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Coverage Pointers - Volume XVIII, No. 6

Volume XVIII, No. 6 (No. 462)

Friday, September 9, 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:

 

Do you love situations?  We embrace them and help you through them.

 

Editor’s Note:

 

Just a quick note from the Editor, as I wing my way back from St. Louis on Thursday after speaking at the PLRB Regional Conference there.  I hope to see you Friday, September 12, at the Buffalo site of the Law School for Insurance Professionals program.  Click here for registration information.  I’m the local chair and will be presenting the basics coverage analysis and drafting a properly constructed coverage position letter.  You’ll learn why we don’t like the words “reservation of rights,” a term so often wrongly used in New York coverage letters.  Be there or be-ware!

 

Kudos and thanks to Agnes Wilewicz.  With this issue, Agnes has been promoted to Associate Editor of Coverage Pointers and is taking up the task of preparing this issue and the remaining portion of the cover letter (as I cannot count on American Airlines Wi-Fi to give me the connection I need during my travels).

 

Before I turn this over to Agnes, let me welcome our newest columnist, Howard Altman, who will cover the capital desk – following the legislature and the insurance regulators, in columns to come.  His welcoming note is below.

 

Welcome Howard and thanks Agnes!

 

Dan

Dan D. Kohane

[email protected]

 

Associate Editor’s Note:

 

This week’s edition finds me at the beginning and end of the issue, as I humbly accept my new position as Associate Editor. As a long time subscriber myself, I am thrilled to the point of near speechlessness to have a hand in preparing this tome for our dear readership. My goal will be to assist Dan in making Coverage Pointers the reader-friendly, clean, clear, and fun periodical you have all come to love and depend upon. Here’s hoping I succeed.

 

My Wide World of Coverage column remains (cover note below, case summaries attached), but I also have some information about an upcoming event you won’t want to miss.

 

DRI’s Insurance Coverage and Practice Symposium in New York City is just around the corner – December 8th and 9th. (You’ll see, that’s actually not that far away.) It is self-described as the foremost educational event for insurance executives, claims professionals, and outside counsel – because it is! Besides that, you get to spend a couple of days in NYC during the holiday season, while reconnecting with old colleagues and making new connections. More information and registration is already available on their event page, linked above. This is always an excellent event, filled with networking opportunities, wonderful programs, marketing potential, and stellar CLE/CEs. If you will be there, drop me a line. It’s always nice to see friends and put faces to all the names that pop into our inboxes daily.

 

Finally, because I have a penchant for prosody and love of lyricism, be sure to check Howard’s cover note below. Suffice it to say, I think Howard is going to fit very well in future editions of CP, and we can’t wait to see what else he has in store for us.

 

Agnes

Agnes A. Wilewicz

[email protected]

 

He Came, He Walked, He Left – A “One Appearance Wonder” – 100 Years Ago:

 

William McKinley Batsch (May 18, 1892 – December 31, 1963) was an American Major League Baseball player who pinch hit in one game for the Pittsburgh Pirates on September 9, 1916. With the hometown Pirates down 3-0 in the bottom of the eighth to the Chicago Cubs, Batsch walked for pitcher Erv Kantlehner in his only plate appearance. The Pirates failed to bring Batsch round to score, and the final score of the game at the end of the ninth remained 3-0.

 

When we first looked for reports on the ballgame, and searched archived by his name, we could find nothing.  Eventually, we realized that every box score that reported on the game, misspelled his Batsch as either Batch or Balch.

 

Batsch is one of only five players to walk in his only major league plate appearance; the most famous of the five is 3’ 7”Eddie Gaedel.

 

The first three all played in the 1910s: Dutch Schirick (Sep 17, 1914 with the Browns), Bill Batsch (Sep 9, 1916 with Pittsburgh) and Joe Cobb (April 25, 1918 with Detroit; although recent research shows that Cobb may have actually struck out in his only plate appearance). On June 24, 2007, Kevin Melillo of the Oakland Athletics, became the first player in over half a century to walk in his only plate appearance without taking the field, against the New York Mets. Other than Gaedel, the other four players pinch-hit for pitchers; all five appeared in games their teams ultimately lost.

 

Peiper’s Pabulum:

 

We join you just hours away from the start of the NFL season. To those of you excited about the start of a new season, we commend you on your resolve in waiting since last February for this day. For those of you about to be football widows or widowers, we encourage you to embrace the alternative to lost Sundays on the coach….lost Sunday’s at the mall.  I am told shopping is always better during the 3 ½ hours it takes the Bills to commit another folly to the record book.  As for me, most of my Sunday’s are now spent at a hockey rink or a natatorium so I am not longer in either block. 

 

Another slow two weeks for decisions.  Our luck, just like your fantasy football team’s, is bound to turn around soon.  In the meantime, if you’re in the Northeast, enjoy the extended Summer for a few more weeks.  Snow, no doubt, is just around the corner. 

 

Steve

Steven E. Peiper

[email protected]

 

Suffrage, 100 Years Ago:

 

A century ago, President Wilson was known as a lukewarm supporter of the women’s right to vote. His first formal endorsement of suffrage was in a speech before Congress in September 1918, where he spoke of women and their role in the Great War.

 

President Wilson asked Congress, “We have made partners of the women in this war… Shall we admit them only to a partnership of suffering and sacrifice and toil and not to a partnership of privilege and right?” - See more at: https://www.wilsoncenter.org/article/woodrow-wilson-and-the-womens-suffrage-movement-reflection#sthash.DmkhQzmI.dpuf

 

It wasn’t until June 4, 1919, when there were enough votes in Congress to send the 19th Amendment to the states for ratification and not until 1920 that the Amendment was pass, permitting women equal voting status. 

 

But in 1916, 100 years ago today, the President was still suggesting patience:

 

The New York Times

New York, New York

9 Sep 1916

 

WILSON PLEDGES HIS AID

TO WOMEN IN FIGHT FOR VOTE

 

President Tells Suffrage Convention

It Will Come “In a Little While.”

 

CHEERED BY DELEGATES

 

Says They Will Not Quarrel

About the Method and Is

Thanked by Mrs. Catt.

