Coverage Pointers - Volume XVIII, No. 5

Volume XVIII, No. 5 (No. 461)

Friday, August 26, 2016

 

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. 2016
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:

 

Two calls today where the word “situation” was heard in the first sentence after “Hey, how are you and where are you?”  While we don’t WANT you to have a situation, if you have one, we’re here to help.

 

The summer is coming to an end.  It was the most beautiful summer in Western New York that any of us can remember and according to NOAA (not the same as Noah), we’re on the cusp of having August recorded as the hottest in history.  Not much rain (sorry farmers) but plenty of sunshine. 

 

The appellate courts have continued to be quiet during the summer recess months, but we report what’s there for your consideration.

 

We Thank Our Peers and Colleagues:

 

It is award and recognition time in the various publications and we are always honored to be judged favorably by our peers in Best Lawyers in America and Super Lawyers.

 

Hurwitz & Fine Attorneys Honored In Best Lawyers in America:

 

Hurwitz & Fine, P.C. attorneys were highly recognized with 13 firm attorneys listed in the Best Lawyers in America 2017 list. The nationally recognized Best Lawyers lists are compiled by surveying the leading lawyers in each field who confidentially evaluate their peers in the legal community. Listed attorneys include:

 

  • Robert P. Fine (Corporate Law, Health Care Law, Mergers & Acquisitions, Tax Law, Trusts & Estates)

  • Lawrence C. Franco (Corporate Law, Tax Law, Trusts & Estates)

  • Dan D. Kohane (Commercial Litigation, Insurance Law, Litigation - Insurance)

  • Ann E. Evanko (Corporate Law, Employment Law – Management, Litigation Labor & Employment)

  • Paul J. Suozzi (Personal Injury Litigation – Defendants)

  • Roger L. Ross (Real Estate Law)

  • Lawrence M. Ross (Corporate Law, Health Care Law, Tax Law)

  • Michael F. Perley (Litigation – Municipal, Personal Injury Litigation – Defendants)

  • Diane K. Church (Banking & Finance Law)

  • Andrea Schillaci (Product Liability Litigation – Defendants)

  • Edward C. Robinson (Elder Law)

  • Audrey A. Seeley (Insurance Law)

 

Dan D. Kohane was identified with special distinction as a “Lawyer of the Year in Insurance Law for Buffalo, the second time he has been so designated. Lawyers listed as such have received particularly high ratings in these surveys by earning the highest level of recognition from their peers for their abilities, professionalism, and integrity in their specific area of law.

 

A Remarkable 75% of Hurwitz & Fine Attorneys Listed as Super Lawyers:

 

Hurwitz & Fine, P.C. is honored to have 75% of the firm’s attorneys named to the New York Super Lawyers list (Upstate Edition), with several attorneys being prominently featured in the Top 10, Top 50 and Top 25 Women lists. Only 5% of eligible attorneys statewide make the list.

 

The 2016 New York Super Lawyers list includes:

 

  • Robert P. Fine, Business/Corporate

  • Lawrence C. Franco, Business/Corporate

  • Dan D. Kohane, Insurance Coverage (Top 50)

  • Ann E. Evanko, Employment & Labor (Top 50 and Top 25 Women)

  • Roger L. Ross, Real Estate

  • Lawrence M. Ross, Health Care

  • Michael F. Perley, Personal Injury Defense: General (Top 10, Top 50)

  • Andrea Schillaci, Business Litigation (Top 50 and Top 25 Women)

  • Edward C. Robinson, Estate Planning & Probate

  • Earl K. Cantwell, Business Litigation

  • Jody E. Briandi, Personal Injury Defense: General (Top 50 and Top 25 Women)

  • Audrey A. Seeley, Insurance Coverage (Top 50 and Top 25 Women)

  • David R. Adams, Construction Litigation

  • Todd C. Bushway, Personal Injury Defense: General

  • V. Christopher Potenza, Personal Injury Defense: General

  • Steven E. Peiper, Insurance Coverage

  • Paul J. Suozzi, Personal Injury Defense: General (Top 50)

  • Diane F. Bosse, Insurance Coverage (Top 25 Women)

 

Rising Stars:

 

  • Jennifer A. Ehman, Insurance Coverage

  • Marc A. Schulz, Personal Injury Defense: General

  • Kinsey A. O’Brien, Employment & Labor

  • Patricia A. Fay, Personal Injury Defense: General

  • Agnieszka A. Wilewicz, Insurance Coverage

  • Amber E. Storr, Business Litigation

     

The Super Lawyers nomination process invites attorneys to review their peers across the state to determine which have attained the highest degree of peer recognition and professional achievement. We extend heartfelt gratitude to our peers in the legal community for this recognition, our clients for their trust and to our staff who support our ongoing efforts to provide top quality legal services.

 

Six of the top 50 lawyers in all upstate New York are from Hurwitz & Fine and five of the top 25 women lawyers in the upstate region came from the firm.  We are particularly proud of the six “Rising Stars”, reflecting our commitment to developing younger lawyers in all of our practice groups.

 

Altman in Action:

 

We introduced Howard Altman a couple of issues back, a fine coverage lawyer, with Labor Law and appellate experience, who is resident in our Melville, Long Island office.  He has fit right into a groove and perhaps by next issue, will be penning a column for this newsletter.  Since Cassie Kazukenus moved on to other pastures (OK, the “dark side”), we have not had a column focusing on regulatory changes, legislative activity, circular letters and opinions issued by the insurance side of the Department of Financial Services.

 

Howard will be taking those duties and we’re negotiating over a column name.  Each side has retained counsel and expect this matter to be successfully mediated shortly.

 

We do try to enjoy life and rejoice in the friendships that make the practice of law especially enjoyable.  With one particular client, we have a history of poetic interactions as part of our file reports.  One particular exchange was shared with Howard and his reaction and response follows, published with his permission and consent.  We bring you Howard Altman:

 

It’s nice to find a funny poem

To make the office feel like home

For I, myself, have spent some time

Fitting random thoughts to rhyme.

 

Writing poems, so it would seem,

Can be a way to meld the team

As efforts go, it could we worse

Than setting our reports to verse.

 

The coverage issues of the day

Could all be tackled in this way!

AI status? Notice late?

In rhyme, reports would be so great!

 

Motions, then, could bring elation

Finding rhymes for subrogation

So, to see my colleagues share

This fun, poetic flare,

Is one more reason I will cheer

To be part of your team here.

Wilewicz’ Wide World of Coverage

 

Dear Readers,

 

Fall is just around the corner, if you can believe it. I, for one, will be very glad to greet my favorite season of the year. While summer has been lovely (albeit on the hot and dry side this time around), I do look forward to things cooling off a bit. Fall brings us back-to-school and sweater weather and pumpkin-flavored everything. Can’t wait.

 

This week, the Second Circuit has been quiet and the Wide World has again had to look beyond New York’s borders for coverage-themed inspiration. Thus, we bring you Capson Physicians Insurance v. MMIC Insurance, a rescission case out of Iowa. There, Dr. Hasik is an OBGYN who sought coverage without telling the carrier that he was being sued. In fact, attorneys had contacted him the year prior requesting records about his former patients. When the carrier found out (after it had issued prior acts coverage with a long retro date, no less), they were not pleased. They disclaimed coverage for those suits and sought to rescind the policy entirely. The Eighth Circuit agreed. Since the carrier would not have issued the policy had it known the truth, it was within its right to rescind it. The case itself is a well-written one, a good read, and adds to the ever-increasing corpus of case law on rescission. Enjoy.

