Coverage Pointers - Volume XVIII, No. 23

Volume XVIII, No. 23 (No. 479)

Friday, May 5, 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

 

www.hurwitzfine.com

© 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. 

 

Welcome new subscribers.  Every issue another few join us and we are delighted to have you as part of our family.  You are reading the cover letter for this week’s issue of Coverage Pointers.  The actual issue is attached.

 

In the cover letter, we intersperse our famous Hundred Years Ago stories which may or may not have to do with the law or insurance.  However they often demonstrate how often history repeats itself.  Sometimes, they are just interesting to your historically-minded editor.   

 

KUDOS – KUDOS – KUDOS

 

We are delighted to announce the following “promotions” within the H&F Family.   Note that “members” in a Professional Corporation equate to “partners” in a partnership:

 

Elected to Equity Shareholder Status:                 Steve Peiper                        ([email protected])

Elected to Membership:                                          Jennifer Ehman                  ([email protected])

Elected to Membership:                                          Agnes Wilewicz                  ([email protected])

 

Give these fine lawyers a round of applause!

 

Mother’s Day:

 

A special upcoming Happy Mother’s Day to my stepdaughter Lorraine Maxwell and her husband Ryan Maxwell (a 1L at Buffalo Law School, studying for exams).  Lorraine became a mother on Friday last when she delivered our first grandchild, Phillip Ryan Maxwell, who came in at an astounding 10 lbs., 11 ozs., and 22 inches in length.   Mother, father and baby Phillip are doing fine.  At that size, our grandson drove home from the hospital and went right to first grade.

 

A tip of the hat to betterwritingskills.com for this excellent discussion on the correct spelling of Mother’s Day.

 

Take any group of people and ask them this question. Does Mother's Day need an apostrophe, and — if so — where does it go?

After the fighting stops, the combatants will have settled into three camps. Let's look at all three in turn.

Incidentally, because the names of holidays are written with an initial capital, we write Mother's Day, not Mothers day, regardless of where you put the apostrophe, if any.

Choice 1. Mothers Day: no apostrophe

The argument here is that Mothers do not own the day, so no possession is involved. No apostrophe is thus needed. We are describing a day for Mothers, not a day belonging to Mothers.

Choice 2. Mother's Day: an apostrophe before the s

Here the argument is that the day belongs to one specific Mother (yours presumably). So, because possession is involved, Mother's Day needs an apostrophe.

Choice 3. Mothers' Day: an apostrophe after the s

Here the argument is that the day is shared among all Mothers collectively. We thus need an apostrophe after the s.

And the winner is...

 

As shown above, you can make a reasonable case for all three of the choices. This article makes clear, though, that the original campaigner for creating Mother's Day, Anna Jarvis, explicitly wanted an apostrophe, and she wanted it to be before the "s":

It was to be a singular possessive, for each family to honor their mother, not a plural possessive commemorating all mothers in the world.

 

Having said this, you will continue to see all three forms.

If, following Anna Jarvis's wishes, you employ the usage "Mother's Day", it would be consistent to write "Father's Day" in the same manner.

Upcoming Events – Mark Your Calendars!

 

This week we’re highlighting some upcoming events that might pique your interest.  Save-the-date, mark your calendars, and drop us a line if you’ll be attending any or all of the events. We would love to find you and put faces to names, as they say.

 

• May 31-June 2, 2017 (Boston): DRI Insurance Bad Faith and Extra Contractual Liability Seminar. A seminal program providing insights from seasoned litigators in the field, as well as consultants and in-house managers, regarding emerging bad faith issues, theories, and developments.

• June 14-15 (Riverside California):  PLRB Western Regional  Adjusters Conference. PLRB provides outstanding claims training and education in a cost-effective, interactive educational setting. Front-line adjusters, supervisors, and managers can build upon their claim knowledge and boost their job performance. Attendees can earn up to 12 hours of state-accredited adjuster continuing education credit by attending our educational sessions.   I’ll be presenting on Emerging Homeowners Risks.

 

• September 6-7 (New Orleans):  PLRB Central Regional  Adjusters Conference (see above)

 

• October 4-8, 2017 (Chicago): DRI Annual Meeting. DRI’s flagship conference, a premier education event, which provides phenomenal networking and continuing education opportunities for practitioners and industry professionals from around the country.

 

• October 4-5  (Jacksonville):  PLRB Eastern Regional  Adjusters Conference (see above)

 

• December 6-8, 2017 (New York City): DRI Insurance Coverage and Practice Symposium.  I’ll be presenting on special New York coverage problems.

 

Wilewicz’ Wide World of Coverage

 

Dear Readers,

 

I am beyond thrilled. As Dan noted above, this past week I was promoted to Member of the Firm (i.e. a Partner!). I’m still on cloud nine and in a state of mild disbelief. While I’m nearing the end of my first decade of law practice, I have only been at Hurwitz & Fine for the last two years. Nevertheless, I have felt from day one that this was my “forever firm”. I’m so very proud to be a Member here, and look forward to many more decades to come. My only regret is not having made the move sooner.

 

This week in the Wild World of Coverage, we have a couple of Second Circuit cases once more from our own New York turf. Also, we direct your attention to John Ewell’s column for what would otherwise be a Thousands Flee! decision you may find of interest. Environmental coverage cases hold a special place in my nerd heart, but this one out of the State of Washington elicits a stabbing sensation. Long story short, the high court there found that, despite unambiguous pollution exclusion, there was coverage for a pollution claim because an alleged prior act of negligence may have been an efficient proximate cause of the loss. What?! Yes, exactly. See John’s write-up.

 

Now, back to the show. First, in Liberty v. Admiral, the Second Circuit addressed whether an “other insurance” clause that contained “in comparison language” created co-primary or excess coverage. That is, the clause stated that insurance be excess over any other insurance “unless the written agreement with you requires that the insurance provided for the additional insured be primary concurrent or primary non-contributory, in comparison to the additional insured's own policy or policies.” The Court found that this was meant to create excess coverage for that policy. Interesting.

 

Second, in Hannan v. Hartford, the Second Circuit tackled a case where group life policy holders believed that they had been misled about policy terms and benefits. They filed ERISA claims as a result. The Court there found that since there was a lack of fiduciary duty and/or relationship, those claims could not stand. (p.s. Many thanks to Larry Waters, soon-to-be former Law Clerk and soon-to-be H&F Associate, for assisting this week in putting together my attached column. Best of luck on the Bar Exam. See you in September!)

 

Until next time!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Cal Crum Debuts:

 

I love stories of Major League ball players who played only one game in the big leagues and never again appeared in a game.  Today, I focus on Cal Crum, a ballplayer with a great name and a rather limited major league career.

 

He played two games in the major, the first, 100 years ago May 4. Cal, acquired from Minor League Terra Haute Highlanders the previous August, came in as a last inning relief pitcher for the Boston Braves (later, the Milwaukee and then the Atlanta Braves) in a game against the Brooklyn Dodgers.  The box score tell us that he faced five batters and gave up a walk and a hit.

 

He played his second, and last major league game, on April 23, 1918 in the Polo Grounds against the New York Giants.  He pitched 2.1 innings, gave up six hits and four earned runs, batted once (without a hit) and was pulled for Hugh Canavan  a fellow whose major league career spanned 11 games in the 1918 season).  Crum was hit so hard that one of the sportswriters wrote a poem about it:

 

The Akron Beacon Journal

Akron, Ohio

24 Apr 1918

 

SCOREBOARD REFLECTIONS

 

By JACK VEOOCK

 

Something in a Name

 

You may be a great hurler,

Cal Crum,

A regular hair curler

Cal Crum;

But the clan of McGraw

Surely handling you raw—

‘Twas a riot, we saw,

Mister Crum.

 

These two games earned him a 15.43 ERA and he was traded to the minor league Indianapolis Indians playing out his career in the minors.  He finished playing baseball in 1921, playing for the Tulsa Western League team and settled there. He was married in 1916 to Edith Cook, who died five years later.  Clarence became the Tulsa Deputy Court Clerk in 1930, was then elected Court Clerk in 1936 and held that position until his death in 1945.

 

Peiper’s Plea:

 

Monday was a great day.  I was delighted to see that both Jennifer Ehman and Agnes Wilewicz joined the rank of partner with our firm.  It was well deserved for both of them, and I, personally, could not have been more pleased. 

 

Jen joined us right out of law school, and it has been a blessing to watch her professional development.  She is a remarkably talented, and it has been, and continues to be, a privilege to work with her.  Agnes joined us a lateral, and has had an enormous impact on the success of the coverage group and the firm as a whole in a short time.  She too is a privilege to work with.   

 

Monday was a good day for myself as well, but it was much sweeter having shared the day with both of them.  While I am reluctant to comment about myself, I do want to take a quick moment to express my gratitude to the firm, clients, family and friends who have had an impact on my career to date.  In particular, I am eternally grateful for the opportunity to work with, learn from, and occasionally steal an idea from, Dan Kohane.  His dedication to his craft, and to this profession, have benefited me in more ways that I could possibly recount here. 

 

Nuff’ said.  I surely hope so because as my wife and I joked, I can find the grey cloud in every silver lining. Thusly, I offer you… 

 

Today is a day just like every other day in recent past.  It’s raining, again, in the Great Lakes.  It rains every day in the Great Lakes, it seems.  I am exceedingly tired of grey skies, wet cuffs, and muddy paw prints on my floor at home.  If you’re like us, and remain stuck in this horrid weather pattern, we surely understand…and join your lament. 

 

More on that in a bit.  Another complaint in the meantime, s'il vous plait.   The current note notwithstanding, on occasion we do try to offer thoughtful commentary on issues facing the insurance industry.  From time to time, we might even disagree with a decision or the reasoning behind it.  On rare occasions, we may have an opportunity to speak and/or write on another publication or forum.

 

We do this, frankly, because we enjoy it.  We also do it because we know that some people actually read what we write, and appreciate that it is considered and honest.  It is humbling to know that we have such an audience.  Not only this writer, this group or this firm finds it important, but so too do many other people, groups and firms.  It strengthens the profession, and discussion/writing/speaking should be welcomed as a constructive advancement of legal ideas. 

 

With this in mind, we (or perhaps just me) find it unnecessary and unprofessional to quote our thoughts on a particular issue in a case where we/I am the faithful opposition.  While I’d like to convince myself that my thoughts are as compelling as the judiciary, I am inclined to believe they do not carry the weight of actual case law.  So, please, when handling a case against someone who is trying to add to the profession by writing or speaking, leave their commentary to them.  There is plenty of law to rely upon, and that’s what should carry legal arguments at the end of day anyway. 

 

Stepping down off of Dan’s soapbox, and moving on to more important things.