 

$800,000 RAISED BY WOMEN

 

Association Adopts a Suffrage Flag

and Goes on Record as Being

Absolutely Nonpartisan.

 

Special to The New York Times.

           

ATLANTIC CITY, N. J., Sept. 8.—President Wilson made tonight to the crowds of delegates and members of the National American Woman Suffrage Association an address which brought them to their feet, shouting and cheering him to the echo.  He dispelled their last fears in regard to his standing on the suffrage question.

 

Triumph for the suffrage cause “in a little while” was predicted by the President, and he added:

 

“I have come here to fight with you.”

 

Immediately the 4,000 women in the New Nixon Theatre stood and cheered.  A few minutes later Dr. Anna Howard Shaw, Honorary President of the association, with Mr. Wilson still present, declared:

 

We have waited long enough to get the vote.  We want it now.  I want it to come during your administration.”

 

Again the great audience of women stood and cheered, waiving handkerchiefs. 

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, dear readers.  I am new to authoring a Coverage Pointers article, so go easy on me. In the coming weeks, months, and, with luck, years, I will be bringing you the latest in updates in proposed insurance legislation from the Senate and Assembly, along with Circular Letters and Opinions from the Department of Financial Services’ Insurance Department. Alas, the summer has been slow in Albany, so instead, I bring you a poem:

 

“The time has come”, the Kohane said, to speak of many things

To tell our readers of new laws; of loopholes and pulled strings.

But DFS, the summer off, gave nothing to enforce.

The Senate has been absent too, though that’s par for the course

 

And so, instead of writing here of new legislation,

I can report but stories of the law’s procrastination.

I hope that come the fall, there will be new laws to parse

And even if the pickings stay far between and sparse,

 

I will seek to navigate the laws’ new terrain,

And hope to use this space to inform and entertain.

 

Howard

Howard B. Altman

[email protected]

 

A Century Ago, Bread Cost More Bread:

 

The Junction City Daily Union

Junction City, Kansas

9 Sep 1916

 

UP GOES PRICE OF BREAD

 

No More Nickel Loaves Will Be Sold

At Birmingham, Alabama

 

Birmingham, Sept. 9.—Beginning September 11, 20 ounces of bread will be sold in Birmingham for 10 cents, an increase of 5 cents a loaf.  The advance in price is attributed to alleged high cost of flour and ingredients.  The present 10-cent loaf is 24 ounces. 

 

Tort and Verdicts, a Century Ago: 

The accident:

 

The Junction City Daily Union

Junction City, Kansas

9 Sep 1916

 

HAD A BAD ACCIDENT

 

Teddy Orr Got His Leg Caught in An Auto Wheel.

 

Teddy Orr, a delivery boy for the Hygienic Dairy, met with a bad accident this morning that will detain him at home for some time.  He was riding on the side of the motor car delivery when his foot got caught in a rear wheel.  His leg was twisted and badly broken.

 

Speedy Justice, What a Verdict!:

 

The Junction City Daily Union

Junction City, Kansas

9 Mar 1917

 

RAY T. ORR GETS $400

 

Awarded Verdict for Damages

From Waldo E. Clark.

 

The following cases were up in the district court yesterday afternoon and today.

 

Ray Theodore Orr vs. Waldo E. Clark.  Jury returned a verdict of judgment of $400.00 in favor of plaintiff.

 

Editor’s Note:  Ray married, his leg injury and his massive settlement notwithstanding, lived until age 77, ending up working as a hourly laborer in a cement plant.  He died at age 77 and is buried in the city where he was born, Junction City, Kansas.

 

Phillips Federal Philosophies:

 

Hello, All:

 

Two cases this week:  the first, Zurich American Ins. Co. v. Wausau Business Ins. Co., out of the Southern District of New York considers a rather vanilla question of policy interpretation and ambiguity.  The district court concludes (spoilers!) that even where a policy dispute is being litigated between two sophisticated insurers: (1) an ambiguous policy provision may still be construed against the drafter; and (2) New York Insurance Law section 3420’s timely disclaimer requirement does not apply.

 

I found Calhoun v. The Providence Mutual Fire Insurance Company, out of the District of Connecticut, interesting due to its consideration of whether an insurance company could be found liable in negligence where it failed to notify its insured that an insurance adjuster reported the presence of mold, which the insureds alleged resulted in respiratory illnesses.  Although the district court recognized the seriousness of the safety concern at issue, it concluded that “imposing a legal duty in this context would affect the relationships between insurers and their agents in investigating insurance-related claims by increasing potential liability for insurers, whenever insurance-related investigations disclose problems outside the scope of the underlying claim. Similarly, the imposition of a duty in this circumstance would also undermine public policy goals of avoiding increased litigation.” 

 

As always, thanks for reading.

 

J.

Jennifer J. Phillips

[email protected]

 

Campaign Contributions, Not Quite as Generous a Century Ago:

 

The New York Times

New York, New York

9 Sep 1916

 

WIDOW’S MITE FOR WILSON.

 

City Home Inmate Sends a Dime

Toward President’s Campaign

 

            Contributing a “widow’s mite” in the shape of a dime to the Democratic National Campaign Committee, Mrs. Theresa Patrick, who lives at the City Home on Blackwell’s Island, sent a letter to National Chairman McCormick yesterday, in which she said she wanted to do all she could for the re-election of President Wilson.

 

“I have three sons and two grandsons,” she wrote, “who were born Republicans, and always so voted, but who promise the Lord this election each will cast his first Democratic vote for Woodrow Wilson.  God bless him.”

 

Hewitt’s Highlights:

 

Dear Subscribers:

 

My family and I spent the last “summer” weekend transitioning into the fall by picking apples, taking a hay ride, and drinking apple cider at a farm on Long Island. The threatened Hurricane which cleared the beaches and cooled the temperatures never hit here on Long Island thankfully. I hope all of you who were affected made it through ok. Since we last talked, my oldest returned to school in the Second Grade and my youngest fared well on his first day of Kindergarten.  I hope the excitement they feel now carries through the entire year.  My wife, a teacher, also is back at school and is excited for the new year.

