the 90/180-day category of serious injury under Insurance Law § 5102 (d). The Court held a serious injury may exist where the evidence demonstrates that the injured party suffered a medically determined injury or impairment of a non-permanent nature which prevented him or her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the occurrence of the injury or impairment. A claim under this category must be supported by objective medical evidence of an injury or impairment of a nonpermanent nature which would have caused the alleged limitations on the plaintiff's daily activities. Further, there must be proof that the injured party was curtailed from performing her usual activities to a great extent rather than some slight curtailment.


The crux of plaintiff's claim is that she sustained a head injury during the accident and that the symptoms that she suffered as a result caused her to temporarily leave her graduate program in the fall of 2006. Defendant submitted plaintiff's deposition testimony, her medical records and an affidavit from a neuropsychologist, Robert McCaffrey, who reviewed the records and conducted an independent neuropsychological examination of plaintiff. Plaintiff testified that, immediately after the accident, she felt completely okay and spent two days camping before renting a car to drive three or four hours home. One week later, she sought medical treatment for knee pain, jaw pain and a toothache. Plaintiff testified that she began having headaches approximately one month after the accident. She explained that she had to leave her graduate program in the fall of 2006 because she had headaches, difficulty focusing and was not able to "stand very well." Nonetheless, plaintiff then traveled alone to California, Mexico and Korea before returning to the United States in February 2007. While traveling, plaintiff did not seek any medical treatment.


In his affidavit, McCaffrey averred that he reviewed all of plaintiff's medical records, including those generated by the physicians who treated plaintiff before and after the accident, a physician specializing in traumatic brain injury who examined plaintiff in October 2006, and a clinical neuropsychologist who evaluated plaintiff in November 2007. Based on his review of plaintiff's medical records, McCaffrey concluded that there was no objective medical evidence to explain plaintiff's subjective complaints and purported limitations during the 180-day period following the accident. According to McCaffrey, the records indicated that, prior to the accident, plaintiff was seeking treatment for certain preexisting conditions, including depression and headaches, difficulty sleeping, daytime tiredness and hypothyroidism. McCaffrey opined that plaintiff's subjective complaints were “reflection of her longstanding personality characteristics that predate[d] the . . . accident." Defendant’s submissions were sufficient to shift the burden to plaintiff to present competent medical evidence based upon objective medical findings and tests to support her claim of serious injury and to connect the condition to the accident.


In opposition, plaintiff submitted purported affidavits from her treating physicians. Each of the physicians averred that they were licensed in Massachusetts, but none claimed to be licensed in New York. The affidavits by two of them were unsworn and thus without probative value. With regard to the last remaining one her out-of-state affidavit was notarized but not accompanied by a certificate of conformity as required by CPLR 2309 (c). However, because defendant did not allege that a substantial right would be prejudiced by considering it, the court rejected his argument that the affidavit must be disregarded.


That affidavit, however, was based on plaintiff's subjective description of her limitations and not supported by quantitative testing performed during the relevant time period. Moreover, because Smith failed to counter or even address defendant's proof that plaintiff's symptoms were caused by a preexisting condition, her opinion that plaintiff's symptoms and consequent limitations were caused by the accident was speculative and insufficient. This seems to be the opposite conclusion reached by the Third Department in Rodman v. Deangeles a decision from February 16, 2017 discussed a few columns back in which the Third Department relied more heavily on subjective complaints by the plaintiff.



Tessa R. Scott

[email protected]


03/15/17          Global Liberty Ins. Co. v Therapeutic Physical Therapy, P.C.

Appellate Division, First Department

Checking Box 18 Preserves a Petitioner’s Fee Schedule Defense

Respondent, Therapeutic Physical Therapy, sought recovery for physical therapy services provided to its assignor before April 1, 2013, and petitioner insurer disclaimed parts of the claim on the ground that it had already reimbursed a different provider for "eight units" for services on some of the same dates. Respondent checked the box on the prescribed disclaimer form indicating that it was relying on a "fee schedule" defense, specifically the "eight unit rule."


The lower arbitrator held that respondent was precluded from asserting its defense because the disclaimer was insufficiently specific in that the other provider was not named. Respondent appealed to the master arbitrator, arguing that it adequately preserved its defense. The master arbitrator, without addressing the issue of preservation, incorrectly found that the lower arbitrator had "considered the fee schedule defense" and "determined that respondent failed to provide evidence as to the other provider."


The master arbitrator's award was arbitrary, because it irrationally ignored the controlling law presented on the preservation issue — namely, that an insurer adequately preserves its fee schedule defense by checking box 18 on the NF—10 denial of claim form to assert that plaintiff's fees [were] not in accordance with the fee schedule


The court unanimously reversed, on the law, without costs, the petition granted to the extent of vacating that portion of the master arbitration award, and the matter remanded to a different arbitrator for arbitration of the fee schedule defense on the merits.


03/15/17          High Definition MRI, P.C. v Mapfre Ins. Co. of N.Y.

Appellate Division, First Department

It Is Proper To Sever No Fault Claims with Unrelated Breach of Contract Claims

The first Department held that the lower court properly severed the breach of contract cause of action, since the 198 unrelated no-fault claims asserted therein raised no common issues of fact or law.  Not much else to see here folks.