 

After enduring the wettest spring since 1870, I wondered what, or where more particularly, the wettest place on earth is.  Hello Google.  Turns out the wettest place on earth is shared by a number of villages in Northeast India (the villages of Cherrapunjee and Mawsynram, to be specific).  The area, apparently, averages approximately 460 inches of rain per year.  Presumably needing some place to go, all of that precipitation helps form the famed Seven Sisters waterfall.  In case you’re wondering, there are a lot of seven sisters waterfalls.  This one, apparently, is the only such named waterfall in India. 

 

In case you’re further wondering, and I trust by now you’re not, the wettest place in the United States is on the island of Kaua’i in Hawaii.  Mount Waialeale reportedly receives over 450 inches of rain annually.  Not surprisingly, the Pacific Northwest is the wettest place in the continental US with a paltry rain accumulation of between 100 and 120 inches annually.  New Orleans is the rainiest large city in the United States, and our own Buffalo/Rochester area share the title as the snowiest large cities.  I know you didn’t want to know, but now you do.

 

Shaking off my umbrella, and thinking of sunnier days ahead, we bid you farewell until next issue.  Cheers. 

 

Steve

Steven E. Peiper

[email protected]

 

We Don’t Need No Stinkin’ Jury:

 

The Baltimore Sun

Baltimore, Maryland

05 May 1917

 

MACHINE DETECTS CRIME

 

Hopkins Professor’s Chronoscope

Picks Out Guilty Man.

 

DUNLAP SHOWS HOW IT WORKS

 

Registers Thousandth 0f Second’s

Delay In Answering—Suspect Quickly

Exonerated or Exposed

 

A crime has been committed, and four persons are suspected.  Each of the four is put through the same test separately and then the scientist points with unerring finger and says, “There is the guilty man.”

 

How does he do it?  By the chronoscope.

 

The Johns Hopkins chronoscope, which was exhibited last evening at the North Avenue Baptist Church by Dr. Dunlap, professor of experimental Psychology at Hopkins, is a fearful and wonderful little machine.  It is a perfected and simplified form of the apparatus invented by the late Dr. Hugo Munsterberg, of Harvard, and owes its existence and usefulness to the theory of normal mental reactions.

 

A spoken word conveys to the brain a certain thought, and when you are asked to reply immediately with another word your word will bear some relation to the first word and to the thoughts which it created in your brain.  If it is a simple word from which you should get a simple reaction, you will come out with your response in a normal length of time.

 

Gauges Times in Answering.

 

That’s the secret of it—the length of the time it takes you to answer.  Two disks, sensitive to the human voice, are arranged, one before the interrogatories and one before the suspect.  A word spoken by the interrogator starts an indicator revolving on a dial at great speed.  The answer of the suspect breaks the current again and stops the indicator.  The dial is so finely divided that it is able to measure a thousandth part of a second. 

 

The distance the indicator travels between question and answer registers the time it took the suspect to think of this answer.  A test given last night’s audience will show the infallibility of the machine. 

 

Phillips Federal Philosophies:

 

Hello, All:

 

This week has been all about speakeasies, whether it be celebrating happy life changes with family behind a pawn shop on the Lower East side or a birthday bash with a prohibition-punch purveyor right here in Buffalo.  I must admit I’m liking the trend, and nothing gets a conversation started better than, “I don’t know, what do you think is in a ‘Corpse Reviver #2?’”  Of course, there’s always the ironic outcome that, the longer you spend in a speakeasy, the less easy it is to speak, but having limited myself to only a glass or two of bathroom champagne, I wouldn’t really know about such things.

 

Speaking of speakeasies (lest you think that I was not thinking of you, dear readers, during my travels), this week’s case involves a drinking establishment’s claim for coverage for a suit against it when one of its patrons was involved in an auto accident. In Nautilus Insurance Co. v. 93 Lounge Inc. et al., the Eastern District of New York considers an exclusion for bodily injuries resulting from alleged violations of New York’s dram shop laws. Spoiler alert: at the end of the decision, the insured probably needed a drink.

 

As always, thanks for reading.

 

J.

Jennifer J. Phillips

[email protected]

 

Losing to a Woman Leads to Death:

 

The Evening World

New York, New York

05 May 1917

 

Man Whom Miss Rankin Defeated for

Congress Tries Suicide

 

ELHART, Ind., May 5.—Jacob E. Crull of Montana, who was defeated for the Republican nomination for Congress last summer by Miss Jeannette Rankin to-day sat on the steps of an undertaking establishment and drank poison.  He is expected to die.  Relatives, with whom Crull was visiting, said he was heartbroken. 

Editor’s Note:  We wrote about Jeannette Rankin’s election to Congress in a previous edition of Coverage Pointers .  She was the first woman elected to federal office.

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

My oldest son turns 8 years old next week and he is having his Taekwondo birthday party this weekend, where he gets to be Black belt for a day. He’s pretty excited and also has a Batman theme for his family party picked out. The big gift from us is a new bicycle so we think it will be a happy time. The long days and warmer weather also have brought a “spring” into everyone’s step around here on Long Island. I hope you are enjoying it.

 

On to the serious injury threshold. In one case, the court considered an expert affirmation even though the expert was not disclosed prior to the note of issue being filed as there was no evidence that the failure to disclose the experts was intentional or willful, and there was no showing of prejudice to the plaintiff. In another case, the Court held that an MRI showing the bulging disc, together with the quantified limited range of cervical motion found by a chiropractor, was sufficient objective evidence of a serious injury to defeat a motion for summary judgment. In another case, the failure to address disc bulges and herniations by a chiropractor in MRIs, rendered the chiropractor’s opinion conclusory.  In a final case, the Appellate Court disagreed with defendant’s argument that range of motion limitations had to be measured by any specific instrument.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

Defrauding an Insurer is Not New:

 

The Evening World

New York, New York

05 May 1917

 

WILL PROSECUTE ALLEGED

INSURANCE CO. LOOTERS

 

Pennsylvania’s Attorney General

Begins an Investigation in Pittsburgh

 

PITTSBURGH, May 5. – Determined to prosecute every person having anything to do with the alleged defrauding of the Pittsburgh Life and Trust Company, Attorney General Brown arrived here to-day to make a thorough investigation of the company, the surplus of which is said to have been entirely wiped out through the sale of the controlling stock to New York promoters.

 

State Insurance Commissioner O’Neill, who on Tuesday made application in court here for an order to liquidate the affairs of the company, is also here to prepare for the court hearing Monday on the question of a receivership.  

 

Tessa’s Tutelage:

 

Dear Readers:

 

I am just back from Switzerland and recovering from chocolate and cheese withdrawal.  Luckily, I came back to a relatively rare loss-transfer case to discuss for Coverage Pointers.  Although many of you may be very familiar with loss transfer, some may be new to the topic.  This is my quick and dirty overview.  Loss transfer is applicable where you have a motor vehicle accident property for hire.  The money available for the injured party stays the same as in regular no-fault coverage ($50,000).  The question is merely, which insurance company is going to pay it.

 

The only way to litigate loss transfer cases is in arbitration through Arbitrator Forums, Inc..  There, the arbitrator will determine fault.  Once fault is apportioned, the insurance companies will pay their share, if any, of the $50,000.

 

The case we have this week is simple, one party feels that arbitration is not the appropriate venue because it rescinded its policy to the driver so that it did not provide coverage on the date of the accident.  The Arbitrator and the Second Department were not swayed by the retroactive denial of insurance coverage defense. Necessarily, once it can be shown that there was coverage on the date of the accident, the only venue for litigation is arbitration.    Again, the moving party couldn’t catch a break because the court held that it didn’t present any evidence which would warrant overturning the arbitrator’s decision.  So, the arbitrator’s decision held. 

 

If you have any questions about loss transfer, no-fault, or the best places to visit in Switzerland, just shoot me a line.

 

My best,

 

Tessa

Tessa R. Scott

[email protected]

 

My Namesake, a Century Ago:

 

New York Herald

New York, New York

05 May 1917

 

“HONEST DAN” MADE

A CAPTAIN AT LAST

 

Promoted by Woods After

Many Years with Police

 

“Honest Dan” Costigan is a captain at least.  For years a police lieutenant in charge of the vice squad, he has been rewarded by Commissioner Arthur Woods, along with two others of similar rank—Percy M. De Bois and George G. Kauff.

 

“Honest Dan” has been a terror of gamblers for many years.  At the same time he is one of the few if not the only man in the uniformed force who has enjoyed the full and complete confidence of every police commissioner he has served under.  His honesty, sincerity and integrity have been proverbial and no gambler, no matter how astute, ever has been able to “reach” him. 

 

Jen’s Gems:

 

Greetings!

 

I wanted to start by thanking everyone who has sent their well wishes and congratulations on my promotion to membership at Hurwitz & Fine .  It is truly an honor to have been named a member of this amazing firm, and to be part of our fantastic coverage group.  It seems like only yesterday I started at the firm out of law school.  I still have a clear recollection of the hours Steve Peiper spent during those early months trying to explain to me the difference between additional insured status and contractual indemnity (a lecture I am sure many of you have also received).  And, admittedly, it did take multiple hours for the proverbial “light bulb” to go off.  But, that moment, like so many other moments, have confirmed that I picked the right profession and the right place to practice it.  Thank you.

 

In addition, if you are in the Buffalo area, and you have not yet signed up for next Friday’s “Updates and Hot Trending Topics Affecting Insurance Coverage” CLE program, sponsored by the New York State Bar Association Committee on Continuing Legal Education and the Torts, Insurance and Compensation Law Section.  There is still time:  http://www.nysba.org/InsuranceCoverage2017/.  I will be speaking on preparing an effective position letter, and I hope to see many of you there.

 

Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

Marriage Redux:

 

San Francisco Chronicle

San Francisco, California

05 May 1917

 

BIGAMY CHARGED BY S.F. WIFE

IN ANNULMENT SUIT

 

For eight years, according to Mrs. Sybil Rose, saleswoman in a local cloak house, her husband, Walter Rose, a traveling salesman, has been keeping two wives, and keeping them apart.  She says she has learned that the “sister” whom her husband has been visiting in Los Angeles for eight years is really another wife.

 

Mrs. Rose of San Francisco filed suit to have her marriage annulled in the Superior Court yesterday.  She says the other woman was married to Rose two years before she was, and can keep him.

 

According to her attorney, William Klein, Mrs. Rose has known of the Los Angeles woman during all her married life, but has believed Rose when he said it was his sister he visited.  She never met the “sister.”

