Volume XX, No. 13 (No. 523)
Friday, December 14, 2018
A Biweekly Electronic Newsletter
As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
For those who celebrated Chanukah, we hope you had a joyous and “enlightened one” and for the many who are still chasing down last minute Christmas gifts, we do not have any policy that precludes accepting those extra ones you happen upon in your travels. Seriously, we hope you are enjoying this wonderful holiday season and that your families enjoy great health and happiness throughout the coming months and years.
The H&F team is doing its thing, with travel throughout the state and nation a significant part of our practice. We remind you that we can assist you throughout New York State, New Jersey and now Connecticut, with the addition of Lee Siegel to our coverage team. In addition, through organizational involvement and our national practice, we can put you in touch with lawyers throughout the United States and Canada to assist you with any kind of legal issue you may confront.
Lee Siegel joins our firm as a litigator in our Insurance Coverage Group. Lee brings 25 years of insurance coverage, bad faith, class action, and defense litigation experience to Hurwitz & Fine. Admitted in New York and Connecticut, Lee represents carriers in complex coverage and bad faith matters across the country. Lee joins us from The Hartford where he was Assistant Vice President in the Law Department. Lee provided real time coverage advice and litigation management to all property and casualty lines of business. Previously, Lee oversaw coverage and bad faith litigation for Hartford Financial Products, The Hartford’s management and professional liability group. There, Lee was renowned for his ability to manage large tower, multi-carrier D&O litigations, and was recognized as an expert in fidelity, computer and social engineering fraud, and cyber coverage.
Lee began his career at one of Manhattan’s top medical malpractice firms, defending doctors and hospitals across New York City. Then, after getting bit by the coverage bug, Lee joined a national firm where he represented carriers in coverage and bad faith litigation nation-wide. Lee double majored in history and political science at Indiana University and graduated from Hofstra University School of Law where he was Research Editor of the Law Review. Lee is an avid volleyball player, amateur photographer, and the seven-time champion of his fantasy football league—Lee will happily give clients free fantasy football advice. Now that he’s hung up his coaching whistle, most weekends you’ll find Lee hiking with his trusty trail companion, Mocha, his 8-year-old rescue who still thinks she’s a puppy. Lee lives in Connecticut with his teenagers, Seth and Rachel.
This week’s issue has the usual eclectic cases. Particularly interesting is a Second Circuit case in Agnes’ column upholding an “any contractor” exclusion, a most popular endorsement finding itself included in more and more contractor’s policies. There also a Ninth Circuit case discussing additional insured coverage in Brian Mark’s column and a Southern District case on AI coverage and defense costs in Larry Water’s offering. I must admit that I am a fan of additional insured opinions.
In my column, you’ll find a discussion of vehicle ownership and the right to conduct discovery of an insurer’s file to help determine who owns a car. There’s also an decision involving an insurer that could not open a default judgment against it, because of a history of recalcitrant conduct.
One Hundred Years Ago – Brakes and Headlights May Make Cars Safer? Who Would have “Thunk”?
Democrat and Chronicle
Rochester, New York
14 Dec 1918
FOR SAFETY IN MOTORING
Council Is Considering Questions of Brakes and Headlights
Ways and means of causing motorists to keep their brakes is first-class condition and their headlights in conformity with the law are being considered by a committee of the Rochester Safety Council. A. A. Ruttan, of the Bausch & Lomb Optical Company, its chairman, reported at the meeting of the Executive Committee of the council yesterday that the matter is now under investigation, but that the committee is not ready yet to report.
Paris Honors our President – a Century Ago:
New-York Tribune
New York, New York
14 Dec. 1918
President Is Made
“A Citizen of Paris”
PARIS, Dec. 13.—By a unanimous vote the Municipal Council of Paris to-day decided to confer upon President Wilson the title of a citizen of Paris.
When President Wilson is receiving the Grand Gold Medal of the City of Paris to Mrs. Wilson will be presented a gold brooch set in diamonds, with dove in bas-relief bearing an olive branch.
Election Fraud – Not a New Problem:
Middletown Times-Press
Middletown, New York
14 Dec 1918
More Arrests in Election
Case At Newburgh
(By Telephone to the Times-Press)
Newburgh, Dec. 14—More arrests have been made here on charges concerning the violation of law pertaining to election. Edward Lockwood was placed under arrest again Friday afternoon, on the charge of vote buying. John Lockskin was also charged with a similar crime.
Matthew D. Hill, Edward Gotto, Ernest Partrick, Thomas Lockskin, members of the Board of Election in the First District of the Fifth Ward, have been arrested charged with a violation of the statute in reference to secrecy in voting, it being alleged that they permitted an unauthorized person to enter the election booth. The charge grows out of the Deisseroth case. Two new affidavits were filed in the case of John Deisseroth and he was notified to appear again.