 

See you all in a couple of weeks!

 

Agnes

Agnes W. Wilewicz

[email protected]

 

 

How Much was a Finger or Two Worth 100 Years Ago?:

 

Democrat and Chronicle

Rochester, New York

26 Aug 1916

 

$1,525 FOR TWO FINGERS

 

Awarded Michael Mathias at

Hearing of Commission in Batavia

 

Batavia, Aug. 25.—In the Court House in Batavia to-day, Industrial Commissioner Wiard, of Batavia and Deputy Commissioner McLusky, of Buffalo, heard the evidence in a number of unsettled claims for compensation.

 

An award of $1,525 was granted Michael Mathias, of Batavia, a carpenter employed by John Glade & Son.  He lost the use of two fingers of his left hand. 

 

James Lafler, of Batavia, was granted $1,250.90 for the loss of his right thumb on April 17th, when he caught it in a drop hammer at the Johnston Harvester Company words.

 

John Patterson, of Batavia, was injured on June 1st when working on the Roberts Brothers’ flour mills, while in the employ of John Glade & Son as a carpenter.  He fell over a gas pipe projecting from the floor, suffering a split kneecap. In additional to his compensation which he has recovered to date, he was awarded an additional year, making a total of $565.20.  The case was closed. 

 

Peiper’s Pontification:

 

It is here, the penultimate weekend of summer.  The return of school nears, and with it the likely return of actual decisions to discuss. This week it has been a chore to locate something, anything, worth writing about.  Fortunately, the Appellate Division, First Department came to my rescue with a decision regarding disclosure of evidence prior to trial, and what might be the appropriate remedy.  Plaintiff’s failure to produce a copy of a video which, purportedly, showed the defect at issue resulted in the striking of her pleading. 

 

Introducing a bit less of a Draconian penalty, the Appellate Division appears to suggest preclusion may have been a more appropriately fashioned remedy.  Preclusion, it seems to me, is a stiff penalty where, as here, the plaintiff lost the opportunity to present compelling evidence simply by not recognizing its importance earlier in the case.  Stiff, but appropriately fair, we might add.

 

With the return of school, I’d like to say my children will be trading in their complaints of boredom for complaints of homework.  Was that not the plight of your childhood?    It surely was mine.  My children, and I suspect most of yours, do not suffer the same excruciatingly boring summers as did their father.  Indeed, I spent most of my summers working on my aunt’s dairy farm or sitting around my parent’s house contemplating the molecular composition of the paint I was watching dry.

 

Not my children.  Nope, they’ve spent the biggest part of their Summer swimming at the beach or local pool/waterpark, going on field trips, and clowning around at day camp.   A day late, or perhaps three decades, and several dollars less, I will welcome the bus’ return to our street.  As will my wallet.

 

Happy Friday, have a great weekend.

 

P.S. – Fearing what to write, I considered previewing the upcoming Buffalo Bills season.  However, having just recently set the new low for irrelevance with the Pokemon column from a couple of weeks ago, I was fearful of setting the bar even lower by referencing the Bills’ chances.   With that, I’ll simply sign off with proudly noting…at least I’m not a Jet’s fan.  You know who you are.   

 

P.P.S.  Yes, this is Buffalo.  And, yes, we do have beaches…on Lake Erie and Lake Ontario.   Oh, and one more thing, only some of the beaches are polluted with martinis.  Again, you know who you are.

 

Editor’s Note:  We are proud to spend our summer evenings and weekends at the Land of the Blue Martinis a/k/a Crescent Dreams.

 

Bonehead Merkle Traded, 100 Years Ago:

 

The Evening World

New York, New York

26 Aug 1916

 

Giants Trade Fred Merkle

For Catcher Lew McCarthy

 

Fred Merkle, the first baseman who lost the Giants the National League pennant in 1908 by his failure to touch second base in a game with the Cubs, has been traded to the Dodgers for Catcher Lew McCarthy.  No other players or money is involved.  The Dodgers are badly in need of a first sacker on account of Captain Dauber’s injury, while the Giants are in the same boat regarding a backstop, Rariden having been hurt recently and the team having no worthy substitute.  The players will probably fill their new roles to-day.  Merkle has been with the New Yorks since 1907, while McCarthy went to Brooklyn in 1913 from Newark, the International League champions of that year. 

 

Editor’s Note:  If you don’t remember the story of how Fred “Bonehead” Merkle was awarded that nickname, that chased him his entire life, you’ll find the story in our May 12, 2011 edition.

 

Barnas on Bad Faith:

 

Hello again:

 

Summer is winding down.  I can’t believe that is true, but my calendar confirms that it is.  However, my summer is not going down without some last minute excitement.  This weekend I am apparently going to see the World’s Largest Rubber Duck, “Mama Duck.”  “Mama Duck” is coming to Canalside in Buffalo this weekend for the Maritime Festival.  “Mama Duck” is over six stories high and weighs 11 tons (look her up on the Google if you are curious.  She is quite large).

 

Speaking of winding down, I was one of many who tuned in for the final ever Tragically Hip concert this past Saturday.  If you don’t know the Tragically Hip you probably are not from someplace near Canada.  In this writer’s opinion, the Tragically Hip is the best Canadian band ever (apologies to Rush fans, among others).  When lead singer Gord Downie announced he had terminal brain cancer and the Hip announced one last tour for this summer I desperately tried to get tickets but could not do so.  However, CBC decided to broadcast the band’s final show from Kingston, Ontario across Canada and the world, and approximately 11.7 million people tuned in.  It wasn’t quite as special as catching a concert in person one last time, but I am glad to have had the opportunity to view one last show.  Thanks for the music and the memories guys.

 

I have two cases to report on this week.  In Edens, the Tenth Circuit concludes that the decedent did not have underinsured/uninsured motorist coverage under a policy issued to an LLC of which he was a member.  Because there was no coverage, the bad faith claim against the insurer was also dismissed.

 

Hinson is a bad faith failure to settle claim out of the Eleventh Circuit.  The facts in Hinson are important.  The insured was at fault in a serious motorcycle accident, which exposed him to liability far in excess of the policy’s $10,000 bodily injury limit.  Titan, the insurer, offered to settle four times without success.  Then, the plaintiff’s attorney offered to settle, but the offer came with a number of conditions.  First, the defendant only had twenty days from the date of the letter to respond to the settlement offer.  Interestingly, the plaintiff’s attorney chose to send the letter on December 21.  By the time the letter was reviewed by the adjuster responsible for handling the claim it was already January 2.  Second, the letter required the defendant to provide an affidavit setting forth the existence of any additional insurance coverage.  Titan sent the insured a letter with the affidavit, called him three times, and went to his home, but it could not get his signature on the affidavit before the deadline.  Despite Titan’s compliance with seven of the eight terms of the settlement offer, the plaintiff’s attorney refused to settle and a verdict of $2,000,000 was eventually entered against the insured.

 

The Eleventh Circuit overturned the court below and held that whether Titan acted in bad faith was an issue of fact to be decided by a jury.  In so doing it found that there was substantial evidence that Titan acted in good faith.  Unfortunately for Titan, there was also evidence that supported the insured’s claim that it failed to act with due regard for his interests.  Read the summary and case and decide for yourself.  I think this one could have gone either way.

