Coverage Pointers - Volume XVIII, No. 25

Volume XVIII, No. 25 (No. 481)

Friday, June 2, 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. 

 

This issue comes to you from the Marriott World Center in Orlando, Florida.  For the past nine years, I’ve been honored to be part of the planning committee for the PLRB Claims Conference, to be held next April in Orlando.  We’re planning terrific CE and CLE programs.

 

Thanks for the many good wishes on our firm’s 40^th Anniversary, June 1.  We’re delighted to continue to serve our clients throughout New York State, with offices strategically placed to efficiently provide legal services wherever you need them.

 

In this Week’s Issue:

 

There is a helpful decision in my column on limiting additional insured coverage in a premises liability context as well as an instructive decision on the importance of sending out timely disclaimer letters.  Read and learn.

 

Andrea Schillaci Recognized for Excellence

 

Please join me in congratulating Andrea Schillaci who was just awarded an Excellence in Law Award in the category of Top Women in Law by the New York Daily Record, a WNY legal newspaper headquartered in Rochester. The three categories were Top Women in Law, Up & Coming Attorneys and Unsung Heroes.

 

The Top Women in Law awards "recognize the outstanding accomplishments of female attorneys who are making notable contributions to the legal profession while inspiring positive change in the community."

 

Andrea chairs our Commercial Litigation Team.  Well deserved.

 

New York State Bar Association SBA - Toxic Tort Litigation CLE program.

 

PROGRAM LOCATIONS:

 

Friday, June 2, 2017 | Sheraton Syracuse University Hotel & Conference Center

Our own Chris Potenza serves as Local Chair

Friday, June 9, 2017 | New York Society of Security Analysts
1540 Broadway, Suite 1010 | New York, NY 10036

Not Able to Attend in Person?

A Live Webcast Option is Available: Friday, June 9, 2017

If you cannot watch the webcast at the scheduled time and date, the recording will be available to you to access after the presentation date for a 60 day period enabling you to watch on your schedule and earn your MCLE credits.*Newly admitted attorneys (less than twenty-four months) must attend the live program in order to earn Skills credits. Newly admitted attorneys are not able to earn Skills credits by viewing the webcast.

Who Should Attend:

Environmental Law practitioners, Toxic Tort litigators, Real Estate transactional attorneys, Claims Professionals

Program Description

This half-day program provides a thorough overview of toxic tort litigation. Our faculty, a mix of distinguished litigators and experts, will highlight the intricacies of a toxic tort claim. This program will explore the skills necessary to demonstrate causation and harm, and will analyze recent cases and industry developments. This unique program is not to be missed!

 

Ewell’s Universe:

 

Dear Subscribers:

 

I hope everyone had a relaxing Memorial Day weekend. I decided to get away for a bit and drove up to Canada’s Wonderland, which is just north of Toronto, Ontario in Canada. It was a beautiful drive, and for those who don’t know, Canada’s Wonderland is the biggest rollercoaster park in all of Canada.

 

When we got to the park, I told my girlfriend to pick the first rollercoaster we would go on. She immediately pointed to the Leviathan, the tallest and fastest rollercoaster in the park and all of Canada. Moments later, we hopped into the front car and off we went! As the car reached the top of the 300 foot drop, I held my breath as the coaster dropped straight down 28 stories. We then flew over several hills, rather quickly, at 92 MPH. After that, we spent the rest of the day riding every rollercoaster in the park, all of which seemed tamer in comparison. Can’t wait to go again! If you’re ever near Toronto, spend a day at Canada’s Wonderland. Be sure to get a Fastpass, especially if you hate waiting in line. Otherwise, the queue is about an hour for each ride.

 

In Ewell’s Universe today, we have an interesting case from the New Jersey Supreme Court which discusses the interplay between additional coverage sublimits and a “hard cap” on the amount recoverable under the policy for flood damage. There, the plaintiff sustained hurricane damage after Superstorm Sandy and sought coverage for $1 million in flood damage as well as $200,000 for debris removal. The policy’s flood limit was $1 million. Although the policy provided additional coverage up to $500,000 for debris removal, the policy was clear that the most the insurer would pay for the “total of all loss or damage caused by Flood” was $1 million. Accordingly, the Court held that insurer had fulfilled its contractual obligations by paying the $1 million flood limit and denied coverage for the $200,000 sought for debris removal. In reaching this decision, the New Jersey Supreme Court relied on an analogous New York case, which declined to apply additional coverage from other sublimits of the insurance policy in addition to a flood limit. As such, this decision is noteworthy for New York insurers because New York and New Jersey law are in agreement on this point.

 

'Til Next Time,

 

John

John R. Ewell

[email protected]

 

Child Labor Encouraged by Washington for War Efforts:

 

The Colfax Chronicle

Colfax, Louisiana

02 Jun 1917

 

Children May Help

 

Washington —Secretary Redfield today proposed that children go into the rag, waste paper, and old iron business to raise funds for war relief work.  He recommended that in every town and city an organization be formed to systematize the collection of junk by children. 

 

Jen’s Gems:

 

Greetings! 

 

The New York Insurance Association (“NYIA”) is holding its 2017 Annual Conference this week in Buffalo.  It is a fantastic event.  Beyond participating in the golf tournament yesterday, Steve Peiper and I got to spend this morning at the Exhibit Trade Show.  If you spotted us, I hope you said “hello.”  We were the two wearing “Got A Situation” name badges and handing out very nice pens.  We still have a few extras if you did not get one. 

 

In terms of my column this week, I report on an interesting decision out of New York County Supreme Court, Fireman’s Fund Ins. Co. v Travelers Cas. Ins. Co. of Am.  In the decision, the court examines language in an additional insured endorsement which provides that “[t]he person or organization does not qualify as an additional insured with respect to the independent acts or omissions of such person or organization.”  Based on this language, the court found that the coverage was limited to situations involving vicarious liability.  Finding that the case at issue was not a vicarious liability situation, the court found the additional insured endorsement did not trigger. 

 

Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

Pony Punishment – a Century Ago:

 

 

The Patriot

Indiana, Pennsylvania

02 Jun 1917

 

Boy Horse Thief Sent

to Industrial School

 

Rudie Bellas, a 12-year-old boy, who was recently placed in the care of the Willard Home by direction of the juvenile court, was sent to the Boy’s Industrial school at Oakdale Monday as the result of his connection with the disappearance of a horse on Saturday.  While attending the circus on Saturday, Miss Campbell, daughter of David Campbell, of White township, left her horse in the rear of Thomas’s Bros. livery and the boy secured the animal and rode to Dixonville, where Sheriff Boggs found the stolen property, as well as the youthful horse thief the following day.

 

Tessa’s Tutelage:

 

Dear Readers,

 

This week we have three cases for discussion.  Some are a little easier to digest than others.  In the land of arbitration we have a matter decided by Arbitrator Brown.  There reimbursement for a multi-mode stimulator was denied by a peer review doctor.  According to Arbitrator Brown, the peer review report addresses a TENS unit, not a multi-mode stimulator and did not sufficiently lay out the standards of care for the injuries at issue.  I won’t get into the differences between a multi-mode stimulator and a TENS unit, but the take away here is that your peer review report must address the product/service being used.  If in the off chance that a multi-mode stimulator is the same thing as a TENS unit, the report should include a discussion of that, with supporting documents.

 

In the land of litigation we have Hu-Nam-Nam.  There the Court reminds us that to vacate a default judgment against you, you need to have a good reason for your delay and proof that you have a viable defense to the claim against you.  That’s where things fell apart for our defendant here.  They put on a good show about an accident occurring on June 21, 2010 but the accident at issue occurred on June 20, 2010.  That didn’t really cut it for the Court.  Lastly, we have a case that one case where the underlying facts aren’t all that clear.  That’s okay, because the take away is that vacating an award of a Master Arbitrator is hard (but you already knew that).  To have any successful argument you need more than speculation and inference, you must have admissible evidence.

 

Have a lovely weekend!

 

Tessa

Tessa R. Scott

[email protected]

 

Gone but not Forgotten:

 

Star-Gazette

Elmira, New York

02 Jun 1917

 

SAYS HIS BRIDE

LEFT HIS HOME

 

Jacob Weinstein, proprietor of the College Pharmacy of 1009 College Avenue, is seeking separation from his bride of last September.

 

Mr. Weinstein and Miss Matilda R. Greenberg of Syracuse were married September 19, 1916, at Utica.  After their marriage they came to this city and lived on East Market street.  Mr. Weinstein alleges that his wife left his bed and board without just provocation on March 24 and has refused and declined to return and live with him.  Attorney Harry Moseson represents Mr. Weinstein.

 

For the past several weeks an effort had been made to locate Mrs. Weinstein, who is the daughter of a furniture dealer, A. B. Greenburg, of Syracuse.  It was not until yesterday that she was found working as a stenographer in an office in Binghamton.  Mr. Weinstein says she was employed there under her maiden name. 

 

Peiper’s Perception

 

We start this week with top billing for our friends at the New York Insurance Association. NYIA is having their annual meeting in the City of Good Neighbors (that’s Buffalo for those of you wondering), and we have had the opportunity to catch up with the NYIA staff and conference attendees over the past few days.  For those of you who don’t known of NYIA, you should check them out.  It is a fine group, and run by a finer group of people. Plus, as I was reminded over the past few days, they are avid Coverage Pointers fans so you know that they are well-informed, and tolerant of bad jokes.   Kudos to them for a first rate conference.

