Volume XVIII, No. 24 (No. 480)
Friday, May 19, 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.
HURWITZ & FINE CELEBRATES ITS 40TH ANNIVERSARY
AND
EXPANDS ITS PRACTICE IN THE CAPITAL DISTRICT
Edward Flink, Jamey Maswick and Thomas Sica Join the Firm
Hurwitz & Fine, P.C. is a statewide coverage, trial and business law firm that handles insurance coverage and defense matters as well as business transactions throughout the state.
Based on growing client needs, the firm is pleased to announce further expansion of the firm east and north with the opening of a new branch office in Lake Placid and greater coverage in the Albany area.
We welcome Edward Flink as a Member and James (Jamey) Maswick as an Associate, both of whom were formerly affiliated with Flink Smith LLC, and both of whom will be serving the Albany/Capital District/North Country area where they are well established, well known and well respected. Ed, who becomes the 14th attorney in our state-wide coverage team, is a seasoned trial lawyer who will be recruiting and training attorneys in complex coverage matters as he develops our Albany presence.
Jamey is a graduate of Albany Law School who has experience in a wide range of litigation and business transaction experience that will help with our expansion, as well as continuing to service clients he has developed out of the Lake Placid office. Also joining the group will be Tom Sica who joins us as Special Counsel to support our clients in the Albany area and who, like other attorneys across the firm, stands ready to serve wherever needed in New York State.
You are welcome to reach us any time at:
Headquarters
1300 Liberty Building
Buffalo, New York 14202
716-849-8900
Long Island Office
535 Broad Hollow Rd., A-7
Melville, New York 11747
631-465-0700
Capital District/North Country Office
2577 Main Street
Lake Placid, NY 12946
518-523-2441
And we are happy to meet you by appointment at:
Albany
Corporate Woods
Albany, NY 12211
518-786-1800
as well as in Albion, Amherst, Niagara Falls, Palm Beach Gardens and Toronto.
With their addition, and as the firm turns 40 on June 1, we are celebrating “40 on the 40” with 40 attorneys across New York State! We are proud of our growth and legacy as a premier and nationally recognized firm.
There’s a lot of history here with a great deal of longevity. I was hired as the firm’s the first law clerk hired in 1977 – 45 days after the firm opened its doors. And in 1979, Ann Evanko, our Managing Partner, joined the firm, together with Larry Franco, chair of our Business, Estates and Trust Department, as young associates. Roger Ross, chair of our Commercial Real Estate Department, joined in 1981. We have several lawyers who have been with us for many years and are part of our leadership in the firm’s stability and expansion. We are proud of our accomplishments but most proud of our dedicated and creative lawyering for our clients.
Welcome New York Insurance Association:
We welcome our NYIA friends to town in two weeks (nice of them to come celebrate our anniversary with us!) as they hold the NYIA 2017 Annual Conference one block away from us at the Hyatt Regency in downtown Buffalo. Our own editors Steve Peiper and Jen Ehman will be in attendance wearing “Got A Situation?” badges I dared them to wear so you’d recognize them! Stop by our table for a fun multitasking “Got A Situation?” pen/flashlight/stylus that Jen thought you just might need – she uses hers to find things in her purse. There are still spots available if you would like to register for this important insurance industry advocacy event: https://nyia.org/nyia-2017-annual-conference/
Mother’s Day, Revisited:
We often receive comments about case law of which we’ve reported as well as the historical tidbits we offer. Special thanks to Rachel Sheffield, Casualty Practice Leader at Triton Claim Management for her comments on the origin of “Mother’s Day”. Rachel wrote to tell me that “according to the Christian faith of King Henry VIII in England, it’s called Mothering Sunday and not Mother’s Day at all. It moves with Easter but always on a Sunday, the fourth in Lent. It was about getting everyone to the ‘mother church’ and gave servants a day off. It then progressed to including actual mothers who were then at church instead of working (you might want to check all these facts!) I believe America modernized the day, as they tend to do, to change them into more ‘palatable’ holidays!”
Thanks, Rachel!
Tender Benders:
This question comes up too often and in fact twice in the past two weeks:
Question:
“I have a situation. We insure a subcontractor who appears entirely responsible for the plaintiff’s accident. The plaintiff is our employee. A lawsuit has been commenced against the general contractor under the New York State Labor Law. Our policy provides additional insured coverage to the general contractor for this loss – and we recognize we’re primary – and there is a hold harmless/indemnity agreement running in favor of the general contractor.
The GC has tendered to us under both the insurance provisions and the trade contract defense and indemnification provisions. Should I accept under both?”
Answer:
If you owe additional insured status, and you know your coverage is primary, accepting a tender based on additional insured status is surely proper and is often recommended. This way you may be able to control the outcome of litigation.
However, if you accept a tender, as well, under trade contract defense and indemnity provision remember that unless you limit that acceptance to your policy limits, you run the risk of putting your insured or its excess carrier in a tough position. Imagine, for example, you provide $1 million in general liability coverage for both the subcontractor and the general contractor. If you accept contractual indemnity, without a limitation to your policy limits, and it was a verdict in a day, week, month or year of $1.5 million, you have told the general contractor that your insured will reimburse it for the $500,000 over your policy limits. Your insured or its excess carrier may be surprised about that and not happy that you have exposed them to damages without their input and consent.
We recommend that you be hesitant about accepting contractual indemnification where your insured or its excess carrier faces potential exposure unless you’ve had a frank discussion with them about the reasons for this decision.
This Issue:
There are some very interesting decisions reported in the attached issue of Coverage Pointers including one where “reservation of rights” language was deemed acceptable (because there was a real question of fact about the underlying circumstances). It is a good decision on appropriate disclaimer protocols.
There’s another case discussing the requirement that disclaimer letters be mailed to the insured and the injured party (or their attorneys). New York does not require that disclaimer letters be sent certified, return receipt requested, although that protocol would have given the insurer the proof it needed.
You’ll also find a rather concerning decision which left in place a deceptive practices pleading (GBL Section 349) because the insurer did not disprove it committed that conduct.
Labor Law Pointers:
If you handle New York construction site litigation and you don’t already subscribe to our sister publication, Labor Law Pointers, you are missing a jewel. Contact Dave Adams at [email protected] and tell him that Dan sent you.
PLRB Regional Adjuster Conferences
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. Come learn about new claim products and services at the Insurance Services Expo. The Regional Adjusters Conference is the right choice for your professional growth and development!
The exposition includes 85 to 90 regionally-focused service providers, with claims-specific expertise. The expo will provide valuable contacts and resources to improve claim outcomes. Come network with some of the top service providers in our industry.
2017 Western Regional Adjusters Conference
June 14-15, 2017
Riverside Convention Center
Riverside, CA
2017 Central Regional Adjusters Conference
September 6-7, 2017
Hilton New Orleans Riverside
New Orleans, LA
2017 Eastern Regional Adjusters Conference
October 4-5, 2017
Hyatt Regency Jacksonville
Jacksonville, FL
Tessa’s Tutelage:
Dear Readers,
This week no-fault and estate law meet, probably not for the first time. The Second Department considered whether the Administrator of a decedent’s estate should have been compelled to appear for a deposition. The Insurance company wanted to get out of paying the costs associated with medical equipment purportedly used by the decedent following a motor vehicle accident. To do this they requested that the Supreme Court direct the administrator to sit for a deposition. The Supreme Court did so. The Second Department did not. The Second Department agreed that generally disclosure of information should be liberal. However, the information must still be relevant. The Second Department could not see any way that the testimony of the Administrator would be relevant to the insurance company’s case. I tend to agree.
The other case up for review was the decision of the Civil Court to order plaintiff to pay defendant’s counsel $250 in fees. Plaintiff appealed. The Second Department assumed that the Civil Court had relied upon the Rules of the Chief Administrator of the Court, which allows a court to award money to reimburse expenses incurred and reasonable attorney fees. The Second Department noted that no appeal as of right lies from the portion of an order which was decided “sua sponte” and declined to grant leave to appeal. Now, if you are wondering what “sua sponte” means, it generally refers to an action taken by a judge without a request from one of the parties.
Happy reading,
Tessa
Tessa Scott
President Wilson’s May 19, 1917 Message Regarding Military Draft
By the President of the United States of America
A Proclamation
Whereas, Congress has enacted and the President has on the 18th day of May, 1917, approved a law which contains the following provisions:
Section 5. That all male persons between the ages of twenty-one and thirty, both inclusive, shall be subject to registration in accordance with regulations to be prescribed by the President, and upon proclamation by the President or other public notice given by him or by his direction, stating the time and place of such registration, it shall be the duty of all persons of the designated ages, except officers and enlisted men of the Regular Army, the Navy and the National Guard and Naval Militia while in the service of the United States, to present themselves for and submit to registration under the provisions of this act.
And every such person shall be deemed to have notice of the requirements of this act upon the publication of said proclamation or other notice as aforesaid given by the President or by his direction.
THE PENALTY FOR FAILURE
And any person who shall willfully fail or refuse to present himself for registration or to submit thereto as herein provided, shall be guilty of a misdemeanor and shall, upon conviction in the District Court of the United States having jurisdiction thereof, be punished by imprisonment for not more than one year, and shall thereupon be duly registered.
***
Provided, further, that persons shall be subject to registration as herein provided who shall have attained their twenty-first birthday and who shall not have attained their thirty-first birthday on or before the day set for the registration, and all persons so registered shall be and remain subject to draft into the forces hereby authorized unless exempted or excused therefrom, as in this act provided.
Provided, further, that in the case of temporary absence from actual place of legal residence of any person liable to registration as provided herein, such registration may be made by mail under regulations to be prescribed by the President.