 

See you next time.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

We Can Almost Drive as Fast:

 

The Sun

New York, New York

26 Aug 1916

 

FLIES 661 miles in

8 hrs. and 41 MINS

 

Aviator Contesting for Trophy. 

Starts and Lands on the Water

 

Flying at Newport News, Va., yesterday for the Curtiss Marine flying trophy, Victor Carlstrom covered 661 miles in 8 hours and 41 minutes with a passenger, starting from and landing on the water, according to a telegram received last night from Capt. Thomas S. Baldwin, head of the Atlantic Coast Aeronautical Station.  The flight compares favorably with the best performances ever made in that length of time, although it sets no new record.

 

The Curtiss trophy is offered for the longest flight made in ten consecutive hours.  The flight may be straight away or between two points not less than fifteen miles apart.  The flier must start from and alight upon the water.  If a passenger is carried, that counts 5 per cent, additional distance in reckoning the score.

 

Oscar A. Brindley won the trophy in 1915, flying about 500 miles in the required time. Carlstrom used a twin motor Curtiss flying boat.  His exploits in the air have attracted considerable attention.  He flew here from Newport News last spring in about five hours, and took Alan R. Hawley from Sheepshead Bay to Washington in about three hours. 

 

Tessa’s Tutelage:

 

Dear Readers,

 

This week continues a bit of a dry spell in the courts for no-fault cases.  Fear not, no-fault faithfuls we have arbitrations cases to consider.

This week we have two arbitration cases decided by the esteemed Mona Bargnesi. One matter concerning the sufficiency of an IME report.  This one concerns a claim for lost wages. It interested me because the language used by the IME doctor indicated her symptoms were exaggerated, however several treating doctors declared the injured party unable to work following the motor vehicle accident. Bargnesi decided that without explaining the continued subjective  symptoms of the injured party, the IME report was not sufficient to show that she did not have a disability.  The next Bargnesi decision compliments the first matter.  Here, there is neither subjective complaints from the injured party or much objective evidence that treatment is helpful.  Thus, the applicant could not show that the injured party needed continued treatment.

 

Have a lovely weekend!

 

Tessa

Tessa R. Scott

[email protected]

 

Insurance Fraud Isn’t a Recent Invention:     

 

Greenwood Daily Journal

Greenwood, South Carolina

26 Aug 1916

 

DOCTOR IS HELD IN

INSURANCE GAME

 

Said To Have

Invented New Scheme

Reap Coin

 

PLANNED TO COLLECT $2,077

ON JUST ONE “BROKEN ARM”

 

Police Seize Dr. Max Lowinthan

After Allege Accomplice Tells Story

to Grand Jury—“Patient” Got

Job as Furniture Mover and

Plot Failed.

 

(Special to The Journal.)

 

New York, Aug. 26.—Dr. Max Lowinthan, a practicing physician of No. 1871 Seventh Avenue, was arrested last night at his summer home in Arverne, L. I., by Lieut. Barney McConville on a charge of attempted larceny in the first degree.  He was taken to Police Headquarters. 

 

Dr. Loewinthan was indicated yesterday by the Grand Jury after Thomas Hill, an alleged accomplice, had described what District Attorney Swann declares is a new method of swindling insurance companies.  Mr. Swann says the men belong to a gang of eleven who are thought to have reaped thousands of dollars.

 

Says Doctor Invented Scheme.

           

Dr. Loewinthan is charged with trying to steal $2,077 from the Zurich General Accident and Liability Insurance Company.  Benjamin Gunner and Alexander H. Mongeltort, lawyers, have also been indicted and are out on bail. 

 

Hill, for whom agents of the insurance company have been looking, gave himself up to Mr. Swann Wednesday and told the story he later related to the Grand Jury.

 

He said that while he was employed as a machinist in the garage of Charles Weisendecker, at No. 248 West One Hundred and Twenty-fourth Street, he was approached by Dr. Loewinthan, an examiner for the Zurich company, who told him he knew of a way in which he could make some easy money.  He consented to listen. 

 

The doctor, so Hill declares, told him that under the Employer’s Liability Act, a broken arm was as good as an amputated arm, and if he would fake an accident and pretend his arm had been broken he would get from his employers, through their surety, one-third of his wages for three years. 

 

This looked good to Hill, and April 27 last, he says, he staged an accident.  He had an automobile run over a pit and suddenly pulled it down.  Lying underneath he howled and groaned until his fellow workmen extricated him. 

 

Hewitt’s Highlights:

 

Dear Subscribers:

 

We are still in the summer doldrums as to opinions issued by the Appellate Division on serious injury. We have one decent case this week that explores a plaintiff challenging a jury’s decision. In those cases, where the plaintiff seeks to set aside a jury verdict, it is a hard burden. In this case, the Appellate Division found that the jury was entitled to believe the defendant’s experts who stated that plaintiff’s lumbar issues were due to degeneration over plaintiff’s expert who claimed it was due to the accident.   Furthermore, although the plaintiff had testified a doctor told him not to go to work for seven weeks, he never identified the doctor and there was no supporting evidence of that claim. Therefore, the Appellate division denied the motion to set aside the verdict.

 

School does not begin until after Labor Day here on Long Island so my children are still enjoying the summer. We are taking them to Sesame Place this weekend to enjoy the rides, for the children,  and the lazy river, my wife’s favorite part. I hope you are enjoying summer’s last few weeks.

 

Until next time,

 

Rob
Robert Hewitt

[email protected] 

 

Obama Care – North of the Border -- a Century Ago:

 

The Labor World

Duluth, Minnesota

26 Aug 1916

 

HEALTH INSURANCE

COMING IN CANADA

 

Liberty Party Adopts Plank to

Provide Compulsory Protection

For Workers

 

The National Liberal party of Canada led by Sir Wilfrid Laurier had adopted a plank for compulsory health insurance of wage-earners, maternity benefits to be included, as part of its program for the election following the conclusion of the war.  Leading Canadian newspapers anticipate that in order to retain its popularity the Conservative party will adopt a similar progressive program of social legislation.  It is expected, therefore, that health insurance laws will be enacted in Canada, in the early days of reconstruction.

 

Compulsory health insurance of wage-earners based on joint contributions from the state, employers and employees has been established in Germany, Austria-Hungary, Russia, Great Britain, Holland and Norway, Roumania [sic] and Serbia.  In most of these countries both cash and medical benefits are provided for the insured workers, and effective campaigns for the prevention of sickness have become general. 

 

A model health insurance bill on lines suited to American conditions has been drafted by the American Association for Labor Legislation.  This bill has strong backing throughout the country and, it is announced, will be introduced into more than twenty state legislatures next year. 

 

Jen’s Gems:

 

Greetings!

 

This will hopefully be one of our last abbreviated issues.  When I say abbreviated I don’t mean that we have left anything out, I simply mean that we continue to suffer from the expected summer decision drought.  My fingers are crossed that things will heat up in the next few weeks. 