Hewitt’s Highlights:
Dear Subscribers:
Last edition our cover notes did not accompany the article due to technical difficulties, but I hope you had a wonderful Thanksgiving. We went to my mother-in-law’s house. She’s moving to Georgia so it was the last Thanksgiving at my wife’s childhood home, which obviously was emotional for her. In the meantime, we are busy decorating and getting ready for the holiday season. The weather has grown cold down on Long Island, but the lights and decorations bring some cheer. Our Melville office is also looking forward to the Christmas Party in Buffalo this week. There are a few decisions this week dealing with plaintiff’s unexplained cessation of treatment; that two weeks missed work does not qualify for the 90/180-day category; and that 5% limitation in one plane of range of motion is not enough to be a serious injury.
Hope everyone who celebrated had a Happy Hanukkah and hope those that celebrate Christmas have a Merry Christmas. See you next edition.
Until next time,
Rob
Robert Hewitt
Why am I Skeptical?
Vancouver Daily World
Vancouver, British Columbia
14 Dec 1918
YOUNG WIDOW WORTH $500,000 wishes to hear from honorable gentleman, object matrimony. Address P. O. Box 1912, Jacksonville, Fla.
Editor’s note: $500,000 in 1918 is worth $8,997,226.28 is 2018 dollars. So, would a young woman with a $9 million nest egg advertise for a husband in the personals? Well, maybe …
Overpaid Federal Judiciary?
The Houston Post
Houston, Texas
14 Dec 1918
Salary Increase Granted
U.S. Judges
Associated Press Report.
WASHINGTON, Dec. 13.—By a vote of 193 to 79 the house tonight passed a bill providing salary increases of $1500 a year for each of 131 judges of the United States district and circuit courts and the court of claims. The measure now goes to the senate. District and court of claims judges would receive $7500 a year and circuit judges $8500.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
When we last went to press, many of our colleagues were attending DRI Insurance Coverage and Practice Symposium in New York, and the rest of us are holding down the fort and looking ahead to other coverage conferences down the road. To that end, registration is now open for the ABA TIPS’s Insurance Coverage Litigation Midyear Conference in Arizona in February. Not only will this conference feature a beautiful (read: warm!) venue at the Biltmore Resort, but will be host to a wide array of panel discussions and the very informative and engaging toolbox lunch sessions. These are distilled, targeted small group meetings (usually around 10 or so) on hot-button and interesting coverage issues of the day. As always, please let us know if you have any interest or questions, and we would be happy to assist, even if you are not an ABA member. There may be sponsorship opportunities.
Now, in the federal coverage realm, the Second Circuit recently dove back into the field and issued a case of interest to us insurance folks. In American Empire Surplus v. Colony Insurance, the court addressed the interpretation of a contractor exclusion. There, the provision provided coverage for any bodily injury that was caused by an occurrence arising out of the operations performed by the contractor, but precluded coverage for injuries sustained by any contractor. The contractor named in the policy was Technico, and it was their employees who were injured on site. The court found that just because Technico was defined as “the contractor”, the broader language precluding coverage for injuries sustained by any contractor barred recovery under the policy. Had the carrier wanted to provide coverage for that particular contractor, they could have carved it out. Since they did not, there was no coverage.
Very happy holidays to all! We’ll see you after a short recess.
Until next time!
Agnes
Agnes A. Wilewicz
Amazing that a War’s Ending Leads to Medical Improvement:
New-York Tribune
New York, New York
14 Dec 1918
Shell Shock Cured
by Armistice News
WASHINGTON, Dec. 13.—More than 2,000 American soldiers in France, suffering shell-shock, were cured by news of the signing of the armistice, Surgeon General Ireland to-day told the Senate Military Committee. Of 2,500 shell-shock patients, the general said, all except about 300 were well almost immediately. “it was the greatest experience in psychotherapeutics known,” the committee was told.
Editor’s Note: Wonder what it does for bone spurs?
Barnas on Bad Faith:
Hello again:
This is a great time to be a fan of the NCAA revenue sports in Upstate New York. The Buffalo Bulls finished off the football season 10-3, and will be heading to Mobile, Alabama, to take on Troy in the Dollar General Bowl on December 22. Syracuse went 9-3 and earned an invite to the Camping World Bowl in Orlando against old Big East rival West Virginia on December 28. In women’s basketball, the UB women are 6-2 coming off of their appearance in the Sweet 16 last year, and the Syracuse women are 8-2 and sport the number 15 ranking in the country. Then there’s men’s basketball. The UB men are 9-0 to start the season and are the number 14 ranked team in the nation, easily the highest ranking in school history. Syracuse, who was ranked to start the year, is back in the poll at number 25 after a thrilling win against old rival Georgetown.