Peiper’s Presentation:
Within the past two weeks, we’ve seen a “think-tank” estimate that 95% of all automobile traffic will be conducted in fully autonomous vehicles within the next decade and a half. Thus, by the year 2030 the group suggests that American driving habits will switch from traditional driving to ride sharing/ride hailing. The movement, it is presumed, will slash prices in automobile insurance, costs associated with driving, and costs associated with a traditional oil/gas burning vehicle. We remain skeptical that by 2030 we’ll all be ordering up a driverless ride through our smart phone. Nevertheless, your author does note how bizarre the thought would have been in 2004 that one could hail a ride through a button on your mobile. Heady stuff, indeed, for a flip phone.
If the predictions prove even partially correct, the changes in law, insurance and industry will be monumental. And, don’t be so sure it’s not forthcoming.
Hello I-Car.
Apple, you know that little tech company in California, obtained its first permit to test autonomous vehicles on April 13th. On May 1st, Apple was writing to the California DMV with suggested changes to the most recent driverless car regulations. Those regulations, by the way, were released eons ago on March 10, 2017. To date, the California DMV has issued permits to 30 different manufacturers who are interested in developing fully automated systems.
You cannot tell me that “on the road” outside claims professionals won’t be more than happy to let some else drive. I, personally, have seen the NYS Thruway more than enough through the driver’s side windshield, and I’m sure there are more than a few of you reading this who would share similar sentiments.
While future roads will be decidedly safer with no one actually driving on them, the current batch of cases is a bit more traditional. As offered below, we have a full assortment of indemnity arguments. As with most indemnity claims, the language of the contract is strictly construed.
For all of us gawkers out there, the Coon case tells us our options are limited when assaulted while in the process of watching an altercation. In that case, plaintiff was struck while security personnel was removing an unruly patron. Plaintiff attempted to sue the security company, but to no avail as the Court ruled a duty was not owed to third parties. The case brings new meaning to the term “launched an instrument of harm.” A little Espinal humor for those of you “in the know.”
That’s it for now. See you in two more, if not rendered obsolete by Apple before then.
P.S. – If you’re wondering what were the most popular phones in 2004, feel free to peruse at your leisure.
https://en.wikipedia.org/wiki/List_of_best-selling_mobile_phones#2004
P.P.S. - The author is not responsible for lost productivity.
Steve
Steven E. Peiper
Happy 100th Birthday Skippy Roberge
Regular readers know my love for baseball trivia. This would have been Skippy Roberge’s 100th birthday. Who? One of Lowell, Massachusetts’ favorite sons. That’s who.
From the Lowell Sun and Sam Weisberg:
Al "Skippy" Roberge and Johnny Barrett, who was on that list, were the last players from the city of Lowell to play in the major leagues, both concluding their careers in 1946. Only serious injuries suffered during World War II kept Roberge from reaching his true potential on the diamond.
"Skippy" was rated as the top all-around athlete to emerge from Lowell's Keith Academy (1933-37), where he was the football team's quarterback, an All-American forward in basketball and a shortstop and pitcher in baseball.
He then starred in the strong semi-pro Lowell Twilight Baseball League and the Lowell YMCA basketball circuit, before catching the eye of Boston Braves manager Casey Stengel, who signed him to a pro contract in 1938.
Roberge worked his way up from the minor leagues until he reached the majors in 1941, and carloads of his fans from Lowell would journey down to musty Braves Field to see their hometown boy in action. He played second and third base for the Braves in 1942, but then his baseball career was cut short right in his prime by World War II, during which he served three years in the Army, receiving a Purple Heart for injuries sustained in battle.
"Skippy" returned to baseball following the war, winding up his major league career with manager Billy Southworth's Braves in 1946.
He continued his pro career until retiring in 1952 at age 35.
Checking his major league career, Roberge participated in 177 games, had 508 at-bats, 112 hits, 19 doubles, two triples, three home runs, 29 walks, scored 35 runs, batted .220 and posted a .972 fielding percentage while playing for a pair of Hall of Fame managers, Stengel and Southworth.
Read more: http://www.lowellsun.com/sports/ci_26267897/heres-vote-skippy-roberge#ixzz4gChv4MZF
Hewitt’s Highlights:
Dear Subscribers:
Serious injury cases are few this edition. The First Department issued a few cases of note. In one, the plaintiff’s expert failed to address a pre-accident MRI which showed multiple disc bulges and back problems. The expert did not state why any limitations were not the result of that pre-existing injury as opposed to the accident. In another case, the only medical evidence in the record in plaintiff’s favor was from a doctor plaintiff saw three years after the accident. That doctor’s referencing of a report by a physician plaintiff claimed to have seen earlier was deemed hearsay.
On a personal note, it’s been a busy Spring with Communions and children’s birthdays, Little League, and soccer. My 8-year-old was extremely excited that his classroom caterpillar turned into a butterfly. The class plans on releasing all the butterflies this week. I hope your Spring has also brought you joy.
Until next time,
Rob
Robert Hewitt
Paris Out of Stitches, a Century Ago:
New-York Tribune
New York, New York
19 May 1917
More Sewing Girls in
Paris Strike; 8,000 Out
Paris, May 18.—The ranks of the striking sewing girls were increased to-day to 8,000, the employes [sic] of several additional establishments having joined the movement for a Saturday half-holiday with pay and an increase in pay of one franc a day because of the high cost of living.
The strikers assembled this morning in the neighborhood of the Place de l’Opera and proceeded by groups to the entrances of the different shops to see that no deserters from their ranks were returning to work. Then they went to the labor Exchange, where the head of the Dressmakers’ Employers’ Association made a conciliatory statement, in which he said he personally was in favor of granting the demands except the Saturday half holiday, which, he claimed, could be allowed by certain houses, but could not be accepted by the association as a general measure.
There has been no serious disorder.
Barnas on Bad Faith:
Hello again:
I write you this note while sitting at an outdoor table at Bryant Park in Midtown Manhattan on a perfect spring evening. I don’t know what more one could ask for than beautiful weather, outdoor power outlets, free Wi-Fi, and some green space to gaze at while writing Coverage Pointers. This is my first time in Bryant Park. Apparently, the area was first designated as a public space back in 1686 by New York’s colonial governor, Thomas Dongan. Interestingly, the park is located entirely over an underground structure that houses the stacks of the New York Public Library Main Branch, which I also visited today. While we coverage attorneys spend quite a bit of time in New York City, it seems that so much of it is spent on planes, trains, and buses shuttling back and forth between airports and courthouses. It’s a refreshing change to have a few moments to sit down and enjoy some of the outdoor space that New York City has to offer.
If you choose to, you will find two bad faith cases in my column today. The Harmon case is an Idaho Supreme Court decision that is actually applying Alaska law. It is a curious decision, in which the court concludes that State Farm breached the insurance contract despite concluding that State Farm had satisfied its obligation to pay for the loss to the motorhome at issue. The court below had dismissed the bad faith claim based on its conclusion that State Farm had not breached the insurance contract, but the Idaho Supreme Court reinstated the bad faith claim. The case was remanded for consideration of whether State Farm acted in bad faith and whether the insureds suffered any extra-contractual damages.
Linthicum looks like a bad faith setup to me. After a fatal car injury to their son, the plaintiffs’ attorney sent a letter to the driver’s insurer stating that he anticipated bringing claims for wrongful death and the infant’s pain and suffering, which is recognized under Georgia law. Later, the plaintiffs’ attorney sent a time sensitive demand offering to settle only the wrongful death claim for the insured’s policy limits. The insurer did not respond, and an excess judgment was eventually taken against the insured. The court concluded that the insurer did not act in bad faith by failing to accept the settlement demand. As the offer would not have settled all the claims against the insured, the insurer was not obligated to accept it or negotiate further.
Back to the present, a band at the park has broken out into a dance along polka ditty. Time to dance.
Signing off,
Brian
Brian D. Barnas
First Woman Admitted to US Supreme Court Passes Away, a Century Ago:
The Brooklyn Daily Eagle
Brooklyn, New York
19 May 1917
BELVA LOCKWOOD DIES,
AGED 86 YEARS
Was Pioneer Suffragist, Woman
Lawyer and Presidential Candidate.
Washington, May 19—Mrs. Belva A. B. Lockwood, the first woman admitted to practice before the Supreme Court, a pioneer in the woman suffrage movement, and the only woman who ever was a candidate for President of the United States, died here today after a long illness, aged 86 years.
She was born October 24, 1830, in Royalton, N.Y., and her maiden name was Belva Anna Bennett.
The apparently hopelessness of woman’s cause so aroused her that she fought for more than fifty years against the exclusion of women from rights which men enjoyed. She fortified herself with a collegiate education at Genesee College and was preceptress of seminaries at Lockport, Gainesville and Oswego, N.Y.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
While I generally write about our own Second Circuit, the highest federal court covering New York State (apart from SCOTUS, I suppose), this time the Circuit has been quiet on the insurance front. Perhaps that’s because this week the Wide World of Coverage comes to you from the proverbial, and this time literal, courthouse steps. That is, they knew I was coming! That’s right, this edition will necessarily be brief as I’m just taking a break from preparing my argument before that very venerable court. As you will undoubtedly read about in a forthcoming edition of CP, we have a case currently before the Second Circuit and I’m arguing it ... today! It’s a coverage case about definitions, endorsements, and the dreaded alleged ambiguity. I’ll let y’all know how it goes.
Until next time!
Agnes
Agnes A. Wilewicz
Brooklyn Bar Considers Admission of Women:
The Brooklyn Daily Eagle
Brooklyn, New York
19 May 1917
R. H. McQuistion’s Views Not
Properly Reported.
Friends of R. Hunter McQuistion, lawyer, and former Assemblyman, were surprised to read a report quoting him as opposing the admission of women lawyers to membership in the Brooklyn Bar Association at a recent meeting, as he is an ardent advocate of woman suffrage.
“I have not expressed any opinion on the proposition. If I were to vote on the proposition I would vote for their admission,” said Mr. McQuistion today.
Another man, who was mistaken for Mr. McQuistion, in opposing the admission of women lawyers to the association, said:
“I wish we had no women lawyers. I would not like to see a woman on the Bench or in the jury box and I am not in favor of letting them in.”