 

Eight months ago Rose was several days late in returning to San Francisco from Los Angeles, and Mrs. Rose telephoned to the “sister” to learn what was keeping him.  The “sister,” according to Mrs. Rose, was much surprised to hear that Rose was supposed to be her brother, and in a few minutes’ conversation both women learned a lot.

 

Mrs. Rose says her husband married the other woman in Michigan ten years ago.

 

Ewell's Universe:

 

Dear Subscribers:

 

Worlds are colliding in Ewell’s Universe after the atrocious decision issued by the state of Washington’s high court. The facts are straightforward. A homebuilder improperly installed a hot water heater, piping carbon monoxide into the home. The homebuilder’s insurer denied coverage under the policy’s pollution exclusion and sought summary judgment. The Washington Supreme Court found that:

 

1.  the pollution exclusion at issue was unambiguous;

2.  carbon monoxide was a pollutant under the policy;

3.  the pollution exclusion applied; and

4.  the insurer “correctly applied the language of its pollution exclusion” to this case.

    

   But wait…the Court nonetheless found coverage and held that the insurer acted in bad faith. Make sense?

    

   The Court did not take issue with the particular exclusion at issue—as noted above, the pollution exclusion was unambiguous and applied.  Rather, the Court stretched the allegations of the complaint into providing coverage by stating that a jury could conceivably see the alleged negligent installation of the hot water heater (which released carbon monoxide into the house) as a separate event in the causal chain than the alleged failure to discover to detect the release of carbon monoxide into the house.

    

   The problem with this decision is that exclusions thus do not apply if the casual chain can be traced back to some alleged negligent act. As noted by the insurer in this case, applying the efficient proximate cause rule eviscerates the exclusion entirely. It defies logic and reason that the Court found that the exclusion is unambiguous and applied, yet does not bar coverage.

    

   Things get interesting when the Court “advised” the insurer that it could have avoided liability by writing “an exclusion for acts of negligence relating to the installation of home fixtures generally or hot water heaters specifically.” I, for one, think that an exclusion for “home fixtures generally” would be ambiguous. I still fail to see how the pollution exclusion—which applied—did not bar coverage for this carbon monoxide based injury.

    

   Even more appalling is that the Court held that the insurer acted in bad faith. The Court explicitly stated in its decision that this was the first case in the state of Washington where the Court applied this rule in a third party coverage case. Read that again: first case in the state. Thus, because the insurer failed to anticipate the high court’s expansion of efficient proximate cause, it acted in bad faith. Apparently, the insurer should have anticipated when it issued its denial letter whether and how the law would change a decade later. Retroactive bad faith? Moreover, it is hard to see how the insurer acted in bad faith when it denied coverage based on the pollution exclusion, and the Court held that the pollution exclusion was unambiguous and applied.

    

   This decision is absurd… confusing… and illogical… Thankfully this is not the law in New York. We hope that this opinion does not gain traction in other jurisdictions.

    

   'Til Next Time,

    

John

John R. Ewell

[email protected]

 

Buffalo’s Last Call for Reserve Officers:

 

Dunkirk Evening Observer

Dunkirk, New York

05 May 1917

 

Last Call for Reserve Officers.

 

Buffalo, May 5.—Today and Monday are the only remaining days in which young and middle aged men can enroll for the officers’ training camp at Madison barracks, which starts May 14.  Not only is Monday the last day in which applications will be received but it is the last chance to get on Uncle Sam’s honor roll of volunteer officers.  Major Welch, U.S.A., has approved 200 applicants for men of Buffalo and vicinity who have volunteered for the service.  About 65 men were rejected for physical disability.

 

Barnas on Bad Faith:

 

Hello again:

 

First, I want to congratulate Agnes and Jen on their promotions and Steve on being named a shareholder.  Agnes, Jen, and Steve are three great attorneys and three even better people.  Much deserved recognition.

 

This weekend is the Kentucky Derby.  However, the weather here is not looking like it is going to cooperate with the outdoor derby party I was planning on throwing Saturday; 45 degrees and rain is not ideal outdoor party conditions.  I guess I will just have to enjoy my mint julep indoors.

 

I have two cases in my column this week.  Woodson is a Fourth Circuit case involving a flood insurance policy.  As the decision details, flood insurance policies are heavily regulated by the federal government.  Here, the court decided that the Woodsons’ breach of contract and bad faith claims were barred by the one year suit limitation period required by federal regulations.  This was a tough break for the Woodsons, who commenced their action one day before the year expired, but they did so in state court.  The policy expressly required them to commence the action within a year in federal court.  As such, their claims were time barred.  The court also concluded that the Woodsons’ bad faith claim based on North Carolina statute was preempted by federal law.

 

Port Liberte is a bit of an odd decision out of federal court in New Jersey.  The decision seems to all but concede that the plaintiff’s bad faith cause of action did not contain sufficient allegations to survive a motion to dismiss.  However, rather than dismissing the claim, the court decided to stay and sever the claim pending resolution of the breach of contract cause of action.  The court will only address the possible bad faith claim if it first concludes that the plaintiff is entitled to benefits.  I find this decision to be quite strange, but you can read it for yourselves and decide.

 

Finally, take a look at the decision from Washington in John’s column, which holds that the insurer committed bad faith, despite the lower courts concluding that the insurer’s position was correct as a matter of law.

 

That’s all for this week.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Attempted Suicide No Longer to be a Crime a Century Ago?

 

Suicide Bill Up to Governor

Dunkirk, Evening Observer

May 5, 1917

 

Albany, May 5 -- The legislature has passed a bill striking out of the Penal Law the section making attempted suicide a crime. The bill has been urged for years by physicians, who have contended that the man or woman who commit suicide is suffering from a disease, the cure of which is only made more difficult by the prospect of criminal proceedings if the suicide is not successful.

Editor’s Note:  Governor Whitman vetoed the bill.

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Readers,

 

Happy May, and an early Happy Mother’s Day to all the moms out there, mine too. Hi, Mom! 

 

It’s been a slow two weeks on the legislative front, until they (whoever “they” is) announced that Congress is ready to vote on TrumpCare 2.0.  TrumpCare, the Sequel.  What will the new Bill provide?  They—there is that elusive ‘they’ again—won’t say yet. Something to look forward to for the next issue, Dear Reader? So, today I bring to you New York’s Senate Bill S3790, the State’s proposed changes certain sections of the Insurance Law to expand coverage for contraceptives. 

 

Howard

Howard B. Altman

[email protected]

 

Irish Stereotype (in Headlines), a Century Ago

 

Democrat and Chronicle

Rochester, New York

5 May 1917

 

IRISH MEETING ENDS AS USUAL

 

Free Fight Follows Efforts

to Discuss Home Rule Question.

 

New York, May 4.—When the chairman of a mass meeting held to-night in Cooper Union by thirty-two organizations composed of Americans of Irish birth or descent refused to receive a resolution calling upon President Wilson and Congress to intercede in behalf of Irish independence, a riot broke out which resulted in the ejection of more than thirty persons from the hall and which was not quelled until 200 policemen made free use of their clubs.

 

The trouble began at the close of a speech of former United States Senator James F. O’Gorman, when Richard F. Dalton, a Long Island city lawyer, rose and addressed the chair.

 

“I have listened with attention to what has been said by the previous speaker,” Dalton said, “but I have heard no word said about home rule.”  Then he drew a typewritten paper from his pocket.

 

“You cannot read that,” declared Chief Magistrate William McAdoo, the chairman, but the young man was persistent and had started to read his resolution when he was seized by two detectives and carried to the nearest exit.

 

Instantly cries of “free speech,” “gag rule,” “we want home rule” and “down with England” arose from all parts of the hall.  These shouts were drowned out with “clan calls” and the entire audience arose.  Flags of the Irish republic were waved by hundreds in the audience.

 

Women stood up on chairs and cried at the top of their voices, “We will fight for America but down with England.”

 

The disturbers were charged by seventy policemen who had been stationed at the hall in preparation for possible trouble.  Men and women were ejected as the disorder increased.  Chairman McAdoo was unable to make himself heard although he shattered the desk in front of him with blows from a hickory cane.

 

The policemen on duty no sooner checked the rioting in one part of the building than it broke out afresh in some other section of the hall.  Not until the reserved had more than doubled their number did they restore a semblance of order. 

 

 

Dear Readers,

 

Not too much going on in my life lately.  Later this month, my youngest sister is getting married in the Florida Keys.  Although I’m not a huge fan of destination weddings, as I feel like it is a forced vacation, I’m sure it will be a blast and am beginning to look forward to it.   

 

This edition of Off the Mark discusses a construction defect case from Montana, which was decided last year.  The case of Employers Mutual Casualty Co. v. Fisher Builders, Inc., involved the collapse of a deck during a contractor’s work modifying a home. 

There, the Montana Supreme Court reversed the trial court’s finding of no “occurrence”, holding that the term “accident” within the definition of an “occurrence” in a CGL policy may include intentional acts, if the damages were not objectively intended or expected by the insured.

 

Until next time …

 

Brian

Brian F. Mark
[email protected]

 

Headlines from this issue, attached:

 

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

 

• Section 1983 Claims Fall Outside of “Public Entity” and CGL Policies

• Carrier Wins on Late Notice (Pre-Prejudice Case).  Failure to Indicate Late Notice by Claimant Did Not Void Denial where Notice from Claimant Came after Disclaimer Based on Insured’s Late Notice.

• In Rare Win on Lack of Cooperation, Carrier Establishes its Heavy Burden to Prove Willful and Avowed Obstruction

• In Pre-Prejudice Case, Question of Facts as to Late Notice and Late Disclaimer

• No Coverage for School District on Claims for Intentional Wrongful Acts.  Reasonableness of Attorney Fees Must is Determined after Hearing.

• A Written Contract Calling for Additional Insured Status, Signed Four Years after the Loss to “Memorialize” an Agreement, is Insufficient to Confer AI Status where Written Contract was Required at Time of Loss.  “Coverage by Estoppel” Disallowed where Certificate of Insurance not Issued by Agent.

• Even Though Boyfriend had Keys to Girlfriend’s Car, it Still Might Not be “Furnished or Available” for His Regular Use.