 

We also take a moment to salute our “more experienced” friends and colleagues of Hurwitz & Fine.  I have been with the office for a little over a ¼ of its existence, and I am still one of the rookies.  Indeed, the notary who authenticated the documents which created the firm, is still with it, forty years later.  As you may recall, our Editor, too, came with the place when it opened in 1977 (or a few days thereafter).  I am honored to be a small part of the anniversary, and humbled by the responsibility of maintaining the legacy created over the first 40 years.  Again, cheers to all.

 

With regard to the column this week, we first note the “Well…Duh!!!” decision issued by the Second Department.  For those of you who might wish to criticize your counsel for a loss at the trial court level, we invite you to review the Allstate case.  Insurance Law 3420(d)(2), which requires timely denial letters, DOES NOT apply to first party property damage cases.  It, you know, kinda says that right in the statute, and there has been, oh, a dozen or so Court of Appeals cases which have said the same thing.  Nevertheless, Allstate had to trudge to the Second Department to have its denial on a vacancy exclusion affirmed because the trial court confused bodily injury with property damage.  Justice delayed is justice denied, except when it comes to insurance carriers apparently! 

 

We also note the interesting State Farm decision regarding consent of use of an automobile.  While the decision provides a nice discussion of what an owner must do to prove lack of consent, we note the often confused difference between the insurance definition of consent and the tort defense definition of consent.  In tort, consent is determined “through the eyes” of the owner.  For insurance purposes, however, it is generally determined “through the eyes” of the driver.  Thus, for a tort defense on consent, the question is did the owner really give consent.  For coverage, however, it is did the driver really believe he or she had consent. 

 

That’s it for now.  Happy June to all. 

 

Steve

Steven E. Peiper
[email protected]

 

Landlords Barred from Selling Food to Tenants, a Century Ago:

 

 

Democrat and Chronicle

Rochester, New York

02 Jun 1917

 

CANNOT SELL TO TENANTS

 

Law Forbids Food Contracts Whereby

Landlords Get Commission

 

 Albany, N.Y., June 1.—Hereafter food dealers and apartment house owners cannot legally arrange for the sale of commodities to tenants when a commission is involved.  Governor Whitman to-day signed the Wicks bill prohibiting agreements or contracts between dealers in foods and other commodities and the owner, agent or employees of apartment or tenement houses giving such dealers the privileges of selling supplies to occupants.  During the investigation last year of the Wicks Food Committee, testimony was adduced showing that such agreements were prevalent and that they added materially to the high cost of foodstuffs. 

 

Phillips Federal Philosophies:

 

Hello, All:

 

Thanks to all of you who joined us last night at the Hotel Henry to celebrate the firm’s 40^th Anniversary, and to those of you who couldn’t make it, we missed you and hope to see you at the 50^th!  Also, I ate your dessert. 

 

This week’s case comes from the Eastern District of New York, where in Scottsdale Ins. Co. v. Priscilla Properties, the district court considered the insurer’s request to rescind an insurance policy.  The insured company, a construction general contractor, had applied for coverage under a specific program underwritten for artisan subcontractors which excluded general contractors or construction managers.  The district court agreed that the insurer had met its burden of establishing the misrepresentation was material and permitted rescission.

 

As always, thanks for reading.

 

J.

Jennifer J. Phillips

[email protected]

 

More British Women Carousing Because of War:

 

Middletown Times-Press

Middletown, New York

02 Jun 1917

 

WAR LOWERS TONE

OF BRITISH WOMEN

 

London, June 2—The war is having a lamentable effect upon British women, according to a report made by Brigadier-General F. C. Bridgeman at the annual meeting of the London City Mission.  He said that home missionaries note with sadness the remarkable change.  Public houses are now full of women carousing.

 

One missionary, said Brigadier-General Bridgman, wrote as follows of a trip about London:

 

“Dirty, unkempt, ragged, brutal in appearance and vile in their language were the women.  Never in my life did I hear such foul talk as came from them.”

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

Memorial Day has come and gone but our thoughts will always be with those who gave their lives for their country. The unofficial start of summer has also arrived. My two sons are counting down the end of the school year, as is my wife, who is a teacher of English as a Second Language. (16 school days left on Long Island for those that are counting). With summer camp and summer activities, Robert and Joey will be kept pretty busy, regardless.  

 

The Courts have issued three serious injury opinions for this edition. In the first, defendant’s motion failed because their experts did not address plaintiff’s claim of TMJ syndrome in the jaw. In the second, defendant’s own expert found range of motion limitations that they did not cite a medical basis for their conclusion that it was subjective. The third case by the third department is a more substantial opinion factually. First, on liability, plaintiff won by establishing that defendant had crossed a double yellow line and had no medical or emergency excuse. The court found issues of fact as to the various injuries claimed which essentially came down to a battle of the experts, which each side citing to an expert as to why it was correct. That will almost always lead to a denial of a motion for summary judgment. The dissent as to the 90/180-day category felt that plaintiff had not shown any curtailing of his activities. The dissent also found that as to psychological issues, plaintiff’s expert failed to cite any medical or objective basis for its conclusions.

 

I want to also congratulate our firm on reaching its 40^th anniversary!

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

More Women Participating in Service Nation During Wartime:

 

Everything

Greensboro, North Carolina

02 Jun 1917

 

They Beat Us

 

Being something of a man ourself, we hate to say it, but the women are beating the men to the war game.  Take the papers from most any town or city and you will find where the women are busy where they have organized different societies; where they have not only offered their services, but are doing service.

 

The men are helping on some of the committees, but the women lead the race.  Those younger men who are eligible for field duty, of course, are not expected to organize or take part in the same proceedings.  They will register and go to the front when called and render active service.  But we are talking now about the fellow just over thirty-one; the man who knows he will not be subject to the draft at least for some time; the older fellow up to fifty and sixty.  He is loafing on the job.  True, he is now getting busy in a way to buy Liberty Bonds, but he isn’t as busy along that line as he might be.  Wonderful change since the days of, say, Saint Paul, when he was telling the women to keep their mouths shut in public.  In every town and in every home the woman is taking the initiative; she is doing things—as busy and as thoughtful and as hopeful as possible.  The man, wonderful creature that he is, is arguing the question and looking wise.

 

Wilewicz’ Wide-World of Coverage:

 

Dear Readers,

 

Is that summer in the air? I think it might be, as evidenced by the midge infestation we appear to have at our house (or are they sandflies?) and the increase in available parking as people start playing hooky in the warm weather. All good things.

 

This week, in the WWW of Coverage, we have a case that hits all of this column’s assigned beats: Second Circuit, coverage, and environmental! In Cincinnati Insurance v. Roy’s Plumbing, the insured sought coverage under its policy for claims asserted against it based upon the never-ending Love Canal litigation up in Niagara Falls (a contaminated Superfund site that has literally been litigated for decades). Unfortunately for them, their policy included a fairly common, straight forward pollution exclusion. Since the allegations all stemmed from environmental pollution and/or contamination, it was triggered. Thus, no coverage for you. The Court reasoned that the exclusion was clear and the claims fit squarely therein. It’s a good, quick read, so see the attached!

 

Until next time,

 

Agnes

Agnes A. Wilewicz

[email protected]

 

First Congresswoman Delivers First Speech:

 

The Labor World

Duluth, Minnesota

02 Jun 1917

 

JEANETTE RANKIN DELIVERS

MAIDEN SPEECH IN HOUSE

 

Introduces Amendment Amid Applause

and Has It Passed In Five Minutes

 

WASHINGTON –Miss Jeannette Rankin, Montana, game but a little nervous, made her maiden speech in the house Monday.  She introduced, spoke on and had passed in less than five minutes, amid vociferous applause, an amendment providing that as much as possible of the food conservation work under the Lever bill shall be done by women.

 

Miss Rankin, after nearly two months of virtual silence caused a stir as she arose, obtained recognition as “the lady from Montana,” and handed her amendment to the page.

 

The amendment follows:

 

“Provided that the secretary of agriculture shall so far as is practicable engage the services of women for the work herein provided for.”

 

Then Begins Speech.

 

Miss Rankin, still standing, was again recognized.  She braced herself on the back of the preceding row of chairs and began her first speech.

 

“This amendment will place women where they can be effective,” she said.  “By having in these offices woman officials who understand the home, women can be encouraged to conserve food.  By using women we can concentrate the attention of women in large questions of the nation.  Women must learn to think of food in carload lots, in transit, in storage, in the board of trade, and in the national market, as well as in the small portion of the family table. 

Editor’s Note:  For those who may not recall, in the November 1916 election, Jeannette Pickering Rankin was the first woman elected to federal office.  Our story was here.

 

Barnas on Bad Faith:

 

Hello again:

 

This note is coming to you from the DRI Insurance Bad Faith Seminar at the Hyatt Regency in Boston, Massachusetts.  That’s right; Barnas on Bad Faith live from a bad faith conference.  It has been a great conference so far, with knowledgeable speakers presenting on a number of interesting topics, including institutional bad faith claims, discovery issues with bad faith claims, and an update on the forthcoming Restatement of the Law, Liability Insurance.  I’ve had the pleasure of meeting a number of Coverage Pointers readers here over the past day as well.  I would love the chance to meet a few more Friday.  If you see this note and would like to say hello just shoot me an email at the address below.