Steven E. Peiper

[email protected]




03/16/17       1626 2nd Ave., LLC v National Specialty Ins. Co.

Appellate Division, First Department

Business Interruption Coverage Triggered, but Questions of Fact Abound

Plaintiff commenced this action to recovery for business interruption losses sustained due to flooding.  The claim, apparently, sought recovery for “lost rents” which the Court determined was “covered under the plain terms of the relevant policy.” 


Notably, however, plaintiff did not seek summary judgment, and it was not granted sua sponte.  Rather, defendant moved for summary judgment, and its motion was denied due to papers “laden with factual questions and particularly inappropriate for resolution prior to the completion of discovery.” 


Peiper’s Point – We’re shaking our heads at this one.  If flood, I am curious as to how the business interruption coverage was “covered.”  If so, why then not grant summary judgment to plaintiff.  We also wonder, of course, what must have occurred to have the Court admonish defendant’s summary judgment motion as inappropriate and “laden” with questions of fact.  If covered, what, pray tell, was the question of fact?  


03/15/17       Burkha Assets, LLC v Seneca Ins. Co.

Appellate Division, First Department

Appraisal Award Does Not Extinguish Fundamental Coverage Arguments/Defenses

The decision tells us that the parties settled their valuation dispute via appraisal. Nevertheless, as there were still questions of policy interpretations which remained outstanding, the Court was unwilling to dismiss Seneca’s coverage arguments.  With issues of fact, as to coverage, the case was permitted to proceed.




03/22/17       Tower Ins. Co. of NY v. Hands Across Long Island, Inc.

Appellate Division, Second Department

Subrogation Action Fails Where Not-For-Profit Defendant did not have Duty to Prevent Tenants from Smoking in Rental Units

Tower commenced this action in subrogation after fire damage was sustained to a building it insured.  The building was owned by Tower’s subrogor, Main Street, who leased several units in the premises to the defendant.  From what we can tell in reviewing the decision, the fire was started when one of defendant’s tenants was smoking in the units.


Defendant moved to dismiss Tower’s action on the basis that it had no duty to protect against a tenant smoking in the unit  In affirming the trial court’s dismissal of Tower’s case, the Appellate Division first noted that a person does not owe a duty to control the conduct of a third-party. The only exception is when a “special relationship” exists between either the injured party or the tortfeasor.  Here, again, the Court ruled that there was no duty to prevent a third-party from smoking. 


The Court also affirmed the dismissal of Tower’s breach of contract claim against defendant. In support of its position, the Court noted that absent a specific contractual provision neither the landlord, nor tenant, is obligated to make repairs after a fire. Here, there was no obligation for the defendant to effectuate repairs, and, as such, no breach of contractual duties was present. 




03/22/17       Derosas v. Rosmarins Land Holding, LLC

Appellate Division, Second Department

Workers’ Compensation Board’s Award of Benefits Precludes Direct Action against Employer; Tree Cutting Not an Enumerated Activity Under Labor Law

Plaintiff was hired to work as a maintenance employee for Camp Rosmarin in 2005.  In 2012, plaintiff was injured while standing on a mound of clay in the process of cutting and clearing a tree.  Plaintiff commenced the instant lawsuit, sounding in Labor Law §§ 200, 240(1) and 241(6), therein naming Rosmarin Land Holdings, Camp Rosmarin and Scott Rosamarin (as President) as defendants.


Mr. Rosmarin and Camp Rosmarin immediately moved to dismiss the lawsuit on the grounds that plaintiff had applied for, received and accepted Workers’ Compensation Benefits from Camp Rosmarin’s insurance.  As such, the exclusivity protections of the Workers’ Compensation Law applied to preclude the lawsuit.  In affirming, the Appellate Division noted that the Workers’ Compensation Board has jurisdiction to decide the existence of an employer/employee relationship, and that its decisions are final and binding.  If plaintiff wished to challenge the determination, the Court suggests that the appropriate forum would be via motion to reconsider returnable before the Workers’ Compensation Board.


Rosmarin Land Holdings moved to dismiss the Labor Law 240(1) and Labor Law 241(6) Causes of Action, respectively, because plaintiff’s actions were not “enumerated activities” under the Labor Law.  Tree cutting and removal is not a protected activity, and what’s more, even if it was, the “mound of clay” was not a structure.  In addition, the tree cutting qualified as “routine maintenance,” and, as such, outside the scope of the statute. 


Finally, plaintiff’s Labor Law § 200 claim as against Rosmarins Land Holdings was dismissed where, as here, Rosmarins Land Holdings did not direct, control or supervise the means and methods by which plaintiff completed his work.  Moreover, if the incident was caused by a defective condition on the premises, Rosmarin was an “out of possession” land owner, and thus protected from liability in this case.


03/15/17       Rodriguez v. 5432-50 Myrtle Ave., LLC

Appellate Division, Second Department

Just another GOL 5-331 Decision Holding Negligence DOES NOT Void Indemnity Clauses

Plaintiff sustained injury after tripping and falling due to a defective step on an interior staircase.  The building was owned by Myrtle, and a portion of the second floor was leased to Midway. 