Editor’s Note: This article should be read in context with the article about Belva Lockwood, above. She was admitted to practice before the SCOTUS in 1879 yet here, 38 years later, there were some who could not support women being admitted into the Brooklyn Bar Association.
Altman’s Administrative (and Legislative) Agenda
Greetings, Dear Readers,
Happy early Memorial Day (for, by time of our next article, Summer will be unofficially underway). I hope you are enjoying this gorgeous weather, wherever you are. All is well here. I saw the New York Philharmonic perform Beethoven’s 9th symphony last weekend, and enjoyed Shabbat dinner with my girlfriend’s family. That’s right, someone actually decided to date me. I’m as surprised as you are, Dear Reader. We’re having her checked out by a psychiatrist next week to find out why.
No news on the legislative front this week. So instead, I bring you a poem:
The winter’s finally letting go
(Even up in Buffalo).
So as the firm fetes 40 years,
We “downstaters” have no fears
That we will freeze when we go forth
To our party way up north
I hope that you can join us too
For we are nothing without you.
A firm without its clients be
Quite a lonely place, you see.
So thank you, readers, you’re our core
We hope to serve for 40 more.
Howard
Howard B. Altman
Boxing KO’d – a Century Ago:
Middletown Times-Press
Middletown, New York
19 May 1917
PRIZEFIGHTING IN THIS
STATE KNOCKED OUT.
Albany, May 19—Governor Whitman today signed the Slater bill which will prohibit legalized prizefighting in this state after November 15.
Editor’s Note: There is a love-hate relationship between the New York State Legislature and boxing and there is a long history of boxing and anti-boxing legislation in New York
- 1859: Specific legislation bans promoting and engaging in “ring or prize fights.”
- 1896: The Horton Law becomes effective, legalizing boxing in the state of New York (until 1900).
- 1900-08-30: The Lewis Law repeals the Horton Law, and makes prize-fighting illegal in New York State. Boxing will continue in New York on a club membership basis only until 1911.
- 1911-07-26: Governor Dix signs bill (Frawley Act) permitting ten-round no-decision bouts, using eight-ounce gloves.
- 1917-03-01: Governor Charles E. Whitman vows to crush boxing in the state,
- 1917-05-15: The Slater Bill, outlawing boxing in the state, after having been twice defeated, becomes law.
- 1920-03-25: State Senate adopts the Walker Law, which legalizes boxing and establishes the New York State Athletic Commission, and becomes the model for many other jurisdictions throughout the United States.
- 1984: NY Medical Society passes resolution to ban all boxing in NY.
- 2016: Athletic Commission given power to regulate amount of insurance required for boxing matches.
Phillips Federal Philosophies:
Hello, All:
For those of you who haven’t yet had the pleasure of visiting Buffalo, you should know that the city has a very robust and proud Polish presence (I once started off a job interview with ‘my grandmother’s maiden name is Vinesk’). In addition to having healthy access to pierogi, this means that Buffalo is the Dyngus Day Capital of the World, an Easter Monday traditional festival where one can go “to celebrate spring, show Polish pride, flirt with pussy willows and listen to the best polka bands in the nation.” (https://www.dyngusday.com). The tradition involves the sprinkling with water or tapping with pussy willows of someone you fancy. I generally fancy the paczki, the resulting jelly and sugar all over my face rendering me a less attractive target.
Not to be left out, the Western District of New York released a Dyngus Day decision almost on time for willow-whipping. In Philadelphia Indemnity Insurance Company v. Central Terminal Restoration Corporation, the district court considered an insurance coverage dispute arising out of an incident at a Dyngus Day celebration – specifically, whether there was coverage under a commercial general liability and excess policy in addition to liquor liability policy for alleged violations of New York Dram Shop laws. No paczki were harmed in the underlying accident. I checked.
As always, thanks for reading.
J.
Jennifer J. Phillips
President Opposes Protests, a Century Ago:
Presence of Women Pickets Annoys the President
The Fort Wayne News
May 19, 1917
Washington, May 18 – Until suffragists remove pickets carrying suffrage banners from before the White House and other government buildings in the Capitol, , the government will not appoint a suffrage committee, Representative Harrison, of Mississippi, told a delegation of suffragists at a hearing before the House Rules Committee.
“The picketing at the White House is disrespectful to the President,” Harrison said, “and cannot possibly tend to promote the cause of women’s suffrage.”
He further intimated that every member of the Rules Committee holds this view.
Ewell's Universe:
Dear Subscribers:
Earlier this week, I was at my girlfriend’s apartment when I spotted an envelope stating “IMPORTANT POLICY INFORMATION ENCLOSED”. It was her renter’s insurance policy. I asked if her if I could open it. “Sure,” she said.
“So what does this cover?” she asked. She was particularly concerned with whether “her cat had coverage.” (My girlfriend loves her cat more than anything in the world).
I laughed and asked her what she meant. She was wondering if she had coverage if something happened to her cat resulting in expensive veterinary bills. I explained she would need to buy pet insurance if she wanted that kind of insurance. “But maybe you have liability coverage for your cat… let’s see,” I said.
I flipped through the pages quickly reviewing the grants of coverage, exclusions, conditions, and supplemental endorsements. After reviewing her policy, I told her I had good news! Her cat does have coverage! Even though she does not have coverage for veterinary bills, she does have liability coverage if her cat caused bodily injury or property damage. She was pleasantly surprised to learn that she has coverage for medical payments to others. This would cover situations where a guest or invitee was injured by the cat. However, it would not cover the situation where the cat bit her or another household resident. It made my girlfriend’s day to know that “her cat has coverage.” More precisely, my girlfriend has liability coverage for her cat, as well as coverage for medical payments to others. * Conversation published by permission
As far as today’s cases in Ewell’s Universe…we have a reminder from the Texas Supreme Court that when cancelling an insurance policy, notice must be timely. The case can be reduced to one sentence: 10 days’ notice means 10 days’ notice. This is a good reminder: time frames specified in policies and by state law are important, and Courts are sticklers about deadlines. In the second case, an insurer prevailed at New Jersey’s high court, establishing that a chiropractor defrauded it using a sham business model. The New Jersey Supreme Court agreed with the trial court that the chiropractor and the lawyer knowingly defrauded the insurer. The case was remanded back to the trial court, which originally awarded the insurer $4 million dollars in damages. This case is a victory for the insurance industry, serving as an example against medical fraud rings.
Thanks for reading!
'Til Next Time,
John
John R. Ewell
Object Matrimony
The Winnipeg Tribune
May 19, 1917
Widower, 35, with 1 child, would like to meet domestic servant or working girl, object matrimony. Full particulars to Box 1261, Tribune
---
Refined Lady, 25, worth $20,000, would marry. B-Box 35, League, Toledo, Ohio.
Off the Mark:
Dear Readers,
My oldest child turned nine years old this week. Unfortunately for my wife and I, his excitement had him up two hours before the alarm clock. Despite the lack of sleep, I really enjoyed seeing him so excited. Today we are flying to Florida to attend my sister’s wedding, which should be a lot of fun. I’m sure the boys will be up early, eager to get going. Lucky for me, the wife took care of most of the planning and packing. Woo hoo!
Recently, in Cosgrove v. National Fire & Marine Ins. Co., the Arizona federal court ruled that an insurer was estopped from relying on its subcontractors exclusion because the information pertaining to that defense was improperly disclosed by counsel for its insured contractor. There, the attorney for the insured contractor, whose loyalty was to the insured, provided information to his client’s insurer, which was relied on by the insurer in denying coverage. Although the case was decided based on estoppel due to an attorney’s improper conduct and not the interpretation of policy language, it is certainly a great practice note regarding the importance of remembering who your client is in a tripartite relationship.
In AJD Construction Co., Inv. v. Crum and Forster Specialty Ins. Co., an unreported decision, the Superior Court of New Jersey, Appellate Division held that two cases against an insurance company relative to defects in a condominium complex were barred under the doctrine of preclusion. The claims against Crum and Forster were precluded based on Crum and Forster having been previously granted summary judgment in another declaratory-judgment action. Crum and Forster was granted summary judgment on the ground that it had no duty to defend its insured as the CGL policy did not provide coverage for an insured’s faulty workmanship.
Until next time …
Brian
Brian F. Mark
[email protected]
Fraudsters are Nothing New:
The Sun
New York, New York
19 May 1917
BEREAVED COUPLE BEG
IN BROADWAY
Home and Child Gone, Seek
to Reach Denver Afoot.
Lower Broadway paused long enough in its midday scramble yesterday to bestow a sympathetic glance, and then a coin, upon a couple standing in front of St. Paul’s church beseeching assistance in their attempt to reach afoot their Denver home. They were there by police sanction and their plea was as genuine as the circumstances demanding it were distressing.
A shabbily dressed and pathetic couple straggled into Police Headquarters yesterday morning. They described themselves as Mr. and Mrs. Harry Krom, recently of Hartford, Conn., from which point they had walked to New York. A fire two weeks ago wiped out their little home and all its contents and their two-year-old baby perished in the flames. There was no insurance. Left penniless and heartbroken the couple’s sole solace rested in returning to their former home in Denver. Mr. Krom showed letters from the Coroner of Hartford and from other officials which readily attested the truth of the couple’s statements.
A hour or so later Mr. and Mrs. Krom took their stand at St. Paul’s and this sign painted in a contribution box timidly held out to passersby, soon brought a rattle of coins which will materially shorten the hours between New York Denver:
“Our home was burned and our baby perished in the flames. We had no insurance. Please buy a postal card, five cents. We are walking from Hartford to Denver, 3,000 miles.”
Mr. Krom said he had relatives in Denver who, while in straitened circumstances themselves, will shelter him and his wife until he can land on his feet again.