 

Unfortunately, the Appellate Courts also seemed to be enjoying the end of summer as they did not issue any Serious Injury threshold cases for the second edition in a row. I expect a deluge to come soon, but right now, there is little to write about on that front. I expect the next edition will contain a number of cases.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

Tessa’s Tutelage:

 

Dear Readers,

 

I hope you had a marvelous long weekend, I know I did.  It is now time to start thinking about falling leaves and picking out Halloween costumes. This may be the first year I am feeling ready for Fall to start.  This may be prompted by my hope that once the weather gets cooler the Courts will turn their attention to No-Fault.  Alas, we have a few more weeks of sunshine and swimming before that. As such, we will focus our attention on arbitration matters. 

 

I did my best to take a look at a few cases that did not revolve around lack of medical necessity. Arbitrator Bargnesi considered the preclusion of an issue already arbitrated, and decided that a party who had not sought appeal could not raise the issue again with another arbitrator.  Arbitrator Murphy-Louden clearly fortified the current state of the law which directs that a service provider seeking reimbursement for services must have a valid Assignment of Benefits, otherwise they are not the proper party bringing the claim.

             

Have a great weekend!

 

Tessa

Tessa R. Scott

[email protected]

 

Barnas on Bad Faith:

 

Hello again:

 

It is football season.  Those are four of my favorite words.  College football is already off to an incredible start after last week’s games, and tonight the NFL season kicks off with a Super Bowl 50 rematch.  Hopefully you have your fantasy teams drafted by now and your picks for the first week made in your survivor pools.  Maybe this is the year our beloved Buffalo Bills finally end the longest playoff drought in North American “Big 4” professional sports.  Dare to dream.

 

As football begins, the MLB season has entered its final month, and things are tighter than ever in the American League East.  Unfortunately my Blue Jays are faltering at the wrong time, having dropped five out of our last six games and relinquishing our hold on first place to the Red Sox.  Hopefully we can retake it during our three game series with the Red Sox in Toronto this weekend.

 

This week I have a couple of interesting bad faith cases to report on.  In Belz, the court determined that whether Peerless handled the plaintiffs’ claim in bad faith was an issue of fact for a jury to decide.  Peerless denied the plaintiffs’ claim for cracks in their basement walls because the walls were still standing and had not fully collapsed.  However, the rule in Connecticut under long established case law is that a collapse may be found even if the structure is still standing if the structural integrity is compromised.  Peerless was also aware of numerous other claimants who had made similar claims as the plaintiffs.  Thus, the bad faith claim survived.

 

In Taylor, the Eleventh Circuit affirmed a bad faith verdict a Geico insured obtained against Geico.  Geico’s insured was at fault in a motorcycle accident that caused severe injuries to the claimant.  Geico could have settled the case for the policy limit of $10,000.00 and the cost of the claimant’s motorcycle, but it refused to pay the full cost of the motorcycle.  As a result, the case went to trial and the jury awarded the claimant a verdict of over $900,000.00.  The Eleventh Circuit concluded that the jury’s verdict that Geico acted in bad faith was supported by sufficient evidence.

 

See you next time.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Wilewicz’s Wide World of Coverage:

 

Dear Readers,

 

On this edition of the Wide World of Coverage, we bring you but one case hot off the Second Circuit presses. Though there is no doubt that there will be plenty more this Fall as the courts reawaken and get back into the swing of things.

 

In First Mercury v. Shawmut, the court looked at some very common facts and additional insured issues. In short, we had a GC, a sub, and a sub-sub. As you might have guessed, the sub-sub’s employees were hurt. Sub-sub’s contract required them to add GC and sub to their general liability policy. That policy contained an additional insured endorsement providing coverage for anyone that sub-sub agreed to have added as an AI. The result – coverage! Short story short, since the additional insured endorsement simply required a writing evidencing the sub-sub’s agreement that parties should be added, and the contract stated that GC and sub should be, then the Second Circuit found coverage. The carrier had tried a couple of arguments (see attached), but none of them held water in the face of clear policy and contract language.

 

Until next edition!

Agnes

 

Agnes

Agnes A. Wilewicz

[email protected]

 

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

 

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

 

  • On Long Tail Claims, Insurers Not Responsible for Providing Coverage for Damages Occurring During Years when Insured Could Not Obtain Coverage


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

Robert E.B. Hewitt III

[email protected]

 

  • Back again in the next issue.

 

TESSA’S TUTELAGE
Tessa R. Scott

[email protected]

Arbitration:

 

  • When an Issue Has Been Litigated with an Opportunity to Appeal, a Party Cannot Attempt to Re-Litigate the Issue Where Only Service Dates Have Changed
  • If the Applicant Cannot Establish that it has Standing to Bring the Case, the Arbitrator has No Authority to Hear the Case

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Shut out this week.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Interpreting Connecticut Law, Second Circuit Holds Employer’s Carrier on Hook for Contractor and Owner as Additional Insureds, Where Employer Not a Party to Underlying Action

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Court Strikes Law Firm’s Answer in Lawsuit Brought by Workers’ Compensation Carrier for Recovery of Lien Amounts Owed

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Bad Faith Claim Survived Summary Judgment Based on Insurer’s Failure to Consider the Collapse Policy Provision, Based on a Company Policy that Was Contradicted by Connecticut Case Law
  • Bad Faith Verdict Upheld against Insurer where a $900,000.00 Verdict was Taken against its Insured Following Carrier’s Refusal to Pay an Additional $1,436.20 to Settle

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

  • Installation Ambiguity and a Better Late than Never Exclusion
  • Insurer’s Duty of Care during an Inspection

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

  • Warming up.  Nothing yet.

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

 

  • Class Action Requires Separate Deductibles Per Claim

 

That’s it for now.  As always, we love to hear from you, with situations or otherwise.

 

Dan (and Agnes)

 

Dan D. Kohane

Agnes A. Wilewicz

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], [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

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

Patricia A. Fay

 

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

Altman’s Administrative (and Legislative) Agenda
Earl’s Pearls

 

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


09/01/16       Keyspan Gas East Corp. v. Munich Reinsurance America, Inc.