• An Assault is an Assault, and when it is the “Operative Act” and there is an Assault and Battery Exclusion, Coverage is Property Denied

• Application to Dismiss Claim for Failure to Procure Insurance Fails when the Party that Promised to Provide Insurance did not Provide Proof that it did

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

Robert E.B. Hewitt III

[email protected]

 

• A Court Can Still Consider an Expert Affirmation despite a Party’s Failure to Disclose Its Experts Prior to the Filing of a Note of Issue Where There Was No Prejudice

• Plaintiff Created Issue of Fact by Presenting Evidence That He Suffered Serious Injury to His Spine

• MRI Showing Bulging Disc Plus Range of Motion Limitations Enough to Find Issue of Fact

• Defendant’s Chiropractic Expert Failed to Address MRIs Which Found Bulges and Herniations and Thus Was Found to be Conclusory

• Defendants Failed to Address 90/180-Day Category of Injury Set Forth in Bill of Particulars

• Defendant Failed to Address 90/180-Day Category of Injury Set Forth in Bill of Particulars

• Plaintiff’s Expert Who Found Limitations of the Range of Motion Was Not Required to Use Any Particular Instruments to Measure Range of Motion

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

• Arbitration Is the Only Forum to Litigate a Loss Transfer Matter

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

• Delay of 37 Days in Answer Excused, and Defendant Entitled to an Order Compelling Plaintiff to Accept its Late Answer

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

• Second Circuit Holds that “In Comparison” Language in Other-Insurance Provision Does Not Trigger Co-Primary Coverage (New York Law)

• Second Circuit Holds Alleged Misleading Information about Life Insurance Plans Did Not Violate ERISA (Connecticut/Federal Law)

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

• Court Finds Disclaimer Not Subject to New York Insurance Law Section 3420(d) where Policy was Not Delivered in New York

            

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

• Bad Faith Claim under North Carolina Law was Preempted by Federal Regulations for Flood Insurance Policies

• Poorly Pleaded Bad Faith Claim Stayed Pending Resolution of the Breach of Contract Claim

 

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

• Drive-Through Exclusions

 

EWELL’S UNIVERSE
John R. Ewell

[email protected]

 

• Where Hot Water Heater Released Carbon Monoxide and Caused Injury, Unambiguous Pollution Exclusion Applied But Did Not Bar Coverage; Thousands Flee (from Doing an Insurance Business in Washington State)

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

• Insurance and Emergency Contraception

 

 

OFF THE MARK
Brian F. Mark
[email protected]

 

• Montana Supreme Court Reverses Lower Court Holding that an “Accident” May Include Intentional Acts if the Damages were Not Objectively Intended or Expected by the Insured

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

• No CGL Coverage for Construction Defect

 

All for now.  Stop the rain out east if you have the power.  Happy Mother’s Day.  See you in a couple of weeks.

 

 

Dan D. Kohane

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

 

Office:            716.849.8942

Mobile:           716.445.2258

Fax:                716.855.0874

E-Mail:            [email protected]  

Website:         www.hurwitzfine.com  

Twitter:           @kohane

LinkedIn:       www.linkedin.com/in/kohane

 

 

 

 

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

[email protected]

 

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

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

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

 

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

 

Michael F. Perley

Robert E. Hewitt, III

Jennifer J. Phillips

Brian D. Barnas

 

NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
[email protected]
 

Patricia A. Fay

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

 

Jennifer J. Phillips

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Ewell’s Universe

Altman’s Administrative (and Legislative) Agenda
Off the Mark

Earl’s Pearls

 

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

 

05/03/17       County of Dutchess v. Argonaut Insurance Company

Appellate Division, Second Department

Section 1983 Claims Fall Outside of “Public Entity” and CGL Policies

In 1983, Bozella was convicted of murder in connection with the death of a 92-year-old woman. His conviction was overturned in 1989, and he was retried and convicted again in 1991. On October 14, 2009, Bozella's conviction was vacated based on newly discovered evidence which allegedly should have been disclosed to Bozella's defense counsel by the Dutchess County District Attorney's Office.

 

Thereafter, Bozella commenced an action in federal court against the County of Dutchess and an assistant district attorney (hereinafter together the plaintiffs), to recover damages for civil rights violations. After lengthy motion practice, the only cause of action remaining in the underlying action was Bozella's cause of action to recover damages pursuant to 42 USC § 1983 against the County, which alleged that the County had an unconstitutional Brady disclosure policy (see Brady v Maryland, 373 US 83).

 

The County tendered its defense in the underlying action to its insurance carrier, Argonaut Insurance Company, also known as Argonaut Group (hereinafter Argonaut), pursuant to coverage provided by a public entity policy of insurance (hereinafter the subject insurance policy). Argonaut disclaimed coverage, and the plaintiffs commenced this action seeking a judgment declaring that Argonaut was obligated to defend and indemnify them in the underlying action.

 

To prevail on a cause of action to recover damages pursuant to 42 USC § 1983 against a municipality, a plaintiff must specifically plead and prove "(1) an official policy or custom that (2) causes the claimant to be subjected to (3) a denial of a constitutional right".  A plaintiff may demonstrate "the existence of a policy or custom by showing that the acts of the municipal agent were part of a widespread practice that, although not expressly authorized, constituted a custom or usage of which a supervising policy-maker must have been aware".

 

Argonaut established its prima facie entitlement to judgment as a matter of law, and the plaintiffs failed to raise a triable issue of fact in opposition thereto. The wrongful acts alleged in the cause of action to recover damages pursuant to 42 USC § 1983 in the underlying action were not covered under the public officials' liability or the law enforcement liability coverage parts of the subject insurance policy.

 

There is no coverage for these wrongful acts under the public officials' liability coverage part, since the wrongful acts occurred "in part" prior to the policy's retroactive date of October 1, 1999. Similarly, there is no coverage for the wrongful acts under the law enforcement liability coverage part, as the wrongful acts allegedly were first committed prior to the policy's effective date of October 1, 2009.

 

Under the CGL policy, there was an exclusion for any claim involving any "activity or function by or on behalf of any law enforcement agency or any agent thereof and/or activity or function related to the administration of the criminal justice system. The claims fall within the scope of this exclusionary clause, this is clear and unambiguous in its meaning.

 

05/03/17       Glanz v. New York Marine and General Insurance Company

Appellate Division, Second Department

Carrier Wins on Late Notice (Pre-Prejudice Case).  Failure to Indicate Late Notice by Claimant Did Not Void Denial where Notice from Claimant Came after Disclaimer Based on Insured’s Late Notice.

This was a direct action against NY Marine, after the underlying plaintiff, Glanz, secured a judgment against NY Marine’s insured. 

 

On September 5, 2009, the Glanz, allegedly was injured when he tripped and fell on a sidewalk at 92-94 Penn Street in Brooklyn, a premises owned by 92-94 Penn, LLC (“Penn”). Penn was insured by New York Marine and sued Penn on October 27, 2010.

 

Penn failed to appear or answer the complaint, and a default judgment was entered on October 17, 2011. A month later, New York Marine first received notice from Penn of Glanz's action on November 14, 2011, and New York Marine disclaimed coverage on the basis of Penn's untimely notice of claim by letter dated December 15, 2011. Five days later, Glanz provided notice of his claim to New York Marine. On May 2, 2013, a default judgment in the principal sum of $285,822.50 was entered against Penn.

 

Glanz thereafter commenced this action pursuant to Insurance Law § 3420 to recover the amount of the unsatisfied judgment from New York Marine.

 

Under the direct action statute, an injured party to recover any unsatisfied judgment against an insured, directly from the insurer.  However, under §3420(a)(3) an injured party must demonstrate that he or she acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer.

 

Here, New York Marine made a prima facie showing that Glanz failed to act diligently in attempting to ascertain New York Marine's identity and in expeditiously notifying it of his claim  and Glanz offered nothing in response.

 

Further, Glanz's argument that New York Marine's disclaimer was ineffective against him is without merit. "[W]here the insured is the first to notify the carrier, even if that notice is untimely, any subsequent information provided by the injured party is superfluous for notice purposes and need not be addressed in the notice of disclaimer issued by the insurer.

 

Here, Glanz did not notify New York Marine of his claim until after the insured, Penn, had done so. Thus, New York Marine was not required to cite Glanz's failure to provide notice in its disclaimer letter of December 15, 2011.

Editor’s Note:  Kudos to Ann Odelson, et al.

 

05/03/17       West Street Properties, LLC v. American States Ins. Co.

Appellate Division, Second Department

In Rare Win on Lack of Cooperation, Carrier Establishes its Heavy Burden to Prove Willful and Avowed Obstruction

Another direct action lawsuit to recover the amount of an unsatisfied judgment.

 

In a nonjury trial the lower court found that American States had an obligation to pay the unsatisfied judgment up to the monetary limits of the subject policy.

 

This was a non-cooperation disclaimer. An insurer that seeks to disclaim coverage based on its insured's alleged noncooperation is required to demonstrate that it acted diligently in seeking to bring about its insured's cooperation, that its efforts were reasonably calculated to obtain its insured's cooperation, and that the attitude of its insured, after the cooperation of its insured was sought, was one of willful and avowed obstruction, the co-called Thrasher rule [Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168)].  The insurer has a heavy burden of proving lack of cooperation.

 

Here, American States met its heavy burden of proving that its insured breached the subject policy by failing to cooperate in the defense of the underlying action. American States made diligent efforts, through written correspondence, numerous telephone calls, and a visit to the insured's home, that were reasonably calculated to bring about the insured's cooperation. Further, its insured's attitude, after his cooperation was sought, was one of willful and avowed obstruction.

 

Among other trial evidence, there was testimony from an investigator who met with the insured at the insured's home. The investigator testified that the investigator told the insured that the insured risked losing coverage under the policy if the insured refused to cooperate. The insured, while acknowledging that he knew that he had attorneys defending him and that a default judgment could be entered against him if he failed to appear at a deposition, made statements to the effect that he would cooperate only if he were paid for certain work he claimed to have performed, and that the plaintiff could "just get in line" were it to obtain a judgment against him.

 

05/03/17       Evanston Insurance Company v. P.S. Bruckel, Inc.

Appellate Division, Second Department

In Pre-Prejudice Case, Question of Facts as to Late Notice and Late Disclaimer

Evanston commenced an action seeking an order that it had no duty to defend or indemnify its insured, Bruckel in an underlying action. Evanston contended that Bruckel failed to comply with a condition precedent to coverage contained in the policy and because the causes of action asserted in the underlying action were subject to policy exclusions.

 

The carrier established that Bruckel failed to comply with the condition in the subject policy that required it to "immediately" forward to the plaintiff copies of any legal papers received in connection with a lawsuit. The underlying action was commenced in March 2012, and Evanston  did not receive a copy of the summons until March 2013. Since the subject policy was issued prior to the amendment to Insurance Law § 3420, the plaintiff was not required to show that it was prejudiced by the failure to give notice of the commencement of litigation in order to satisfy its prima facie burden.

 

However, the failure of an insured to timely notify the insurer of a claim does not excuse the insurer's failure to timely disclaim coverage.” The timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage. Bruckel and the State (underlying plaintiff) raised triable issues of fact as to whether the plaintiff acquired knowledge of the commencement of the underlying action in April 2012, or, at the latest, October 2012, and thus, whether it timely disclaimed coverage in March 2013, on the basis of, inter alia, late receipt of a copy of the summons and complaint.