Editor’s Note: The story in another paper is worth considering:
Hartford Courant
Hartford, Connecticut
19 May 1917
According to Chief John C. Moran of the fire department there have been no deaths from fires of recent date, and none on record for some time of the death of a 2-years-old baby. Chief Morgan was firm in his belief that the whole affair was a “fake” and that the couple had probably never lived in this city. The name Harry Krom is in the city directory with the address, No. 244 High Street. This is a large rooming house and it was said that no person by that name had ever lived there.
Headlines from Today’s Issue (attached):
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Question of Fact as to Whether Disclaimer Letter Send to Claimant’s Counsel. Mailing Practices Challenged.
- Questions of Fact Preclude Summary Judgment in Rescission Action. Rules and Standards for Rescission Discussed.
- Claims for Retrospective Premiums Raise Question of Fact as Do Counterclaims for Deceptive Practices
- Attorney’s Fees Not Recoverable in Defense of Declaratory Judgment Action Involving No Fault Benefits
- Agreement to Defend while Reserving Rights on Indemnity because Insured’s Liability Needs to be Determined, a Proper Approach
- A Question of Fact whether Reasonably Satisfactory Coverage can Include a Self-Insured Retention
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
- Plaintiff’s Expert Failed to Explain Why Alleged Limitations Were Attributable to Accident as Opposed to Documented Preexisting Injuries
- No Record of Plaintiff Receiving Treatment until Three Years after the Accident
- Defendant’s Motion Failed to Address All Injuries Set Forth in the Bill of Particulars
TESSA’S TUTELAGE
Tessa R. Scott
Litigation
- No Right of Appeal to Sua Sponte Orders
- Deposing the Administrator of an Estate would not provide Relevant information
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
First Party
- Increased Costs Due to Lender-Placed Insurance Did Not Excuse Defendant’s Default
- Six Year Delay in Filing Fraud Action is Untimely as a Matter of Law; Court May Not Search the Record to Dismiss Parties as part of Review of a Section 3211 Motion
Potpourri
- Motion to Dismiss/Sever Second Third-Party Action as Untimely Denied Due to Lack of Demonstrated Prejudice
- Security Contractor Does Not Owe Duty to Injured By-Standers
- Negligence Trigger of a Contractual Indemnity Clause Requires, of all things, Negligence
- General Release Issued by Plaintiff Does Not Preclude Claims of Indemnity/Contribution in a Subsequent Lawsuit Where Claimant is Named as a Defendant
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
- Nothing on which to report.
JEN’S GEMS
Jennifer A. Ehman
- Court Finds Unsigned Contract Invalid for Purposes of Triggering Additional Insured Status; Applies Employee Exclusion to Named Insured’s Claim for Coverage
BARNAS ON BAD FAITH
Brian D. Barnas
- Under Alaska Law, Insureds’ Bad Faith Cause of Action was Reinstated after Court Concluded that State Farm Breached the Insurance Contract
- Insurer did not Act in Bad Faith under Georgia Law by Failing to Accept an Expiring Offer to Settle that Left a Potential Pain and Suffering Claim Unresolved
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
- Last Train to Coverage-ville
EWELL’S UNIVERSE
John R. Ewell
- Texas Supreme Court holds that 10 Days’ Notice Requirement for Cancelling at Issue Policy Means 10 Days’ Notice
- New Jersey High Court Reinstates Nearly $4 Million Verdict to Insurer Defrauded by Sham Business Model
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
- Albany is quiet. Be afraid. Be very afraid.
OFF THE MARK
Brian F. Mark
[email protected]
- Arizona Federal Court Holds that Insurer is Estopped from Asserting a Coverage Defense in a Breach of Contract Action Based on the Subcontractors Exclusion Because the Information Pertaining to that Defense was Improperly Disclosed by Counsel for the Insured Contractor.
- Superior Court of New Jersey, Appellate Division Precludes Insured from Re-Litigating Coverage Issues Where Carrier had been Granted Summary Judgment in a Prior Declaratory-Judgment Action.
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- Payment of Settlement check to Counsel was Payment to Insured
All the best to you and yours. We love hearing from you.
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
ASSISTANT EDITOR
Jennifer A. Ehman
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
Michael F. Perley
Jennifer A. Ehman
Agnieszka A. Wilewicz
Edward B. Flink
Patricia A. Fay
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
Hewitt’s Highlights on Serious Injury
Tessa’s Tutelage
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Barnas on Bad Faith
Phillips’ Federal Philosophies
Altman’s Administrative (and Legislative) Agenda
Off the Mark
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
05/17/17 Matsil v. Utica First Insurance Company
Appellate Division, Second Department
Question of Fact as to Whether Disclaimer Letter Send to Claimant’s Counsel. Mailing Practices Challenged.
Matsil was hurt when he fell from a ladder in June 2014 while working for Brian Doris Home Improvements, Inc. (“Brian Doris”). He sued Brian Doris and others.
It is undisputed that Brian Doris’ insurance company, Utica First received a notice of claim regarding Matsil's accident on or about July 8, 2014. Insofar as relevant to this appeal, Utica First contends that it promptly disclaimed coverage by letter dated July 10, 2014, addressed to Brian Doris, with a copy to Matsil's counsel.
After successfully moving for a default judgment against Brian Doris in the underlying personal injury action, Matsil and his wife commenced a direct action this action against Utica First and Brian Doris pursuant to Insurance Law § 3420, claiming, that they did not receive the July 10, 2014, notice of disclaimer.
Utica First moved to dismiss the claim, seeing a judgment that it had no duty to defend or indemnify any party in connection with Matsil's accident, based on the July 10, 2014, disclaimer letter. In support of its motion, Utica First attempted to show that it had a standard office practice in place in July 2014 for the mailing of disclaimer letters. The court found the proof of mailing practices insufficient to support summary judgment.
"Generally, proof that an item was properly mailed gives rise to a rebuttable presumption that the item was received by the addressee. The presumption may be created by either proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed.
Here, Utica First's submissions were insufficient to establish, prima facie that the July 10, 2014, disclaimer letter was timely and properly mailed to Matsil's counsel.
Editor’s Note: We are not sure what submissions were presented to the court but knowing the talented counsel involved, we would expect that office protocols were presented. While there is no requirement that disclaimer letters be sent by certified mail, had that been done here, and had a receipt been presented, the proof would have been established. We are not suggesting that certified letters are necessary but if a receipt it received and maintained, it is easier to establish proof of mailing.
05/17/17 Leading Insurance Group v. Xiao Wu Chen
Appellate Division, Second Department
Questions of Fact Preclude Summary Judgment in Rescission Action. Rules and Standards for Rescission Discussed.
This was an action seeking to declare that a commercial policy issued to Xiao Wu Chen was void and that Leading was therefore not required to defend or indemnify its policyholders
In March 2011, Tong, commenced an action against K and K seeking damages for injuries he alleged that he sustained when he was renovating property owned by the defendant K and K leased by the defendant Xiao Wu Chen, doing business as Family 99 Cent Store (“Chen”). In the underlying action, Tong alleged that he severed his thumb when he was cutting plastic floor tile in preparation for the opening of the business.
Chen had obtained insurance for the business from Leading. In the underlying action, K and K commenced a third-party action against Chen to recover damages for contractual and common-law contribution and/or indemnification and breach of contract (hereinafter the third-party action). Leading commenced this action seeking a judgment declaring that (1) the insurance policy issued by it to Chen was void ab initio due to material misrepresentations made by Chen during the application process, and (2) it was not obligated to defend or indemnify Chen.
"To establish the right to rescind an insurance policy, an insurer must show that its insured made a material misrepresentation of fact when he or she secured the policy. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. The continued acceptance of premiums by an insurer after learning of facts which would allow for rescission of an insurance policy may constitute a waiver of, or estoppel against, the insurer's right to rescind.
Here, K and K failed to establish its prima facie entitlement to judgment as a matter of law. K and K failed to eliminate triable issues of fact as to whether the plaintiff had a basis to rescind the insurance policy based on Chen's alleged material misrepresentation of fact when it secured the policy. K and K also failed to eliminate triable issues of fact as to whether the plaintiff was estopped from rescinding the policy based on the policy's renewal. Accordingly, the Supreme Court properly denied K and K's motion.
05/17/17 Burlington Ins. Co. v. Clearview Maintenance & Services, Inc.
Appellate Division, Second Department
Claims for Retrospective Premiums Raise Question of Fact as Do Counterclaims for Deceptive Practices
Clearview is a roofing company. Burlington issued two commercial liability policies to Clearview and each contained a premium audit provision, providing for an audit and adjustment of the premium after the end of the policy term based upon the gross receipts of the insured. With respect to the first policy, the premium was $158.3340 per every $1,000 of the defendant's gross receipts. The defendant estimated its gross receipts to be $300,000, resulting in an advance premium of $47,500. The amount of the premium for the second policy was based on a rate of $175.00 per every $1,000 of the defendant's gross receipts. Again, the defendant estimated its gross receipts to be $300,000, resulting in an advance premium of $52,500.
At the end of the policy term, the audit for the first policy computed the Clearview’s premiums to be substantially higher. Burlington billed for the premiums differential and when the premiums were not paid, commenced this suit/
Clearview counterclaimed, alleging that Burlington "induced" the Clearview to buy the policy by offering a low advance premium, that the low advance premium was simply a "bait and switch" tactic
Burlington moved for summary judgment on the amended complaint and dismissing the counterclaims.
The Second Department found a question of fact as to whether Clearview’s application for coverage took into account only the roofing work or also that portion of the business which involved selling roofing materials.
This raised a triable issue of fact, as the policies do not define key terms such as "exposure" and "gross sales," and the audit statements and the affidavit of the accounts and receivable collections manager do not explain how the auditor arrived at the "audit exposure" amounts.
The counterclaims included deceptive trade practice claims under
General Business Law § 349. To prevail, policyholder is required to show that the insurer engaged in a deceptive act or practice, that the challenged act or practice was consumer-oriented, and that the defendant suffered an injury as a result of the deceptive act or practice. The court found that the insurer, in its motion to dismiss, did not present proof that it did not engage in acts or practices that were deceptive or misleading in a material way when it issued its policies
Further discovery may lead to relevant evidence on issues including whether the plaintiff's business practices have been investigated by federal or state agencies and the results of any such investigations.