 

For any new members, I report on decisions coming out of the New York trial courts.  In New York, our trial courts are called Supreme Courts, which is not to be confused with the New York Court of Appeals, which is our highest court.  The decision I am reporting on this week is Chao Jiang v. Ping An Ins. out of Supreme Court, New York County.  The decision contains one holding that is worth mentioning.   In a breach of contract claim, absent other factors, the party that entered into the contract is the party that can be held liable for a breach.  In Chao Jiang, plaintiff sought to hold the entity that negotiated the agreement responsible.  The court was not persuaded finding that the proper party to the action was the entity that issued the coverage.  The court emphasized the absence of any intent by the negotiating party to be bound by the agreement or other factors which would lead the court to believe that the negotiated party and the issuing party were one in the same. 

 

I also wanted to remind everyone that the latest product of the DRI Insurance Committee, the updated Uninsured and Underinsured Motorist Compendium, is now on sale. This compendium surveys the law of each state and the District of Columbia to provide insurance carriers and insurance defense counsel with an essential reference to the complex issues that arise in this area of insurance law.  Each state author is an attorney with significant experience in the defense of UM/UIM claims. The survey of the law of each state is arranged in a lucid question and answer format. Among the topics surveyed in the compendium: Is UM/UIM coverage mandatory or discretionary? Must UM/UIM coverage match liability limits? Under what circumstances is UM/UIM coverage available? What conditions precedent must the insured satisfy? What coverage defenses can the insurer assert? Is arbitration of UM/UIM claims allowed, or specifically prohibited? Can offsets against the UM, UIM, UMPD, UEO or other uninsured coverage limits be taken? Are there particular UM/UM issues unique and/or specific to your state?

 

If you would like to order a copy, here is the link:  http://www.dri.org/Store/Product?productCode=2016-03D.

 

Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

Help Wanted:

 

Morning Register
(Eugene OR)

August 26, 1916
200 Hop Pickers Wanted: 

 

Picking begins Sept.7. All wire hops good fir wood, good camping ground, yards clear of weeds.  Will furnish tables, baskets and will haul pickers to yard and back to town when picking is over free of charge.  All pickers must be registered by September 1st.  J.W. Seavey Phone Eugene 5F2…

 

Phillips Federal Philosophies:

 

Hello, All:

 

I’m a little late getting my letter together for you all today, as I spent most of the morning arguing with my calendar.  It seemed to be implying that summer is in imminent danger of being over, kaput, see-you-later for another year.  I take significant issue with this, inasmuch as I have not yet gotten a chance to check off every one of my intended fruity umbrella drinks, sandy toes, late night barbeque events that I had planned.  I swear, summer was the very next thing on my to-do list.

 

The Eastern District of New York is celebrating the end of summer (smooth segue!) by considering the validity of an insurer’s issued lapse notice for a life insurance policy. In Lebovits v. PHL Variable Insurance Company, the district court construed in favor of the insured an ambiguity in the policy language’s definition of how a default payment should be calculated.  In so concluding, the court notably rejected the insurer’s attempt to rely on evidence of “industry practice” to resolve the ambiguity.

 

As always, thanks for reading.

 

J.

Jennifer J. Phillips

[email protected]

 

 

Highlight and Headlines for this Week’s Issue (attached):

 

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

 

  • Injured Party Not Necessarily Bound by Coverage Decision if it was Not a Party to Lawsuit When Coverage Determined Not to Exist.  Question to be Resolved in Subsequent Action (Revised)


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

Robert E.B. Hewitt III

[email protected]

 

  • Plaintiff Established Issue of Fact as to Whether He Sustained a Serious Injury to Lumbar Spine

  • Jury Was Entitled to Credit One Expert over another Expert that Injuries Were Caused by Degeneration and Not the Accident

 

TESSA’S TUTELAGE
Tessa R. Scott

[email protected]

 

Arbitration:

 

  • The IME Report Must Provide a Sufficient Explanation for Any Ongoing Symptoms

  • Lack of Subjective and Objective Evidence of Injured Party’s Symptomology Improving through Treatment Will Not Establish Medical Necessity

 

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Disclosure of Evidence of at Trial Warrants Preclusion, Not Striking of Pleading

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

 

  • Interpreting Iowa Law, Eighth Circuit Holds that Carrier Can Rescind Medical Malpractice Policy with Retroactive Prior Acts Coverage, Where Doctor Failed to Disclose Negligence Suit Pending at Time of Application

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Court Dismisses Breach of Contract Claim against Entity that Negotiated the Coverage

 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • No Coverage No Bad Faith

  • Insurer’s Efforts to Contact Insured regarding Time Limited Settlement Offer Presented an Issue of Fact on Bad Faith Claim

 

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

  • Losing Lapse Notice

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

 

  • Insured’s Coverage Argument Lays an Egg

 

Every day we have together is a gift.  Rejoice in it.

 

All the best.

 

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

Audrey A. Seeley

[email protected]

 

ASSISTANT EDITOR

issueifer A. Ehman

[email protected]

 

INSURANCE COVERAGE TEAM
Dan D. Kohane, Chair
[email protected]

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Audrey A. Seeley

Jennifer A. Ehman

Patricia A. Fay

Agnieszka A. Wilewicz

Jennifer J. Phillips

Brian D. Barnas

Howard B. Altman

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
Audrey A. Seeley, Team Leader
[email protected]

 

Jennifer A. Ehman

 

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

 

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

Earl’s Pearls

 

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

08/04/16       Hermitage Insurance Company v. 186-190 Lenox Road, LLC

Appellate Division, First Department

Clarification – In the most recent issue, we indicated that the injured party, in this case, would not be bound by the results in the declaratory judgment action.  In reviewing it again, it would be better said that the court did not reach the question of whether the injured party would or would not be bound, leaving that issue to another day.  Had the injured party been in the DJ at the end, it would have been bound/

 

However, the counseling point remains – the injured party ought to be a party in a declaratory judgment action so that it is bound, if coverage is determined not to exist.  We modify our summary below.

 

Injured Party Not Necessarily Bound by Coverage Decision if it was Not a Party to Lawsuit When Coverage Determined Not to Exist.  Question to be Resolved in Subsequent Action.

On or about January 30, 2009, Smith was injured in a slip and fall on property owned by defendant 186-190 Lenox Road, LLC (“Lenox”). Lenox had obtained a liability policy from plaintiff Hermitage which covered the date of the accident.

 

In January 2012, Smith sued Lenox for the injuries and commenced a personal injury action against Lenox. Hermitage received its first notice of the accident by email dated June 11, 2012. Hermitage disclaimed eight days later and then in August, commenced this Declaratory Judgment Action to confirm its disclaimer.  Lenox and Smith were named as defendants.  Neither appeared and Hermitage moved for a default judgment.

 

Smith opposed, arguing that (i) she was not properly served, and (ii) even if she was, the action as against her should be dismissed as abandoned, since Hermitage did not move for a default judgment within one year of her failure to answer. Smith did not oppose Hermitage's request for a default judgment against Lenox. Lenox did not oppose the motion.

 

Supreme Court granted the motion for a default judgment against Lenox. As to Smith, "the motion was denied and the complaint [was] severed and dismissed as abandoned." The court then: "ORDERED, ADJUDGED and DECLARED, that Plaintiff HERMITAGE ... has no duty to defend or indemnify ... LENOX ... against the claims being made by Cynthia Smith ...."