Midway moved for summary judgment to dismiss plaintiff’s Complaint on the basis that the incident occurred due to a defect that was outside of the demised premises, and also outside of its control.  The Court agreed, and overturned the trial court’s denial of Midway’s motion.


Midway also moved to dismiss common law indemnity/contribution claims against it, as well as contractual indemnity claims.  As Midway was not responsible for the defective stairway, it followed there was no basis for Myrtle’s cross claims under common law indemnity and contribution principles.  Moreover, as there was no duty created under the lease for Midway to maintain the staircase, it followed that Myrtle’s breach of contract claim was likewise dismissed. 


Midway’s luck ran out at that point, however.  The motion to dismiss Myrtle’s claims that Midway failed to procure insurance was denied where, as here, Midway produced no proof that it, in fact, secured coverage as it was required to do under the lease. 


Moreover, Midway’s argument that the contractual indemnity clause of the lease was in violation of GOL § 5-321 was resoundingly rejected. Where, as here, the dispute centered on a commercial lease, negotiated at arm’s length, the Court ruled that parties were free to “enter into an indemnification agreement whereby they use insurance to allocate the risk of liability.”  Under circumstances such as those present here, the GOL’s prohibition does not apply. 


Further, the indemnity clause applied to any loss which “happened in connection with the premises (including adjacent sidewalks or driveways)” unless caused by Myrtle’s gross negligence.  Given the breadth of the indemnity clause at issue, a question of fact exited as to whether the current claim fell within its scope. 



Agnes A. Wilewicz

[email protected]


03/03/17       Kevin O’Connor v. Oakhurst Dairy

United States Court of Appeals, First Circuit

“For Want of a Comma”, First Circuit Holds Lack of Serial or Oxford Comma in a List Created Ambiguity in Interpretation (Maine Law)

Maine’s wage and hour law provides for overtime for certain types of employees. Exempt from the overtime rules are other types of employees. At issue in this case was whether a dairy’s delivery drivers were exempt from the rules, and thus not entitled to recover benefits from their employer for overtime work. That exemption read thus – the protection of the overtime law does not apply to employees involved in: “The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of: (1) Agricultural produce; (2) Meat and fish products; and (3) Perishable foods.” The delivery drivers were involved in the distribution of produce, but were they meant to have been included? Or, did the statute just cover employees involved in packing (for shipment or distribution)?


The First Circuit issued at 29-page linguistic dissertation about potential meanings and the effect of punctuation. In short, they found that since there were two possible interpretations, there was an ambiguity. Indeed, had there been a comma following the word ‘shipment’, there would have been no dispute that distribution was a separate category. However, without it, it was unclear. As such, the dairy’s employees were not exempt as per the statute and the employer was on the hook for their overtime pay.

Assoc. Editor’s Note: The Oxford (or “serial”) comma should just always be used. It makes sense, makes things clearer, and separates items in a list. (See what I did there?) Moreover, the lesson here in this case is if one doesn’t use it, one risks the dreaded ambiguity finding.



Jennifer A. Ehman

[email protected]


03/15/17       Navigators Ins. Co. v. Merchants Mut. Ins. Co.

Supreme Court, New York County

Hon. Kathryn E. Freed

Additional Insured Endorsement in Subcontractor’s Policy Triggered; Citing Pecker Iron Works Coverage is Primary

This is a dispute over insurance coverage for the owner of a jobsite and its general contractor.  West 149th owned property and retained Aleem Construction, Inc. to preform construction work.  Aleem then retained Radiant Plumbing and J&M Construction Company.  An employee of J&M sustained injury when he was struck by large pipes that had been improperly stored and stacked near the area where he was working. 


Navigators provided coverage for Aleem and the property owner.  Merchants insured Radiant.  Navigators brought this action seeking a declaration that Merchants was obligated to defend and indemnity Aleem and West 149th.


Pursuant to the Merchants policy, an additional insured included “[a]ny person or organization, when you and such person or organization have agreed in writing in a contract,…that such a person or organization be added as an additional insured on your policy…”   Coverage was provided with respect to “bodily injury…caused, in whole or in part, by… (1) Your acts or omissions…”   The endorsement also stated that such coverage would be primary if required by the contract


The court first addressed the claim for coverage by West 149th.  It dismissed the claim noting the endorsement required privity, which did not exist. 


With regard to Aleem, Merchants asserted that the insurance procurement language in the Radiant/Aleem subcontract was not clear because it directed that “the General Contractor (   )” be named, but did not identify who the general contract was for this project.  Relying on the finding in the underlying action that Aleem was liable under Labor Law § 240 based on its status as the general contractor, and deposition testimony from Radiant’s principal that Aleem was the general contractor, the court found no question of fact. 


The court then went on to note that based on the allegations in the complaint and testimony that the injured plaintiff’s accident was caused by Radiant’s storage of pipes, the duty to defend was triggered.


The next question then was whether the coverage was primary to the Navigators policy.   Navigators had standard other insurance language making its policy excess over any other primary insurance available to “you [i.e., Aleem]…for which you have been added as an additional insured by attachment of an endorsement.”  


The Merchants policy, as noted above, stated that coverage for an additional insured “would be primary if required by the contract.”  Navigators pointed to the prime contract which contained requirements for insurance coverage of this nature and argued that the provisions were incorporated into the Radiant/Aleem agreement.