Editor’s Note: Almost Impossible to prove the negative.
05/16/17 Fiduciary Insurance Company v. Medical Diagnostic Services Appellate Division, First Department
Attorney’s Fees Not Recoverable in Defense of Declaratory Judgment Action Involving No Fault Benefits
Star of New York Chiropractic (“Star”) sought reimbursement for chiropractic services and was successful. However, it is well settled in New York that a prevailing party may not recover attorneys' fees from the losing party except where authorized by statute, agreement or court rule. An insured party may recover attorneys' fees where it successfully defends against its insurer's action seeking a declaratory judgment that it has no duty to defend or indemnify its insured.
Here, Fiduciary owes Star no duty to defend, as Star is merely seeking reimbursement for chiropractic services rendered to the claimant in this no-fault action. Star was assigned the claimant's rights for such reimbursement, the claimant was merely the injured party in the taxi at the time of the accident, and plaintiff owed no duty to defend the claimant. Accordingly, Star, as assignee of the claimant's rights, could acquire no greater rights than its assignor.
05/11/17 44 Lexington Associates, LLC v. Liberty Mutual Group, Inc.
Appellate Division, First Department
Agreement to Defend while Reserving Rights on Indemnity because Insured’s Liability Needs to be Determined, a Proper Approach
Liberty agreed to fully defend 44 Lexington in an underlying personal injury action subject to a reservation of rights on the issue of indemnification. Dissatisfied with that offer, 44 Lexington brought a declaratory judgment action seeking a determination that Liberty Mutual was obligated to fully defend and indemnify.
Liberty moved to dismiss the complaint, arguing that it was premature because the scope of plaintiffs' potential liability in the underlying action, and therefore the scope of Liberty Mutual's potential indemnity, had not yet been determined. Plaintiffs defaulted on responding to that motion, and the complaint was dismissed.
Plaintiffs moved to vacate the default, which the IAS court denied. We affirm.
44 Lexington cannot demonstrate a meritorious cause of action. Liberty was well within its rights to offer plaintiff a full defense of the underlying litigation subject to a reservation of rights pending the determination of plaintiff’s liability. Indeed, had Liberty Mutual failed to reserve its rights, it could have been equitably estopped from doing so in the future.
05/09/17 Almonte v. Citibank NMTC Corporation
Appellate Division, First Department
A Question of Fact whether Reasonably Satisfactory Coverage can Include a Self-Insured Retention
Citigroup Technology, Inc. (“CTI”) and ABM entered into a "Service Contractor Agreement," whereby ABM agreed to provide certain janitorial services for Citi. Under section 7 of the agreement, entitled "Insurance," ABM was required to obtain the insurance set forth in Exhibit C "and in a form reasonably satisfactory to CTI." Exhibit C required commercial general liability insurance with a combined single limit of no less than $3,000,000 per occurrence, and that CTI, among others, be named as an additional insured. It also required ABM to "furnish to CTI Certificate(s) of Insurance evidencing the above coverage."
ABM procured a $2,000,000 policy with a $1,000,000 self-insured retention (SIR). It also furnished to Citi's insurance agent Certificates of Liability Insurance evincing the $1,000,000 SIR. Following the commencement of plaintiff's personal injury action, which implicates the required insurance, Citi moved for summary judgment on its cross claim against ABM for breach of contract for failing to procure the required insurance, arguing that ABM impermissibly obtained the SIR.
Although neither section 7 nor Exhibit C in the agreement mention an SIR, section 8, entitled "Indemnification," provides, in pertinent part, that "[t]he obligations set forth in this section shall remain in effect regardless of whether [ABM] maintains or fails to maintain any insurance coverage required hereunder, or self-insures for any liability, and any self-insured coverage shall be deemed insurance coverage hereunder " (emphasis added). Accordingly, the contract is ambiguous as to whether an SIR is a permissible form of insurance coverage. Issues of fact also exist as to whether Citi accepted the SIR or waived any objection to it, given the "reasonably satisfactory" language in section 7 of the agreement and the fact that
Citi did not previously object to the SIR even though the Certificates of Liability Insurance evinced the $1,000,000 SIR.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
05/11/17 Jenkins v. Murtagh
Appellate Division, First Department
Plaintiff’s Expert Failed to Explain Why Alleged Limitations Were Attributable to Accident as Opposed to Documented Preexisting Injuries
Defendant established entitlement to judgment as a matter of law. Defendant submitted, inter alia, plaintiff's medical records, including a CT scan performed about five months before the accident which found multiple bulging discs and a possible herniated disc, and a report of his chiropractor that found range of motion within normal limits one month after the accident. In opposition, plaintiff failed to raise a triable issue of fact as to whether limitations found by his expert three years after the accident were causally related to the accident, in light of the preexisting conditions shown in plaintiff's medical records. Plaintiff's expert did not explain why the alleged limitations were attributable to the accident, as opposed to the preexisting conditions. Furthermore, the expert's opinion as to causation is speculative, because he failed to reconcile his findings with the earlier full range of motion findings by plaintiff's chiropractor
05/11/17 Lee v. Rodriguez
Appellate Division, First Department
No Record of Plaintiff Receiving Treatment until Three Years after the Accident
Defendants demonstrated prima facie that plaintiffs suffered no serious injuries to any of their allegedly injured body parts by submitting the affirmed reports of an orthopedist and a neurologist who found no deficits in the relevant ranges of motion upon recent examination. They also submitted evidence that plaintiffs neither reported any injury to the police immediately after the motor vehicle accident nor sought any medical treatment shortly after the accident, indicating that their claimed injuries were not causally related to the accident. In opposition, plaintiffs' only admissible submissions were the affirmed reports of a doctor who found limitations in range of motion in the allegedly injured body parts on examination of plaintiffs some three years after the accident.
Moreover, to the extent the doctor recited findings made by another doctor who purportedly examined plaintiffs three weeks and two months after the accident and referred to MRI reports not in the record, his reports are hearsay and therefore may not be relied upon to raise an issue of fact As the record is devoid of any medical records, charts or bills to support the claim of having received treatment after the accident, it shows no causal connection between the accident and plaintiffs' claimed injuries.
05/10/17 Mayes v. Aldoais
Appellate Division, Second Department
Defendant’s Motion Failed to Address All Injuries Set Forth in the Bill of Particulars
No facts were given in the decision. 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. Although the plaintiff alleged in the bill of particulars that she sustained serious injuries to her right shoulder and right wrist, the defendants failed to submit competent medical evidence addressing those alleged. Since the defendants failed to meet their prima facie burden, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. Accordingly, the summary judgment motion should have been denied.
Tessa R. Scott
Litigation
05/12/17 Active Care Med. Supply Corp. v Delos Ins. Co.
Appellate Term, Second Department
No Right of Appeal to Sua Sponte Orders
Plaintiff commenced this action to recover first-party no-fault benefits for medical supplies provided to its assignor, who allegedly had sustained injuries in a motor vehicle accident which had occurred on June 26, 2010. Defendant moved for summary judgment dismissing the complaint on the ground that the action was barred by the doctrines of res judicata and collateral estoppel by virtue of an order it had obtained against this provider involving the same motor vehicle accident. Plaintiff opposed defendant's motion and cross-moved for various types of relief.
The Civil Court, in an order entered October 23, 2015, granted defendant's motion for summary judgment dismissing the complaint, denied plaintiff's cross motion and awarded defense counsel "$250 in fees." Plaintiff appeals, as limited by its brief, from so much of the order as awarded defense counsel "$250 in fees."
The Second Department “assume[d]” that the Civil Court relied upon Rules of the Chief Administrator of the Courts which permits a court to award "to any party or attorney . . . costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney's fees, resulting from frivolous conduct." The Second Department noted that no appeal as of right lies from the portion of an order which was decided “sua sponte” and declined to grant leave to appeal.
Now, that doesn’t mean that the Plaintiff had no remedy. The Second Department advised that plaintiff "could properly have moved to vacate the order and appealed as of right."
05/17/17 State Farm Mut. Auto. Ins. Co. v RLC Med., P.C.
Appellate Term, Second Department
Deposing the Administrator of an Estate would not provide Relevant information
The plaintiff insurance company commenced this action against the defendant Estate of Ronald Collins, seeking a judgment declaring that the plaintiff has no obligation to pay no-fault claims for medical services purportedly rendered by Collins. In an order dated June 2, 2015, the Supreme Court directed that the administrator of Collins's estate appear for a deposition. The defendants appeal from that portion of the order.
Civil Practice Rules, provide that "[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action." The terms "material and necessary" in this statute "must be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity'"
However, there is a limit. “It is incumbent on the party seeking disclosure to demonstrate that the method of discovery sought will result in the disclosure of relevant evidence or is reasonably calculated to lead to the discovery of information bearing on the claims'" Here, the plaintiff made no showing that conducting the deposition of the administrator will result in the disclosure of relevant evidence or is reasonably calculated to lead to the discovery of information bearing on the claims
Accordingly, the Supreme Court improperly directed that the administrator appear for a deposition.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
First Party
05/17/17 Wells Fargo Bank, N.A. v Miller
Appellate Division, Second Department
Increased Costs Due to Lender-Placed Insurance Did Not Excuse Defendant’s Default
Defendant procured a mortgage on a residential property. The mortgage was secured by a note which was executed in favor of American Home Mortgage. American Home subsequently sold the mortgage to Wells Fargo. Wells Fargo commenced the instant action seeking to foreclose on the note due to defendant’s default.
In moving for summary judgment, plaintiff submitted evidence of the existence of a mortgage, the residual on the note and the default of the note obligations. In opposition, defendant argued that he could not meet his monthly obligations because Wells Fargo insisted on purchasing a hazard insurance policy which raised the monthly premiums. It is alleged that the “lender-placed insurance” (“LPI”) was improper, and caused the default posture.