The UB and Syracuse men’s basketball teams will meet at the Carrier Dome next Tuesday. Anyone who reads this note regularly probably can surmise that this presents somewhat of a conflict for me. I grew up a diehard Syracuse basketball fan in Buffalo. One of the best sports memories of my life was watching them win the 2003 national championship. When I got older I couldn’t afford to go to school there, but I could afford to buy basketball and football season tickets and make the drive down the 90 to the Carrier Dome on game days. However, I am also a proud undergrad and law school graduate of the University at Buffalo. Having grown up here, it’s almost unfathomable that our basketball team is ranked number 14 in the nation ahead of giants like Villanova and Kentucky.
I haven’t decided what I’m going to wear to the game yet. Syracuse might need the win more than UB, who should have a clear path into March Madness through the MAC Conference Tournament. I’m not sure I can actually go to the Carrier Dome wearing something other than Syracuse colors, but we’ll see what happens. Either way, it will be cool to watch my two favorite basketball teams take on each other while sporting numbers next to their names (assuming they don’t get tripped up on Saturday).
My sports dilemmas aside, I’d like to extend a warm welcome to Lee Siegel who I’ve just had the pleasure of meeting for the first time. I’m looking forward to seeing the new dimension that he will bring to our coverage team and getting the chance to work with him moving forward.
Have a nice weekend.
Signing off,
Brian
Brian D. Barnas
Kids a Plenty, but Not Hers:
Buffalo Courier
Buffalo, New York
14 Dec 1918
FIRST WIFE’S NINE CHILDREN
TOO MUCH FOR SUCCESSOR
Justice Sears in equity term of Supreme Court yesterday granted Martha L. Oleszewski a separation from Leon Oleszewski on the ground of cruel treatment. She was also awarded $10 a week alimony.
The defendant had nine children by a former wife when he married the second time. After trying for a couple of years to govern the children of another woman, the plaintiff gave it up as a bad job and sued for a separation.
Off the Mark:
Dear Readers,
The recent family vacation to Universal Studios went well. It was expensive, but was well worth it as the kids really had a good time. The wife and kids had every kind of butterbeer available. They seemed to like the butterbeer ice cream the best. Me, I preferred a Duff’s beer from Moe’s in the Simpsons’ section. The firm’s holiday party is this week, and I’m looking forward to catching up with my cohorts. Although I’m not a fan of flying up to Buffalo in winter, the weather does not look bad.
The construction defect front continues to remains quiet. This edition of “Off the Mark” discusses a recent construction defect case from the US Court of Appeals for the Ninth Circuit. In Probuilders Specialty Ins. Co. v. Phoenix Contr., Inc., the Court affirmed the district court’s finding that the insurer had no duty to defend or indemnify its insured in an underlying construction defects action due to the insured’s failure to comply with the Contractors Special Conditions endorsement. The endorsement at issue required the insured to obtain indemnity agreements and insurance certificates from any independent contractors performing work.
Happy Holidays to all!
Until next time …
Brian
Brian F. Mark
[email protected]
Advances in Telephone and Telegraph Technology:
New York Herald
New York, New York
14 Dec 1918
MULTIPLEX DEVICE
NEW PHONE WONDER
Called by Engineers Biggest
Invention Since the
Discovery of Telephony.
IS IN COMMERCIAL USE
Mr. Vail Gives Credit to Many
Technical Men for
Developing the Apparatus.
Much interest was aroused in electrical circles by the announcement from Washington published in THE SUN yesterday morning concerning the new multiplex telephone and telegraph device, which is called by Bell engineers the greatest invention in telephony since the original discovery. It was learned that he apparatus has been in fully successful operation on circuits between Baltimore and Pittsburg for two months. The device makes it possible at one and the same time to carry on five different conversations—two one way, three the other, but not all in the same direction—over the pair of wires of a single telephone circuit.
As to telegraphy, it makes such a circuit available for forty simultaneous telegraph messages. If desired, the circuit can be made to carry simultaneously part dots and dashes and part spoken words. The new principle, according to Bancroft Gherardi, acting chief engineer, is difficult to explain to the public, but the new instruments produce what science calls carrier waves of different frequency, so that each voice is perfectly distinct t to the ear at the proper one of the several receivers.
Wandering Waters
Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.
In NBA news, Jimmy Butler is proving his worth as he continues to produce in the clutch moments for the Sixers. Prior to Butler, the Sixers struggled to win close games. Now, the Sixers are winning every close game. Not only is Butler hitting the game-winning shot, but he is also playing stellar defense in the final seconds to secure the victory. However, Jimmy Butler is injured and projected to miss a few games. It will be interesting to see whether Butler’s clutch play has rubbed off on any of the younger players.
This week we have one case from the United States District Court, Southern District of New York.
Until next time….