 

Smith lacks standing to appeal from an order granting a default judgment against Lenox, which failed to appear or answer the complaint and failed to oppose the motion for a default judgment.  Although Smith, as a named party, could have opposed Hermitage's position on coverage, she elected to seek dismissal on procedural grounds. Thus, having been granted the relief she sought on her own behalf, and having failed to offer any substantive opposition to Heritage's claim of untimely notice or to oppose Heritage's request for a default judgment against Lenox, Smith was not aggrieved by that portion of the order that declared that Heritage was not obligated to defend and indemnify Lenox in the underlying action.

 

Is the decision binding on Smith?  The court does not reach the question.”  If Smith gets a judgment against Lenox and commences a direct action, she may or may not have the right to litigate the coverage issues.  The court will determine the question at that time

Editor’s Note:  Interesting case, indeed.  For those who wonder whether it is important to include the injured party or others as defendants in a declaratory judgment action (your author always does), this confirms the importance of that inclusion (otherwise, they may not be not bound by the decision – they surely are bound, if they are a party).


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

Robert E.B. Hewitt III

[email protected]

 

08/24/16                 Molina v. Leeway Transportation, Inc.

08/17/16                 Foulkes v. Dubin

Appellate Division, Second Department

Plaintiff Established Issue of Fact as to Whether He Sustained a Serious Injury to Lumbar Spine

Two simple decisions with no facts are given. The Appellate Division held in support of their motion for summary judgment dismissing the complaint, the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained a serious injury to the cervical and lumbar regions of his spine.

 

08/17/16                 Serrano v. Rachel’s Car Serv. Inc.

Appellate Division, Second Department

Jury Was Entitled to Credit One Expert over another Expert that Injuries Were Caused by Degeneration and Not the Accident

On January 19, 2010, the plaintiff was involved in a car collision with the defendant Eduard Abramov. Abramov's vehicle was owned by the defendant Rachel's Car Service, Inc. At the trial on damages, one of the plaintiff's physicians testified that the plaintiff's left knee had a 14% loss in range of motion following the accident. The physician performed arthroscopic surgery on both of the plaintiff's knees. Following the surgeries, the physician observed that the plaintiff's left knee still had a 14% loss in range of motion, and that his right knee also had a 14% loss in range of motion.

 

Another physician for the plaintiff testified that he performed a discectomy on the plaintiff's L4-5 and L5-S1 vertebrae. Although the plaintiff reported pain relief after the surgery, the physician advised the plaintiff not to lift, push, or pull more than 15 pounds. He also advised him not to kneel, squat, or drive a motor vehicle. The physician testified that the accident was the cause of the plaintiff's injuries. The plaintiff testified that he did not return to work for seven months after the accident. He testified that a doctor told him that he could not return to work for that period of time, although the plaintiff did not identify the doctor

 

The defendants submitted the testimony of an orthopedic surgeon and a diagnostic radiologist, both of whom reviewed MRI films of the plaintiff's knees and the lumbar region of the plaintiff's spine. Both physicians opined that the plaintiff's injuries were due to degeneration and that the MRIs showed no evidence of traumatic injury.

 

The jury found that the plaintiff did not sustain a serious injury under any category of Insurance Law § 5102(d) as a result of the subject accident. The Supreme Court then denied the plaintiff's motion for judgment as a matter of law and entered judgment in favor of the defendants and against the plaintiff, dismissing the complaint. A motion for judgment as a matter of law pursuant to CPLR  4401 may be granted only when the trial court determines that, upon the evidence presented, there is no valid line of reasoning and permissible inferences which could possibly lead rational persons to the conclusion reached by the jury upon the evidence presented at trial, and no rational process by which the jury could find in favor of the nonmoving party.   Moreover, a jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached its verdict on any fair interpretation of the evidence. A jury is entitled to accept one expert’s opinion over another expert’s opinion.

 

The court found the jury's verdict finding that the plaintiff did not sustain a serious injury could be reached on a fair interpretation of the evidence. The evidence adduced by the plaintiff at trial failed to establish, prima facie, that the plaintiff sustained a serious injury to either of his knees under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) . The evidence adduced by the plaintiff also failed to establish, prima facie, that the injury that kept him out of work for seven months following the accident was medically determined.

 

The evidence presented by the plaintiff did establish, qualitatively, that he sustained a serious injury to the lumbar region of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d). However, the defendants presented evidence that any injury to the lumbar region of the plaintiff's spine was not caused by the accident. The jury was entitled to credit the testimony of the defendants' experts over that of the plaintiff's experts, and there was no basis to disturb its determination.

 

TESSA’S TUTELAGE
Tessa R. Scott
[email protected]

 

Arbitration:

 

08/18/16       (Applicant) v Liberty Mutual

Arbitrator Mona Bargnesi

The IME Report Must Provide a Sufficient Explanation for Any Ongoing Symptoms

This case arises out of a motor vehicle accident which occurred on October 15, 2013.  The Applicant allegedly suffered injuries to her neck, back, and right arm.  At the time of the accident she had an underlying work- related injury and the motor vehicle accident “flared her neck pain.”  

 

She advised her treating medical providers that she was unable to work the same hours that she did prior to the accident. Thereafter applicant fell down the stairs, causing an increase in back pain.  She was referred to chiropractic care and removed from work via the instructions of her doctor.  Many of her treating physicians agreed that she was unable to work.

 

An IME was performed in April of 2014. The examining doctor noted that she had a resolved round cervical strain and pre-existing cervical disc disruption with forearm pain.  He concluded that she did not have any disability stemming from the motor vehicle accident and she had returned to her pre-accident status.  He stated that “any decrements in range of motion would be secondary to symptom exaggeration, particularly in the lumbar spine where there is not evident pathology.”

 

Arbitrator Bargnesi found that applicant had established her burden to show that she was disabled and was unconvinced by the doctor’s IME report because it lacked sufficient explanation with regard to her ongoing low back symptomology.

 

08/22/16       Rochester Chiropractic Associates v Safeco Insurance Co.

Arbitrator Mona Bargnesi

Lack of Subjective and Objective Evidence of Injured Party’s Symptomology Improving through Treatment Will Not Establish Medical Necessity

This claim arose from a motor vehicle accident which occurred on December 20, 2013. The 26 year old driver allegedly injured her back, neck, left shoulder and hip. Thereafter she sought chiropractic treatment with Steven Ess, DC complaining of neck and back pain.

 

The record establishes that the injured party underwent two Independent Medical Examinations (IME).  In her first she complained of lower back pain radiating up toward the mid-thoracic spine.  At he follow up IME she reported that she “feels the same now as she did at the time” of the first exam. Dr. Higgens, who conducted both IMEs concluded that her “treatment to date has been reasonable and necessary, but that she ‘has made as much progress as can be expected with her chiropractic treatment’ and no further chiropractic treatment is recommended.”

 

Arbitrator Bargnesi concluded that Dr. Higgins' IME contained a sufficient factual basis and medical rationale to show that further chiropractic treatment was not providing any benefit and was not medically necessary. She supported her conclusion by pointing to the fact that the injured party felt the same as at 2014 IME and that she had normal cervical range of motion on November 14, 2014, and later found decreased range of motion; indicating that treatment was not improving her condition.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

08/25/15       Fox v. Grand Slam Banquet Hall

Appellate Division, First Department

Disclosure of Evidence of at Trial Warrants Preclusion, Not Striking of Pleading

Plaintiff commenced the instant action after she fell, and sustained injuries at a party hosted by Grand Slam.  As part of discovery, plaintiff was asked to produce any photographs of the loss location which she had in her possession.  At a subsequent deposition, plaintiff was also asked about whether the party was videotaped.  Apparently, plaintiff advised that the party was videotaped by a photographer who was also hired for the event.  Plaintiff, however, never advised that she, herself, possessed a copy of the video recording.  Certainly, no photos or videos of the location were produced by plaintiff.