While rejecting the incorporation argument, the court nevertheless found the Merchants policy to be primary.  It noted that the language in the Merchants policy did not necessary require that the word “primary” actually be used.  Citing the Court of Appeals decision in Pecker Iron Works, the court held that since the agreement required Radiant to procure insurance naming the general contractor as an additional insured (a recognized term in insurance contracts), there was an intention to provide the same level of coverage as to the named insured (i.e., primary coverage).  Therefore, between the two policies, the court found the Merchants policy to be primary and the Navigators policy excess. 


Yet, that did not end the analysis.  The court went on to find that while it agreed Merchants owed Aleem a defense on a primary basis the question of indemnity was still open.  The court pointed to the decision by the court in the underlying matter wherein it denied the injured plaintiff’s motion for summary judgment against Radiant, and held that the adjudication of the issue of indemnification under the Merchants policy must await a determination in the underlying action.    


03/03/17       Harrison v. Allstate Indem. Co.

Supreme Court, Steuben County

Hon. Marianne Furfure

Question of Fact as to Residency Where Homeowners Lived with Wife’s Ailing Mother for Two Years Prior to the Fire

Allstate issued a homeowners policy to Charles and Kathryn Harrison for their Pine Hill residence which was in place since 2004.  In 2009, Mrs. Harrison moved to a Dodge Avenue home to help care for her gravely ill mother.  Mr. Harrison joined her approximately six weeks later, after it became apparent that this wife was going to be gone longer than initially anticipated. 


About a year later, Mr. Harrison changed his drivers’ license address and mailing address from Pine Hill to Dodge Avenue.  Mrs. Harrison did the same.  In July of 2010, Mr. Harrison spoke to Kimberley Hughes, an employee of the Dowdle Agency, to inform them that plaintiffs were living at the Dodge Avenue address and, as a result of the call; the billing address for the renewals was changed. 


While the Harrisons were staying at the Dodge Avenue address, their two sons, a cousin, and a friend stayed at the Pine Hill property at different times and for various amounts of time. The house was destroyed by a fire on August 30, 2012.


After the Harrisons filed a claim for insurance coverage, Allstate disclaimed liability on the grounds that, as the Harrisons had not resided in the home for more than two (2) years, it was not covered as a dwelling.


The court began by noting that the term "reside" was not defined in the policy and, therefore, it was possible that under the circumstances of this case, the Harrisons could be found to have resided at Pine Hill for insurance policy purposes even while they were caring for Mrs. Harrison's mother on Dodge Avenue for an extended period of time.  While residency does require some temporary or physical presence, a degree of permanence and intention to remain at the property is a necessary component. 


The Harrisons’ evidence that they had always intended that their absence from Pine Hill to be temporary and that they planned to return as soon as possible, coupled with the fact that they left all of their possessions at Pine Hill, continued to pay the taxes and make improvements to the property raised a question of fact whether, under these circumstances, the Harrisons satisfied the insurance policy requirement that they reside in the insured premises. This question of fact precluded summary judgment to both parties.


The court also found a question of fact as to what the Harrisons advised the agent and whether there was a failure by Allstate's agent to follow company protocol or notify Allstate of the change in use, given their move to the Dodge Avenue residence for that prolonged period of time.



Brian D. Barnas

[email protected]


03/17/17       Courteau v. Teachers Insurance Company

United States District Court, District of Connecticut

Allegation that Insurer Ignored Relevant Law and Intentionally Cited Inapplicable Policy Language was Sufficient to State a Cause of Action for Breach of the Covenant of Good Faith and Fair Dealing

Teachers insured a home owned by the Courteaus in Somers, Connecticut.  In October of 2015, the Courteaus discovered that the basement walls of their home had a series of horizontal and vertical cracks throughout.  Upon investigation, the Courteaus learned that a chemical compound in the concrete was responsible for the cracking.  The concrete was most likely supplied by Mottes Concrete Company.  According to the Courteaus, it is only a matter of time before the basement walls fall in and the entire home falls into the basement.


The Courteaus notified Teachers, who denied the claim.  Teachers denied the claim because the damage was caused by cracking in the foundation, which was excluded under the policy.


The Courteaus commenced an action against Teachers alleging breach of contract, violation of the covenant of good faith and fair dealing, and violation of the Connecticut Unfair Insurance Practices Act.  According to the Courteaus, Teachers had knowledge of a number of similar cases and the strategies other insurers had used to deny claims.  The Courteaus allege that in the denial letter, Teachers intentionally cited policy exclusions wholly inapplicable to the plaintiffs' claim for coverage knowing full well that the plaintiffs are unsophisticated with respect to the complex language contained in insurance policies.


Teachers moved to dismiss the causes of action for bad faith and violation of the Connecticut Unfair Insurance Practices Act.  The statutory claims were dismissed because the insureds failed to sufficiently allege that Teachers engaged in an unfair general business practice.


However, the breach of the covenant of good faith and fair dealing claim was allowed to go forward.  The court cited similar claims of breach of the covenant of good faith and fair dealing that had survived motions to dismiss.  The court also relied on case law concluding that the term foundation was ambiguous, and read the allegations that Teachers intentionally misled the insureds in the light most favorable to them.