Appellate Division, First Department

On Long Tail Claims, Insurers Not Responsible for Providing Coverage for Damages Occurring During Years when Insured Could Not Obtain Coverage

This is an insurance coverage dispute involving long-term, gradual environmental property damage caused by pollution from manufactured gas plants (MGPs) owned by Keyspan. Hazardous waste from the MGPs leached into groundwater over a protracted period of time. The New York Department of Environmental Conservation (NYDEC) made claims against Keyspan, requiring it to assume the costs of investigation and clean-up of the environmental contamination. Keyspan, in turn, filed claims with its insurer, defendant Century Indemnity Company (Century), under certain general liability policies in effect during a 16 year period in which the pollution was occurring. There is no dispute that the harm caused by the pollution was indivisible and continuous over a long period of time that greatly exceeded the 16-year period during which Century had issued insurance policies.

 

The court has to determine the proper allocation, under the Century insurance policies, of risk of loss attributable to a continuous harm occurring, in part, during periods when liability insurance was unavailable in the marketplace. Keyspan contended, and the motion court agreed, that the pro rata allocation analysis set forth by the Court of Appeals in Consolidated Edison Co. of N.Y. v Allstate Ins. Co. (Con Edison) (98 NY2d 208 [2002]) should be refined to require that the insurer assume the allocated risk for losses occurring during periods when liability insurance was unavailable in the marketplace. Century argues that under a pro rata allocation of risk, Keyspan, the insured, should be held accountable for losses attributable to periods of time when it could not, and consequently did not, purchase insurance.

 

The court determined that the insurer does not have to indemnify Keyspan for losses that are attributable to time periods when liability insurance was otherwise unavailable in the marketplace.

 

This case involved two separate sites.  Century claimed that contamination of the Hempstead site took place between 1903 and 2001, whereas contamination of the Rockaway site began in 1905 and possibly continued until 2012. The contamination was caused by Keyspan's operation and maintenance of the MGPs.

 

In 1995, NYDEC sought to hold Keyspan strictly liable for the resulting pollution, requiring it to pay for the investigation and clean-up of these sites. Keyspan's remediation costs ran in the millions of dollars. Keyspan now seeks to have Century indemnify it for these costs based upon 16 successive years of general liability insurance policies issued by Century from 1953 to 1969. The various claims in this action implicate multiple successive insurance policies, as well as periods of no insurance. Insofar as is relevant to this appeal, Keyspan's claim for indemnification by Century includes not only the 16-year period that the policies were in effect, but also periods of time, both before 1953 and after 1969, when insurance covering this risk could not be purchased in the marketplace. Century denies that it must indemnify Keyspan for any damages that did not occur "during the policy period," contending that any property damage that occurred outside that 16-year period and during periods of no insurance is the sole responsibility of Keyspan, whether or not other insurance coverage was available in the marketplace. In concrete terms, the parties' dispute implicates responsibility for as many as 70 years' worth of allocated risk.

 

The legal challenges raised in these cases occur because it is impossible to precisely determine what injury or damage took place during a particular policy period or during periods of no insurance. While the occurrence of some injury during the policy period will usually trigger coverage under the terms of a particular policy, the parties still face thorny issues about who bears the risk of injuries attributable to different time periods outside of those policy periods.

 

Under well-established precedent, the courts are required to look first at the language of the policies involved. Con Edison, as here, involved a claim for indemnity in connection with environmental contamination clean-up. Viking Pump concerned personal injuries resulting from exposure to asbestos. In Con Edison, the Court of Appeals held that where the insurance policies provide coverage for "all sums" of liability that resulted from an accident occurring "during the policy period," a pro rata allocation based upon an insurer's time on the risk is consistent with the policy language. The specific issue before the Court was whether indemnification for liability for long-term, continuous environmental damage should be allocated among all the insurance policies that are triggered, or whether, for every policy triggered by some part of the continuous injury occurring during that policy period, the insurer should be held jointly and severally liable for all of the damages. The court held that pro rata allocation was more in keeping with the terms of the particular policies than joint and several liability for each insurer. In distinction, the Court of Appeals, in reviewing different policy language, as recently held in Viking Pump, that when a policy contains anti-stacking or non-cumulation provisions, pro rata allocation of risk is not consistent with the policy language.

 

Where a pro rata allocation is warranted, courts applying New York law have approved the use of a time on the risk allocation.  In cases involving environmental contamination, the formula assumes that the amount of pollution occurring in any particular year is always the same as in every other year. This assumption accounts for the uncertainty in determining the amount of pollution occurring in any particular year.

 

Pro rata allocation typically includes apportioning some part of the risk to the policyholder in connection with periods of no insurance. Policyholders will usually be required to bear the burden of periods when it could have, but chose not to, obtain insurance because the insured decided to self-insured for those years.


Each policy, despite some minor variations, provides the insured with coverage for occurrences, accidents and continuous and repeated exposure to conditions that result in damage "during the policy period." While none of the policies expressly address how to allocate liability in a situation where the underlying damage is long-term, continuous and indivisible, the fact that the policies require Century to indemnify Keyspan for occurrences, accidents, etc., "during the policy period" is consistent with allocation for time on the risk.

Unavailability is an exception to time on the risk, since it allocates responsibility for periods of time when no insurance was purchased and it is, therefore, inconsistent with policy language restricting coverage to the policy period. There is no other or additional contractual language in the policy justifying this exception. There are no express contract provisions requiring the insurer to cover damages outside of the policy period when insurance is otherwise unavailable.

Accordingly, the insurer is not responsible for losses that occurred on years when it was not on the risk, even if coverage was not available in the marketplace.


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

Robert E.B. Hewitt III

[email protected]

 

Back again in the next issue.

 

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

Arbitration:

 

08/29/16       Northtowns Orthopedics v. Geico

Arbitrator Bargnesi

When an Issue Has Been Litigated with an Opportunity to Appeal, a Party Cannot Attempt to Re-Litigate the Issue Where Only Service Dates Have Changed

This matter arose out of a motor vehicle accident which occurred on December 10, 2013. The 14 year-old rear seat passenger allegedly injured his neck, back and, left shoulder. Mikhail Strut, M.D., prescribed various medications for Assignor, which was the subject of the claim.