Larry
Larry E. Waters
A Teacher Only Deserved So Much, 100 Years Ago:
Democrat and Chronicle
Rochester, New York
14 Dec 1918
JUDGE SETS VERDICT ASIDE
And Suit of Teacher for Half
Year’s Pay Is Dismissed.
City Judge Delbert C. Hebbard yesterday handed down a decision setting aside the verdict of a jury granting the sum of $376.13 to Anna Curran against the Board of Education and dismissed the complaint. Miss Currant was a school teacher who sued the Board of Education for a half year’s pay claiming that she was hired for a whole year and received only half of what she was entitled to.
At the trial Deputy Corporation Counsel Charles I. Pierce, representing the board, made a motion for nonsuit claiming that the city of Rochester should have been sued and not the Board of Education, because the city pays the teachers. Judge Hebbard reserved decision and allowed the case to go to the jury which brought in a verdict in favor of the school teacher.
Phillip Donnelly, who represented Miss Curran, sailed for France last night to do welfare work for the Knights of Columbus.
Boron’s Benchmarks:
Dear Subscribers:
I hope you are all well. I am, and should be, after carving out five days of blissful vacation in mid-November with my wife, for a trip for two to Virginia Beach. Four weeks ago, the two of us were in Norfolk harbor touring the de-commissioned USS Wisconsin battleship. According to Wikipedia, and as we learned on our tour, during her career Wisconsin (the crew affectionately referred to the ship as “Wisky”) served in the Pacific Theater of World War II, where she shelled Japanese fortifications and screened U.S. aircraft carriers as they conducted air raids on enemy positions. During the Korean War, Wisconsin shelled North Korean targets in support of U.S. and South Korean ground operations. After the Korean conflict ended, she was decommissioned for a time. However, she was reactivated on 1 August 1986; after a modernization and retrofitting program, she participated in Operation Desert Storm in January and February 1991. I found touring Wisconsin last month to be an amazing experience, and recommend you consider doing the tour if you are ever in that part of the country.
The only state Supreme Court to issue a decision in the past two weeks on insurance coverage issues was the Supreme Court of North Dakota. Through its unanimous decision in Dahms v Nodak Mutual Insurance Company, written by the ageless Chief Justice VandeWalle, the longest-serving incumbent Chief Justice in the United States, the North Dakota Supreme Court affirmed the District Court’s grant of summary judgment to the insurer, dismissing the insureds’ action seeking to obtain additional insurance payments after a fire loss. I hope your read of the Dahms case, which in pertinent part grappled with the issue of whether Coverage A or Coverage B of a homeowners policy provided coverage for a residential garage fire loss, may be helpful in the work you do.
In any event, be well friends, and enjoy the holiday season.
Regards,
Eric
Eric T. Boron
Record Wrongful Death Verdict in Buffalo:
Buffalo Morning Express and
Illustrated Buffalo Express
Buffalo, New York
14 Dec 1918
WOMAN GETS BIG VERDICT
Mrs. Helen Buschalewski recovers
heavy damages for death of husband.
The largest verdict awarded by a Supreme Court jury at the present term was reported yesterday afternoon to Justice Wheeler in the case of Mrs. Helene Buschalewski against the New York Central Railroad company, Mrs. Buschalewski, who sued to recover damages for the death of her husband, Brownislaus, was awarded $10,000, and her infant daughter, Irene, who was two months old at the time of her father’s death, was given an additional $2,500.
Buschalewski was killed in the Central’s Gardenville yards last February 18th in an accident caused by a derailment. The railway company claimed he brought the accident upon himself, but Justice Wheeler strictly applied the safety appliance act and, on motion of the plaintiff’s attorney, Hamilton Ward, charged the jury that the only question upon which it had to pass was the question of damages.
The jury thereupon apportioned the loss to the widow and child as $10,000 and $2,500.
Jerry’s No-Fault Navigation
Dear Subscribers,
This week’s edition brings forth two cases that deal with the basics in paperwork – filling it out correctly and making sure you send it on time. When it comes to no-fault paperwork, it’s no different than renewing your license. If you fail to do either one right, you fail to establish the basics of your claim or defense. When it comes to motorcycle accidents, there is a limited exception allowing no-fault benefits for class C motorcycles. But, to take advantage of the exception, the medical provider must note it in the NF-2 claim form.
Likewise, late arbitration submissions always face the high standard for reversal on appeal. While a door may be opened for an insurance carrier’s late submission based on a lack of coverage defense, the Courts will look closely at the proof and strength of such a defense in its decision. For more details, please see the attached case notes.
To you and your families, Happy Holidays!
Jerry
Jerry Marti
Post-War Insurance Advice
The Butte Miner
Butte, Montana
14 Dec 1918
U.S. INSURANCE
BOTHERING MEN
Discharged Soldiers Must Forward
Premium to Washington; Does Not
Cease After Five Years, Changes Form
Some misunderstanding as to the government war risk insurance seems to have arisen among discharged soldiers who have returned to Butte. Government officials and others in touch with the army insurance are emphatic in their advice to discharged soldiers to retain this insurance and await developments.