03/15/17       M.V.B. Collision Inc. v. Allstate Insurance Company

District Court of Nassau County

New York does not Recognize a Cause of Action for Violation of the New York Unfair Claim Settlement Practices law

MVB Collision commenced an action as assignee of three separate vehicle owners against Allstate for breach of contract and four insurance adjusters employed by Allstate who allegedly negligently adjusted the amount of estimates for the automobiles. 

The first cause of action against Allstate based on breach of contract was dismissed.  Allstate issued a policy to Marilyn Mandel.  The Mandel vehicle allegedly caused property damage to a vehicle owned by Luanne Dresher.  MVB brought the breach of contract cause of action as assignee of Dresher’s claim against Allstate.  However, since there was no contractual relationship between Fresher and Allstate, there was no breach of contract claim that Dresher could assign to Plaintiff.  Dresher never obtained a judgment against Allstate’s insured.  Thus, there was no claim to assign.


The court also dismissed the causes of action against the individual adjusters.  The claims against the adjusters were based mostly upon their alleged violation of the New York Unfair Claim Settlement Practices law.  However, New York does not recognize a private cause of action for unfair settlement practices under Insurance Law 2601. 


03/10/17       Key Fat Corp. v. Rutgers Cas. Ins. Co.

Supreme Court, Queens County

Insurer did not Act in Bad Faith by Relying on Policy Exclusion Eventually Deemed Waived based on Insurance Law 3420

This case arose out of a construction accident involving a property owned by Key Fat.  Bando leased the property from Key Fat.  On June 30, 2006, one of Bando’s workers, Guallpa, was injured when he fell from a ladder.  Guallpa sued Key Fat, which brought a third party action against Bando for common law and contractual indemnity.


Key Fat’s insurer, Seneca, tendered the defense of the action to Bando’s insurer, Rutgers.  Rutgers disclaimed based upon an employee exclusion in the policy.  However, the disclaimer was not sent to Key Fat.  In the underlying action, judgment was entered in favor of Guallpa against Key Fat, and Key Fat was awarded summary judgment on its common law and contractual indemnity claims against Bando.


Key Fat and Seneca then filed a coverage action against Rutgers.  The lower court and appellate court both concluded that Rutgers disclaimer based on the employee exclusion was not valid as against Key Fat because a copy of the letter was not provided to Key Fat.  Rutgers eventually paid the limits of its primary and umbrella policies, plus interest, to Seneca.


Before the settlement was finalized, the instant action was commenced.  The first and second causes of action were dismissed based on the settlement and decision in the prior coverage action.  However, Key Fat and Seneca also asserted a cause of action for bad faith against Rutgers.


The bad faith cause of action was dismissed by the court.  Initially, Key Fat and Seneca lacked standing to assert a bad faith cause of action against Rutgers because they lacked contractual privity with the insurer.  Thus, Plaintiffs lacked standing to bring a bad faith cause of action.


Even if Plaintiffs had standing, they failed to meet the strict standard for alleging a bad faith claim under New York law.  Rutgers relied on an otherwise valid policy exclusion to disclaim coverage for Key Fat’s claim.  Rutgers was denied the exclusion on the ground that it failed to satisfy the technical requirements of Insurance Law 3420.  While it could have acted more expeditiously, Plaintiffs did not allege sufficient facts to state a claim that Rutgers acted in gross disregard of the rights of its insured.



Jennifer J. Phillips

[email protected]


03/06/17       Kraatz v. USAA Casualty Insurance Co.

Western District of New York

Everything but the Breach

This insurance coverage dispute stems from a homeowners policy issued by defendant USAA Casualty to the plaintiff insured.  Twelve days after a severe winter storm, Plaintiff contacted Defendant’s customer service number to notify Defendant of damage to his property.  “During that call, Plaintiff spoke to a claims representative for 14 minutes.  Despite the Policy language that indicated Defendant would cover the cost of damage caused by the weight of snow and ice, [which Plaintiff asserted this was], the claims representative informed Plaintiff that his claim would be denied.  The claims representative said that the damage to his garage might be covered, but the damage to his home would not be.  Further, the claims representative told Plaintiff that because of his high deductible, ‘it would not be in [his] best interest to pursue a claim at that time.’” Plaintiff did not pursue a claim at that time.


Nine months later Plaintiff decided to pursue the claim.  An inspection was performed, but Defendant disclaimed coverage because the claim had not been reported promptly and documentation of the cause of the loss and damages was not available for review. 


Plaintiff commenced an action for breach of the insurance policy, fraud, constructive fraud, negligent misrepresentation, and violation of New York General Business Law § 349, and sought punitive and consequential damages as well as injunctive relief.  Defendant moved to dismiss for failure all claims except the breach of contract cause of action for failure to state a claim.  Plaintiff cross-moved for summary judgment on his claim for declaratory relief.  As the district court noted, “[a] motion to dismiss tests the sufficiency of the complaint. … Conversely, a motion for summary judgment tests the sufficiency of the evidence.” 