In granting Wells Fargo’s application, the Court noted that the bank met its obligations of establishing a mortgage, note and breach of the note. In opposition, the court was not persuaded by defendant’s arguments regarding hazard insurance. Further, defendant’s claim that Wells Fargo’s insistence on LPI breached the covenant of good faith and fair dealing was rejected where a previous Release, in a class action which Mr. Miller was part of, precluded such arguments.
05/05/17 Larke v Moore
Appellate Division, Fourth Department
Six Year Delay in Filing Fraud Action is Untimely as a Matter of Law; Court May Not Search the Record to Dismiss Parties as part of Review of a Section 3211 Motion
Plaintiffs assert that they were named as beneficiaries on a life insurance policy maintained by their uncle. However, at some point prior to his death, the uncle changed his beneficiary to Ms. Moore. In support of their conclusion, plaintiffs alleged that Ms. Moore used “fraud, undue influence and/or coercion” to change the policy before the policyholder died on April 21, 2008.
Here, the action was not commenced against Ms. Moore until April 21, 2014. Unfortunately, the statute of limitations for fraud is two years, or two years from the date the fraud could have been reasonably been discovered. Plaintiffs were unable to establish that it could excuse a six year delay in commencing the action; in essence, to prove that it reasonably only learned of the alleged fraud within two years prior to the commencement of the action.
While missing the statute of limitations by four years, plaintiffs argue that because they rejected Ms. Moore’s Answer she could not move to dismiss. As such, plaintiffs posit the novel theory that they are entitled to a default judgment due to Ms. Moore’s failure to timely answer. In fact, Ms. Moore did timely answer and raise statute of limitations as a defense therein. Two months after the answer, plaintiffs rejected the Answer because Ms. Moore apparently failed to provide a verification of the pleading. The Court was not persuaded by plaintiff’s default argument, and further noted that their two month delay would have resulted in a waiver of the argument in any event.
Finally, the Court reversed the trial court’s decision to sua sponte dismiss VOYA Financial. The Court explained that a trial court does not have the authority to search the record and grant dispositive relief on a Motion to Dismiss under CPLR 3211.
Potpourri
05/16/17 Range v Trustees of Columbia Univ. in the City of NY
Appellate Division, First Department
Motion to Dismiss/Sever Second Third-Party Action as Untimely Denied Due to Lack of Demonstrated Prejudice
Second Third-Party defendant City Safety filed a motion seeking to dismiss, or in the alternative, sever a claim against it for indemnity/contribution. The lawsuit was commenced long before the claim against City Safety. The Note of Issue was filed on April 23, 2015, and the lawsuit against City Safety not started until September 23, 2015.
City Safety argued that the delay prejudiced its rights to conduct discovery, and was occasioned by a deliberate delay from the Second Third-Party Plaintiff. In affirming the trial court, the Appellate Division noted that City Safety would be entitled to collect discovery “while the case makes its way up the trial calendar.” Further, it would be able to review any existing discovery that was exchanged by the other litigants before City Safety’s involvement.
The Court also noted the fact that the claims against City Safety involved the same law and facts at issue in the main-party action, and the fact that same witnesses will be called in both actions. Finally, the Court rejected City Safety’s argument that its indemnity exposure should not be determined by the same jury hearing plaintiff’s case. Not surprisingly, the Court found no inherent prejudice in the matter being tried at the same time.
05/16/17 Coon v Hotel Gansevoort Group, LLC
Appellate Division, First Department
Security Contractor Does Not Owe Duty to Injured By-Standers
Plaintiff was injured when struck by an unruly patron who was being escorted out of a hotel by defendant SSI. SSI was retained by the hotel to serve as security at the location. SSI moved for summary judgment against plaintiff on the theory that it did not owe a duty to plaintiff. Its contract, and hence its duty, were limited to the hotel.
The Appellate Division overruled the trial court, and ordered that the action against SSI be dismissed. There was no duty owed to the plaintiff, and likewise no evidence that SSI breached its duty to the hotel – thus, destroying the hotel’s claims of indemnity/contribution.
05/16/17 Wilk v Columbia University
Appellate Division, First Department
Negligence Trigger of a Contractual Indemnity Clause Requires, of all things, Negligence
Plaintiff’s decedent was killed injured when he fell from a scaffold while at a jobsite owned by Columbia. Bovis served as the general contractor, and decedent apparently fell through a window that had been removed by ACT Abatement Corporation. Pursuant to the contract entered into by ACT, indemnity was owed so long as the incident arose from its work. Thus, Columbia and Bovis were not obligated to establish negligence on behalf of ACT to trigger the protections afforded under the contract.
The Court also ruled that Columbia/Bovis’ claims for common law indemnity/contribution did not need to be reached in light of the finding of contractual indemnity. Even if applicable, the Court summarily held that the common law indemnity claim was inapplicable.
In addition, the Appellate Division upheld the trial court’s dismissal of Total Safety. The contractual indemnity clause applicable to Total Safety required a demonstration of negligence. Here, because there was no negligence established against Total Safety, it followed that any claims for common law and/or contractual indemnity failed.
05/04/17 Salewski v Stelan Music
Appellate Division, Third Department
General Release Issued by Plaintiff Does Not Preclude Claims of Indemnity/Contribution in a Subsequent Lawsuit Where Claimant is Named as a Defendant
Plaintiff was a passenger in a vehicle driven by her husband. Mr. Salewski was driving a truck owned by his employer, Werner, at the time it collided with a vehicle owned by Defendant. Defendant, thereafter, commenced a personal injury action against Mr. Salewski and Werner. That action was settled with defendant receiving a settlement payment; in exchange for which a General Release was issued in favor of Salewski and Werner.
After defendant’s case was settled, Mrs. Salewski commenced the instant bodily injury claim. Defendant, in turn, commenced a third-party claim for indemnity/contribution against Mr. Salewski and Werner. Both then moved for summary judgment on the basis that any action by defendant was barred by operation of the General Release.
In overturning the trial court, the Appellate Division noted that the Release was meant to apply to the injuries and claims asserted by defendant. It was not intended to be expanded to include defendant’s indemnity claims arising out of a third-party’s lawsuit. Further, the term “injuries” as employed in the Release only apply to the ailments allegedly suffered by defendant.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
Nothing on which to report.
JEN’S GEMS
05/10/17 Colony Ins. Co. v. American Empire Surplus Lines Ins. Co.
Supreme Court, Kings County
Judge Debra Silber
Court Finds Unsigned Contract Invalid for Purposes of Triggering Additional Insured Status; Applies Employee Exclusion to Named Insured’s Claim for Coverage
This decision arises out of an August 14, 2013 incident in which an employee of Champ Construction sustained injury while working on a construction project. The incident occurred on property owned by 57 Graham. CP & A Associates Construction (“CPA”) was retained as the general contractor.
This decision centers on the subcontract between CPA and Champ. The subcontract required that insurance be carried, and that it would not be valid without the Subcontractor General Conditions Version 2012-2013 signed and agreed to be all parties. It also stated that “all work under this Subcontract is pursuant and subject to the Subcontract General Conditions Version 2012-2013.” However, the record contained no evidence that the parties ever executed Subcontract General Conditions Version 2012-2013 or any other version of the document. And, the subcontract was only executed by Champ on December 9, 2013 and never executed by CPA.
Nevertheless, CPA and the owner sought cover under a commercial general liability policy issued to Champ by American Empire. Pursuant to policy, specifically, the Schedule contained in Endorsement CG 20 10 07 04, additional insureds were identified as “[a]ll entities required by written contract to be included for coverage as additional insureds in respect to operations performed by the Named Insured or on their behalf.” Coverage was then provided for bodily injury caused “in whole or in part, by….1. Your acts or omissions…in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above…”
American Empire denied the tender on the basis that it was not provided a copy of an executed contract between its insured and CPA.
Champ also tendered its defense in the personal injury action to American Empire, which was likewise denied citing the Workers’ Compensation and Employer’s Liability exclusion.
Colony, the insurer for CPA, then brought this action, and American Empire moved for summary judgment. American Empire submitted that the subcontract was not valid, by its terms, unless the Subcontractor General Conditions Version 2012-2013 was signed and agreed to by all parties, which it was not. Thus, any reliance on an unsigned copy of the conditions was misplaced.
It also submitted that the plaintiff’s direct claims against Champ and the cross claims of CPA and the owner where likewise excluded based upon the Workers’ Compensation and Employer’s Liability exclusion.
In opposition, Colony argued that CPA and the owner were additional insureds because Champ “admitted that it entered into a contract with CP[A] pursuant to which it agreed to obtain insurance naming both CP[A] and [the owner] as additional insureds.” Colony dismissed the fact that the rider was unsigned as of no moment at this juncture. It also argued that the exclusions were inapplicable based upon the insured contract exception or where otherwise untimely asserted.
In considering the arguments, the court found that American Empire had no duty to defend or indemnify CPA or the owner in the underlying action since Colony failed to demonstrate the existence of a valid contract requiring these entities to be so named. The court noted that the subcontract was never fully executed and it was invalid since the Subcontractor General Conditions Version 2012-2013 was not signed and agreed to by all parties. The court also dismissed any cross claim by Champ for coverage finding the employer’s liability exclusion applied, and noting the lack of dispute that the injured employee was employed by Champ at the time of the incident.
Note: I am curious about a few parts of this decision. Specifically, the last part of the court’s finding seems incomplete. While I would agree that the direct claims of the injured plaintiff would be excluded based upon the Employer’s Liability exclusion, but what about the cross-claims? Presumably, CPA asserted a claim for contractual indemnification based upon a hold harmless agreement. And, it appears from the language cited that Champ would have coverage for the claim. But, the court never gets there. Perhaps, the court reasoned that the contract was invalid and felt that it did not need to do so. It is not clear. It is also unclear why the injured plaintiff sued Champ directly if, as the court says, there was no dispute that he was working in the scope of his employment with Champ at the time of the loss.