Premiums on the war risk insurance should lie paid within 31 days after the day they are due, otherwise the insurance will lapse, but maybe renewed under directions which will be Issued from the bureau of war risk insurance at Washington, D.C. Every man upon his discharge should have been given a form showing the date to which his insurance is paid. He should forward his premium to Washington within 31 days after that date.
Insurance may be reduced down to $1,000 in drops of $500. The majority of the men in service took out the full $10,000, for which the premium ranges from $5 to a little above $7 a month, according to age.
It’s Tough to be THAT Good Looking:
The Buffalo Times
Buffalo, New York
14 Dec 1918
‘COUNT’ BEWAILS
HIS GOOD LOOKS
“Czaki Bela,” Sued by Widow for
Grand Larceny, Tells of Her “Infatuation.”
NEW YORK, Dec. 14.—“Count Czaki Bela” declared yesterday that Mrs. Anna Gruich, a comely young Newark widow who has brought charges of grand larceny against him, was infatuated with him because of his good looks. He said:
“Mrs. Bruich knew I was a married man. When I threatened to leave her she insisted I remain and she would start me in business in Newark. I never married her, and never got any money from her except in presents, which sometimes amounted to as much as $200 in one week.”
Mrs. Gruich charges the “Count,” whose real name is Louis A. Alberthy, tricked her out of $24,000 after humiliating her by going through a fake marriage in Philadelphia. She testified at the trial before Judge Mulquen in general sessions:
“I fell an easy victim to his proposal for a secret marriage because of his affability and romantic lovemaking. He first called at my home after the papers published accounts of my collecting large damages because of the death of my first husband in an automobile accident.
The Evening World
New York, New York
14 Dec 1918
SCOTT-BAKER ENGAGEMENT
JUST ‘FOR TERM OF THE WAR’
Aunt Explains Broken Troth of
Society Girl-Nurse and
Former Princeton Star.
The broken engagement of Miss Mimi Scott, the New York society girl serving as a nurse in an American Base Hospital in France, and Capt. “Hobey” Baker, Princeton athletic star and one of the “Aces” of the aviation service, serves to bring to light the “engagement for the term of the war” which loses its romance with the coming of peace, according to her aunt, Miss Scott of No. 28 West 57th Street.
Announcement that the engagement has been broken came to the family in a cablegram from France a little more than two weeks ago. Miss Scott’s comment was the first discussion of the case by the Scott family.
“The friendship between the families is not affected by the breaking of the engagement,” Miss Scott said. “It is just one of those engagements between a young man and a young woman serving their country abroad, that come to an end with the end of the war.
“With the excitement of war service gone, they find they are not congenial, so the engagement is broken and they remain friends. We admire Capt. Baker greatly.”
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
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
[email protected]
Michael F. Perley
Jennifer A. Ehman
Agnieszka A. Wilewicz
Lee S. Siegel
Edward B. Flink
Brian D. Barnas
Brian F. Mark
Eric T. Boron
John R. Ewell
Larry E. Waters
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Edward B. Flink
Eric T. Boron
Brian D. Barnas
James L. Maswick
NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
[email protected]
Jerry Marti
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Diane F. Bosse
Topical Index
Hewitt’s Highlights on Serious Injury
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Jerry’s No-Fault Navigation
John’s Jersey Journal
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
12/12/18 Portillo v. Carlson
Appellate Division, Second Department
Someone Other than Title Owner Can Own a Vehicle; Insurance Company Records May Contain Useful Information
Portillo was injured on October 25, 2007, when he was struck by a motor vehicle while riding his bicycle. Thereafter, the plaintiff commenced this action against the defendant, alleging that Carlson owned and controlled the vehicle. Carlson denied this allegation in his answer. During their depositions, Carlson and his wife, Diane, each testified that Diane was operating the subject vehicle at the time of the accident, the title and registration to the vehicle were in Diane's name, and they had one insurance policy together covering all of the family's vehicles, including the subject vehicle.
The plaintiff subsequently served a notice for discovery and inspection on Carlson, seeing an executed authorization for all documentation in the possession of the subject vehicle's insurer relating to that vehicle and the accident. Thereafter, the plaintiff moved to compel the defendant to produce the requested authorization.
A certificate of title is prima facie evidence of ownership. However, this presumption may be rebutted by evidence demonstrating that another individual owns the subject vehicle. This may include evidence that a person other than the title holder exercised "dominion and control" over the vehicle.