The district court granted in part and denied in part Defendant’s motion to dismiss.  First, the court noted that to state a claim for fraud under New York law and in conformance with federal pleading rules, Plaintiff needed to, among other things, (1) specify the statements alleged to be fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent, as well as plead facts giving rise to a strong inference of fraudulent intent. The court found that Plaintiff had sufficiently stated the circumstances of the alleged fraud – the initial conversation with customer service.  Further, “[g]iven that Plaintiff's alleged description of the cause of damage is nearly identical to the description of damage which the policy covers, Plaintiff's allegation that the claims representative knew he was making a false statement when he said, on the spot, that damage ‘would not be covered’ is persuasive and at least as compelling as any competing inference.”


The court dismissed the claim of constructive fraud, which required Plaintiff to plausibly allege that Defendant owed a confidential or fiduciary duty to Plaintiff. “When a plaintiff alleges a fiduciary or confidential relationship with an institutional defendant, the plaintiff ‘must come forward with facts demonstrating that his or her relationship with the institution was somehow unique or distinct from the institution's relationship with others generally.’ Indeed, unless the plaintiff offers a reason to depart from the general rule … ‘no special relationship of trust or confidence arises out of an insurance contract.’”  The court found that the claims representative's statements did not give rise to a “special relationship of trust or confidence.” 


The court next dismissed Plaintiff’s claim for negligent misrepresentation.  It rejected Plaintiff’s assertion that Defendant’s claims representative “possessed unique facts or specialized expertise of insurance coverage for claims,” a necessary element of the claim. “Possessing general knowledge of an industry, without more, does not satisfy the unique or specialized expertise factor,” and here Plaintiff did not “allege that, in contacting the claims representative, he was seeking the advice of someone with particular expertise. To the contrary, Plaintiff alleges that he called a customer service number and spoke to the person that picked up the call.”


The district court dismissed Plaintiff’s General Business Law § 349 claim and claim for punitive damages, both on the ground that Plaintiff failed to plausibly allege a pattern of conduct aimed toward the public generally.  “[C]ourts almost uniformly find that disputes between policy holders and insurance companies concerning the scope of coverage are nothing more than private[,] contractual disputes that lack the consumer impact necessary to state a claim.”


The court permitted Plaintiff to pursue a claim for consequential damages, noting that a party breaching a contract may be held liable for “those risks foreseen or which should have been foreseen at the time the contract was made.”  The potential for consequential damages requires consideration of “the nature, purpose and particular circumstances of the contract” as well as “what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed.” In this case, the court found that “[a]n insurance company should reasonably foresee that it will be liable for the cost of borrowing money to cover expenses that the insurance company wrongfully refuses to cover.”


Finally, the district court denied Plaintiff’s motion for partial summary judgment as premature, noting that it had been filed, not only prior to discovery, but prior to Defendant even filing an answer (the motion to dismiss had been filed in lieu of an answer).


John R. Ewell

[email protected]


03/13/17       Bennett v. USAA Casualty Insurance Company

Supreme Court of Delaware 

Delaware Supreme Court Drops Bad Faith Claim after Insureds Produced No Evidence to Support Bad Faith Claim

In 2009, the Bennetts' toilet cracked causing water damage to their condominium and their personal property inside the home. They filed a claim with their insurance company, USAA. The USAA policy contained an “other insurance” provision, which stated that if the condominium was covered by other insurance “in the name of a corporation or association of property owners covering the same policy,” the USAA policy would be secondary to that policy. USAA requested that the Bennetts provide a copy of the condominium association's bylaws so that it could determine who was responsible for the repairs. Mr. Bennett forwarded them to USAA. The Bennetts also filed a claim with the condominium association ("Association") and the Association's insurance carrier, Philadelphia Indemnity Insurance Company ("PIIC").


There were significant delays in getting the Association and PIIC to pay for repairs to the property. The Bennetts contacted USAA to inform them that the Association and PIIC had not paid any benefits for their unit repairs, and demanded benefits under their dwelling coverage with USAA. The next day, USAA sent a denial letter to the Bennetts, informing them that USAA's coverage was secondary to that of the Association, and requested that if their claim was denied by PIIC, that they forward the denial letter to it for review. The Bennetts filed suit against USAA for, among other things, bad faith.


At their jury trial, the Bennetts testified in their case-in-chief regarding the damages to their condominium and personal property. A contractor witness also testified. The Bennetts did not call a representative from USAA to explain what information USAA knew or considered in rendering its decision to deny the claim. At the conclusion of the Bennetts' case, USAA moved for a directed verdict on the bad faith claim, arguing that the Bennetts had the burden to produce any evidence to show that USAA lacked a reasonable justification to deny coverage. The trial court granted USAA's motion for a directed verdict on the bad faith claim. On appeal to the Supreme Court of Delaware, the Bennetts contend that the Superior Court improperly required them to produce evidence that USAA did not have a reasonable justification for denying their claim.


In Delaware, to state a bad faith claim, the insured must show that the insurer failed to honor its contractual obligations without reasonable justification. The Delaware Supreme Court found that "[g]iving the Bennetts all reasonable inferences drawn from the evidence, and viewing the evidence in a light most favorable to them, they failed to raise a material fact for consideration by the jury on their bad faith claim." The Bennetts both testified that they were unaware of why USAA denied the claim, and did not call a representative from USAA to give an explanation. Nor did the Bennetts call an insurance expert to opine on USAA's action. Further, when the Superior Court asked the Bennetts' counsel why he did not call a USAA representative to elicit their explanation, counsel said he did not want to risk presenting evidence that USAA had a reasonable basis for the denial. Therefore, the Supreme Court of Delaware affirmed the trial court's decision "because the Bennetts did not produce any evidence in their case-in-chief to support a bad faith claim."