 

05/03/17       East Ramapo CSD v. New York Schools Insurance Reciprocal Appellate Division, Second Department

No Coverage for School District on Claims for Intentional Wrongful Acts.  Reasonableness of Attorney Fees Must is Determined after Hearing.

These appeals arise out of an insurance coverage dispute between the plaintiff, East Ramapo Central School District (“School District”), and its insurer, the defendant, New York Schools Insurance Reciprocal (“NYSIR”). The policy issued by NYSIR provided coverage for claims, "made against the Insured and reported to [NYSIR] during the Policy Period and any Extended Reporting Period," for "Wrongful Act(s) by the Insured in the performance of duties for the School Entity."

 

The policy defined the term "School Entity" as the School District. The term "Insured" was defined, in relevant part, as the “School Entity, the Board of Education of the School Entity, all present and former members of the Board of Education, officers, trustees, employees . . . but only while acting solely within the course and scope of their duties or employment for the School Entity." The term "Wrongful Act" was defined under the policy as "any actual or alleged breach of duty, negligent error, misstatement, misleading statement or omission by an Insured solely in the course and scope of the Insured's duties or employment for the School Entity." The policy excluded coverage for claims related to, among other things, "any fraudulent, dishonest, malicious, criminal or intentional wrongful act or omission by an Insured."

 

A class action was commenced against former and present members, employees, or attorneys of the School District's Board of Education, alleging that they "engaged in numerous schemes to siphon off public money to support private religious institutions in various yeshivas, forcing a large cut in instructional programming in the public schools to a degree that the right of public school children to an education is impugned."

 

The complaint in the underlying action alleged violations of the Establishment Clause of the First Amendment and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and article VIII of the New York Constitution, and claims of breach of fiduciary duty and fraud. The School District provided notice of the underlying action to NYSIR. NYSIR disclaimed coverage on several grounds, including that the alleged acts of the defendants in the underlying action fell outside the scope of their duties and employment with the School District and that the allegations in the underlying action cast the pleadings in that action wholly within the policy's exclusion for claims related to intentional, wrongful acts.

 

The School District commenced this action against NYSIR asserting a cause of action alleging breach of contract, a cause of action alleging breach of the implied covenant of good faith and fair dealing, and a cause of action seeking a declaration that NYSIR had a duty to defend and indemnify it in the underlying action. The School District moved for summary judgment on its cause of action seeking a declaration that NYSIR was obligated to defend it in the underlying action. NYSIR cross-moved for summary judgment declaring that it was not so obligated.

 

A duty to defend is triggered by the allegations contained in the underlying complaint and arises whenever the allegations of the complaint against the insured, liberally construed, potentially fall within the scope of the risks undertaken by the insurer.  An insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision

 

NYSIR had a duty to defend the School District in the underlying action because the complaint included allegations that the defendants breached their fiduciary duty by failing to take reasonable steps to ascertain the value'" of certain properties that were sold by the School District and not utilizing a method of sale, which is apt to bring in the best price.' Those allegations, liberally construed, suggest a reasonable possibility of coverage

 

However, in the underlying action the lower court then dismissed 8 of the 10 causes of action asserted in the amended complaint, including the cause of action alleging breach of fiduciary duty. A motion to renew was made.

 

Upon renewal, the Supreme Court properly determined that NYSIR was not obligated to defend the School District after September 30, 2013. The two remaining causes of action in the underlying action, set forth in a third amended complaint, alleged violations of the Establishment Clause of the First Amendment of the United States Constitution and article VIII of the New York Constitution. The breach of fiduciary duty claim, which triggered NYSIR's duty to defend, was dismissed. Contrary to the School District's contention, the remaining causes of action in the underlying action were based solely upon allegations that the defendants in that action intentionally participated in a scheme to, inter alia, illegally fund religious activities and institutions, and therefore, fall entirely within the policy's exclusion for claims related to intentional, wrongful acts.

 

On the application by NYSIR to discover all of the School Districts files, the School District did not waive the attorney-client privilege by commencing an action against NYSIR for indemnification. Although the School District placed the reasonableness of its attorneys' fees at issue, it did not place at issue any legal advice it received from its attorneys in connection with the underlying action, its attorneys' work product, or their private mental impressions, conclusions, opinions, or legal theories. NYSIR failed to demonstrate that invasion of the privilege was necessary to assess the reasonableness of the School District's attorneys' fees in the underlying action.

 

Rather, the reasonableness of the attorney's fees can be determined by, inter alia, an examination of the invoices of the School District's attorneys for the work performed in the underlying action, all documents filed in the District Court in the underlying action, and all correspondence exchanged among the parties' counsel in the underlying action.

 

As to the determination of the reasonableness of attorney's fee, that is left to the sound discretion of the trial court. The School District sought an award in the principal sum of more than $2,200,000 for attorneys' fees and expenses, but the court determined that it was entitled to an award in the principal sum of only $187,500.

 

The lower court based its determination on its conclusion that the results obtained by the School District's attorneys were not favorable, and that the time expended and the rates charged were excessive, considering the lack of novelty of the questions presented and the results achieved. The Second Department did not agree with the court that the results obtained were not favorable, especially given that the District Court dismissed most of the claims against the defendants in the underlying action, or that novel questions were not presented. The matter is remanded for a full hearing on damages.

 

Finally, the lower court determined that there should be no discovery on the bad faith claim because there was no bad faith.  The appellate court determined that whether there was bad faith or not, should not be determined on a discovery motion.

 

04/28/17       Landsman Development v. RLI Insurance

Appellate Division, Fourth Department

A Written Contract Calling for Additional Insured Status, Signed Four Years after the Loss to “Memorialize” an Agreement, is Insufficient to Confer AI Status where Written Contract was Required at Time of Loss.  “Coverage by Estoppel” Disallowed where Certificate of Insurance not Issued by Agent.

Landsman Development (“Landsman”) and RLI Insurance Company (“RLI”) ) each sought a declaration that Technology Insurance Company (“TIC”) was obligated to defend and indemnify Landsman as an additional insured in an underlying personal injury action. Technology moved for summary judgment, asserting that it

 

On September 2, 2010, Militello was injured in a scaffold collapse at property owned by Landsman during the course of his employment with Landsman Building Services Group, Inc. (BSG). Landsman had hired BSG to perform certain interior renovations to part of a building which had been leased to the Rochester City School District.

 

Militello sued Landsman, which was insured by RLI. BSG was insured by Technology, and the Technology policy had an additional insured endorsement, which provided that an insured shall include as an additional insured the persons or organizations shown in the schedule. The schedule stated: "[b]lanket as required by written contract."

 

Here, there was no "written contract" between BSG and Landsman at the time of the accident on September 2, 2010, and therefore Landsman does not qualify as an additional insured under the Technology policy.  The only "written contract" relating to additional insured coverage was executed on December 8, 2014, almost four years after the underlying accident. RLI contended that the written contract dated December 8, 2014, simply memorialized a pre-accident mutual understanding between Landsman and BSG. The Fourth Department rejected that

Argument, concluding that “a mutual understanding” is not the same as a written contract in effect at the time of the accident.

 

Landsman argued that the certificates of insurance in its possession conferred additional insured status. However, a certificate of insurance, by itself, does not confer insurance coverage, particularly [where, as here,] the certificate expressly provides that it is issued as a matter of information only and confers no rights upon the certificate holder [and] does not amend, extend or alter the coverage afforded by the policies.

 

In the Fourth Department, an insurance company that issues a certificate of insurance naming a particular party as an additional insured may be estopped from denying coverage to that party where the party reasonably relies on the certificate of insurance to its detriment.  However, here, neither Technology nor its authorized agent issued the Certificate.

 

04/28/17       Tuttle v State Farm Mutual Automobile Insurance Company

Appellate Division, Fourth Department

Even Though Boyfriend had Keys to Girlfriend’s Car, it Still Might Not be “Furnished or Available” for His Regular Use.

Tuttle sought coverage under a policy issued to her former boyfriend. She obtained a $330,000+ judgment against him after she was injured in an accident. He fell asleep while had been driving a vehicle in which she was a passenger.

 

Tuttle owned the car, insured by another carrier and that policy carried minimum liability limits ($25,000/$50,000).  The boyfriend owned a separate car, insured by State Farm.  He carrier paid the $25,000 policy limits.  Tuttle now sought the excess limits from State Farm arguing that her boyfriend was operating a "non-owned car" under the State Farm policy.

 

Initially, State Farm reserved its right to disclaim on the grounds that plaintiff's vehicle was not a "non-owned car" under the policy and that it was not given notice of the accident within a reasonable time. Thereafter, it abandoned the late notice position and disclaimed only on the ground that the vehicle was not a "non-owned car" under the policy. Tuttle, having secured a judgment against the State Farm insured, commenced a lawsuit challenging the declination.

 

The lower court granted judgment in favor of State Farm based on the late notice defense.  The Fourth Department reversed on the ground that State Farm did not disclaim on that basis and therefore could not rely upon it for a coverage defense.

 

As to the non-owned issue, the appellate court found that State Farm failed to meet its burden of establishing its entitlement to judgment as a matter of law.

 

The insurance policy defined a "non-owned car" as "a car not . . . furnished or available for the regular or frequent use of" the insured. In determining whether a vehicle was furnished or available for the regular use of the named insured, factors to be considered are the availability of the vehicle and frequency of its use by the insured.

 

The purpose of that exclusion is to provide coverage to an insured for the occasional or infrequent use of a vehicle not owned by him or her  and for “which coverage is not intended as a substitute for insurance on vehicles furnished for the insured's regular use”..

 

Tuttle and her boyfriend testified the boyfriend had a set of keys to the vehicle but drove it only on rare occasions. Furthermore, both of them testified that they had separate vehicles insured under separate policies and that they did not use those vehicles interchangeably. Thus, the court concluded that State Farm failed to establish as a matter of law that plaintiff's vehicle was furnished or available for her boyfriend's regular use. The issue will be resolved at trial.

Editor’s Note:  If someone has a set of keys to a vehicle, isn’t it “available” for his or her use?  Granted, in this case he may not actually use it but sure sounds “available” to (some of) us.

 

04/27/17       Graytwig v. Dryden Mutual Insurance Company

Appellate Division, Third Department

An Assault is an Assault, and when it is the “Operative Act” and there is an Assault and Battery Exclusion, Coverage is Property Denied

In May 2015, Michael Christian sued Graytwig for injuries sustained in a February 2014 incident.  It was claimed that Graytwig’s employee physically removed Christian from plaintiff's bar, causing him to fall.  Dryden Mutual Insurance Company, Graytwig’s insurance carrier, disclaimed any responsibility to defend or indemnify plaintiff based on the insurance policy's assault and battery exclusion.