 

Apparently, during the overnight break while she was being cross-examined at trial, plaintiff “located” a copy of the video.  She produced the video to her attorneys at noon the next day.  Notably, however, plaintiff’s counsel did not provide a copy of the video to defense counsel until 3:00 or 4:00 that afternoon. 

 

Upon learning of the existence of the video, the trial court struck plaintiff’s Complaint and granted judgment in favor of the defendants.  The Appellate Division, however, reversed and ordered a new trial.  In support of its ruling, the Court noted that plaintiff agreed to be precluded from the introduction of the video at trial, and also agreed that the trial court would issue a curative instruction to the jury.  Accordingly, while preclusion might have been an appropriate remedy, the Court ruled that dismissal was an abuse of discretion by the trial judge.

 

In addition to remanding for a new trial, the Appellate Division also “reopened” discovery for a period of 60 days to permit defense counsel to engage in any necessary discovery so as to mitigate any real or perceived prejudice by the withholding of the video. 

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

07/19/16       Capson Physicians Insurance Company v. MMIC Insurance Inc.

United States Court of Appeals, Eighth Circuit

Interpreting Iowa Law, Eighth Circuit Holds that Carrier Can Rescind Medical Malpractice Policy with Retroactive Prior Acts Coverage, Where Doctor Failed to Disclose Negligence Suit Pending at Time of Application

The facts in this one are fairly straight forward, though multiple policies were potentially at play. In 2012, Dr. Hasik was an OBGYN in Arkansas, who moved to Iowa to work for a hospital there. While he previously had his own malpractice insurance, the hospital negotiated coverage for him with another carrier. On October 29, 2012, Dr. Hasik completed an application for professional liability coverage with MMIC Insurance. That application asked about claims that had previously been made against him. The doctor reported two medical malpractice suits that had been filed in 1983 and 1997, and paid by other carriers. However, where the application asked if the doctor was aware of any potential claims or circumstances that might reasonably lead to a claim or suit against him, Dr. Hasik responded “no”. The policy was issued, effective October 31, 2012.

 

On November 16, 2012, Dr. Hasik was served with a lawsuit relative to his June 20, 2011 delivery of a stillborn baby (the “Wilson baby”). At the time, he described the stillbirth as a “very unexpected adverse outcome”. Notably, in August of 2011, the doctor had received a request for medical records from the office of an attorney representing the mother. He reviewed this request and his office manager responded to it. When he received notice of the suit, he reported it to his prior insurance carrier (Capson Physicians Insurance) but not to MMIC. Capson agreed to defend him under a reservation of rights.

 

Meanwhile, the hospital negotiated with MMIC to add prior acts coverage and a retroactive coverage date. The policy was so endorsed, and on December 3, 2012 MMIC was amended to include that coverage, with a retro date of January 2, 2007. Then, on December 7, 2012, the hospital notified MMIC of the Wilson lawsuit.

 

On January 22, 2013, Dr. Hasik was served with another complaint. This time, the mother of the Ray baby alleged medical negligence relative to the August 20, 2010 delivery wherein the baby suffered neurological injuries during delivery and shortly after birth. In April 2012, Dr. Hasik had received a request for medical records from Ray’s attorney, and in June 2012 his office responded to that request. MMIC received notice of this lawsuit on January 24, 2013, two days after Dr. Hasik was served. In light of the material misrepresentations in the doctor’s application, MMIC disclaimed coverage for both suits and sought to rescind the coverage.

 

Capson (the other carrier) sued MMIC for a declaration that MMIC was the primary carrier for Dr. Hasik and that Capson was excess on the claims. MMIC counterclaimed and sought judicial confirmation of its rescission of the policy. Long procedural story short, the Eighth Circuit ultimately agreed with MMIC. The nondisclosure of the Wilson lawsuit was “the equivalent of a false assertion” and the “claim made against Dr. Hasik constituted a significant change that affect the risk that MMIC was offering to underwrite”. It also “rendered part of Dr. Hasik’s application untrue”. Since the doctor, like any insured, has a duty to provide truthful statements and disclose material facts, their failure to do so warranted rescission. It was undisputed that MMIC would not have issued prior acts coverage to Dr. Hasik, had it known he was being sued. It was thus entitled to rescind the coverage it agreed to provide.

 

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

08/11/16       Chao Jiang v. Ping An Ins.

Supreme Court, New York County

Judge Jeffrey K. Oing

Court Dismisses Breach of Contract Claim against Entity that Negotiated the Coverage

Plaintiff is a former officer of China North East Petroleum Holding Ltd. (“CNEP”).  In 2010, CNEP purchased two insurance policies (a primary and an excess) to provide coverage for its directors and officers.  In 2011, CNEP extended both policies through April 30, 2012. 

 

The primary policy was initially underwritten fifty percent (50%) by the Ping An defendants and fifty percent (50%) by AIG.   The initial period for the primary policy ran from May 1, 2010 through April 30, 2011.  CNEP subsequently extended the policy period, but the Ping An defendants refused to extend coverage for a second period.

 

As a result, plaintiff claims that Huatai Insurance Group of China (“Huatai Group”), ACE Insurance and ACE Group negotiated the extension and Huatai Group became co-insurer for CNEP for the second period.

 

In August 2010, the SEC opened a formal order of investigation into CNEP and its officers and directors.  In June 2011, a subpoena was issued for plaintiff’s testimony, and in November 2012, the SEC named CNEP and a number of former officers and directors, including plaintiff, in a civil proceeding alleging diversion of offering proceeds and violation of various security laws.  The following year, the DOJ commenced a parallel criminal proceeding to which plaintiff ultimately pled guilty to knowing failure to implement internal controls. 

 

The claims were reported to CNEP’s insurers.  AIG advanced defense cots for both the SEC and DOJ Actions, however, Ping An and Huatai Group refused to pay out their respective policy limits.  As a consequence, the excess carrier refused to pay any amounts as the primary coverage had not yet exhausted.  Plaintiff claims that his legal fees exceeded the primary limits.

 

Plaintiff then brought this claim against the insurers alleging deceptive business practices under the GBL § 349, breach of contract, breach of covenant of good faith and fair dealing, and seeking declaratory relief. 

 

Plaintiff reached a settlement agreement with the Ping An defendants prior to this decision being issued.

 

This left two motions to be decided by the Court.  The first was filed by ACE seeking a dismissal of the complaint.  ACE submitted that while the primary policy was negotiated by an ACE employee there was no contract between ACE and CNEP.  Apparently, the ACE employee issued a questionnaire to CNEP.  The questionnaire listed ACE group a “Strategic Partner” in the letterhead.  The primary policy confirmation document, while signed by the ACE employee, indicated that it was executed “[f]or and on behalf of Huatai Insurance Company of China Limited.”  The court granted ACE’s motion to dismiss finding that there was no contract between CNEP and ACE. 