03/09/17       Osprey Landing, LLC v. First American Title Ins. Co.

Maine Supreme Judicial Court

Maine's High Court Rules That Title Insurer Has No Obligation to Preemptively Indemnify Insured for Future Possible Claims

Osprey Landing, LLC ("Osprey") acquired a parcel of oceanfront property (the "property") from Osprey Perch, LLC and purchased a title insurance policy from First American. After transfer of the parcel, Osprey sued Thomas and Janet Blevins, owners of a lot abutting the property, claiming that a deeded easement over the Blevinses' lot permitted passage of motor vehicles. The Blevinses counterclaimed, asserting the existence of a private prescriptive easement over the Osprey property.


Byron Miller, the owner of the seller-company, executed an affidavit in which he expressed his knowledge of a history of public use of a path over the property. However, the Blevinses stipulated to a dismissal with prejudice of their prescriptive easement counterclaim. Miller was later deposed in the ongoing discovery for Osprey's suit, and reiterated his knowledge of a history of public use of a path over the property. Following the Miller deposition, Osprey sent another request to First American invoking title insurance coverage, independently of the Blevins litigation, to “put First American on notice of” Miller's affidavit and deposition, asking First American to take “appropriate action ... to defend, vindicate and safeguard Osprey's title.” First American again declined, and procured a second affidavit from Miller, in which Miller stated that he asserted no claim to a prescriptive easement over the property, and knew of no one who could do so. Osprey filed suit to enforce First American's purported duty to defend and indemnify Osprey. First American moved for summary judgment as to all counts and Osprey filed a cross-motion for summary judgment. The trial court granted First American's motion and denied Osprey's cross-motion. Osprey appealed.


On appeal, Osprey argued that Miller's testimony created the risk of a future public prescriptive easement claim adverse to Osprey's title. Therefore, according to Osprey, the policy required First American to take some action to either perfect Osprey's title or compensate Osprey for this perceived title defect.


The court reviewed the title insurance policy at issue, and found that the policy only imposed an obligation on First American to “provide for the defense” of Osprey's title when a third party makes a claim adverse to Osprey's title. The court further found that there was no currently known claim against Osprey's title. Tellingly, Osprey itself conceded that it was unaware of any litigation claiming the existence of a prescriptive easement over the property. Nor did Osprey identify any cloud on its title or any other title defect that would implicate First American's duty to defend. Osprey could not even identify a person or group who could potentially assert rights to a prescriptive easement over the property. Thus, the Court found that there was no duty to defend because any encumbrance on the title was "merely hypothetical," and any loss or damage due to the "hypothetical encumbrance."


Despite this, Osprey contended that the alleged potential title defect triggered coverage because "the fact that no individual; person has asserted a public prescriptive easement claim does not eliminate the potential loss or damage to Osprey." Maine's High Court rejected this argument and held that "no obligation is imposed on First American under these circumstances to preemptively indemnify Osprey Landing."



Howard B. Altman

[email protected]


Nothing new this week.  Poetic offerings in cover note.


Brian F. Mark
[email protected]


06/09/94       George A. Fuller Co. v. United States Fid. & Guar. Co.
Appellate Division, First Department
First Department Holds That Construction Defects Do Not Constitute “Occurrences”, and Therefore, Are Not Covered Under Commercial General Liability Insurance Policies

In Fuller, the insured was the construction manager of a building project in New York City.  The insured was sued by the entity that retained it for failing to “adequately and properly … supervise the installation of the building’s wood flooring and an aluminum curtain wall with windows and store front glazing and to provide for the installation of a code compliant water metering system.”  As a result, it was alleged that the flooring buckled and cracked, rendering it unusable, the defective curtain wall and window installation caused widespread water infiltration into the building and the building’s water metering plans had to be revised.


The insured sued its insurer and on summary judgment the trial court declared that the insurer was obligated to provide a defense in the underlying action.  The insurer appealed, and the First Department reversed, holding that the insurer was entitled to a declaration that it had no coverage obligation.


In its decision, the First Department analyzed the underlying complaint and determined that it did not allege an “occurrence”.  The court found that construction defects do not constitute “occurrences” under commercial general liability insurance policies.  The court noted that the commercial general liability policy was never intended to cover its insured’s work product or its compliance, as a general contractor or construction manager, with its contractual obligations.  Requiring the insurer to defend “would transform [it] into a surety for the performance of [the insured’s] work.”  As such an interpretation was inconsistent with the language of the contract; the court declared that the insurer did not owe a defense obligation.


The court in Fuller noted that asserting claims in a complaint such as “negligent performance” and “negligent construction” represent nothing more than a damage claim for breach of contract.  The court further held, that even if the alleged construction defects were otherwise covered, such claims would fall within the policy exclusions for damage to the insured’s work product, 2(j)(5) and 2(j)(6), as the alleged defects relate to the construction of the building that the insured contracted to build. 