 

The exclusion, provides that "notwithstanding anything contained herein to the contrary, . . . this policy excludes any and all claims arising out of any assault, battery, fight, altercation, misconduct or other similar incident," including claims of negligent hiring and supervision.

 

Graytwig commenced a declaratory judgment action, naming Christian and the carrier, seeking a declaration that Dryden is obligated to defend and indemnify the bar.

 

Initially, Christian argues that the terms in the general liability coverage apply, rather than those in the exclusion, as the language providing that the exclusion is subject to the terms in the general liability coverage is controlling over the language that the exclusion applies "notwithstanding anything contained herein to the contrary." The terms of the general liability coverage — in both its definitions of covered occurrences and general exclusions — provide for coverage of bodily injury resulting from intentional acts where only "reasonable force" was used to protect "persons or property."

 

Christian argued there was an issue of fact as to whether Graytwig’s employee used reasonable force to remove Christian.

 

The Court had previously addressed, and rejected, similar arguments pertaining to a policy in which, with language identical to plaintiff's policy, the assault exclusion began, "notwithstanding anything contained herein to the contrary" (Handlebar, Inc. v Utica First Ins. Co., 290 AD2d 633, 633 [2002], lv denied 98 NY2d 601 [2002]). The terms of the exclusion controlled over those in the general liability coverage, as "language such as a 'notwithstanding' provision 'controls over any contrary language' in a contract" the phrase '[n]otwithstanding any other provision' trump conflicting contract terms"]).

 

Finally, Christian asserts that the assault and battery exclusion does not apply because the underlying action alleges acts of negligence. Following Mount Vernon v. Creative Housing, the court found that the negligence claims would not exist but for the operative act of the assault.

 

Christian alleged that plaintiff's employee "attack[ed]," "push[ed]" and "assault[ed]" him. As described in the sworn statements of Christian and various witnesses, the incident at issue occurred when plaintiff's employee ejected Christian from plaintiff's bar by placing him in a headlock and pushing him out on to an icy sidewalk where he fell and struck his head. Multiple witnesses allegedly saw plaintiff's employee pick Christian up and carry him to the exit, apparently while in the headlock. Plaintiff's employee also admitted in a sworn statement to police that he placed his left arm "over and behind" Christian, took him to the exit and pushed him outside and that he could not tell if Christian then "slipped or he never had his footing."

 

As it is readily apparent that Christian's claim is based upon an assault for which coverage is precluded, and the exclusion also specifically precludes coverage for claims of negligence arising out of an assault or similar misconduct, it is clear that Dryden met its burden.

 

04/26/17       Simmons v. Berkshire Equity, LLC
Appellate Division, Second Department
Application to Dismiss Claim for Failure to Procure Insurance Fails when the Party that Promised to Provide Insurance did not Provide Proof that it Did

Simmons fell due a defect in the sidewalk and sued Livingston Car Park (“Livingston”), the lessee of the abutting sidewalk, Berkshire, the property owner and Eilat Management (“Eliat”), a company that shared space with Berkshire.  Management Corp.). The lease for the parking lot was entered into between Livingston and nonparty Security Equity, LLC (hereinafter Security).

 

An answer was filed on behalf of Livingston and a separate answer was filed on behalf of Berkshire and Eilat (hereinafter together the Berkshire defendants). In their answer, the Berkshire defendants asserted cross claims against Livingston for contractual and common-law indemnification, and two cross claims alleging the failure to procure insurance as required by the lease. Livingston moved for summary judgment dismissing the complaint and all cross claims insofar as asserted against it.

 

Berkshire may enforce provisions of Livingston's lease for the parking lot. An undisclosed principal may sue on a contract made in the name of its agent unless there is a showing of fraud. Here, Livingston's submissions confirmed that Berkshire owned the property that Livingston was renting, and that the lease was valid. Livingston does not assert that it would not have entered into the lease had it known then that Berkshire was, in fact, the owner. However, the three cross claims asserted by Eilat based on provisions of the lease were properly dismissed for lack of standing, as Eilat was not a party to the lease or an owner of the premises, and there is no claim that Security entered into the lease on its behalf or that the lease was intended for its benefit.

 

Livingston sought to dismiss cross claims alleging breach of contract for the failure to procure insurance but did not submit any evidence demonstrating that it procured an insurance policy as required by the lease

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

Robert E.B. Hewitt III

[email protected]

 

05/03/17       Yampolskiy v. Baron

Appellate Division, Second Department

A Court Can Still Consider an Expert Affirmation despite a Party’s Failure to Disclose Its Experts Prior to the Filing of a Note of Issue Where There Was No Prejudice

The Appellate Division noted that a party's failure to disclose its experts pursuant to CPLR 3101(d) (1) (i) prior to the filing of a note of issue and certificate of readiness does not divest a court of the discretion to consider an affirmation or affidavit submitted by that party's experts in the context of a timely motion for summary judgment. It upheld the Supreme Court’s finding that there was no evidence that the failure to disclose the experts was intentional or willful, and there was no showing of prejudice to the plaintiff.

 

Despite this, the Appellate Division held that the defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.  The papers submitted by the defendants 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.

 

05/03/17       Linarez v. Suarez

Appellate Division, Second Department

Plaintiff Created Issue of Fact by Presenting Evidence That He Suffered Serious Injury to His Spine

The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff'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 opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained serious injuries to the cervical and lumbar regions of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d). No facts are given.

 

04/28/17       Carpenter v. Steadman

Appellate Division, Fourth Department

MRI Showing Bulging Disc Plus Range of Motion Limitations Enough to Find Issue of Fact

Plaintiff commenced this action seeking damages for injuries she allegedly sustained when the vehicle she was operating was struck from behind. The complaint, as amplified by the bill of particulars, sought recovery under three categories of serious injury, i.e., the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories  Defendants established that plaintiff did not sustain an injury that prevented her from performing substantially all of the material acts which constitute such person's usual and customary daily activities for not less than 90 days during the 180 days immediately following the occurrence of the injury.  Defendants submitted plaintiff's deposition in which she testified that she did not take any time off from her work in sales after the accident, although she left early on several occasions. Defendants thus established that plaintiff's activities were not curtailed to a great extent. In opposition to the motion, plaintiff failed to raise a triable issue of fact.

However, plaintiff established an issue of fact with respect to the consequential limitation of use and significant limitation of use categories. Defendants met their initial burden by submitting the affirmed report of the physician who conducted an examination of plaintiff on behalf of defendants and reviewed her medical reports, including an imaging study that showed preexisting degenerative disc bulging at C5-6. He concluded that plaintiff sustained only a temporary cervical strain and that the diagnostic studies showed no evidence of a traumatic injury as a result of the accident.  The Court concluded that plaintiff raised an issue of fact through the submission of the chiropractor's first affidavit. Plaintiff's chiropractor concluded that the disc involvement as shown on the MRI was causally related to the accident. Proof of a herniated or bulging disc, without additional objective evidence, is insufficient to establish a serious injury. Here, however, the MRI showing the bulging disc, together with the quantified limited range of cervical motion found by the chiropractor, was sufficient objective evidence of a serious injury. The chiropractor also showed objective evidence of an injury by stating that he detected muscle spasms.  

 

04/28/17       Martinez v. City of Buffalo

Appellate Division, Fourth Department

Defendant’s Chiropractic Expert Failed to Address MRIs Which Found Bulges and Herniations and Thus Was Found to be Conclusory

Plaintiff commenced this action seeking damages for injuries he sustained when he was struck by a snowplow while he was operating his own motor vehicle in the lane adjacent to the snowplow. In attempting to make a U-turn with the snowplow, defendant proceeded into plaintiff's lane of travel, and the two vehicles collided. 

 

The Appellate Division concluded that there were issues of fact with respect to whether the snowplow was a vehicle "actually engaged in work on a highway" at the time of the accident to  preclude summary judgment on that issue (Vehicle and Traffic Law § 1103 [b]), which applies to vehicles engaged in work on a highway. Although  defendant testified at his examination before trial that he was "done checking the area" and was not plowing, salting, or sanding the roadway at the time of the accident, plaintiff testified at his General Municipal Law § 50-h hearing that, shortly before the accident, the snowplow was salting the road and had its hazard lights engaged. At another point in his testimony, defendant stated that, shortly before the accident, he was checking the road for ice build-up, but that he could not recall if he was salting the road at the time of the accident. Defendant also testified that his destination at the time of the accident was a local park where he would "take a break," but the record fails to establish if the snowplow was actually on a City street or a town road at the time of the accident and also fails to establish the precise route that defendant was assigned to service that day. In light of those conflicting descriptions of the circumstances surrounding the accident, The Appellate Division conclude that it cannot be determined as a matter of law on this record that the snowplow was actually engaged in work on a highway" at the time of the accident.

 

As far as serious injury, plaintiff argued he sustained a serious injury under the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories set forth in Insurance Law § 5102 (d). Defendants did not challenge plaintiff's assertion that he met his initial burden with respect to the categories of permanent consequential limitation of use and significant limitation of use in his motion. Rather, defendants contended that they raised issues of fact with respect to those categories by submitting the report of a chiropractor who conducted an independent medical examination of plaintiff approximately five months after the accident. In his report, the chiropractor opined that plaintiff was suffering from only cervical and lumbar strain/sprain, and that plaintiff  was able to return to pre-loss activity levels and capable of working and performing all of his usual activities of daily living without restrictions. The Appellate Division noted that the chiropractor failed to address or reconcile his opinions with the cervical MRI studies that reveal a small central C3-4 disc herniation, a right paracentral C5-6 disc herniation, and a left paracentral C6-7 disc herniation, all of which impinge in varying degrees on the anterior aspect of the thecal sac. The chiropractor also failed to address in his report the cervical spine surgery that plaintiff underwent in 2014, and failed to address or reconcile his opinions with the EMG study that established right C6 radiculopathy in plaintiff's upper extremity. Therefore, the opinions therein were found to be conclusory, speculative, and insufficient to raise an issue of fact with respect to the serious injury categories of permanent consequential limitation of use and significant limitation of use.

 

With respect to the 90/180-day category, it was undisputed that plaintiff's medical providers were unanimous in their opinions that all of plaintiff's injuries are permanent in nature. Thus, on this record, plaintiff failed to meet his initial burden of demonstrating a medically determined injury or impairment of a non-permanent nature with respect to the 90/180-day category as none of the injuries were nonpermanent.

 

04/26/17       Valerio v. Terrific Yellow Taxi Corp.