 

My column today has the Kabrich case from the Ninth Circuit.  After the insured suffered a property loss, Allstate attempted to investigate the scope of her damage.  However, the insured failed to respond to Allstate’s requests and filed a lawsuit.  After the litigation started, Allstate was finally able to inspect the property after filing a motion to compel.  It determined that the damage exceeded the policy limit, and paid the limits.  Surprisingly, the insured then argued that Allstate breached the contract and acted in bad faith by delaying payment of the claim.  The Ninth Circuit rejected this argument and concluded that there was no breach of contract or bad faith.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Governor Cuomo Sent Names for High Court:

 

The Commission on Judicial Nomination has released a list of seven nominees—six judges and a private-practice lawyer— to succeed the late Sheila Abdus-Salaam on the New York Court of Appeals.

 

• Eric Corngold, a partner at Friedman Kaplan Seiler & Adelman who previously served in the New York Attorney General's Office.

• Four are justices on the Appellate Division, First Department. They are: Paul Feinman, Judith Gische, Rosalyn Richter and Troy Karen Webber.

• The presiding justice of the Appellate Division, Fourth Department, Gerald Whalen.

• Mary Kay Vyskocil, a Southern District bankruptcy judge.

   

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Readers. Happy June! I am pleased to report that Shabbat dinner with my girlfriend’s family went surprisingly well, with her family actually liking me! I’m as surprised as you are.  We’re having them checked out by a psychiatrist next week to find out why. 

 

New on the legislative front, the Congressional Budget Office released its findings on the American Health Care Act. In short, the proposed Bill is predicated to leave tens of millions uninsured, and dramatically increase premiums for the sick and for senior citizens.  To quote Pete Townsend, Dear Reader, “I hope I die before I get old.”

 

Howard

Howard B. Altman

[email protected]

 

Object Matrimony:

 

The Pittsburgh Press

June 2, 1917

 

WOULD LIKE TO MEET some well-to-do young men of refinement. Am young and attractive.  Give right name and address. Loretta Morrison, Strictly confidential, general delivery, city.

 

Off the Mark:

 

Dear Readers,

 

The trip down to the Florida Keys was a lot of fun.  The kids were in the pool all day, every day and have some serious tans to prove it.  Last weekend my youngest and I did some camping and hiking in the Catskill Mountains.  It was great to get back to nature and the views while hiking were amazing.  We can’t wait to do it again.

 

Unfortunately, I did not come across any recent noteworthy decisions pertaining to coverage for construction defects.  However, I did find a case that may be helpful when litigating discovery issues in a declaratory-judgment coverage action.  In Westfield Insurance Co. v. Icon Legacy Custom Modular Homes and Icon Legacy, the plaintiff insurer commenced a declaratory-judgment action against its insured disputing coverage for underlying faulty workmanship claims against its insured.  Following the dismissal of its bad faith claim, the defendant insured moved to compel the production of numerous documents and information, including the insurer’s claims and underwriting files and documents related to all actions in which the insurer is defending an insured where there are property damage claims caused by the work or product of the insured.  Upon an examination of whether, and to what extent extrinsic evidence is discoverable in a declaratory-judgment action where bad faith is no longer at issue, the U.S. District Court for the Middle District of Pennsylvania held that the defendant insured failed to establish sufficient grounds to compel the requested discovery.  The insured failed to demonstrate an ambiguity in the plaintiff’s policy and that the requested extrinsic evidence would likely resolve the ambiguity.

 

Until next time …

 

Brian

Brian F. Mark
[email protected]

 

 

Highlights of this week’s issue, attached:

 

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

 

• Additional Insured Status for Landlord for “that Part of the Premises Leased to the Tenant” (a Particular Unit) Did Not Confer AI Status to Landlord for Parking Lot Accident

• Default Against Insurer is Upheld, for Failure to Sufficient Articulate Reasons for Default

• Failure to Disclaim Timely in Bodily Injury Claim Results in Insurer’s Loss of Ability to Rely upon Exclusions

• Standard of Review of Compulsory Arbitration Discussed

• Insurer Wins on Pre-Prejudice Late Notice Disclaimer

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

Robert E.B. Hewitt III

[email protected]

 

• Defendant’s Expert Failed to Address Plaintiff’s Claim of Serious Injury to the Jaw

• Defendant’s Expert Failed to Substantiate Belief that the Significant Range of Motion Limitations He Found Were Self-Imposed

• Plaintiff Raised Issues of Fact as to Every Serious Injury Category Alleged By Submitting Physician Reports Finding Such Limitations

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

Litigation:

 

• To Successfully Move To Vacate a Judgment, You Must Show a Reason for the Delay, and That You Have a Meritorious Defense

• Petitioner Did Not Establish Grounds for Vacating the Decision of the Master Arbitrator

 

Arbitration:

 

• The Peer Review Must Specifically Address the Medical Equipment Prescribed

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

• The Sky is Blue, Water is Wet, and in Other News Insurance Law 3420 Does Not Apply to Property Damage Claims and Estoppel Requires Prejudice

 

Potpourri

 

• Proof of Lack of Consent under V&T 388 Requires More than Simple Testimony by Owner and Driver

• Designation of “Cross-Motion” Does Not Automatically Save Otherwise Late Summary Judgment Application

• No Claims of Vicarious Liability Preclude Defendant’s Third-Party Claim for Common Law Indemnification

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

• Second Circuit Finds that Insurer had No Duty to Defend or Indemnify Insured Sued in Love Canal Superfund Litigation, Where Policy has Pollution Exclusion (NY Law)

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

• Language in AI Endorsement Stating that the “Person or Organization Does Not Qualify as an Additional Insured with Respect to the Independent Acts or Omissions of Such Person or Organization,” Limits Coverage to Claims where Vicarious Liability is Alleged

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

• Under Washington law, Insurer did not Breach the Insurance Contract or Act in Bad Faith where Delay in Payment was Attributable to the Insured

 

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

• Rescission Decision

 

EWELL’S UNIVERSE
John R. Ewell

[email protected]

 

• New Jersey Supreme Court Denies Coverage for Debris Removal Where Policy Capped Total Amount Recoverable for Flood Damage

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

• American Health Care Act

 

OFF THE MARK
Brian F. Mark
[email protected]

 

• Pennsylvania Federal Court Denies Motion to Compel Discovery of Extrinsic Evidence in a Declaratory-Judgment Coverage Action where Insured Failed to Demonstrate an Ambiguity in the Policy and that the Requested Extrinsic Evidence Would Likely Resolve the Ambiguity

   

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

• “Insured v. Insured” Exclusion

 

 

That’s it from Orlando.  Keep those cards and letters coming in.

 

We LOVE hearing from you.

 

Dan

 

Dan D. Kohane

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

 

Office:            716.849.8942

Mobile:           716.445.2258

Fax:                716.855.0874

E-Mail:            [email protected]  

Website:         www.hurwitzfine.com  

Twitter:           @kohane

LinkedIn:       www.linkedin.com/in/kohane

 

 

 

 

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

[email protected]

 

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

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

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

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Ewell’s Universe

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

Earl’s Pearls

 

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

 

05/31/17       Atlantic Ave. Sixteen AD, Inc. v. Valley Forge Ins, Co.

Appellate Division, Second Department

Additional Insured Status for Landlord for “that Part of the Premises Leased to the Tenant” (a Particular Unit) Did Not Confer AI Status to Landlord for Parking Lot Accident

Raven was employed by the Linea 3, which operated a wedding and party-favor supply business in a portion of a building owned by the Atlantic. Linea rented space in the building pursuant to a written lease with Atlantic. The lease provided that the building's parking lot was a common area, and that Atlantic was responsible for maintaining the common areas, including snow removal.

 

Universal also operated a business in a different portion of the building. Universal and Atlantic were owned by the same principals. On the morning of January 28, 2011, Raven allegedly was injured when he slipped and fell on a patch of black ice in the building's parking lot as he was walking from his car to the building to begin work. Raven sued Atlantic and Universal to recover damages for personal injuries (“underlying action”).

 

Atlantic and Universal had a commercial liability insurance policy in effect with the Citizens Insurance Company (“Citizens”) and Linea had a commercial liability insurance policy in effect with Valley Forge. The Valley Forge insurance policy contained an endorsement providing coverage for Atlantic as an additional insured for "liability arising out of the ownership, maintenance or use of that part of the premises leased to [Linea] and shown in the Schedule" (hereinafter the additional insured endorsement). The "Schedule" stated that Linea had leased "Unit 2" of the building, and made no reference to the parking lot.

 

Atlantic tendered to Valley Forge its claim for a defense and indemnification in the underlying action as an additional insured, but Valley Forge denied Atlantic's tender on the ground that the potential liability did not arise out of the ownership, maintenance, or use of the part of the premises leased to Linea. It argued that the parking lot was a common area outside of the leased premises, and Atlantic was responsible for snow and ice removal from the parking lot.