 

Applicant had previously brought a claim for reimbursement for different dates of service concerning the same injured party.  This matter was heard by Arbitrator Coppola.  Arbitrator Coppola was unconvinced by Respondent’s position that the prescriptions were not medically necessary following the Independent Medical Examination conducted by Dr. Louis Nunez.  He concluded that Dr. Nunez’s report contained an insufficient factual basis and medical rationale to reach his conclusion that the medications were not medically necessary. As such, Dr. Coppola found in favor of the Applicant.  Respondent never appealed this decision.

 

Here, the Applicant sought reimbursement for prescription medication rendered to Applicant for different service dates.  Respondent again relied on the IME report of Dr. Nunez.  Arbitrator Bargnesi determined that this issue had already been adjudicated and that Respondent had had every opportunity to contest the decision of Arbitrator Coppola.  Even though the dates of service were different, the issues were completely identical. Moreover, Respondent had never moved to overturn the decision of Arbitrator Coppola.  Thus, Arbitrator Bargnesi found that Respondent was precluded from re-litigating and Applicant was entitled to reimbursement.

 

09/06/16       Northtowns Orthopedics v. Geico

Arbitrator Michelle Murphy-Louden

If the Applicant Cannot Establish that it has Standing to Bring the Case, the Arbitrator has No Authority to Hear the Case

This matter was brought before Arbitrator by Applicant, Northtowns Orthopedics for reimbursement for medical services rendered to the injured party amounting to $5,345.61.  Applicant was unable to produce a valid Assignment of Benefits to establish that it had standing to bring the claim.

 

Arbitrator Murphy-Louden, rightly concluded that she did not have the authority to hear the matter absent the Applicant’s properly executed assignment of benefits form. Without this document the injured party had not relinquished her rights to pursue the matter. Arbitrator Murphy- Louden made clear, a valid Assignment of Benefits was a precondition to pursuit of the matter. As such, she dismissed the matter without prejudice, allowing the applicant to produce a valid Assignment of Benefits, should one actually exist.  

 

Associate Editor’s Note: As hyperlinks to arbitration decisions are difficult to track down, feel free to shoot Tessa an email and she can forward the orders to anyone interested.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Shut out this week.

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

08/29/16       First Mercury Ins. Co. v. Shawmut Woodworking & Supply, Inc.

United States Court of Appeals, Second Circuit

Interpreting Connecticut Law, Second Circuit Holds Employer’s Carrier on Hook for Contractor and Owner as Additional Insureds, Where Employer Not a Party to Underlying Action

The facts in this one are straight forward and relatively ubiquitous. Shawmut Woodworking was the general contractor on a construction project at Yale University. It hired Shepard Steel as a sub. Shepard in turn hired Fast Trek Steel as a sub-sub. A couple of Fast Trek employees were hurt (and one died) at the site when steel beams collapsed. Underlying personal injury actions ensued, and those actions did not name Fast Trek as a defendant.

 

Now, Fast Trek was insured by First Mercury. That policy contained a fairly standard additional insured endorsement which read: “Who Is An Insured is amended to include as an additional insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability for ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured.”

 

Fast Trek’s contract with Shepard had said that they would procure insurance and “name Shepard as additional insured” and “also name the Project owner and construction manager as additional insureds”. The agreement also provided that Fast Trek would assume “towards Shepard all obligations and responsibilities that Shepard assumes contractually toward General Contractor” and it incorporated part of the subcontract documents as between Shepard and Shawmut.

 

Notwithstanding these terms, First Mercury disclaimed coverage as to Shepard and Shawmut. They argued that: first, Shawmut was not an additional insured since there was no writing as between Fast Trek and Shawmut; and second, that the policy only covered vicarious liability claims against Shawmut and Shepard and that those were not sufficiently alleged in the state court actions.

 

The Second Circuit rejected both of those arguments. Based upon the clear terms of the policy, which referred to the contract documents (that in turn incorporated the master contract terms), Shawmut was an additional insured. Fast Trek had agreed to add them, as the construction manager, to their policy. Moreover, the fact that Fast Trek’s agreement with Shepard incorporated terms of Shepard’s contract with Shawmut, made clear that the intent of the parties was to add both entities as AIs to Fast Trek’s policy. There was no language in the policy that required a direct contract between Fast Trek and Shawmut.

 

As for the idea that coverage was limited to vicarious liability claims, this did not hold water for the court either. Again, there was no language in the policy to support this argument. If the parties had intended to include this limitation, language would have been readily available to them. Rather, the language of the policy clearly contemplated that additional insureds might also be tortfeasors, notwithstanding the fact that the underlying plaintiffs were employees of the named insured, which indicated that at least some fault might have been had by each. Since the underlying pleadings alleged that Fast Trek had some potential liability, the additional insureds were entitled to coverage.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

08/25/16       Illinois Natl. Ins. Co. v. Schumann

Supreme Court, New York County

Judge Barbara Jaffe

Court Strikes Law Firm’s Answer in Lawsuit Brought by Workers’ Compensation Carrier for Recovery of Lien Amounts Owed

Defendant Robert Schumann was injured in the course of his employment with Illinois National’s non-party insured.  As a result, Illinois National paid to, or on his behalf, almost $190,000 in benefits, thereby obtaining a lien for that amount on any third-party recovery awarded him against anyone responsible for his injuries. 

 

A lawsuit was eventually filed on Mr. Schumann’s behalf by Sacks & Sacks against the owner of the building where the loss occurred.