Here, documents from the insurer concerning the vehicle and the accident are material and relevant to the issue of whether the defendant exercised dominion and control over the vehicle. Accordingly, the Supreme Court should have granted the plaintiff's motion to compel the defendant to provide an executed authorization for documents in the insurer's possession concerning the vehicle and the accident.
12/12/18 Country-Wide Insurance Company v. Park
Appellate Division, Second Department
Evidence Supported Claim that Injuries Occurred by Operation of Stolen Vehicle so Application to Stay Uninsured Motorist Arbitration Properly Denied. Key to Vehicle was Shielded by Tinted Windows
Park allegedly was injured when he was struck by a vehicle while attempting to prevent an unknown individual from stealing that vehicle. The insurer of the vehicle, Allstate Insurance Company, disclaimed coverage on the basis that the vehicle had been stolen at the time the vehicle struck Park. Park filed for uninsured motorist coverage with Allstate and Allstate moved to permanently stay arbitration of Park's uninsured motorist claim.
At a hearing, Park testified that he had been driving the vehicle and then parked it, removed the key from the ignition, and left the key on the driver's seat while he went into a store for one or two minutes. When he exited the store and discovered someone attempting to steal the vehicle, he stood in front of the vehicle in an attempt to prevent it from being stolen, and was struck by the vehicle. Park testified that the windows of the vehicle were tinted, and were up, so that a person standing outside the vehicle could not see inside. The Supreme Court found that the vehicle was in "a state of theft" when it struck Park and denied the petition and dismissed the proceeding.
Vehicle and Traffic Law § 388 creates a rebuttable presumption that the operator of a vehicle operates it with the owner's permission, which can be rebutted by substantial evidence that the owner did not give the operator consent to operate the vehicle. Evidence that a vehicle was stolen at the time of the accident will rebut the presumption of permissive use.
Here, the Supreme Court's resolution of the issue of Park's credibility is supported by the record and will not be disturbed on appeal. Park's testimony established that the key was not in the ignition of the vehicle and was sufficiently hidden from sight.
12/05/18 Hendeles v. Preferred Contractors Insurance Company RRG
Appellate Division, Second Department
Proof Insufficient to Allow Entry of a Default Judgment, Seeking a Determination of Unfair Claims Settlement Practices under Montana Law
This is an action under a Montana statute for damages alleged caused by unfair insurance claim settlement practices. An application was made to take a default judgment against Preferred Contractors (“PCIC”), which the lower court had denied.
On February 16, 2014, the plaintiff Hendeles was injured when she slipped and fell on ice on the sidewalk in front of a building in Brooklyn. At the time, the subject premises were undergoing conversion into condominium units. Greenfield was the general contractor, and the defendant PCIC, a risk retention group chartered in Montana and registered with the New York State Insurance Department, was Greenfield's insurer.
The plaintiff commenced an action against Greenfield in Kings County, and her counsel provided PCIC's claims adjuster with notice of the action on or about May 10, 2014. In September 2014, PCIC disclaimed coverage and refused to defend Greenfield. Thereafter, on April 4, 2016, the plaintiff obtained a default judgment against Greenfield in the principal sum of $2,000,000.
Plaintiff then commenced this action against PCIC pursuant to the Montana statute, alleging that PCIC's denial of coverage violated the Montana statute which prohibits certain unfair claim settlement practices. After process was served upon PCIC by means of service upon the Superintendent of the Department of Financial Services on June 6, 2016, PCIC failed to appear or answer. In August 2016, the plaintiff moved pursuant to CPLR 3215 for leave to enter a default judgment against PCIC. PCIC opposed the motion, and cross-moved pursuant to extend its time to answer the complaint.
On a motion for leave to enter a default judgment pursuant to CPLR 3215, a plaintiff is required to submit evidence of service of the summons and complaint, the facts constituting the cause of action, and the defendant's default in answering or appearing. A plaintiff must allege enough facts to enable the court to determine that a viable cause of action exists.
Here, the plaintiff's motion papers failed to allege sufficient facts to determine whether a viable cause of action exists, as nothing was offered to show that PCIC engaged in any unfair claim settlement practice prohibited by the Montana Code, which is necessary in order to establish the plaintiff's entitlement to damages under Montana law.
Therefore, the lower court agreed with the Supreme Court's denial of the plaintiff's motion pursuant to CPLR 3215 for leave to enter a default judgment against PCIC. In light of PCIC's brief and unintentional delay in responding to the complaint, the lack of prejudice to the plaintiff, and the existence of a potentially meritorious defense, the lower court providently exercised its discretion in allowing PCIC to file a late answer.
Editor’s Note: An “atta lawyer” is sent to our friend Diane Bucci for her good work on this appeal.
12/04/18 Aspen Specialty Ins. Co. v. Ironshore Indemnity Inc.