Brian D. Barnas
05/11/17 Harmon v. State Farm Mutual Automobile Insurance Company
Supreme Court of Idaho
Under Alaska Law, Insureds’ Bad Faith Cause of Action was Reinstated after Court Concluded that State Farm Breached the Insurance Contract
The Harmons owned a 2008 National Pacifica motorhome. In December 2013, they placed the motorhome in storage at a facility in Spokane, Washington, and planned to keep it there until spring. On December 19, 2013, the motorhome was burglarized. The dashboard was severely damaged when the intruders removed electrical components. The Harmons immediately filed a claim with State Farm, who insured the motorhome under an Alaska Policy form.
On January 21, 2014, the Harmons submitted two drastically different repair estimates to State Farm, one for over $184,000 and the other for $18,491.36. The greater estimate included $155,000 for custom molding of a new dash because the old dash could not be repaired and a replacement could not be found at the time. The smaller estimate included only $2,000 for replacement of the dash, even though a replacement unit could not be located. Within a month, State Farm responded saying that it considered the vehicle totaled, but a few months later, on May 29, 2014, State Farm indicated that it valued the claim at the value of the second estimate. Three weeks later the Harmons filed a lawsuit alleging breach of contract and bad faith. State Farm sought to stay the lawsuit to engage in the appraisal process under the policy, and it was undisputed that State Farm offered to pay the actual cash value of the motorhome while the motion to stay was pending. After a used replacement dash was located, the Harmons advised State Farm that they wanted to have the dash repaired on November 10, 2014. State Farm paid the Harmons $17,752.89—the amount of the repair estimate less the $500 deductible. The stay was lifted, but litigation proceeded.
The Idaho Supreme Court concluded that State Farm breached the insurance contract under Alaska law. Under the reasonable expectations doctrine, it reasoned that State Farm misrepresented the terms of the policy to its insureds by initially agreeing to pay for the cost of making a hypothetical repair if a replacement part existed. While State Farm had satisfied its obligation to pay for the loss to the motorhome, a breach of the contract occurred when it failed to pay the actual cash value of the motorhome on May 29, 2014, and the breach may open the door to a bad faith claim.
The court also reinstated the Harmons’ bad faith claim. The claim was dismissed below based on the finding that State Farm did not breach the insurance contract, which was overturned. Thus, the case was remanded for consideration of whether State Farm acted in bad faith and whether the Harmons suffered any extra-contractual damages.
05/03/17 Linthicum v. Mendakota Insurance Company
United States Court of Appeals, Eleventh Circuit
Insurer did not Act in Bad Faith under Georgia Law by Failing to Accept an Expiring Offer to Settle that Left a Potential Pain and Suffering Claim Unresolved
Mendakota issued an auto insurance policy to Hopkins that was in effect when he struck and killed the Linthicums 11 year old son while driving intoxicated. Hopkins fled the scene and took his car to a body shop for repair. According to the Linthicums, their son lived for “under an hour” after the accident.
The Linthicums retained an attorney, Bordeaux, who sent a letter of representation to Mendakota. In a call dated July 25, 2008, Bordeaux advised the adjuster that he had other avenues to pursue and was not yet ready to accept the policy limits. On August 7, 2008, the adjuster mailed Bordeaux a letter disclosing the policy limits and contained a copy of the policy. On October 8, 2008, the adjuster recorded that Bordeaux agreed to review and sign a limited release. The next day a formal letter was sent to Bordeaux by facsimile tendering the policy limits to “settle the case of Cynthia and Christopher Linthicum, Natural Parents of …, A Minor, Deceased.” A release was also sent for the parents to sign.
Mendakota’s adjuster remained in contact with Bordeaux. According to the file notes, the adjuster spoke with Bordeaux on January 21, 2009, and he said that the case was on hold pending the criminal prosecution and he “[had] no info on [a] trial date. Additional messages were left for Bordeaux on March 17, June 22, and August 12. The adjuster also received updates on the trial from Bordeaux’s assistant in August 2009 and December 2009.
Thereafter, on May 12, 2010, Bordeaux mailed the adjuster a letter demanding the limits of the policy [$25,000] for full and final settlement in exchange for a full and final release for the Linthicums’ claims of wrongful death. Bordeaux demanded notice of acceptance in writing by 5pm on May 24, 2010, or the offer would automatically be revoked. The letter was received on May 17, 2010, and Mendakota did not respond to the offer.
The Linthicums agreed to settle the wrongful death action for $1.2 million, and Hopkins assigned the Linthicums his rights to any claim he might have against Mendakota. Mendakota paid the Linthicums the limit of Hopkins’ policy.
The Linthicums sued Mendakota for bad faith failure to settle. Summary judgment was granted in favor of Mendakota and affirmed by the Eleventh Circuit. Under Georgia law, an insurer is not liable for failing to respond to a time-sensitive offer to settle for policy limits when the offer does not fully resolve the claim against its insured. Here, the time sensitive offer only offered to settle the wrongful death claim. It did not include the estate claim for the decedent’s pain and suffering, which is recognized by Georgia law. The Linthicums had identified both the wrongful death and estate claim as potential basis to collect damages. Thus, Mendakota was not obligated to accept the Linthicums’ offer to settle only the wrongful death claim or continue negotiations because the offer would have exceeded the policy limits.
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
05/07/17 Philadelphia Indem. Ins. v. Central Terminal Restoration Corp.
United States District Court, Western District of New York
Last Train to Coverage-ville
In this insurance coverage dispute, the plaintiff insurer seeks a declaration that it is not obligated to provide commercial general liability coverage under a primary and an excess policy to the insured, Central Terminal Restoration Corporation (“CTRC”), for lawsuits brought by two separate claimants. As explained by the district court, CTRC, which was formed for the purpose of rehabilitating a local landmark, held a Dyngus Day fund-raising event during the policy period at which alcohol was served and for which it obtained a temporary liquor license. A patron of the fund-raising event was allegedly served alcohol despite being already visibly intoxicated or impaired, and he subsequently injured the claimants while operating an automobile. Both claimants commenced suit against CTRC.
The Insurer provided a defense, but subsequently informed CTRC that it was providing coverage only under the liquor liability coverage part of the Primary Policy, and not under the CGL coverage part or under an Excess Policy. The Insurer commenced the instant actions seeking a declaration that its obligation to defend and indemnify CTRC exists only under the liquor liability coverage part to the Primary Policy. After considering the parties’ cross-motions for summary judgment, the district court disagreed.
The court rejected the Insurers argument that the violations of the Dram Shop Act alleged in the claimants’ suits are not “occurrences,” but are instead intentional and non-accidental conduct which is not covered under the CGL portion of the policy. The court noted that this argument has already been rejected by a New York court, citing Markevics v. Liberty Mut. Ins. Co., 278 A.D.2d 285 (2d Dep't 2000), and further recognized that: “It is well-established under New York law that ‘[in] deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured, whether the loss was unexpected, unusual and unforeseen.’” To that end, “no one has argued, and nothing in the record would support the conclusion, that CTRC intended the alleged injuries to [claimants] Sheehan and Serrano. Instead, they were the result of a series of unforeseen automobile accidents. Under well-established New York law, [the Insurer’s] argument that the Sheehan and Serrano Lawsuits do not involve claims for bodily injuries caused by an occurrence must fail.”
The district court next considered a “Fund Raising Event Endorsement” that provided CGL coverage for all “bodily injury” arising out of certain fund-raising events, including the specified Dyngus Day fund-raising event at issue. The court noted that the “arising out” of language means “originating from, incident to, or having connection with.”
Under New York law, when an endorsement uses the phrase “arising out,” courts interpret this language to mean “originating from, incident to, or having connection with.” “To establish coverage, all that is required is ‘some causal relationship between the injury and the risk for which coverage is provided.’” Because the claimants’ suits indisputably involved claims of bodily injury arising out of the Dyngus Day fund-raising event, the plain language of the Fund-raising Endorsement established coverage for the claims.
The district court rejected the Insurer’s argument that a liquor liability exclusion in the CGL portion of the policy applied. The Primary Policy provided that “[t]his [liquor liability] exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.” The court noted that, under New York law, this liquor liability exclusion is “not intended to apply to casual, nonrecurring situations involving the incidental consumption of alcohol.” Because CTRC was not in the business of manufacturing, selling, serving, or furnishing alcoholic beverages, the exclusion did not apply.
Finally, the district court concluded that there was coverage under the Excess Policy as well. “Like the CGL coverage part of the Primary Policy, the Excess Policy covers bodily injuries resulting from an occurrence.” The court therefore granted the motions of the defendants and denied the Insurer’s motion for summary judgment.
EWELL’S UNIVERSE
John R. Ewell
05/12/17 BankDirect Capital Finance v. Plasma Fab
Texas Supreme Court
Texas Supreme Court holds that 10 Days’ Notice Requirement for Cancelling at Issue Policy Means 10 Days’ Notice
Plasma Fab obtained a general liability insurance policy from Scottsdale Insurance Company and financed the policy through a premium finance company, BankDirect. BankDirect paid the annual premium to Scottsdale, and Plasma Fab made monthly payments to BankDirect. Plasma Fab was habitually late on its premium payments. Scottsdale, through BankDirect, had twice canceled Plasma Fab’s insurance policy before due to late payments. Under Texas law, premium finance companies “may not cancel” an insured’s policy unless they mail a notice of intent to cancel that states a cure deadline that is not earlier than the tenth day after the date the notice is mailed. But this time, when Plasma Fab missed its payment, BankDirect’s cancellation notice was not mailed until nine days before the cure deadline stated in the notice.