 

  • By e-mail on September 16, 2013, the insurance adjuster on the file advised Sacks & Sacks of the updated lien amount;
  • By e-mail on September 20, 2013, Sacks asked the adjuster if Illinois National would fully waive the lien;
  • Later that day, the adjuster advised that Illinois National would not waive the lien but could offer a reduction of $65,000 on the condition that Schumann fund his own MSA and satisfied the child support lien.  Of note, the plaintiff’s attorney is entitled to 1/3 of the lien for the cost of recovery.  So, instead of a reduction of the standard 1/3, the adjuster was offering a reduction of $65,000;
  • Sacks then responded that Schumann would pay $25,000 and satisfy one of the two conditions;
  • By e-mail dated January 15, 2014, the adjuster advised that there was no settlement and that Sacks let her know if he was interested in her prior offer, and if not, she would provide a consent to settle with the usual 2/3’s lien reduction;
  • In February 2014, Sacks resolved the underlying action;
  • On February 21, 2014, Sacks sent a check made out to AIG in the amount of $49,245.31 with a cover letter indicating that the check was for full and final settlement of the lien;
  • Upon receipt, the check was cashed; 
  • On March 13, 2014, the adjuster e-mailed Sacks complaining that she was not provided the correct lien amount noting that with the standard reduction she was owed $126,069.02 and demanding the difference; 
  • That same day Sacks responded that the adjuster had offered the reduction in writing and that he had done the MSA;
  • The adjuster responded requesting to see the writing he referenced or remit the balance;
  • Sacks promised to call the following week. 

 

Illinois National eventually brought this lawsuit seeking recovery of the outstanding amount owed.  Sacks moved for summary judgment based on an accord and satisfaction, and Illinois National cross-moved seeking to strike defendants’ answer. 

 

Under New York law, the acceptance of a check in full settlement of a disputed, unliquidated claim, without reservation of rights, discharges a claimed debt.

 

In considering the facts of this case, the court found no genuine dispute arose from the negotiation or from Lee’s rejection of Sacks’ counteroffer.  The court noted that Sacks and Sacks failed to show that a dispute arose when they tendered the check, as the negotiations neither constituted a waiver of Illinois National’s right to the lien, nor did it vest in defendants the right to anything greater than 1/3 of the gross lien.  The court found the e-mails submitted did not evidence the adjuster’s acceptance of $49,245.31.  The court also highlighted the defendants’ failure to produce a letter reflecting such acceptance despite claiming one existed.  The court held that, from its view of the e-mails, “it may solely be inferred that Sacks sought to fabricate a dispute by sending the check.” 

 

Likewise, the court noted that the submission of a check to AIG, without copying the adjuster, and the depositing of same by a low level AIG employee, did not constitute informed acceptance. 

 

The court next considered Illinois National’s cross-motion to strike defendants’ answer.  The cross-motion was based on defendants failed to comply with five court orders directing Sacks to appear for a deposition and to produce any alleged letter of consent relating to the underlying settlement and the lien. 

 

The court struck the answer based on Sacks’ conduct.  It noted that, despite court order, Sacks refused to schedule his deposition.  When Sacks was advised by the court that no more extensions would be given, the deposition was then scheduled for December 18, 2015.  Illinois National’s counsel as a courtesy agreed to Sacks’ request to postpone until after the new year.  On January 8, 2016, Sacks filed this motion for summary judgment.  By compliance order of January 13, 2016, the court lifted the automatic stay caused by the filing of the dispositive motion, and defendants were given until February 16, 2016 to present Sacks for a deposition.  Sacks failed to appear, and never produced the requested documents. 

 

Based on this conduct, the court found that defendants’ attempts to avoid Sacks’ deposition and document discovery inferred that the testimony would not be favorable and the documents promised did not and never did exist.  Thus, the answer was stricken and default entered. 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

09/02/16       Belz v. Peerless Insurance Company

United States District Court, District of Connecticut

Bad Faith Claim Survived Summary Judgment Based on Insurer’s Failure to Consider the Collapse Policy Provision, Based on a Company Policy that Was Contradicted by Connecticut Case Law

The Belzes purchased their home in Vernon, Connecticut in 2001.  In advance of the purchase, the Belzes were made aware of notable cracking in the basement.  Before finalizing the purchase of the home, the Belzes hired an engineer who concluded that the cracks did not threaten the structural integrity of the home.  After completing the purchase, the Belzes began purchasing homeowner's insurance through Peerless, a member of the Liberty Mutual Group, in September 2004.

 

In 2007, the Belzes installed “brightwall” wall panels in their basement to cover the cracks in the walls.  The Belzes claimed that the cracks were no more severe in 2007 than they were in 2001 when the home was initially purchased.  After the brightwall was installed, the cracks were no longer visible.  The cracks continued to be obscured from view until the brightwall was removed in or around April of 2013.  As soon as the Belzes removed the brightwall in 2013, they discovered that the cracking had progressed substantially.

 

On May 9, 2013, the Belzes filed an insurance claim with Peerless with respect to the cracks in the basement walls.  The Peerless policy provided coverage for loss to property involving collapse of a building or part of a building caused by hidden decay.  However, the policy excluded the collapse of a foundation or retaining wall and loss to property caused by faulty, inadequate or defective workmanship or materials used in repair.

 

On May 29, 2013, Peerless denied the Belzes' claim, citing poor workmanship and materials used as its basis for denial.  Shortly after the denial, the Belzes had the cracks inspected by another engineer, who reported that the basement walls were substantially structurally impaired and would need to be replaced to avoid a complete collapse.  He further concluded that the cracking was likely caused by a chemical reaction within the concrete mix itself, which was commonly found in defective concrete supplied by a concrete company named Joseph J. Mottes.  The Belzes had their basement walls replaced in their entirety, and initiated a lawsuit against Peerless.

 

The court rejected all three of Peerless’ arguments in support of its motion for summary judgment on the Belzes breach of contract claim.  First, it concluded that the collapse provision of the policy arguably applied.  The collapse of the basement walls, which were not considered part of the property’s “foundation” or “retaining walls,” could have been caused by hidden decay from chemical reactions in the defective concrete.  Peerless’ timely notice and neglect arguments were also rejected.

 

The court also rejected Peerless’ motion for summary judgment on the Belzes’ bad faith claims.  The Belzes argued that Peerless denied their claim despite knowledge that the cracking damage was caused by hidden decay and may have been covered.  In support of their argument, the Belzes cited multiple lawsuits brought against Peerless and Liberty Mutual Group involving the same type of damage to the same defective concrete.  Importantly, there was also evidence that Peerless’ practice was not to apply the collapse provision to a claimed loss where the impacted structure was still standing, like the Belzes’ walls.  However, this practice was contradicted by long-standing Connecticut case law that a collapse may be found even where a structure is still standing if the structural integrity is compromised.  Thus, the bad faith claim was allowed to go forward.