Appellate Division, First Department
Since Additional Insured Coverage had been Determined and the Time to Appeal that Determination had Expired, It is too Late to Seek Reargument
In a previous appeal, Alphone’s Hotel’s entitlement to additional insured status under an Ironshore policy was determined and no appeal was taken. The time to appeal that order had expired.
Ironshore tried to renew its motion based on the Court of Appeals’ decision in Burlington. However, since the time to appeal the decision had expired, a motion to renew or reargue is time barred.
12/04/18 Tri-State Consumer Ins. Co. v. Hereford Ins. Co.
Appellate Division, First Department
Insurance Carrier Unable to Open Default against it, with History of Unsubstantiated Excuses
Tri-State contended that its attorney failed to make a court appearance because of lack of notice and sought to reopen a default against it. However, it did not demonstrate both (1) a reasonable excuse for the default; and (2) a meritorious defense to the action. Claims of law office failure which are conclusory and unsubstantiated cannot excuse default.
At least two of Tri-State's multiple defaults lack a substantiated excuse - its failure to submit opposition, and its failure to appear at the November 16, 2015 hearing despite counsel's assignment two months prior - and those incidents, in addition to a pattern of dilatory conduct. Since the default was not excusable, Tri-State's motion to vacate the judgment was properly denied, regardless of whether it presented a potentially meritorious defense.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
12/05/18 Amato v. Gorecik
Appellate Division, Second Department
No Serious Injury Where Plaintiff Only Missed Two Weeks of Work
The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine were not caused by the subject accident. In addition, the defendant established, prima facie, that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d) by submitting a transcript of the plaintiff's deposition testimony, which demonstrated that he missed only about two weeks of work during the 180-day period following the accident. In opposition, the plaintiff failed to raise a triable issue of fact.
12/04/18 Pastora v. Diallo
Appellate Division, First Department
Medical Report Four Years After Cessation of Treatment Rendered Speculative Any Conclusion of Serious Injury
Defendants established prima facie that the infant plaintiff's claimed injuries were not serious within the meaning of Insurance Law § 5102(d) through the affirmed reports of an orthopedic surgeon who found normal range of motion and no objective evidence of injury and a radiologist who found no evidence of injury in the MRIs taken of plaintiff's claimed injured body parts after the accident. Defendants also submitted the report of an expert in emergency medicine, who opined that plaintiff's emergency room records, which showed she "[got] checked" after the accident and had no complaints of pain or signs of injury, were inconsistent with her serious injury claims. Relying on plaintiff's deposition testimony, defendants also identified a complete cessation of treatment after several months of physical therapy. In opposition, plaintiff failed to raise a triable issue of fact as to whether she sustained a serious, rather than a minor, injury. Her medical records confirm defendants' position, namely, that there was no objective evidence of injury. Her records also include findings of normal range of motion and resolving complaints. Plaintiff offered no justification for her cessation of treatment only several months following the collision. Moreover, the fact that four years followed in which plaintiff did not seek treatment renders the opinion of her medical expert, submitted in opposition, speculative as to the permanency, significance, and causation of the claimed injuries.
11/29/18 Ogando v. National Frgt. Inc.
Appellate Division, First Department
Five Degree Limitation in One Range of Motion Plane Insufficient to Demonstrate Serious Injury
Plaintiff Ogando's medical records included an MRI report showing multilevel degenerative disc disease and his expert failed to sufficiently raise an issue of fact by challenging the findings of degenerative disease or otherwise attempting to connect plaintiff's injuries to this accident. Ogando's expert also failed to address a prior motor vehicle accident which resulted in claimed lower back and neck injuries or to negate any inference that the accident was the cause of plaintiff's current conditions. Finally, Ogando provided inconsistent explanations for his complete cessation of treatment after three months.
Plaintiff Aybar's claim was also properly dismissed, as she testified that she stopped treatment because her doctors told her it was no longer necessary, and her medical records indicated that she had normal range of motion when treatment ceased. Her later assertion that she stopped medical treatment after no fault benefits expired was in direct conflict with her earlier testimony and thus failed to raise an issue of fact. Moreover, her expert physician only documented a five degree limitation in one plane of motion, which is insufficient for a finding of serious injury under the statute.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
12/12/18 Tec-Crete Transit Mix Corp. v. Great American Ins. Co. of NY
Appellate Division, Second Department
Rejection of Late Opposition Papers was within Trial Court’s Discretion
Plaintiff initially commenced this action seeking recovery for damage and resulting loss of income arising from Superstorm Sandy. At the conclusion of discovery, Great American moved for summary judgment dismissing plaintiff’s Complaint. Plaintiff failed to provide opposition papers, and the motion was returned. Prior to the second return date, plaintiff appears to have presented opposition papers to the court. Its opposition, however, was again untimely, and this time the trial court refused to accept the documentation. Plaintiff then moved for an order granting leave to serve late opposition, and the trial court denied that motion as well.