Appellate Division, Second Department

Defendants Failed to Address 90/180-Day Category of Injury Set Forth in Bill of Particulars

The defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the defendants failed to adequately address the plaintiff's claim, set forth in the 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. No facts were given.

 

04/26/17       Koutsoumbis v. Paciocco

Appellate Division, Second Department

Defendant Failed to Address 90/180-Day Category of Injury Set Forth in Bill of Particulars

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.

 

04/25/17       Liz v. Munoz

Appellate Division, First Department

Plaintiff’s Expert Who Found Limitations of the Range of Motion Was Not Required to Use Any Particular Instruments to Measure Range of Motion

Plaintiff submitted the affirmed report of her orthopedic surgeon, which was sufficient to raise a triable issue of fact. He observed a type I SLAP tear during arthroscopic surgery, measured limitations in range of motion both before surgery and over two years later, and provided a sufficient opinion that there was a causal relationship to the accident based on the plaintiff's history, his own treatment of plaintiff, his review of the MRI report, and observations during surgery. The measured limitations, in multiple planes, were not so slight as to be insignificant as a matter of law. Contrary to defendant's argument, plaintiff's orthopedic surgeon was not required to use any particular instruments to measure the ranges of motion and any discrepancies between his reports raised issues of credibility for the factfinder.

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

04/26/17       Matter of Infinity Indem. Ins. Co. v Hereford Ins. Co.

Appellate Division, Second Department

Arbitration is the Only Forum to Litigate a Loss Transfer Matter
Pursuant to Insurance Law the respondent, as subrogee of Fatimah Salaam and Kim McCorey, commenced two related loss-transfer arbitration proceedings against the petitioner arising out of payments the respondent made in connection with a collision between two vehicles, one of which had been insured by the petitioner and the other by the respondent.

 

The respondent paid first-party benefits to passengers in a "for hire" vehicle insured by the respondent that was struck in the rear by the other vehicle, which, at the time of the accident, was insured by the petitioner. The petitioner participated in the arbitration and opposed any payments to the respondent, arguing that, after the accident, it had rescinded its policy retroactively, so that it provided no coverage as of the date of the accident. The arbitrator rejected that argument and made two awards in favor of the respondent.

 

The petitioner commenced this proceeding pursuant to CPLR 7511 to vacate the awards, and the respondent cross-petitioned to confirm the awards. The petitioner appeals contending that the arbitrator was without jurisdiction to decide the issue and that the arbitrator should have applied Pennsylvania rather than New York law because the subject policy was procured in Pennsylvania. We affirm.

 

The Court held that the petitioner's contention that its retroactive denial of insurance coverage divested the arbitrator of jurisdiction is without merit. Insurance Law provides that arbitration is the only forum in which a loss-transfer claim may be litigated. Moreover, "the contention that a claim proposed to be submitted to arbitration is in excess of the arbitrator's power is waived unless raised by an application for a stay". By failing to apply for a stay of arbitration before arbitration, the petitioner waived its contention that the claim is not arbitrable under Insurance Law.

 

The petitioner also failed to establish any basis under to vacate the arbitration awards. Moreover, any possible error by the arbitrator in applying New York law rather than Pennsylvania law does not provide a basis for vacatur.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

04/26/17       Xu v JJW Enterprises, Inc.

Appellate Division, Second Department

Delay of 37 Days in Answer Excused, and Defendant Entitled to an Order Compelling Plaintiff to Accept its Late Answer

Plaintiff allegedly fell on the sidewalk next to defendant’s building, and started the instant action as a result.  Defendant was served, via the Secretary of State, on May 11, 2015.  Shortly thereafter, defendant forwarded the matter to its insurer who, in turn, assigned a claims professional to handle the claim.  In due course, counsel was assigned by the insurer to defend the interests of JJW. 

 

Despite the time to appear expiring on June 10, 2017, no answer was submitted.  On July 17^th, some 37 days later, counsel requested an extension of time to appear.  Counsel denied the request, and immediately moved for a default judgment.   Defendant cross-moved for an Order compelling acceptance of the Answer.

 

The Appellate Division agreed that plaintiff’s default was improper, and defendant’s motion to compel acceptance was correctly granted by the trial court.  In so holding, the Court noted that such relief was appropriate “where the record demonstrates that there was only a short delay in appearing or answering the complaint, that there was no willfulness on the part of the defendant, that there would be no prejudice to the plaintiff, and that a potentially meritorious defense exists.”

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

04/25/17       Liberty Insurance Corporation v. Admiral Insurance Company

United States Court of Appeals, Second Circuit

Second Circuit Holds that “In Comparison” Language in Other-Insurance Provision Does Not Trigger Co-Primary Coverage (New York Law)

The State University Construction Fund began a project entitled the “Rehabilitation” (their word not mine) of Fitzelle Hall at SUNY Oneonta.  Liberty issued a policy to Schenectady Steel Co, a subcontractor working on the project.  In turn,  Schenectady hired Capital Construction Management Services LL as a sub-subcontractor.  Capital obtained an insurance policy from Admiral Insurance.  As usual, a disagreement ensued over who owes what after a lawsuit involving the Fund.  Admiral wanted Liberty to pay as a co-primary carrier in the underlying suit. 

 

Upon reviewing the District Court’s order, the court ultimately decided for Liberty.  Here, the Liberty policy had an endorsement, which required that its insurance be excess over any other insurance “unless the written agreement with you requires that the insurance provided for the additional insured be primary concurrent or primary non-contributory, in comparison to the additional insured's own policy or policies.”  Although Admiral argued the “in comparison” clause required the Liberty policy to be primary “as long as the circumstances negating the excess other insurance exist,” the Court still sided with Liberty.  Under New York law the court “construe the policy in a way that affords fair meaning to all of the language. . . and leaves no provision without force and effect.”  For the court to side with Admiral, Liberty’s “in comparison” clause would have no meaning in the policy.  Indeed, the court found the Liberty policy is primary “in comparison” only to the policies of the additional insureds.  As such, the Liberty policy is excess to and not co-primary with the Admiral Policy. 

 

04/25/17       Patrick Hannan, et al. v. Hartford Financial Service, Inc.

United States Court of Appeals, Second Circuit

Second Circuit Holds Alleged Misleading Information about Life Insurance Plans Did Not Violate ERISA (Connecticut/Federal Law)

Hartford issued a group life insurance policy to Family Dollar Stores Inc.  The plan automatically enrolled all employees in a basic life insurance with the option to purchase supplemental life insurance.  Patrick Hannan, one of many employees, claimed the materials provided about the program, misled employees about the plan.  Establishing a class, the employees bought a suit alleging Hartford and Family Dollar violated ERISA.  The class argued Hartford and Family Dollar violated ERISA provisions pertaining to fiduciary duties and prohibited transactions.

 

Unlike the employees accepting Hartford’s life insurance policy, the Court rejected Hannan’s claims.  Here, Hartford and Family Dollar did not violate any provision of ERISA.  Under ERISA § 1002(21)(A), an entity is a fiduciary of an employee benefit plan to the extent it exercises discretionary authority . . . over the management or administration of the plan or (2) any authority or control over the management or disposition of plan assets.”  Here, Hartford’s no pre-existing relationship with the plan or post-contract exercise of discretionary control was not enough to establish as a fiduciary of the employee benefit plan.  Similarly, Hannan failed to allege sufficiently that Family Dollar failed in its fiduciary duty not to misrepresent or mislead because the employees did not incur any cost and the enrollment materials accurately disclosed the cost for supplemental life insurance.  Lastly, Family dollar cost-reduction strategies did not violate ERISA prohibited transactions provision § 1106(b)(1).  As such, Hannan’s claims were dismissed.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

01/30/17       Vista Eng’g Corp. v. Everest Indem. Ins. Co.

Supreme Court, Queens County

Court Finds Disclaimer Not Subject to New York Insurance Law Section 3420(d) where Policy was Not Delivered in New York

This declaratory action was brought by the Vista Engineering Corporation, the New York City Transit Authority and Metropolitan Transportation Authority against Everest Indemnity Insurance Company and its insured.  Everest issued a policy of insurance to East Coast Painting & Maintenance.

 

An employee of East Coast Painting sustained injury while working at a construction site located at 27th Street-41st Avenue in Queens.  East Coast Painting had been retained by Vista.  The employee brought suit against Vista, the Transit Authority and the MTA.  By letter dated September 29, 2011, Vista’s carrier sought a defense from Everest.  By letter dated December 5, 2011, coverage was disclaimed based upon a “Third-Party Action Over” exclusion contained in the Everest policy on the ground that the injured worker was an employee of East Coast at the time of the accident. 

 

Vista moved for summary judgment claiming the denial was late as a matter of law pursuant to New York Insurance Law § 3420(d).

 

The court began with the proposition that there was no doubt the subject exclusion explicitly excluded coverage for bodily injuries sustained by employees of East Coast Painting, including the injured plaintiff.  It then found that the only issue was whether § 3420(d) applied.  For convenience, this section provides in relevant part:

 

           (2)     If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.

          

Everest submitted in response to the motion an affidavit that Everest Indemnity was located in New Jersey, and that East Coast and its broker were located New Jersey when the policy was issued.  Further, it was stated that neither the subject policy nor any endorsement to that policy was issued or delivered in New York.  Based on this evidence, the court found that the subject policy and endorsements were all issued and delivered outside of the State of New York.  In opposition, Vista presented no evidence to contradict this showing.  Accordingly, where the policy was issued outside of New York, the disclaimer was not subject to the timeliness requirements of the Insurance Law. 

          

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

05/03/17       Woodson v. Allstate Insurance Company

United States Court of Appeals, Fourth Circuit

Bad Faith Claim under North Carolina Law was Preempted by Federal Regulations for Flood Insurance Policies

Gary and Rebecca Woodson purchased flood insurance policy through Allstate for their waterfront home in Jarvisburg, North Carolina.  Shortly after Hurricane Irene stuck their house in August 2011, the Woodsons submitted a claim to Allstate.  Allstate’s expert concluded there was no damage or permanent movement to the house, and recommended reimbursing the Woodsons only for washed out soil at a cost under $1,200.  In contrast, the Woodsons’ engineer found substantial damage caused by the storm, including movement of the house’s pilings that caused the house no longer to be level.  Allstate denied the claim for foundation damage by letter dated February 28, 2012, and FEMA affirmed Allstate’s findings.

 

Flood policy’s, like the one purchased by the Woodsons, are heavily regulated by the federal government.  Indeed, the terms and conditions of national flood insurance policies are specified by regulation.  One such term is that a lawsuit must be started within one year of a written denial of all or part of the claim.  The suit must be filed in the United States District Court in which the covered property was located at the time of the loss.