 

08/29/16       Taylor v. GEICO Indemnity Company

United States Court of Appeals, Eleventh Circuit

Bad Faith Verdict Upheld against Insurer where a $900,000.00 Verdict was Taken against its Insured Following Carrier’s Refusal to Pay an Additional $1,436.20 to Settle

While Taylor was insured by Geico, he injured Donnerstag in an automobile accident.  Taylor turned his automobile left across Donnerstag's lane of traffic, which caused Donnerstag to collide with Taylor's vehicle and to be thrown from his motorcycle.  Geico determined that Taylor was predominantly at fault and that Donnerstag's bodily injuries far exceeded Taylor's coverage limit of $10,000, but Geico failed to disclose that information to Taylor.

 

Geico contacted Donnerstag's insurer, Allstate, and learned that it was indemnifying Donnerstag for the total loss of his motorcycle, which was appraised at $5,563.80.  Geico did not request a copy of the appraisal or permission to inspect the motorcycle.  Geico verified with Allstate that Donnerstag was disputing the appraisal of his motorcycle.  On June 15, 2009, a regional claims manager for Geico made an entry in Taylor's file questioning if Donnerstag's demand for property damage created a concern.  Geico also called the hospital where Donnerstag was treated and learned that his medical bills totaled $140,981.78.

 

Geico later mailed Donnerstag a package containing a release form, a check made payable to Donnerstag and the hospital in the amount of the $10,000.00 cap on Taylor's coverage for bodily injury, and another check made payable to Donnerstag for $241.00 to indemnify him for his lost  clothing and helmet.  Geico provided a copy of those materials to Taylor.  On June 29, 2009, the regional manager for Geico made a second entry in Taylor's file expressing concern that Donnerstag had not accepted the check for bodily injury and that he might intend to “tie” his demands for property damage and bodily injury.

 

Subsequently, Geico received a letter from Donnerstag stating that he would settle the case for the $10,000 limits and an additional $2,000 for the motorcycle.  In response, Geico again sent Donnerstag checks for $10,000.00 and $241.00, plus a check for $500.00 to cover the deductible paid to Allstate for the motorcycle.  In response, Donnerstag advised Geico that he would finish the settlement if they sent an additional $1,436.20 to pay for the motorcycle.  Geico refused and Donnerstag rejected Geico’s offer and sent back the checks.

 

Thereafter, Donnerstag’s attorney sent Geico a letter, and Geico informed Taylor of the impending lawsuit.  Geico advised Taylor that Donnerstag refused to settle because they sought an additional $1,436.20 for his motorcycle.  Donnerstag sued Taylor and a jury returned a verdict of $900,000.00.

 

Taylor filed a lawsuit against Geico claiming that it acted in bad faith.  At trial, Taylor presented testimony from Donnerstag, an expert witness, and Geico employees.  The jury found that Geico had acted in bad faith.

 

Gieco made a motion for judgment as a matter of law, but the Eleventh Circuit held that there was sufficient evidence for the jury to find that Geico acted in bad faith.  The court rejected Geico’s argument that it had acted in good faith by tendering checks to Donnerstag and that he was not willing to settle because Donnerstag unambiguously stated that he wanted to settle in his letters to Geico.  Geico also never sought permission to inspect the motorcycle and declined to inquire how Donnerstag wanted to structure a settlement.

 

The Eleventh Circuit also held that Geico’s failure to pay Donnerstag $1,436.20 for his motorcycle caused Taylor to incur a judgment of $900,000.00 for Donnerstag’s injuries.  Donnerstag’s letters and testimony established that he would have accepted $10,000 for his bodily injuries if Geico paid him the amount requested for his motorcycle.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

08/29/16       Zurich American Insurance Co. v. Wausau Business Ins. Co.

United States District Court, Southern District of New York

Installation Ambiguity and a Better Late than Never Exclusion

This case involves a coverage dispute between two insurers regarding an obligation to defend and indemnify certain defendants in an underlying personal injury action.  The purported insured parties were the owner and manager of a shopping center respectively, and the underlying accident involved a slip and fall on or near ongoing construction at the shopping center.  Both the owner and the manager qualified as additional insureds under a policy issued by Plaintiff Zurich American Insurance to the general contractor.  At issue was whether these parties also qualified as additional insureds under the policy issued by Defendant Wausau Business Insurance Company to a subcontractor on the project.

 

In resolving the parties’ cross-motions for summary judgment, the district court first considered an endorsement entitled “Expanded Blanket Additional Insured and Waiver of Subrogation (For Installation Exposures).” It added as additional insureds “any person or organization to whom [the policyholder] is obligated by a written agreement to procure additional insured coverage,” so long as the event giving rise to liability occurred subsequent to the execution of the written agreement and the written agreement is in effect at the time that the event.

 

The district court agreed with Zurich that this provision was ambiguous because “[t]he term ‘Installation Exposures’ is defined nowhere in the policy, nor is there any evidence that it is a term of art in the industry. Without the guidance of industry customs or practices or an internal definition, the phrase is susceptible to more than one meaning. It could, for instance, refer to alleged injuries arising from exposure to materials present during installation, like asbestos . . . [o]r it could refer more generally to exposures to liability arising from installation operations.” (internal citations omitted). The district court noted that the lack of definition in the policy did not alone create an ambiguity, but rather, “the problem is that the phrase remains susceptible to multiple interpretations even by a reasonable person who is aware of industry customs, practices, uses, and terminology.” In the absence of any extrinsic evidence to resolve the ambiguity, the district court resolved the ambiguity by construing it against the drafter – in this case, Wausau.

 

The district court nonetheless found that Wausau had properly disclaimed to Zurich under an exclusion provision stating that the insurance did not apply to “any construction, renovation, demolition or installation operations performed by or on behalf of you, or those operating on your behalf.”  Although Wausau raised this exclusion for the first time in its answer to Zurich’s complaint, the court rejected Zurich’s argument that Wausau’s disclaimer was untimely under New York Insurance Law § 3420(d).  The district court found that New York law recognized that this statutory provision did not apply to claims between insurers, whether those claims are for contribution or for full indemnity.  Summary judgment was therefore granted to Wausau.