08/14/16       Cypress Point Condominium Ass’n, Inc. v. Adria Towers, L.L.C.
Supreme Court of New Jersey

Supreme Court of New Jersey Holds that Consequential Damages Resulting from  Faulty Workmanship Constitute “Occurrences” Under Commercial General Liability Insurance Policies

In Cypress Point, a condominium association sued the developer and several subcontractors, alleging faulty workmanship in the construction of the condominium complex.  The work at issue consisted of defectively built/installed roofs, gutters, brick facades, exterior insulation, siding, windows, doors and sealants.  The alleged consequential damages included damage to the structure due to water intrusion. 


The Supreme Court held that consequential damages due to faulty workmanship constitute “property damage” and the event resulting in that damage is an “occurrence” under commercial general liability insurance policies.  In finding that the resulting water damage was an “occurrence” under the plain language of the policy, the court explained that the term “accident” in the policies at issue, includes unintended and unexpected harm caused by negligent conduct.  The court held that consequential harm caused by negligent work is an “accident” and, therefore, is an “occurrence”, which is covered. 


Notably, as the work at issue was performed on behalf of the insured by a subcontractor, the court further held that the consequential damages caused by the faulty work were also covered by the subcontractor exception to the policy’s “your work” exclusion. 



Earl K. Cantwell
[email protected]


12/27/16    Navigators Specialty Ins. Co. v. Moorefield Constr. Inc.,

6 Cal. App. 5th 1258

No CGL Coverage for Construction Defect
California recently adhered to decisions and logic rejecting CGL coverage for construction defects on the essential premise that installing defective construction is not a covered “accident” or “occurrence”.  In this case, Navigators issued CGL policies to Moorefield Construction.  A building owner sued Moorefield on claims of failed flooring.  Navigators accepted Moorefield’s tender of defense of the complaint subject to a reservation of rights.  The litigation eventually settled with Navigators contributing its policy limits of $1 Million towards the settlement.  In the meantime, Navigators filed a declaratory judgment action seeking to declare they had no duty to defend or indemnify Moorefield.  One of the essential arguments was that failure of the flooring was not a covered occurrence because it was not the result of an “accident”.


After a bench trial, the Trial Court found there was no covered occurrence because Moorefield had directed the flooring subcontractor to install the flooring despite knowledge that moisture vapor emissions from the concrete slab exceeded specifications.  The Trial Court also held that Moorefield had not met its burden of proving what portion, if any, of the $1 Million paid by Navigators constituting “damages”, and what portion may have fallen within supplementary payment provisions of the policies.  Moorefield appealed on two primary issues: the first with respect to coverage, and the other relating to the supplementary payment provisions.


With respect to the first question, the Appellate Court held that under California law an accident does not occur when an insured performs a deliberate and intentional act unless some additional, unexpected, unforeseen happening occurs that results in damages.  The Court agreed that the conduct here was not an accident, but rather a deliberate decision to install the flooring despite knowledge that the moisture vapor emission rate from concrete slab exceeded specifications and, presumably, resulted in the damaged flooring.  In short, the damage was not produced by an additional, unexpected, independent, and unforeseen event.  Navigators thereby had no duty to indemnify Moorefield and was entitled to recoup that portion of the $1 Million settlement payment attributable to “damages”. 


This decision and analysis is consistent with others across the country which has held that defective construction, even if it results in unexpected and unattended consequences, is not a covered accidental occurrence because it is a deliberate, albeit misguided act.  Other courts however, have focused on the result/outcome and have found coverage, in whole or in part, for construction defects under an analysis that an unexpected or unattended outcome may qualify as a covered accidental occurrence.


With respect to the second question on appeal, the Appellate Court reversed the Trial Court and held that the supplemental payments provision in the CGL policy would include and cover awarded attorneys’ fees which were or would be taxable as costs against the insured.  Supplementary payments are tied to the insurers’ duty to defend, not the insurers’ duty to indemnify.  Here, Navigators had a duty to defend Moorefield at the time of the settlement because there was potential for coverage for the flooring failure.  Although the Trial Court eventually found that Navigators had no duty to defend, the finding was not “retroactive” back to the time of the settlement.


As a result, Moorefield had to reimburse Navigator’s for that portion of the $1 Million settlement payment attributable to damages, with the case remanded back to the Trial Court to determine what part of the $1 Million settlement payment could be apportioned to damages as opposed to attorneys’ fees and costs of suit. 


As stated, this case falls within a number of cases within the country which have declined to cover construction defects under CGL policies under the theory there is no covered “accident or occurrence”.  Other cases have also held that construction defects do not fall within covered “damages” or losses under CGL policies.  This case also indicates that, even if no coverage may eventually be found, there may nonetheless be a duty to defend at least up to and including that point where no coverage is determined to exist.


This case also illustrates that, while the CGL liability coverage was not applicable to the core damages claims, other parts of the policy may have a secondary or tangential effect.  In this case, the supplementary payments provision did provide some coverage and payment for attorneys’ fees and court costs.


A new trial could also have been avoided if the original Trial Court in making its decision had made an apportionment of the $1 Million settlement payment between damages and attorneys’ fees/costs.



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