 

On February 27, 2013, the Woodsons filed a lawsuit for breach of contract and for violation of the North Carolina Unfair and Deceptive Trade Practices Act in North Carolina state court.  The Fourth Circuit concluded that their lawsuit against Allstate was barred by the one year statute of limitations.  The policy and regulations specifically require the insureds to commence a lawsuit in federal court within one year, and the Woodsons failed to do so by commencing their lawsuit in state court.  In addition, the Woodsons’ bad faith claim was governed exclusively by federal law.  Thus, it had to be commenced within one year of the denial of the claim.  Thus, the court held  that the Woodsons' state law claim under the North Carolina Unfair and Deceptive Trade Practices Act for bad faith handling of their claim under the policy is preempted by federal law and that any similar claims under Title 44, Part 62, of the Code of Federal Regulations, if available, were nonetheless barred by the one-year statute of limitations contained in federal law.

 

04/25/17       Port Liberte Homeowners Association, Inc. v. Lexington Insurance Company

United States District Court, District of New Jersey

Poorly Pleaded Bad Faith Claim Stayed Pending Resolution of the Breach of Contract Claim

Port Liberte is a condominium complex in Jersey City.  Port Liberte had a property insurance policy with Lexington.  After Superstorm Sandy, Lexington paid Port Liberte nearly $6 million in damages, but it declined to pay Port Liberte approximately $3.3 million in claimed damages.  Port Liberte sued alleging (1) Breach of Contract; (2) Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Breach of Fiduciary Duty; and (4) Declaratory Judgment.

 

The Complaint alleged that Lexington wrongly classified certain items as “Outdoor Property,” which had the effect of subjecting those items to a contractual sublimit.  Lexington allegedly misclassified certain damage items as “Debris Removal,” and some disposal costs as “Decontamination Costs,” categories which also were subject to a contractual sublimit.  Lexington allegedly wrongfully denied Port Liberte's claims for consequential loss of monthly docking fees.

 

Counts 1 and 4 straightforwardly alleged that Lexington breached the contract of insurance between the parties.  Counts 2 and 3 allege that the same conduct constituted bad-faith conduct.  Thus, Lexington moved to dismiss, arguing that the bad faith counts did not allege specific facts elevating the denial to the level of bad faith.  The denial was characterized as heinous, largely through the medium of piling on adjectives.

 

Despite the lack of a well pleaded bad faith claim, the court decided to sever and stay the bad faith causes of action and proceed with the breach of contract action.  The court decided to explore the issue of bad faith later if Port Liberte is entitled to coverage under the contract.

 

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

03/31/17       Nautilus Insurance Co. v. 93 Lounge Inc. et al.

Eastern District of New York                                             

Drive-Through Exclusions

This coverage dispute concerns defense and indemnification obligations with respect to two underlying actions against Nautilus’ insured, 93 Lounge.  Both suits arose out of a single accident in which a patron of 93 Lounge, after drinking at that establishment, struck multiple pedestrians with the vehicle he was driving.  In the motion before the district court, Nautilus sought a declaration that it had no duty to defend or indemnify 93 Lounge under a Commercial General Liability Policy.

 

The district court found in favor of Nautilus.  Initially, the court noted that the allegations against 93 Lounge in both underlying complaints were that the establishment sold, served, and the driver consumed alcoholic beverages on 93’s premises and, as such, 93 Lounge contributed to the accident in violation of New York’s Dram Shop laws.  As such, coverage was excluded under the clear and unambiguous language of the Policy’s liquor liability exclusion, which excluded coverage for bodily injuries for which 93 Lounge might be held liable for by reason of “[c]ausing or contributing to the intoxication of any person,” “[t]he furnishing of alcoholic beverages to a person … under the influence of alcohol,” or “[a]ny statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.”  Because the district court could find no other basis for liability in the underlying actions that did not derive from, arise out of, or was independent of 93 Lounge serving alcohol to the driver, thereby contributing to his intoxication, Nautilus had met its burden of establishing coverage was excluded.

 

The district court also agreed that coverage was clearly and unambiguously excluded under the policy’s exclusion for “bodily injury … arising out of the ownership, maintenance, use or entrustment to others of any … ‘auto.’”  Although 93 Lounge had no formal relationship with the driver, “[n]othing in the language of the exclusion indicates that the exclusion was limited to only the insureds and others with a formal relationship[] with the insured.”  The court further noted that this exclusion expressly stated that it applied even if a claim framed the negligence or wrongdoing as occurring in the “…supervision, … or monitoring of others, if the ‘occurrence’ which caused the ‘bodily injury’ … involved the ownership, maintenance, use or entrustment to others of any … auto[mobile].”  The court therefore granted summary judgment to Nautilus.

 

EWELL’S UNIVERSE
John R. Ewell

[email protected]

 

04/27/17       Xia v. Probuilders Specialty Ins. Co.

Washington Supreme Court

Where Hot Water Heater Released Carbon Monoxide and Caused Injury, Unambiguous Pollution Exclusion Applied But Did Not Bar Coverage; Thousands Flee (from Doing an Insurance Business in Washington State)

The Supreme Court of Washington considered whether a pollution exclusion barred coverage where an improperly installed a hot water heater pumped carbon monoxide into a home causing injury to the homeowner.

 

Xia purchased a home built by Issaquah Highlands, who carried commercial general liability insurance through ProBuilders. After moving into her home, Xia began to feel ill. Apparently, an exhaust vent attached to the hot water heater had not been installed correctly and was discharging carbon monoxide directly into home. ProBuilders denied coverage based on a pollution exclusion. Xia sued Issaquah Highlands and ultimately settled for $2 million. In exchange for a covenant not to enforce the judgment, Issaquah Highlands assigned to Xia all first-party rights, and causes of action against its insurer, ProBuilders. Xia sued ProBuilders seeking declaratory judgment with regard to coverage and alleging, among other things, breach of contract and bad faith. Xia and ProBuilders brought cross motions for summary judgment.

 

On appeal, the Washington Supreme Court found that:

(1)      The pollution exclusion at issue was unambiguous;

(2)      Carbon monoxide is a pollutant under the policy;

(3)      The pollution exclusion applied; and

(4)      The insurer “correctly applied the language of its pollution exclusion” in this case.

 

Despite this, Washington’s high court held that, for the first time ever in a third party coverage case, the efficient proximate cause rule applied. Under Washington law, the rule of efficient proximate cause provides coverage “where a covered peril sets in motion a causal chain[,] the last link of which is an uncovered peril. If the initial event, the ‘efficient proximate cause,’ is a covered peril, then there is coverage under the policy regardless whether subsequent events within the chain, which may be causes-in-fact of the loss, are excluded by the policy.”

Thus applying the efficient proximate cause rule, the Court stated that a jury could reasonably and conceivably view the allegations in the complaint as separate steps in the same causal chain. Specifically, that the alleged negligent installation of the water heater may be a separate step from the alleged the failure to discover and correct the defect. ProBuilders argued that applying the efficient proximate cause rule to this case would eviscerate the exclusion entirely, arguing that all acts of unintentional pollution begin with negligence. The Court disagreed.

The Washington Supreme Court held that ProBuilders breached its duty to defend because “the efficient proximate cause of Xia's loss was a covered peril: the negligent installation of a hot water heater.” In other words, the Court found a duty to defend because the causal chain could be traced back to an alleged negligent act, the installation of the water heater (Note: wasn’t the carbon monoxide pumped in the home from the defective installation?). Finally, the Court held that insurer acted in bad faith, despite the fact that this was the first case in the state of Washington to expand the efficient proximate cause rule to a third party coverage case.

 

 

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

Insurance and Emergency Contraception

This week, New York’s Senate will consider proposed bill S3790, which provides for the dispensing of “emergency contraception” when provided pursuant to an ordinary prescription or order and when lawfully provided other than through a prescription or order.  The Bill  defines emergency contraception to mean “one or more prescription or non-prescription drugs, used separately or in combination, in a dosage and manner for preventing pregnancy when used after intercourse, found safe and effective for that use by the United States food and drug administration, and dispensed or administered for that purpose.”

 

You can view the bill at:

 

https://www.nysenate.gov/legislation/bills/2017/S3790

 

The purpose of the Bill is to make emergency contraception drugs purchased over-the-counter without a medical prescription covered by insurance companies. The Bill will provide:

 

               Section 1 adds a new subsection (n) to section 3216 of the Insurance

Law, to provide that emergency contraception drugs purchased

over-the-counter without a medical prescription shall be covered by

individually purchased insurance plans.

 

Section 2 adds a new subsection (t) to section 3221 of the Insurance

Law, to provide that emergency contraception drugs purchased

over-the-counter without a medical prescription shall be covered by

group purchased insurance plans, such as insurance plans provided

through employment.

 

 

OFF THE MARK
Brian F. Mark
[email protected]

 

04/19/16                 Employers Mut. Cas. Co. v. Fisher Builders, Inc.  
Supreme Court, Montana
Montana Supreme Court Reverses Lower Court Holding That an “Accident” May Include Intentional Acts if the Damages Were Not Objectively Intended or Expected by the Insured

The defendant, Fisher Builders, was hired by the Slacks to construct a remodeled home on the site of an old vacation home.  In order to maintain the status of the home as a pre-regulation structure and receive the benefit of favorable zoning regulations, the remodeled home had to incorporate the existing structure.  Approval of the building permit was also conditioned on the requirement that the existing deck remain unchanged as a result of the proposed project. 

 

While Fisher Builders was remediating damage to the walls of the existing home caused by carpenter ants, the deck collapsed.  As a result of the collapsed deck, the building department revoked the construction permit.  The revocation was appealed and a settlement was reached.  However, the agreement only permitted the Slacks to construct a home smaller than originally approved.

 

The Slacks commenced a negligence action against Fisher Builders.  Fisher Builders was insured under a CGL policy issued by the plaintiff, Employers Mut. Cas. Co. (“Employers”).  The policy contained the standard definition of “occurrence”. 

 

Employers commenced a declaratory-judgment action and moved for summary judgment.  The District Court granted the motion, concluding that the conduct of Fisher Builders was clearly intentional and did not constitute an “occurrence” under the policy, regardless of whether the consequences were intended.  The Supreme Court examined prior cases wherein it had held that an “accident” may include intentional acts, if the damages were not objectively intended or expected from the standpoint of the insured.  Relying on this analysis, the Montana Supreme Court reversed the District Court’s decision, ruling that issues of fact existed as to whether Fisher Builders intentionally tore down the entire existing structure and whether Fisher Builders intended or expected the deck to fall down.

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

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

Court of Appeal of the State of California, Fourth Appellate District

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 have 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.