 

09/02/16       Calhoun v. The Providence Mutual Fire Insurance Company

United States District Court, District of Connecticut

Insurer’s Duty of Care during an Inspection

This case arose out of an insureds’ claim to Providence Mutual under a homeowner’s policy relating to a boiler on the insured premises.  Providence Mutual sent an independent adjuster to investigate the claim, and the adjuster’s report to the insurance company indicated that there was evidence of water intrusion into the basement for an extended period of time, including “visible mold on some wall surfaces.”  Neither the adjuster nor the insurer informed the insureds of the presence of the mold.  Providence Mutual denied the claim because the mold was not caused by a “Peril Insured Against” as required by the relevant policy, and because the insureds failed to take reasonable measures to protect the property from further damage at the time of the underlying loss.

 

The insureds subsequently commenced the instant action for breach of the policy; bad faith for failing to inform the insureds of the presence of the mold; and negligence based on this failure to report, which allegedly resulted in the insureds’ exposure to mold and their suffering of respiratory illnesses.

 

In considering Providence Mutual’s motion for summary judgment, the district court readily disposed of the breach of contract claims based on the plain language of the policy, which provided limited coverage where water or moisture caused a covered loss.  A Limited Fungi Endorsement made clear that Providence Mutual would provide coverage “only if (a) both the cause of the damage and the resulting damage are unknown to all ‘insureds,’ and (b) the seepage, leakage, condensation and/or damage is ‘hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure.’ ”  Because there was no dispute that the resulting mold damage was visible, the loss was not covered under the policy.  Further, because there was no breach, the insureds’ bad faith claim failed as well.

 

The district court then considered whether, in support of the negligence claim, there was any duty on the part of the insurer, beyond the scope of the homeowner’s insurance coverage, to inform the insured when it discovered the presence of mold in a covered property.  The court noted that, under Connecticut state law, the existence of a duty depended on two considerations: first, whether an ordinary person in the defendant's position, knowing what the defendant knew or should have known, would anticipate that harm of the general nature of that suffered was likely to result.  Second, whether public policy supported imposing responsibility for the alleged negligent conduct in light of the particular consequences or particular plaintiff in the case.

 

The district court concluded that neither factor supported the imposition of negligence liability here.  With respect to the reasonable anticipation of harm, the court noted that “it is not clear why [the insurance adjuster] should foresee the specific health issues that resulted for the [insureds], serious respiratory illness, particularly when this risk was visible” and the adjuster “was not retained to examine mold or the attendant risks that might arise from the presence of mold.” Further, “Providence Mutual's agreed-upon role in relation to the [insureds] was to investigate and determine applicable insurance coverage in connection with their home.”

 

The district court further found that public policy did not support imposing a new duty in these circumstances, noting that other state jurisdictions have already declined to do so.  Although the court recognized the seriousness of the safety concern at issue, it concluded that “imposing a legal duty in this context would affect the relationships between insurers and their agents in investigating insurance-related claims by increasing potential liability for insurers, whenever insurance-related investigations disclose problems outside the scope of the underlying claim. Similarly, the imposition of a duty in this circumstance would also undermine public policy goals of avoiding increased litigation.” Providence Mutual’s motion for summary judgment was therefore granted.

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

Warming up.  Nothing yet.

 

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

 

02/11/16       Selective Insurance Co. v. County of Rensselaer

New York Court of Appeals

Class Action Requires Separate Deductibles Per Claim

The County had a practice of strip-searching all people placed in the county jail regardless of the charge, which the federal courts suggested was unconstitutional when the alleged crime was only a misdemeanor, and there was no reasonable suspicion that the arrested person was concealing weapons or contraband.  A class action was brought against the County in federal court consisting of people arrested in Rensselaer County and charged with misdemeanors from 1999-2002.  The County in turn sought a defense from Selective Insurance which provided policies covering personal injuries arising from law enforcement activities.  The policies issued between 1999 and 2001 had a $10,000/claim deductible, and the 2002 policy had a $15,000 deductible per claim.  Selective agreed to defend the County subject to the policy limits and the deductible. 

 

There was ultimately a settlement of the class action consisting of about 800 people with an approved payment of $5,000.00 to the lead plaintiff, and $1,000.00 to other class members, and a payment of attorneys’ fees of $442,700.00.  The issue arose when the County refused to pay more than a single deductible.

 

Selective brought an action in New York State Supreme Court asserting that each class member/settlement was subject to a separate deductible.  The County opposed that argument, asserted that the $10,000.00 deductible was the only amount due, and also claimed that the legal fees should be allocated to only one policy.  The Trial Court ruled that a separate deductible payment applied to each class member, but agreed with the County that the legal fees should be allocated to only one policy.  This decision was affirmed by an intermediate appellate court, and then affirmed by the New York Court of Appeals.

 

The Court of Appeals disagreed with the County that the deductible should apply only once, but did agree with the County that the legal fees should be allocated to the one policy covering the lead plaintiff.  Under the policy language, the improper strip- searches constituted separate “occurrences”, and each separate occurrence was subject to its own deductible.

 

With respect to the attorneys’ fees, Selective asserted that, because the injuries to the class members did not constitute one occurrence, the attorneys’ fees likewise should be allocated among the various “occurrences”.  However, the County alleged that the fees should be attributable only to the lead plaintiff because there was only one set of lawyers for all class members.  Significantly, because the policies were supposedly silent as to how fees should be allocated in class actions, the Court of Appeals interpreted the ambiguity in favor of the insured and ruled that the fees should be charged only to the policy covering the lead plaintiff (and hence subject only to that deductible).

 

This case represents an interesting application of typical insurance language in a more complicated class action environment.  Ultimately, each alleged act was held to constitute its own “occurrence” and hence carried its own deductible.  Therefore, each alleged occurrence between 1999-2002 was subject to the per claim deductible of $10,000.00 or $15,000.00, which effectively meant that Selective paid none of the actual settlement.

 

The County was able to prevail with respect to the allocation of attorneys’ fees because the policy was largely silent on apportioning fees among multiple class action plaintiffs, and the traditional argument of construing ambiguity in a policy in favor of the insured helped the County win that argument.

 

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