 

The court also found that to the extent plaintiff argued that ACE was an agent of Huatai Group in the negotiation, and is somehow liable, the court disagreed noting that the principle is well settled that an agent who acts on behalf of a disclosed principal cannot be simultaneously liable for a breach of contract absent unambiguous evidence of an intention to be bound.  The court found no such evidence here.  Plaintiff then argued that a parent company can be held liable as a party to its subsidiary’s contract if the parent’s conduct manifests and intent to be bound.  The court recognized this as a legal concept, but found it had no application here.  Although an employee of ACE was involved in the negotiations, there was no indication in the questionnaire or on any other document that ACE was the actual party in interest.  To the contrary, all of the documents, including the policy contained the name Huatai Limited, not ACE.  The court found not allegation sufficient to state a cause of action that ACE exercised such control over the day-to-day operations of Hautai Limited that the later could be deemed a mere instrumentality or dummy corporation for ACE. 

 

The second motion decided by the court was a motion for default plaintiff filed against Hautai Group.  While Huatai Group had not yet answered, they had filed a notice of appearance to appear pro hac vice.  Accordingly, the court found CPLR 3215 inapplicable.  In opposing the default, Hautai Group also cross-moved to dismiss, the court granted the request finding that Huatai Group was not the direct signatory of the primary policy, but, rather, it was only a holding company.  The entity that should have been named was Huatai Insurance Company of China Limited or Huatai Limited.  It was not clear from the decision why this entity was not named, perhaps there were jurisdictional issues.   

 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

08/22/16       Edens v. The Netherlands Insurance Company

United States Court of Appeals, Tenth Circuit

No Coverage No Bad Faith

On May 8, 2013, 22-year-old Zachery Edens was driving a motorcycle owned by his parents, David and Rhonda Edens (the Edenses).  As Zachery Edens was driving northbound on a two-way street in Tulsa, Oklahoma, Neva Whiteman turned left in front of his oncoming motorcycle.  Unfortunately, Zachery Edens couldn't avoid a collision and was pronounced dead at the scene.  The Edenses had insured the motorcycle under their policy with Progressive, and Whiteman had insured her car under her policy with State Farm.

 

In a letter dated September 5, 2013, the Edenses notified Netherlands of Zachary Edens’ accident.  Netherlands had issued an auto insurance policy to Edens LLC, which the Edenses claimed covered the accident.  They claimed that Zachary Edens was a named insured under the policy’s underinsured/uninsured motorist (“UM”) coverage because Zachery was a member of the LLC listed as a named insured.

 

In a September 18, 2013 letter, Netherlands advised the Edenses that it needed additional information to evaluate their demand.  However, the letter ended inconsistently by stating that the file would be closed.  The claims adjuster who drafted and signed the letter later testified that the file closing language was accidentally included by mistake.  After sending the letter, the adjuster spoke to counsel for the Edenses and requested information pertinent to her investigation and their claim.  When no response or documents were received, the adjuster sent a letter dated November 22, 2013 denying coverage because Zachery Edens was not an insured under the policy’s UM coverage.  The Edenses and Edens LLC sued Netherlands, alleging, among other things, failure to adequately investigate the claim, breach of the insurance policy and bad faith.

 

First, the Tenth Circuit concluded that there was no UM coverage for Zachary Edens under the Netherlands auto policy issued to Edens LLC.  The motorcycle operated by Zachery Edens was not a “covered auto” under the policy, and the court concluded that there was no coverage for Zachary Edens under the Business Auto Coverage Form, the Oklahoma Uninsured Motorists Coverage endorsement, or the Business Auto Extension Endorsement.

 

Having concluded that there was no coverage for Zachary Edens under the Netherlands policy, the court next addressed the bad faith claim.  Applying Oklahoma Law, the court concluded that the plaintiffs could not proceed on their bad faith claim because the policy did not cover Zachary Edens’ accident.  While an insured need not prevail on a breach of contract claim to prevail on a bad faith claim, under Oklahoma law, an insured must show that he is entitled to coverage to prevail on a bad faith claim.  Because Zachary Edens was not entitled to coverage under the Netherlands policy the bad faith claim was dismissed.

 

08/08/16       Hinson v. Titan Insurance Company

United States Court of Appeals, Eleventh Circuit

Insurer’s Efforts to Contact Insured regarding Time Limited Settlement Offer Presented an Issue of Fact on Bad Faith Claim

On September 27, 2007, Hinson was driving in Pensacola, Florida when he failed to yield the right of way in an intersection and struck a motorcycle operated by Almand.  Almand’s left leg was crushed in the accident and the motorcycle was a total loss.  As a result of the accident, Almand had emergency surgery that night, and was still in intensive care the following day.

 

Hinson had an auto insurance policy with Titan with bodily injury and property damage limits of $10,000 per person and $20,000 per accident.  The next day, a Titan adjuster determined Hinson was at fault, realized the liability could exceed the $10,000 bodily injury limit, and sent Hinson a letter stating that Hinson could be personally liable for a judgment in excess of the policy limits.

 

On October 1, October 8, November 7, and November 19 Titan attempted to settle the case for the policy limits in exchange for a Release of All Claims, but Almand’s attorney was not yet willing to settle.  A Titan claim note reflects that Titan attempted to call Hinson on December 5, but was told he would be home after 5 p.m.

 

On December 26, Titan received a demand letter from Almand’s attorney stating that Almand was willing to settle if eight material terms were met by January 10, 2008.  The terms included the following: (1) tender of the bodily-injury policy limits, with the check made payable to the Almand and his attorney; (2) a statement under oath from Hinson setting forth the existence of any additional insurance; and (3) payment of the replacement cost of the motorcycle plus various specified upgrades.  The letter concluded, “This is an offer to enter into a unilateral contract that can only be accepted by strict performance of all of its material terms.”

 

The offer letter was received by Titan on December 26, but the Titan adjuster with primary responsibility for handling Almand's claim did not review it until January 2.  On that date, the adjuster attempted to call Hinson at his landline home phone, but he was not at home.  However, the adjuster did reach Alice Kilpatrick, Hinson's then-fiancée who lived with him.  The adjuster advised Kilpatrick of the settlement offer and the need for Hinson to execute a sworn statement regarding additional insurance coverage.  The adjuster attempted to call again on January 3 and 4 in the afternoon, but the calls would not go through.  The adjuster never spoke with Hinson, and Hinson testified that he was not told by Kilpatrick that Titan had called.

 

On January 4, Titan sent Hinson a letter by regular mail regarding Almand's settlement offer.  The letter noted that the demand letter and a proposed affidavit were enclosed and advised of the policy limits and of the possibility of an excess judgment.  The letter also told Hinson to complete the affidavit immediately.  Hinson later testified that he did not remember seeing the letter and that, during the time the settlement offer was open, he did not know of the offer or his need to provide an affidavit.

 

Also on January 4, Titan had a claim manager deliver a copy of the affidavit to Hinson’s home in the afternoon.  Hinson was not home, but the claim manager gave a woman the affidavit and told her it needed to be signed and notarized.  The claim manager did not know the purpose of the affidavit or that there was a specific due.  Hinson testified that he did not receive an affidavit from Titan on January 4 or any other day, and that he was not even aware that someone from Titan had come to his home.  He further testified that he would have promptly returned the completed affidavit had he known he needed to do so.