 

The plaintiffs then commenced this action seeking, among other things, a declaration that Valley Forge was obligated to defend and indemnify Atlantic and Universal in the underlying action.

 

An insurer's duty to defend is exceedingly broad. An additional insured is entitled to the same coverage as if it were a named insured if any of the claims against an insured arguably arise from covered events, the insurer is required to defend the entire action. The phrase "arising out of" requires only that there be some causal relationship between the injury and the risk for which coverage is provided.

 

Here, Valley Forge established its prima facie entitlement to judgment as a matter of law. The additional insured endorsement unambiguously provided that Atlantic was an additional insured for liability "arising out of" the "ownership, maintenance or use" of the "premises leased" to Linea. Linea leased only a portion of the building from Atlantic, not the parking lot where the accident occurred, and it had no duty to maintain the parking lot. As such, there was no causal relationship between the injury and the risk for which coverage was provided, and Raven's injury was not a bargained-for risk.

 

05/31/17       Clarke v. Liberty Mutual Fire Insurance Co.

Appellate Division, Second Department

Default Against Insurer is Upheld, for Failure to Sufficiently Articulate Reasons for Default

On October 20, 2013, the Clarkes were involved in an automobile accident with Liberty’s insured, Bates.  They sued Bates and took a default against him for $50,000 each. Then, under the Direct Action protocols, they served Bates and Liberty with a copy of the judgment.

 

After 30 days went by without payment, the Clarkes sued Liberty (as they are permitted to do under those protocols).  They served Liberty on October 26, 2015 and as Liberty did not appear or answer, they moved in December for leave to take a default against Liberty. Liberty did not oppose the motion but the court would not enter a default because it relied on a complaint verified only by its attorney and not by a party.

 

The plaintiffs moved for leave to renew and reargue their prior motion, asserting, inter alia, that since the action was one to collect an unsatisfied judgment from an insurer, their attorney had personal knowledge of the facts constituting the claim, which he set forth in his affirmation accompanying the prior motion. In the meantime, Liberty tried to serve the plaintiffs with an answer, which was rejected and Liberty made a motion to compel the plaintiffs to accept the answer.

 

On a motion for leave to enter a default judgment pursuant to CPLR 3215, a plaintiff is required to submit proof of service of the summons and complaint, the facts constituting the cause of action, and the defendant's default in answering or appearing. To demonstrate the facts constituting the cause of action, the plaintiff need only submit sufficient proof to enable a court to determine if the cause of action is viable.

 

Here, the affirmation by the plaintiff’s attorney was sufficient because he had all the knowledge necessary to demonstrate that a judgment was entered against the insured and the service protocols had been completed.

 

To defeat the plaintiffs' facially adequate motion and be relieved of its default in answering the complaint, the Liberty had to show either that it did not default, or that it had a reasonable excuse for its default and a potentially meritorious defense to the action.

 

Liberty alleged a clerical error but failed to describe any details as to why or how it occurred.  Liberty did not address why it did not take any action upon being served with the plaintiffs' initial motion for leave to enter a default judgment against it or the resulting court.

 

Accordingly, Liberty’s default is sustained.

 

05/24/17       Ability Transmission, Inc., v. John's Transmission, Inc.

Appellate Division, Second Department

Failure to Disclaim Timely in Bodily Injury Claim Results in Insurer’s Loss of Ability to Rely upon Exclusions

In May 2012, Susan allegedly was injured when she tripped and fell in a pothole in the parking lot of John's Transmission, Inc. (“John's”).  John’s was a tenant and it leased the premises from Ability. Susan sued Ability and others.

 

John's, the tenant, had purchased insurance from Merchants Mutual Insurance Company (“Merchants”).  The Merchants policy named the owner, Ability as an additional insured. Ability sought defense and indemnification in the underlying action from Merchants. Merchants disclaimed coverage by letter dated June 28, 2012, and Ability challenged that disclaimer in this coverage lawsuit.

 

The court noted that when an insurer disclaims coverage for death or bodily injury arising out of an accident, the notice of disclaimer must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.  An insurer's justification for denying coverage is strictly limited to the ground stated in the notice of disclaimer and the failure to raise a ground for disclaimer is waived if not raised.

 

In its disclaimer letter, Merchants stated, in relevant part, that Ability was not named as an additional insured under the insurance policy, a statement that was factually incorrect. Contrary to Merchants' contention, the exclusion upon which Merchants now relies was not mentioned in its disclaimer letter and, therefore, any argument based on that exclusion has been waived.

Editor’s Note:  If the basis for the disclaimer was that an exclusion barred coverage, the court was right. 

 

05/24/17       Allstate Insurance Company v. MVAIC
Appellate Division, Second Department

Standard of Review of Compulsory Arbitration Discussed

This was a proceeding to vacate an arbitration award.  This was a mandatory arbitration award involving the Motor Vehicle Accident Indemnification Corporation.

 

When there is a review of a compulsory arbitration award (as compared to a voluntary arbitration) the court has a greater power of review. An arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious. Here, contrary to Allstate's contention, the arbitration award has evidentiary support in the record, and is not arbitrary and capricious.

 

05/24/17       Ramlochan v. Scottsdale Insurance Company

Appellate Division, Second Department
Insurer Wins on Pre-Prejudice Late Notice Disclaimer
This was a “direct action” under Insurance Law § 3420(a)(2) to recover the amount of an unsatisfied judgment against the Scottsdale insured.  That statute permits a plaintiff who obtains a judgment against a defendant (and thereby becomes a judgment creditor) to directly sue a liability carrier that the judgment creditor believes is responsible for satisfying the judgment.

 

Here, the insurer had denied coverage based on late notice of an occurrence. This was a pre-prejudice statute decision (and we’re running out of those, because they only apply to policies issued or renewed before January 17, 2009).

 

Where an insurance policy requires that notice of an occurrence be given "as soon as practicable," notice must be given within a reasonable time in view of all of the circumstances. "The insured's failure to satisfy the notice requirement constitutes a failure to comply with a condition precedent which, as a matter of law, vitiates the contract'. An insured’s late notice may be excused if the insured had a reasonable belief in nonliability.

 

The burden of proof is on the insured to establish that is had a reasonable belief. "

 

Here, the defendant Scottsdale demonstrated that its insured knew of the occurrence immediately and received a letter of representation from the plaintiff's attorney in June 2008, but waited until September 25, 2009, to notify Scottsdale. The judgment creditor failed to raise a triable issue of fact as to whether the insured's delay in notifying Scottsdale was reasonable based upon its good faith belief in nonliability.

 

The insurer was obligated to disclaim promptly.  That’s generally considered to be within 30 days of notice.  However, here, the insurer demonstrated that Moreover, contrary to the plaintiff's contention, Scottsdale demonstrated, its delay in disclaiming coverage was reasonable under the circumstances. It was conducting an active investigation into issues affecting the decision whether to disclaim.

 

The delay in issuing the disclaimer of coverage was reasonably related to the completion of a necessary, thorough, and diligent investigation into issues affecting its decision to disclaim.

Editor’s Note:  Kudos to our friend Ann Odelson, of Carroll McNulty & Kull, LLC for her usual great legal work.

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

Robert E.B. Hewitt III

[email protected]

 

05/31/17       Bowen v. Wilson

Appellate Division, Second Department

Defendant’s Expert Failed to Address Plaintiff’s Claim of Serious Injury to the Jaw

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 he sustained a serious injury to his jaw, in the form of "TMJ Syndrome," the defendants failed to submit competent medical evidence addressing this alleged serious injury. In addition, the papers submitted by the defendants failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that he sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendants failed to meet their prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.

 

05/31/17       Protonentis v. Battaglia

Appellate Division, Second  Department

Defendant’s Expert Failed to Substantiate Belief that the Significant Range of Motion Limitations He Found Were Self-Imposed

The defendants failed to meet their prima facie burden of demonstrating that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. One of the defendants' experts found significant limitations in the range of motion of the plaintiff's right shoulder and the lumbar region of his spine, and the expert failed to adequately explain and substantiate his belief that the limitations were self-imposed. Since the defendants failed to meet their prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact

 

05/25/17       Fillette v. Lundberg

Appellate Division, Third  Department

Plaintiff Raised Issues of Fact as to Every Serious Injury Category Alleged By Submitting Physician Reports Finding Such Limitations

The facts are as follows: On June 7, 2014, plaintiff was driving northbound when defendant's vehicle, which was traveling in the opposite direction, crossed the double yellow line and struck the front, left side of plaintiff's vehicle. Plaintiff filed a bill of particulars in which he claimed to have sustained a serious injury under the significant limitation of use of a body function or system and the 90/180-day categories. The Appellate Court found that the Supreme Court erred in denying his motion for summary judgment on the issue of liability. Where a driver of a motor vehicle crosses a double yellow line into an oncoming lane of traffic in violation of the Vehicle and Traffic Law and strikes another motor vehicle, a prima facie case of negligence is established. Here, plaintiff's deposition testimony that defendant's southbound vehicle crossed the double yellow line and entered his northbound lane of travel, coupled with defendant's deposition testimony that he pleaded guilty to a traffic ticket for crossing a double yellow line, established defendant's per se negligence. While violations giving rise to negligence per se may be excused if they are the result of an unforeseen and unexpected medical emergency or other emergency situation not of the driver's own making, defendant's testimony, unsupported by any corroborating medical evidence, that he did not recall how the accident had occurred because he blacked out “probably" was insufficient to create an issue of fact as to whether the accident was caused by an unforeseen emergency, medical or otherwise. Moreover, defendant testified that, although one of his prescription medications had the potential to cause drowsiness, he did not believe that the prescription made him drowsy because he had become accustomed to the drug after a few weeks. Accordingly, as defendant failed to rebut plaintiff's prima facie showing that defendant's negligence proximately caused the accident, the Supreme Court should have granted plaintiff's motion for summary judgment on the issue of liability.