Plasma Fab did not pay the past-due premium by the stated cure date, and BankDirect sent a notice of cancellation to Scottsdale. Four days later, a fire destroyed an apartment complex where Plasma Fab’s employees worked. The next day, Plasma Fab tendered the overdue amount (shocking right?). Scottsdale refused to reinstate the policy, citing internal procedures forbidding reinstatement of policies that have been cancelled three times. Plasma Fab was sued for damages arising out of the fire. Scottsdale denied coverage, and judgment for almost $6 million was ultimately rendered against Plasma Fab. Plasma Fab sued Scottsdale and BankDirect for, among others things, breach of contract.
Plasma Fab argued that the policy had not been cancelled because BankDirect failed to comply with the 10 days’ notice requirement. The finance company argued that giving nine days’ notice instead of ten constituted substantial compliance with the law. The Court disagreed, stating that “the essential requirement of a deadline is the deadline, and, as with a missed statute of limitations, the degree of delay matters not: ‘A miss is as good as a mile.’” Therefore, the Court held that because BankDirect failed to meet the 10 days’ notice requirement, the policy had not been cancelled. As a result, Plasma Fab’s $6 million dollar suit against Scottsdale may go forward.
05/04/17 Allstate Insurance Company v. Northfield Medical Center, P.C.
New Jersey Supreme Court
New Jersey High Court Reinstates Nearly $4 Million Verdict to Insurer Defrauded by Sham Business Model
In this case, a chiropractor and an attorney travelled around the country selling a sham business model to chiropractors which violated state law in numerous states. Allstate Insurance Company sued Robert P. Borsody, Esq., a New York attorney, and Daniel H. Dahan, a California chiropractor (collectively, defendants) alleging statutory claims of insurance fraud. At trial, defendants were found to have violated New Jersey’s Insurance Fraud Prevention Act (IFPA) by assisting a New Jersey chiropractor in the late 1990s create an unlawful multi-disciplinary practice, which submitted medical insurance claims to Allstate. Allstate's theory of the case was unique in that it did not rely on any false claim submitted, but on the New Jersey practice's failure to comply with governing standards on the corporate practice of medicine, a necessary precondition to a valid insurance claim. On appeal, the intermediate appellate court reversed finding that the verdict was unsupported by the evidence.
New Jersey law explicitly provides that a medical doctor with a plenary scope of practice may not be employed by a licensee with a more limited scope of practice, such as a chiropractor. To get around the statutory scheme, Borsody came up with a sham business model that would allow the chiropractor to maintain majority control of the business, despite the legal requirement that the majority of the practice be owned by physicians. The scheme vested bare legal title in a physician. However, the physician was subject to direction and financial control by a chiropractor-owner of a management company. In fact, the practice model developed by Brody required the physician to sign an undated resignation letter to ensure that the chiropractor controlled the practice (red flags?). The New Jersey Supreme Court reviewed the record and found that the trial court’s verdict was amply supported by the record, and therefore, reversed the Appellate Division and remanded the case back to the trial court. Notably, the trial court originally awarded $3.96 million to Allstate as damages.
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
Albany is quiet.
OFF THE MARK
Brian F. Mark
[email protected]
04/10/17 Cosgrove v. National Fire & Marine Ins. Co.
United States District Court, District of Arizona
Arizona Federal Court Holds that Insurer is Estopped from Asserting a Coverage Defense in a Breach of Contract Action Based on the Subcontractors Exclusion Because the Information Pertaining to that Defense was Improperly Disclosed by Counsel for the Insured Contractor.
The plaintiff, Karen Cosgrove, hired WTM Construction (“WTM”) to remodel her house. Cosgrove sued WTM in state court for allegedly poor work. WTM was insured by the defendant, National Fire & Marine Insurance Company (“National Fire”), which agreed to defend WTM under a reservation of rights advising that the policy contained a subcontractor’s exclusion. The state court action settled. As part of the settlement, WTM assigned all of its rights against insurers. Cosgrove then sued National Fire in the Maricopa County, Arizona, Superior Court for breach of contract and bad faith. The lawsuit was removed to the U.S. District Court, District of Arizona. In the lawsuit, National Fire counterclaimed for declaratory relief.
Cosgrove moved for summary judgment, arguing that National Fire was estopped from relying on the subcontractor’s exclusion. Cosgrove’s estoppel argument was based on Parsons v. Continental National American Group. In Parsons, the Arizona Supreme Court ruled that “when an attorney who is an insurance company’s agent uses the confidential relationship between attorney and a client to gather information so as to deny the insured coverage under the policy … such conduct constitutes a waiver of any policy defense, and is so contrary to public policy that the insurance company is estopped as a matter of law from disclaiming liability under an exclusionary clause in the policy.” Cosgrove argued that WTM’s attorney violated the Parsons rule because National Fire was denying coverage based on information disclosed by WTM’s attorney during the course of the attorney-client relationship.
In opposition to Cosgrove’s motion, National Fire attempted to argue that the subcontractor information it relied on was not confidential or privileged and that Parsons only applies if the attorney representing the insured discloses privileged or confidential information. The District Court granted Cosgrove’s motion holding that at the time the attorney disclosed the subject information to National Fire, he knew, or had reason to know, that the National Fire policy contained subcontractors exclusion and that National Fire may attempt to deny coverage based on the exclusion.
In granting the motion, the court reasoned that WTM was owed full loyalty by its attorney, but such loyalty was clearly diluted by the attorney’s allegiance to National Fire. The court further held that Parsons only requires that the information has been obtained through the attorney-client relationship and that the disclosure of the information be to the detriment of the insured. The court noted that although the subcontractor information became part of the public record when WTM filed a third-party complaint against subcontractors, the Parsons violation had already occurred as WTM’s attorney had disclosed the subject information well prior to the third-party action being filed. The court also noted that had National Fire performed its own investigation of WTM’s claims, instead of relying on the information disclosed by the attorney retained to represent its insured, it would not be precluded from using the information to deny coverage. Accordingly, because National Fire obtained the subcontractor information from WTM’s attorney and then used that information to the detriment of WTM, National Fire was estopped from relying on the information to deny coverage.
02/06/17 AJD Construction Co. v. Crum and Forster Specialty Ins. Co.
Superior Court of New Jersey, Appellate Division
Superior Court of New Jersey, Appellate Division Precludes Insured from Re-Litigating Coverage Issues Where Carrier had been Granted Summary Judgment in a Prior Declaratory-Judgment Action.
In AJD Construction Co., Inv. v. Crum and Forster Specialty Ins. Co., the Superior Court of New Jersey, Appellate Division held that two cases against an insurance company relative to defects in a condominium complex were barred under the doctrine of preclusion. Prior to this action, Crum and Forster, ADJ Construction’s insurance carrier, was granted summary judgment in a declaratory-judgment action related to construction defects in an unrelated condominium complex where ADJ Construction served as the general contractor. That declaratory-judgment action was commenced by another insurance carrier that also insured AJD Construction. ADJ Construction was named as a party in that action. In that action, the granting of summary judgment was based on the ground that Crum and Forster had no duty to defend its insured as the CGL policy did not provide coverage for an insured’s faulty workmanship.
In this action, AJD Construction sought a declaration that Crum and Forster owed a duty to defend and indemnify AJD Construction relative to three lawsuits arising from construction defects in a different condominium complex than the condos that were the subject of the action where Crum and Forster was granted summary judgment. The claim for coverage asserted by ADJ Construction against Crum and Forster was precluded based on Crum and Forster having been previously granted summary judgment in the prior declaratory-judgment action, which involved the same parties and the same coverage issue.
Earl K. Cantwell
[email protected]
12/29/16 Gusma Properties, LLP v. The Travelers Lloyds Insurance
Court of Appeals of Texas, Houston (14th District)
Payment of Settlement Check to Counsel was Payment to Insured
Travelers insured five (5) buildings owned by Gusma Properties that were damaged by a hurricane. An appraisal award was made of $1,850,142.93, and about a week later a check was written payable jointly to Gusma Properties and its attorney. However, the attorney negotiated the check without the endorsement of Gusma Properties and kept all the money. The insured subsequently sued the attorney, the banks, and Travelers to recover the appraisal award funds. With respect to Travelers, the insured claimed breach of contract, and violation of Texas Insurance Code prompt payment provisions.
The insured settled with the banks essentially for the amount of the appraisal award. However, the insured continued to pursue “delay damages” under the prompt payment provisions in the Texas Insurance Code. The insured sought delay damages for Travelers’ alleged failure to timely “discharge its obligation” to pay the appraisal award. However, the trial court granted the insurance company summary judgment and this was affirmed on appeal.
The Court ruled that the attorney-client relationship between the insured and its counsel created an agency relationship, and when an agent misappropriates payments intended for the principal, the principal bears the loss because payment made to an agent is deemed made to the principal. The Court ruled that Travelers constructively delivered the appraisal payment to the insured, and thus properly discharged its obligation with respect to the policy by submitting the check made jointly payable to the insured and its counsel with the attorney serving as the insured’s agent for purposes of delivery. The timely and good faith constructive delivery also tolled any prompt payment penalties under the Texas statutes.
The insured also tried to argue that the UCC law of negotiable instruments would hold that the underlying obligation was not discharged. The Court however still ruled that under the UCC delivery of the instrument to the attorney –agent was constructive delivery to the insured. The terms of the UCC did not displace or override common law agency principles.
This case presents the lesson of considering the form in which a settlement check is issued. It is usually the best policy to make any such check payable jointly to the insured and their counsel or to the law firm in trust as attorneys for the insured. This case also reinforces the notion that, especially with respect to third parties, the attorney-client relationship is an agency relationship and the attorney is generally empowered to negotiate, act, and speak on behalf of the client/insured.
Reading between the lines, the Court may also have considered the fact the insured obtained the full amount of the appraisal check in its settlements with the banks, presumably because they cashed the check without an endorsement or under a forged endorsement. The Court may have viewed the continued claim for “delay damages” as an overreach on the part of the insured that perhaps should be grateful for the fact that it was (essentially) made whole for the defalcation by its counsel.