 

Titan did not make any further attempts to contact Hinson before the deadline.  On the day of the deadline Titan delivered the settlement package to Almand's attorneys without the affidavit of additional insurance from Hinson.  In a cover letter to the package, Titan explained that it had unsuccessfully attempted to secure the affidavit from Hinson.  The letter stated that Hinson’s phone was disconnected, but Almand’s attorney later confirmed that his phone was working.

 

On January 16 Almand rejected Titan's attempt to settle.  A short while later, Almand filed suit against Hinson in Florida state court.  Ultimately, the case proceeded to a jury trial, resulting in a nearly $2 million judgment against Hinson.  According to Almand’s attorney, the central reason the matter did not settle was Titan did not submit the affidavit along with the rest of the settlement package.  Hinson testified that he would have signed the affidavit if he knew about it.

 

Hinson then commenced a bad faith action against Titan in June 2013.  Titan was granted summary judgment on Hinson’s bad faith claim.  Hinson appealed.

 

In its decision, the Eleventh Circuit focused on Titan’s efforts to advise Hinson of the offer and the steps it took to avoid the excess judgment.  The court found that there was substantial evidence Titan acted in good faith.  Titan complied with all seven settlement terms that were within its direct control.  Titan also attempted to contact Hinson several times about the settlement offer and his need to complete the affidavit: it called his home three times, sent him a letter, and had someone personally deliver the affidavit to his home.

 

However, the court also found that other evidence supported Hinson’s claim that Titan failed to act with due regard for his interests.  Well before receiving the settlement offer Titan knew that Hinson was liable far in excess of the policy limits.  The settlement offer presented an opportunity to avoid excess liability, but time was of the essence.  Despite this, Titan waited nearly a week to contact Hinson about the offer.  The court acknowledged that some of the delay was attributable to the holidays, but Titan first reviewed the letter on a Monday, December 31, and did not attempt to contact Hinson until January 2.  By that point, more than half of the time on the offer had expired.

 

The court also was not convinced that Titan’s efforts to contact Hinson demonstrated it acted in good faith.  First, Titan called Hinson and delivered the affidavit during times it knew he would not be home, before 5 p.m. in the afternoon.  Second, Titan’s letter to Hinson did not identify the deadline by which the affidavit needed to be returned or explain the significance of the affidavit.  Third, the person who delivered the affidavit to Hinson’s home did not know the purpose of the affidavit or that there was a specific date it needed to be returned by.  Finally, Hinson testified that he had no knowledge of Titan’s efforts to contact him, and his fiancée would have told him about the settlement offer and the need for the affidavit if she was informed.

 

Based on this evidence, the court concluded that a jury should determine whether Titan acted in bad faith with regard to its handling of the settlement offer.

 

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

08/09/16       Lebovits v. PHL Variable Insurance Co.

Eastern District of New York

Losing Lapse Notice

Plaintiff, as trustee of an irrevocable life insurance trust, commenced this action seeking a declaration that a life insurance policy held by the Trust and issued by Defendant did not lapse due to the nonpayment of premiums.

 

Premiums for the life insurance policy were deducted monthly from an interest-bearing account maintained by the Trust for this purpose.  On June 22, 2010, this account failed to contain sufficient funds to cover the premium payment due.  Defendant issued a notice to the Trust stating that the premium certificate had entered a 61 day grace period for curing the default.  “At a minimum, $72,078.72 must be received by us on or before 8/22/2010, in order to prevent a lapse.”  Two days before this deadline, the Trust sent a check for the stated amount, which was returned for insufficient funds.  Two days after the deadline, the stated amount was wired to Defendant, who then refused the payment on the ground that the life insurance policy had already lapse.

 

At issue before the district court was whether the lapse notice complied with the requirements of New York Insurance Law.  New York Insurance Law § 3211 prohibits an insurer “from lapsing such a policy less than one year from a default in payment unless it provides notice to the insured. See id. § 3211(a)(1). The notice required by the statute must “state the amount of such payment [due].” Id. § 3211(b)(2).” 

 

The alleged problem with the notice issued by Defendant is whether the amount necessary to cure the default was correctly stated.  The life insurance policy at issue “defines the amount necessary to cure a default as an amount ‘sufficient to increase the new Account Value on that monthly Calculation Date to cover three Monthly Deductions.”  The amount stated in Defendant’s notice constituted three months’ worth of premiums plus the shortfall (the difference between the scheduled June 2010 deduction and the net account value at that time).  The district court agreed that the policy language could be read to support this conclusion, but found that it “is also possible to read the language to mean that the amount due is three monthly premiums, with the shortfall included in that amount,” and such ambiguity is “construed against the insurer as the drafter of the policy.” 

 

Defendant argued that the ambiguity could be resolved by considering extrinsic evidence.  However, because Defendant’s extrinsic evidence “concerns its unilateral intent and industry practice, not the parties’ mutual understanding when the Policy was drafted,” such evidence was irrelevant.  Moreover, the court found that interpreting the policy as Plaintiff argued was consistent with the language of New York Insurance Law § 3203, “which defines the amount due as ‘sufficient premium to keep the policy in force for three months from the date the insufficiency was determined.” (quoting § 3203(a)(1) (emphasis in original)).  Accordingly, Defendant’s notice did not correctly state the amount due, as required by New York Insurance Law 3211, and it was not entitled to lapse the life insurance policy.  Summary judgment was therefore granted to Plaintiff.

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

 

12/15/15       Erie Insurance Exchange v. Bullock

Ohio App. 2015 WL 9393958

Insured’s Coverage Argument Lays an Egg

In 2011, Mr. and Mrs. Bullock purchased a property in Ohio which included a barn.  Two years later, they acquired numerous chickens and began selling eggs.  A year later, the barn which housed the poultry burned down, presumably resulting in a great deal of fried chicken and scrambled eggs. 

 

Erie Insurance denied coverage for the loss under an exclusion barring coverage for structures used in whole or in part for business purposes, or structures used to store business property.  A Trial Court ruled for the insurer, and this ruling was upheld on appeal.  The Court held that the Trial Court and Erie Insurance were eggs-actly right.

 

The insured argued that the poultry operation was not a business, and that whether it was a “business” constituted at least a material issue of fact to deny summary judgment.  The Court ruled that the poultry operation constituted a business because it demonstrated continuity and profit motive.  The Bullocks worked on their chickens and eggs on a regular basis, the operation required considerable maintenance and investment, and the insureds sold eggs locally at a market.  The Court also ruled that a profit motive was present because they sold the eggs and meat, put a name or brand on their product, and obtained required operating licenses. 

 

The insured’s coverage argument laid an egg.  Even though the poultry business was on the “fowl” side, the Court held it was still a business or profession, and the denial of coverage was reasonable and not hen-pecked.  This was not an operation based upon some perceived health benefit, therapy, or a “hobby”.  The Court ruled that the poultry operation met the policy definition of a business as a trade, profession, or occupation, including farming.  Of significant note, was the Court’s observation that a business venture may be a side business, or even an activity that the insured pursues primarily for purposes other than pecuniary gain, and still be a business within the policy definition.

 

The message of this case is that if you want to raise chickens as lovable pets that may not be a business.  If you want to raise chickens and turkeys for a few additional eggs each week and instant Thanksgiving Dinner, that may be OK.  However, If you are going to raise Henrietta Hen and Tom Turkey for outside commercial sale on a regular basis and to make money (whether or not it is profitable), that is a business operation which may be subject to exclusions in residential property policies as well as personal automobile policies.

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