 

As for defendant’s motion for summary judgment alleging lack of serious injury, when a plaintiff relies on the significant limitation of use of a body function or system category, such claim must be based upon objective, quantitative evidence with respect to diminished range of motion or a qualitative assessment comparing plaintiff's present limitations to the normal function, purpose and use of the affected body function or system. Defendant proffered the affirmed independent medical evaluation report of Richard Moscowitz, an orthopedist, who stated that plaintiff had a full range of motion of both shoulders, that plaintiff's diagnosis of an acute cervical sprain had resolved and that plaintiff had reached maximum medical improvement. Defendant also submitted the unsworn report of Gabriel Aguila, a neurologist and one of plaintiff's treating physicians, who asserted that plaintiff's cervical sprain appeared to be resolved and that plaintiff had no restriction of movement or spasms in his neck or back. Together, these reports satisfied defendant's initial burden of establishing that plaintiff's alleged neck, back and left shoulder injuries did not qualify as a serious injury under the significant limitation of use category.

 

In opposition, plaintiff produced the affirmation of Luis Mendoza, one of plaintiff's treating physicians. In his affirmation, Mendoza stated that, following his examination, he determined that plaintiff suffered from, among other things, lumbar radiculopathy, cervical thoracic lumbar sprain/strain, traumatic bursitis of the left shoulder, left shoulder sprain/strain and cervical thoracic lumbar muscle spasms as a direct result of the June 2014 motor vehicle accident. He asserted that he conducted several clinical objective tests on plaintiff — prior to his involvement in a second automobile accident on September 29, 2014 — to determine his range of motion in his neck and lumbar and thoracic lumbar spine. Based on the results of these tests, which he quantified in his affirmation, Mendoza concluded that plaintiff suffered from a "significant loss of range of motion." Mendoza also stated that he observed muscle spasms in plaintiff's spine and that plaintiff tested positive for several other clinical objective range of motion tests to his left shoulder. This evidence, viewed in the light most favorable to plaintiff raised a triable issue of fact as to whether plaintiff's alleged neck, back and left shoulder injuries constitute a serious injury under the significant limitation of use  category.

 

As for plaintiff's alleged psychological injuries, it has been established 'that a causally-related emotional injury, alone or in combination with a physical injury, can constitute a serious injury.  Here, defendant satisfied his initial burden of producing competent medical evidence establishing that plaintiff's alleged psychological injuries did not qualify as a serious injury under the significant limitation of use category by proffering the psychological evaluation of David Masur, a neuropsychologist. Specifically, Masur concluded, based upon his evaluation, that there was no indication that plaintiff suffered from "significant depression, traumatic stress, difficulty with interpersonal relationships, or behavior dyscontrol." He further stated that any anxiety experienced by plaintiff could not be causally related to the June 2014 motor vehicle accident and that, overall, plaintiff's "prognosis for performance at his optimal level of psychological functioning [was] excellent."

 

The burden thus shifted to plaintiff to raise a triable issue of fact as to whether his alleged psychological injuries could satisfy the serious injury threshold. To that end, plaintiff proffered the affirmed narrative report of Barry Goldman, his primary care physician. Goldman stated that plaintiff visited his primary care practice more than a dozen times between August 2014 and November 2015 — three of which predated the second motor vehicle accident in September 2014 — for treatment relating to anxiety, stress, insomnia, nightmares, irritability, temperament changes and reliving and experiencing flashbacks of the June 2014 accident. Based on his review of the medical records generated from these visits, as well as his own examinations of plaintiff, Goldman concluded that plaintiff's diagnosis of posttraumatic stress disorder was causally related to the June 2014 motor vehicle accident. He stated that, although the death of plaintiff's wife and the second motor vehicle accident "may have added to his symptoms, the trauma of his first accident was the cause and directly related to his complaints." This evidence was sufficient to raise a question of fact as to whether the June 2014 motor vehicle accident caused plaintiff to suffer psychological injuries constituting a significant limitation of use of a body function or system/

 

Finally, with respect to plaintiff's claim under the 90/180-day category, defendant failed to meet his initial burden of showing that plaintiff did not sustain a serious injury under this category. Indeed, defendant failed to come forward with any objective medical evidence regarding plaintiff's ability to perform his usual and customary daily activities during the 180 days following the June 2014 accident. In any event, even if the burden shifted to plaintiff, we would find that the affirmation of Mendoza, who diagnosed plaintiff as "temporarily totally disabled" as of September 17, 2014, coupled with plaintiff's deposition testimony and the restriction of activities placed upon him by Aguilar in August 2014, raise a triable issue of fact as to the 90/180-day category.

There was one dissent as to the psychological injuries.  While defendant met his moving burden, the dissent felt plaintiff’s proof failed to raise an issue of fact. In opposition to defendant's cross motion, plaintiff relied on a narrative report from Barry Goldman. While Goldman concluded that plaintiff suffered from posttraumatic stress disorder as a consequence of the June 2014 accident, Goldman's opinion has no probative value inasmuch as he failed to identify any objective tests or diagnostic criteria used in reaching his opinion. Moreover, Goldman opined that plaintiff's psychological injuries were causally related to the June 2014 accident based, in part, on his examinations of plaintiff. Goldman, however, examined plaintiff on only three occasions and his narrative report does not indicate that he performed any psychological testing during any of those examinations. Goldman also based his opinion upon his review of the medical records generated by his colleague, Michele Kay Goldman, but such medical records are not part of the record. Under these circumstances, the dissent that plaintiff failed to raise an issue of fact with respect to his alleged psychological injuries.

 

The dissent also felt the 90/180-day category should have been dismissed. The dissent believed that defendant met his burden to show plaintiff had not been curtailed from performing his usual activities to a great extent. In this regard, although plaintiff testified that he can no longer play golf, he also admitted that he did not do so on regular basis. Furthermore, plaintiff testified that he had difficulty with cooking, putting on his shoes and socks and working with model trains, but there was no evidence indicating that his daily activities were substantially curtailed for at least 90 of the 180 days following the June 2014 accident. Nor did the reports or records from plaintiff's treating physicians place any limitations on his daily activities. In response, the dissent felt that plaintiff failed to tender objective proof demonstrating that he was prevented from performing substantially all of the material acts that constituted his usual and customary daily activities for the relevant period. 

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

Litigation:

 

05/19/17       Hu-Nam-Nam v Allstate Ins. Co.

Appellate Term, Second Department

To Successfully Move To Vacate a Judgment, You Must Show a Reason for the Delay, and That You Have a Meritorious Defense

Plaintiff commenced this action to recover assigned first-party no-fault benefits as a result of an accident which had occurred on June 20, 2010. Defendant did not answer the complaint. Thereafter, defendant commenced a declaratory judgment action in the Supreme Court, New York County, which culminated in an order declaring that Allstate Insurance Company was not obligated to provide coverage for claims by plaintiff, among other providers, relating to an accident which had occurred on June 21, 2010. Shortly after defendant served the Supreme Court order on plaintiff and its assignor, among others, plaintiff applied to the Civil Court for leave to enter a default judgment, which the court granted. The default judgment was entered on May 27, 2014.

 

Defendant moved by order to show cause in the Civil Court to vacate the default judgment, claiming, as an excuse for the default, that it had no record of receiving the summons and complaint, but if defendant had been served, then defendant's failure to answer the complaint was the result of clerical error and office failure. Defendant asserted, as a potentially meritorious defense, that defendant possessed a founded belief that the collision, which defendant's claim representative alleged in her affidavit occurred on June 21, 2010, was a staged incident.

 

Plaintiff opposed the motion. Subsequently, defendant presented the Civil Court with the Supreme Court order in the declaratory judgment action. By order entered May 12, 2015, the Civil Court took judicial notice of the Supreme Court order but denied defendant's motion, finding, among other things, that the Supreme Court order had not been properly served.

 

In support of its motion to vacate the default judgment, defendant was required to establish both a reasonable excuse for its default and the existence of a potentially meritorious defense. While plaintiff's complaint in the Civil Court asserted that the accident at issue had occurred on June 20, 2010, defendant's proffered evidence of a staged accident referred to a June 21, 2010 collision. Consequently, defendant failed to demonstrate that the alleged injuries did not arise out of the June 20, 2010 insured incident. Similarly, the Supreme Court declared that defendant is not obligated to reimburse plaintiff for claims "relating to the June 21, 2010 accident."

 

The Court could not find that the order in the declaratory judgment action, which relieves defendant of liability for claims relating to a June 21, 2010 accident, is a conclusive determination barring plaintiff's recovery in the Civil Court for injuries sustained by its assignor in a June 20, 2010 accident.

 

In the absence of an explanation of the discrepancy in the dates of the accident, defendant failed to demonstrate the existence of a potentially meritorious defense to the action.

 

05/23/17       Country-Wide Ins. Co. v Valdan Acupuncture, P.C.

Appellate Division, First Department

Petitioner Did Not Establish Grounds for Vacating the Decision of the Master Arbitrator

The decision of the court on this case was rather brief, so if you are wondering about the back story you will have to use your imagination a little.  Here, we have a claim that the service provider is a fraudulently incorporated business.  According to Insurance Department Regulations), insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims. 

 

The First Department reviewed the finding of the master arbitrator and concluded that master arbitrator properly confirmed the award of the arbitrator.  They found that “petitioner's submissions relating to the plea of guilty to no-fault insurance fraud by a man married to the owner of respondent, found that respondent was not mentioned once in the "hundreds of pages" submitted, and rejected petitioner's attempt to hold the owner "responsible by association." If you are a little confused about what that means, so was I.  Ultimately, it seems the Court was merely saying there was not sufficient evidence to support the claim, or the bid to overturn the Master Arbitrator’s decision.

 

Arbitration:

 

05/30/17       Elite Medical Supply v Allstate Property Insurance

Arbitrator Gillian Brown

The Peer Review Must Specifically Address the Medical Equipment Prescribed

Here, the injured party was in a motor vehicle accident after which she was provided with a lumbrosacral orthotic and a multi-mode stimulator based on a letter of necessity from her chiropractor.  The prescribing chiropractor explained that “the multi-mode stimulator was prescribed for muscle weakness and to relieve pain, and that an in-office trial had proved effective.” Thereafter, reimbursement was denied on the basis of a peer review by Dr. Portnoy. The prescribing Dr. sent a letter opposing the peer review. 

 

Arbitrator Brown reviewed the peer review submitted by respondent and concluded it was insufficient to deny the claim for reimbursement.  Arbitrator Brown stated “Dr. Portnoy refers only to TENS units in his report, and not to the specific device at issue in this matter. It is clear that the multi-mode stimulator, whatever its efficacy, is not the same as a TENS unit.”  Moreover, Dr. Portnoy supported his opinion with articles relating to TENS units and never discussed the accepted standard of care for similar injuries.

 

As such, Arbitrator Brown awarded Claimant reimbursement for the medical equipment 

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

05/31/17       Swanson v Allstate Ins. Co.

Appellate Division, First Department

The Sky is Blue, Water is Wet, and in Other News Insurance Law 3420 Does Not Apply to Property Damage Claims and Estoppel Requires Prejudice

Plaintiff insured their rental property with Allstate.  After a period of six months where the location was vacant and unoccupied, the insured property was damaged in a fire that was intentionally set.  As such, Allstate determined that the policy’s “vandalism” exclusion applied, and denied the claim accordingly.  Plaintiff commenced this action challenging Allstate’s position.

 

Allstate argued that the loss fell within the vandalism exclusion because the loss was clearly “willful or malicious conduct resulting in the damage or destruction of property” and the building was “unoccupied for more than 90 days prior to the fire.”  Unbelievably, the trial court denied the application, apparently, on the basis that the denial was in violation of Insurance Law 3420(d)(2).  The vandalism exclusion was not included on Allstate’s initial coverage position letter.

 

Insurance Law 3420(d) does not apply to property damage cases, and the Appellate Division surely did not miss that point.  In reversing the trial court, the Court rejected any application of Section 3420(d).  The Appellate Division also went on to note that plaintiffs did not possess a valid argument of waiver or estoppel as there was no evidence Allstate intentionally relinquished the exclusion (waiver), nor was there any evidence of prejudice to plaintiff (estoppel).   

 

Potpourri

 

05/31/17       State Farm Fire & Cas. Co. a/s/o Indiere v Sajewski

Appellate Division, First Department

Proof of Lack of Consent under V&T 388 Requires More than Simple Testimony by Owner and Driver

Mr. Sajewski owned a car.  A 2003 Mercedes to be exact.  Mr. Sajewski, Jr. was driving the car, and eventually drove it through the home owned by Ms. Indiere causing approximately $180,000 in damage.  State Farm paid the claim to its insured, Ms. Indiere, but not surprisingly wished to recover its payment in subrogation from Senior and Junior

 

Sajewski, Sr. moved for summary judgment asserting therein that Junior did not have permission to drive the Mercedes.  However, the Court responded by noting that V&T Law 388(1) creates vicarious liability to owners of vehicles where there is consent (whether express or implied).  The Court also noted that a presumption of consent is applied until the owner can establish otherwise.

 

The Court noted that “uncontroverted” testimony that the owner did not give consent is insufficient to overcome the presumption.  Indeed, even if the owner and driver both disavowed that permission was given, the Court may still require additional support before granting summary judgment.    Here, evidence established that the keys were kept in a central location, available to Junior, and that Junior had driven other cars owned by Senior.  Accordingly, on this Record, the Court found a question of fact. 

 

Peiper’s Point – Parenthetically, we remind you of the different standards for tort and insurance on consent.  In tort, consent is determined “through the eyes” of the owner.  For insurance purposes, however, it is generally determined “through the eyes” of the driver.  Thus, for a tort defense on consent, the question is did the owner really give consent.  For coverage, however, it is did the driver really believe he or she had consent.  Either way, self-serving statements, alone, are insufficient to establish lack of consent. 

 

05/25/17       Rubino v 330 Madison Co., LLC

Appellate Division, First Department

Designation of “Cross-Motion” Does Not Automatically Save Otherwise Late Summary Judgment Application

In an action arising from an Industrial Code violation, and thus Labor Law 241(6) violation, our focus is on the limited issue of defendant Waldorf’s cross-motion seeking to dismiss a contractual indemnity asserted against it.  From the decision, it appears that Waldorf failed to timely move for summary judgment.  As such, it appears to have moved, by way of cross-motion, after the court imposed cut-off date for motion practice.  By calling it a cross-motion, Waldorf sought to avoid having its motion disregarded as untimely.

 

Unfortunately, the “cross-motion” looked for relief against a party other than the original movant.  As such, it was not “nearly identical” to the issues raised in the timely motion.  Because it did not qualify as a “cross-motion,” it followed that the application was converted to a basic motion and thusly rejected as late.

 

05/24/17       Bd. Of Mgrs. of the 125N. 10^th Condominium v 125North10, LLC

Appellate Division, Second Department

No Claims of Vicarious Liability Preclude Defendant’s Third-Party Claim for Common Law Indemnification

The board commenced this litigation as a result of allegedly defective construction.  The defendants included the sponsor of the building, 125North.  Thereafter, 125North started a third-party action Cucich (the architect) and Seta (a consultant on the project). 

 

Cucich and Seta both separately moved to dismiss 125North’s claims for common law indemnification.  Through the use of documents, Cucich and Seta both established that 125North retained some control over the project, and, more importantly, that the only potential liability against 125North had to arise from its own negligence.  Notably, however, common law indemnity is only applicable where the party seeking indemnification faces vicarious liability exposure from a third-party.  As 125North had no potential for vicarious liability, it followed that its claim for common law indemnification was unsupported and, as such, properly dismissed.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

05/31/17       The Cincinnati Insurance Company v. Roy’s Plumbing, Inc.

United States Court of Appeals, Second Circuit

Second Circuit Finds that Insurer had No Duty to Defend or Indemnify Insured Sued in Love Canal Superfund Litigation, Where Policy has Pollution Exclusion (NY Law)

Roy’s Plumbing is a defendant in the current, seemingly never ending Love Canal litigation. Love Canal was a Superfund site near Niagara Falls, New York, which has resulted in decades of lawsuits. Alleged pollutants include a variety of toxic chemicals that were dumped at our around the site by factories in the area. Roy’s policy with Cincinnati, however, contained a fairly standard pollution exclusion. As the court noted the “parties agree that the policy excludes ‘[b]odily injury or property damage which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release, escape or emission of pollutants at any time.’ And the policy language gives ‘pollutant’ a broad definition, covering both ‘substances which are generally recognized in industry or government to be harmful or toxic to persons, property or the environment’ and ‘any solid [or] liquid ... irritant or contaminant, including ... waste’”.

 

In its brief Summary Order, the Second Circuit found that the exclusion barred both a defense and an indemnity obligation. New York law, it reasoned, is very clear on this issue. Where the damage in a claim is environmental in nature “or where the underlying complaint alleges damages resulting from what can accurately be described as pollution of the environment”, there is no coverage due to the pollution exclusion. Here, all of the allegations against Roy’s sounded in environmental pollution. There really were no other claims. Thus, there was no coverage for them under this policy.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

05/15/17       Fireman’s Fund Ins. Co. v Travelers Cas. Ins. Co. of Am.

Supreme Court, New York County

Hon. Carol R. Edmead

Language in AI Endorsement Stating that the “Person or Organization Does Not Qualify as an Additional Insured with Respect to the Independent Acts or Omissions of Such Person or Organization,” Limits Coverage to Claims where Vicarious Liability is Alleged

The underlying plaintiff was working as a delivery person for Brown Bag Laundry, picking up laundry from an apartment owned Robrose Place, LLC when a “gate fell on” him causing him injury.  At the time of the incident, Sky Management was acting as the premises’ management company, and Sky had retained Daffodil General Contracting to perform certain construction work at the premises.  The parties agreed that while Daffodil may have removed the gate; the gate work was done by another contractor.  The relevant agreement obligated Daffodil to name Sky and Robrose as additional insureds, and to defend and indemnify them for the work at the premises.  Daffodil procured general liability coverage from Travelers.  The additional insured endorsement in the policy provided, in relevant part:

 

COMMERCIAL GENERAL LIABILITY COVERAGE PART COMMERCIAL GENERAL LIABILITY - CONTRACTORS COVERAGE PART

1.       WHO IS AN INSURED (Section II) is amended to include any person or organization you are required to include as an additional insured on this policy by a written contract or written agreement in effect during this policy period and signed and executed by you prior to the loss for which coverage is sought.  The person or organization does not qualify as an additional insured with respect to the independent acts or omissions of such person or organization. The person or organization is only an additional insured with respect to liability caused by "your work" for that additional insured....

 

The underlying plaintiff then commenced a lawsuit against Robrose, Sky and Daffadil.  Robrose and Sky tendered their defense to Travelers.  In response, Travelers denied on the basis that Robrose and Sky’s underlying liability arose out of their own “independent acts or omission” and that the accident was not caused by Traveler’s insured.  Travelers argued that Robrose and Sky were being sued for their own negligence under common law and MDL 78 (and not vicariously). 

 

In response, plaintiffs argue that Travelers could not establish that there is no possible factual or legal basis under which it would not eventually be obligated to indemnify Robrose and Sky in the underlying action. 

 

In considering the argument, the court disagreed finding that Travelers had in fact made such a showing.  Considering the language of the additional insured endorsement, notwithstanding the existence of a qualifying written agreement, a prospective additional insured does not qualify as an additional insured as to its own independent acts or omissions.  Relying largely on a North Carolina decision, the court held that this endorsement "must be read to require a duty to defend where the 'alleged liability' arises from the subcontractor's work, but not where the ‘alleged liability’ arises from the independent acts of the additional insured" and "to give meaning to the independent acts' provision of the endorsement, the court must construe the "arising out of [the subcontractor's work]" provision as one providing coverage in cases where the alleged liability is vicarious.

 

Here, the claims of vicarious liability (i.e., the labor law claims) were expressly withdrawn, with prejudice.  Thus, even liberally construing the complaint, the court found that it did not seek to hold Robrose or Sky liable for Daffodil's negligent acts. Instead, the injured plaintiff sought to hold Robrose and Sky liable for their own independent acts and omissions.

 

Lastly, the court dismissed any argument that New York Insurance Law 3420(d) applied in this instance. 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

05/24/17       Kabrich v. Allstate Property and Casualty Insurance Company

United States Court of Appeals, Ninth, Circuit

Under Washington law, Insurer did not Breach the Insurance Contract or Act in Bad Faith where Delay in Payment was Attributable to the Insured

Linda Kabrich owned personal property that was insured by Allstate.  The property was damaged by water.  The policy provided $109,200 in personal property coverage.  Allstate requested information regarding the approximate age and original cost of the items.  Kabrich failed to provide the information, but Allstate paid her $12,200.  After Kabrich filed suit, Allstate sent three additional requests for information and filed a motion to compel.  After the motion was granted and Allstate inspected, it determined that the loss exceeded the limits, and issued the remaining limits to Kabrich.

 

Kabrich alleged breach of contract, bad faith, and statutory violations.  Her only ground for Allstate’s liability was undue delay.  The Court concluded that the bad faith claim failed because Allstate did not breach the insurance contract.  Allstate did not act unreasonably, as it tried to acquire information about the damaged property and made payment.  It was the insured who failed to respond in violation of her obligations under the policy.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

05/07/17       Scottsdale Insurance Co. v. Priscilla Properties, LLC et al.

Eastern District of New York

Rescission Decision

In this insurance coverage dispute, Scottsdale Insurance Company sought to rescind a policy of insurance issued to Defendant Priscilla Properties based on material misrepresentations in both the application for commercial general liability insurance and in a supplemental artisan contractors application.  In these documents, Priscilla represented, among other things, that its business was limited to interior residential remodeling work and not the construction of new homes; that it did not act in the capacity of a general contractor or construction manager; and that it utilized written contracts with customers and subcontractors containing hold harmless agreements.  Scottsdale issued a policy pursuant to its New York Artisan Program, which provided coverage for only subcontractors and excluded general contractors and residential home builders.

 

During the policy period, a lawsuit was commenced against Priscilla for personal injuries sustained by a laborer on a construction project for which Priscilla was acting as a general contractor and/or construction manager for the construction of a new residential home.  Scottsdale disclaimed Priscilla’s claim for coverage, stating that based on Priscilla’s material misrepresentations on its applications, it was returning any premiums paid and commencing the instant declaratory judgment action to rescind the insurance policy.

 

Notably, the insured Priscilla and another named defendant, Pine Construction, never appeared in this declaratory judgment action, and the district court granted Scottsdale a default judgment as against these defendants based on the allegations in the complaint. 

 

With respect to Scottsdale’s motion for summary judgment against the underlying claimant, district court found that Scottsdale “produced uncontroverted evidence demonstrating that, when Priscilla applied for insurance coverage, it made various misrepresentations of fact. Namely, Priscilla falsely indicated that its business involved solely interior residential carpentry, when, in fact, it also performed extensive exterior work and even the construction of new homes. Priscilla falsely indicated that it did not act as a general contractor or construction manager, when, in fact, it regularly did so, including on the date when [claimant’s deceased] was injured. Priscilla falsely claimed that it utilized written contracts featuring hold harmless agreements with customers and subcontractors, when, in fact, it did not.”

 

The district court found that “these misrepresentations were material under New York law. In this regard, Scottsdale produced evidence in the form of its underwriting guidelines to show that, but for Priscilla's false statements, it would not have issued the Policy in question. This much is clear from the fact that based on Priscilla's assertedly limited business operations, Scottsdale underwrote the Policy pursuant to its New York Artisan Program, which only provides coverage for subcontractors and fixes premiums based on the risk associated with their particular trade. The program is evidently meant to exclude general contractors and residential home builders.”  The court concluded that Scottsdale met its burden of establishing that it “would not have issued the same Policy had it known the true nature and scope of Priscilla's work.”

 

The court concluded that the claimant failed to raise a triable issue of fact in opposition, and in fact claimant had limited the opposition to arguing that a declaratory judgment regarding Scottsdale's responsibilities under the policy was premature because there has not yet been a determination of liability in the underlying action.  The court disagreed, noting that, in the insurance context, an insurer's right to dispute coverage ripens when a live claim for coverage is made by the policyholder.  Priscilla had tendered the claim; therefore there was “a sufficiently live claim for coverage under the Policy to establish a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”  Summary judgment was granted in favor of Scottsdale as against the claimant.

 

EWELL’S UNIVERSE
John R. Ewell

[email protected]

 

05/25/17       Oxford Realty Group v. Travelers Excess and Surplus Lines

New Jersey Supreme Court Denies Coverage for Debris Removal Where Policy Capped Total Amount Recoverable for Flood Damage

New Jersey Supreme Court

The Supreme Court of New Jersey considered whether debris removal coverage applies in addition to the policy’s endorsement limiting flood coverage for all losses “resulting from Flood to buildings, structures or property in the open” in the covered flood zone.

 

Plaintiff Oxford owns and manages an apartment complex located in Long Branch, New Jersey (the Property). The Property is located in Flood Zone A. Oxford entered into an insurance contract with Travelers to insure the Property. The Property suffered significant flood damage when Superstorm Sandy struck in October 2012. Oxford submitted a claim to Travelers pursuant to the Policy. Oxford claimed flood damage in excess of $1,000,000 and $207,961.28 in debris removal costs. Travelers asserted that all damage caused by the flood was subject to the $1,000,000 limitation for a flood occurrence and paid Oxford $1,000,000 on its claim. Oxford sued Travelers, and both parties moved for summary judgment on the issue of Travelers’ liability for the debris removal costs.

 

The trial court granted summary judgment in favor of Travelers. The court acknowledged that the Supplemental Coverage Declarations appeared to allow additional debris removal coverage but concluded that the Limit of Insurance for Flood nullified any coverage for flood damage above $1,000,000. The court held that “the general condition that the debris removal is an additional coverage must yield to the specific term in the Supplemental Coverage Declarations that the [$1,000,000] coverage applies to ‘all losses’ caused by flood.” Accordingly, the trial court granted summary judgment in favor of Travelers. The Appellate Division reversed the grant of summary judgment and remanded for entry of judgment in favor of Oxford. The Appellate Division concluded that the Policy provided up to $500,000 for debris removal coverage in addition to the $1,000,000 flood limit. Travelers appealed.

 

The New Jersey Supreme Court found that although the Policy assigned debris removal a coverage sublimit, it did not constitute a self-contained policy provision outside the application of the $1,000,000 flood limit. The Court reasoned that the Flood Endorsement placed a “hard cap” on the amount recoverable for flood damage. The policy’s Flood Endorsement provided that, “[t]he most [the insurer] will pay for the total of all loss or damage caused by Flood . . . is the single highest Annual Aggregate Limit of Insurance specified for Flood shown in […] the Supplemental Coverage Declarations.” The Supplemental Coverage Declarations set that Limit of Insurance at $1,000,000. Thus, the Court found that “the Flood Endorsement categorically denies any flood damage coverage in excess of $1,000,000.” The Court also acknowledged that the Flood Endorsement clarified that the $1,000,000 ceiling applied even if more than one Limit of Insurance applies, such as the Limit of Insurance for debris removal in the Supplemental Coverage Declarations.

 

Accordingly, the Supreme Court held that the $500,000 debris removal limit did not apply in addition to the Flood Endorsement’s $1,000,000 limit. In support of this conclusion, New Jersey’s Supreme Court cited a New York case declining to apply additional coverage from other sublimits an insurance policy in addition to a flood limit when a flood caused multiple types of damage. Thus, New Jersey and New York law are in agreement on this point. The Supreme Court of New Jersey reversed the Appellate Division and reinstated the trial court’s grant of summary judgment in favor of the insurer.

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

American Health Care Act

Last month, the U.S. House of Representatives passed the American Health Care Act, H.R. 1628 ("AHCA") to repeal and replace the Affordable Care Act (“ACA”). The House waited to send the legislation to the Senate for further action until the nonpartisan Congressional Budget Office ("CBO") released its analysis of the legislation on May 24, 2017.

 

The CBO found, among other things, that the AHCA as proposed could leave 23 million Americans uninsured, and could dramatically increase insurance premiums for senior citizens and those with pre-existing conditions. The CBO’s report can be viewed at: https://www.cbo.gov/publication/52752. 

 

Among the key changes proposed in the AHCA is the  repeal the individual and employer mandates; cuts funding to Medicaid; permitting States to “opt out” of mandating coverage for the ACA’s “10 Essential Health Benefits”  ,  The Essential Health Benefits are: outpatient care; Emergency services; Hospitalization;  Pregnancy, maternity, and newborn care (both before and after birth); Mental health and substance use disorder services;  Prescription drugs; Rehabilitative services and devices; Laboratory services; Preventive services;  pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits).^[1]

 

The following is a summary of the changes the proposed AHCA makes to the ACA.

 

Repeal of the Employer and Individual Mandates

 

The AHCA would retroactively repeal the employer mandate effective January 1, 2016, by reducing the tax penalty for failing to offer employees minimum essential coverage to $0.

 

The AHCA would “sort of” repeal the individual mandate by reducing the tax penalty that applies to individuals who fail to maintain minimum essential coverage to $0, but, in its place, creating “a continuous health coverage requirement”.  This provision requires health insurers in the individual market to increase an individual's monthly premium by 30 percent during the first year of enrollment if he cannot prove that he had creditable coverage continuously during the 12-month period prior to his date of enrollment, ignoring any gap in that coverage lasting less than 63 consecutive days.  Thus, rather than be taxed for failing to carry insurance, the uninsured individual, upon obtaining coverage, would pay 30% more in premiums than those who held continuous coverage.

 

Health Coverage Consumer Protections Changes

 

Essential Health Benefits. The ACA requires all coverage in the individual and small group markets to cover the 10 Essential Health Benefits (e.g., emergency services, hospitalization, and maternity care).The AHCA would permit states to receive a waiver that would allow the State to create its own definition of essential health benefits that would have no required categories.

 

Age Factor in Setting Premiums. Under the ACA, the premium that an insurer may charge to a 64 year-old in the individual or small group market may be no more than three times the premium the insurer charges to a 21 year-old Under the AHCA, that ratio would increase from 3:1 to 5:1 for plan years beginning on or after January 1, 2018. In addition, a state could apply for a waiver that would allow it to set a higher ratio.  Thus, seniors could be forced to pay five times the premium paid by younger persons or more.

 

Increase in the Number of Uninsured:  CBO found that the AHCA will leave 23 million more people uninsured in 2026 than if the ACA were to remain in place. However, the AHCA is predicted to the deficit by $119 billion over 10 years.

By far the biggest savings would come from Medicaid, which would face $834 billion in cuts according to CBO.

 

The bill moves on to the Senate

 

The CBO's newly estimated deficit savings mean the Bill can move on to the Senate. We will have to wait and see, Dear Reader, what changes the Senate proposes in light of the CBO findings.

 

OFF THE MARK
Brian F. Mark
[email protected]

 

05/12/17       Westfield Ins. v. Icon Legacy Custom Modular Homes
United States District Court, Middle District of Pennsylvania
Pennsylvania Federal Court Denies Motion to Compel Discovery of Extrinsic Evidence in a Declaratory-Judgment Coverage Action where Insured Failed to Demonstrate an Ambiguity in the Policy and that the Requested Extrinsic Evidence Would Likely Resolve the Ambiguity

In this action, the plaintiff insurer, Westfield Insurance Co. (“Westfield”), commenced a declaratory-judgment action against its insured, Icon Legacy Custom Modular Homes (“Icon”), seeking a declaration that it had no duty to defend or indemnify its insured relative to three underlying claims that allegedly arose out of Icon’s faulty workmanship.  Westfield argued that the alleged faulty workmanship does not constitute an “occurrence” under the policy.   Icon asserted a bad faith counterclaim against Westfield.  Following motion practice, which resulted in the dismissal of the bad faith claim, Icon moved to compel the production of numerous documents and information, including Westfield’s claims and underwriting files and documents related to all actions in which Westfield is defending an insured where there are property damage claims caused by the work or product of the insured. 

 

Upon examination of whether, and to what extent, extrinsic evidence is discoverable in a declaratory-judgment coverage action where bad faith is no longer at issue, the U.S. District Court for the Middle District of Pennsylvania held that “litigants who wish to discover extrinsic evidence in a contract interpretation case must (1) point to specific language in the agreement itself that is genuinely ambiguous or that extrinsic evidence is likely to render genuinely ambiguous; and (2) show that the requested extrinsic evidence is also likely to resolve the ambiguity without imposing unreasonable expense.” 

 

Icon failed to point to an ambiguity in the plaintiff’s policy, merely arguing that the requested extrinsic evidence “goes to the interpretation of the policy language so that [the defendant] can better present its position on the many unique coverage issues involved in this case and explain the reasons the allegations in the underlying complaints support coverage”.  As the requested discovery fell well short of either of the requirements referenced above, the motion to compel was denied.

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

02/24/17       Great American Insurance Company vs. Primo

Texas Supreme Court

“Insured v. Insured” Exclusion

Primo was a Director and Treasurer of a condominium association who was accused of improperly writing checks to himself for just over $100,000.  Primo replied that the funds were for payment for management services, and that he obtained Board approval before writing the checks.  The condominium association made a claim upon its fidelity insurer, Travelers, who paid the claim exchange for written assignment of all in their claims against Primo for the alleged loss.  Travelers then sued Primo to recover the funds, and Primo in turn demanded that Great American, which carried the condominium association’s directors and officers liability policy, defend him in the Travelers suit. 

 

Ultimately, the substantive litigation ended in a judgment for Primo, seemingly vindicating his position.  But Primo had also sued Great American for reimbursement for his defense costs and attorneys’ fees incurred in defense of the Travelers suit.  Great American argued it owed no duty to defend Primo in the Travelers suit because that action fell within the policy’s “insured vs. insured” exclusion which excluded coverage for claims made by an insured against an insured, and those made by or for the benefit of any person or entity which succeeded to the interests of the condominium association.  The Trial Court granted Great American’s Motion for Summary Judgment, a divided Appellate Court reversed, but the Texas Supreme Court reversed the Appellate Court and essentially reinstated the decision of the Trial Court in favor of the insurance company.

 

The Texas Supreme Court essentially agreed with the dissent in the lower Appellate Court.  The exclusion meant that no coverage existed for any claim made against Primo by any person or entity which succeeded to the interests of the condominium association, and that Travelers satisfied this definition because it had received by assignment whatever claims the condominium association had against Primo.  The Supreme Court ruled that Great American established that the “insured vs. insured” exclusion in the policy provided no coverage for the claims against Primo, so those claims were properly disposed of on summary judgment.  In passing, the Supreme Court noted that the general purpose of the “insured vs. insured” exclusion is to prevent collusive suits between business organizations and their directors and officers, as well as to preclude coverage for actions arising out of often bitter disputes that may erupt when a business or its members are at odds.  The overall theory would also be that liability insurance is to protect against the claims of third parties, and not to finance or defend claims between corporate individuals or internal to an organization.

 

The Supreme Court ruled that the Appellate Court had applied a more rigorous and stringent “successor in interest” standard as opposed to the actual policy language of “succeeds to the interest”.

 

It is also noteworthy that the Supreme Court took the occasion to repeat basic principles of insurance policy interpretation that, as with other contracts, courts interpret insurance policies according to ordinary and generally accepted meanings unless the contract in some fashion directs otherwise.  If the insurance policy language lends itself to a clear and definite legal meaning, the contract is not ambiguous and will be construed as a matter of law.  Ambiguity does not arise merely because a party offers an alternative conflicting interpretation, but only when the contract is actually susceptible to two or more reasonable interpretations.  Simple disagreement or differing policy interpretation does not necessarily create a legal ambiguity.