On appeal, the Second Department noted that the trial court is granted with broad discretion in overseeing motion practice, if, upon good cause shown, the trial judge is given the opportunity to accept otherwise untimely motion papers. Here, without good cause shown for the delay, it follows that the trial court likewise did not abuse its discretion by rejecting them.
12/12/18 Tec-Crete Transit Mix Corp. v Great American Ins. Co. of NY
Appellate Division, Second Department
Even without Opposition, Great American’s Motion did not Present a Prima Facie Entitlement to Relief
Despite failing to timely submit opposition papers, Tec-Crete’s action was not dismissed. Rather, upon review of Great American’s application, the trial court ruled that it had not met its burden of establishing Tec-Crete’s failure to cooperate with the insurer’s investigation. Likewise, the trial court ruled that Great American also failed to demonstrate Tec-Crete’s recoverable damages were within sums the carrier had already paid. With triable issues of fact abound, the trial court denied Great American’s application.
On appeal, the Appellate Division agreed. Even though Tec-Crete failed to oppose Great American’s application, the motion itself did not establish Great American’s argument as a matter of law.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]
12/04/18 American Empire Surplus Lines v. Colony Insurance Company
United States Court of Appeals, Second Circuit
Second Circuit finds Contractor Exclusion Unambiguously Precludes Coverage for Bodily Injury Arising Out of Contractor’s Work
In 2014, the New York City Housing Authority (NYCHA), as a property owner, hired contractor Technico to remodel a number of buildings in Manhattan. At the time, NYCHA was insured by Colony and Technico had coverage from American Empire. Over the course of the project, three Technico employees were injured and sued NYCHA. American Empire assumed the defense of those suits and then sought contribution from Colony on the theory that it was actually the primary insurer for the suits. Colony, on the other hand, argued that the personal injury suits were excluded from its policy with NYCHA.
The Colony policy provided NYCHA with coverage for “bodily injury” that was caused by an “occurrence” and which arose out of “(a) Operations performed for you by the ‘contractor’”. The term “contractor” was defined as Technico. The potentially applicable exclusion barred coverage for bodily injury “sustained by any contractor, subcontractor or independent contractor or any of their ‘employees’, ‘temporary workers’, or ‘volunteer workers’”. Thus, Colony argued that the tort suits were excluded from coverage because they were brought by employees of Technico, a contractor, which qualified as “any contractor”. However, American Empire argued that “any contractor” did not include Technico or the term “contractor”, since Technico was expressly defined as the contractor. Moreover, American Empire argued that the purpose of the Owners and Contractors Protective Policy (as issued by Colony) was to cover bodily injury to employees of the designated contractor – here Technico.
The court found that the exclusion was straight forward and unambiguous. Plainly, the wording indicated that the policy did not provide coverage for bodily injury sustained by employees of “any contractor”. The plain meaning of that meant – any contractor. Since Technico was a contractor, they were included in that set of entities. Indeed, the court wrote, "Technico does not lose its status as a contractor simply because it is also the defined “contractor” (in quotes). The presence of the word “any” before contractor supports the breadth of the exclusion. Because these lawsuits were filed by employees of a contractor, Technico, they are excluded under the plain terms of the policy”. If they had wanted to exclude Technico, they could have done so expressly.
JEN’S GEMS
Jennifer A. Ehman
11/27/18 Chelsea Piers LP v. Colony Ins. Co.
Supreme Court, New York County
Hon. Gerald Lebovits
Trial Court Determines that Purchase Order Constitutes Written Contract Irrespective of whether it was Signed
This decision arises out of an injury on a construction site. EPS Iron Works (EPS) sent the property owners a proposal to furnish and install structural steel at a premises known as Chelsea Piers, Pier 59 Event Center. The purchase order, which was executed only by the property owners, stated that “Lessee’s, contractors, vendors, etc. general liability insurance shall apply on a primary, and non-contributory basis with respect to all protection provided to Chelsea Piers thereunder. In addition, the general liability insurance shall provide that no act or omission of lessee, contractor or vendor will in any way effect or reduce the insurance coverage available to Chelsea Piers thereunder.”
EPS subcontracted the work to Sterling Iron Works LLC (Sterling), and an employee of Sterling was injured while working on the premises.
EPS’s CGL policy issued by Colony contained a broad form additional insured endorsement with the “caused, in whole or in party, by” the named insured’s acts or omissions language. Upon receipt of the owners’ tender, Colony denied coverage for the injury and resulting lawsuit on the basis that the Purchase Order failed to expressly state that EPS must procure additional insured coverage and that it was signed by the owners only.
On this motion, the court considered Colony’s argument as to requirements of the contact and considered whether the loss was “caused, in whole or in part, by” EPS’s acts or omissions.
The court held that the Purchase Order satisfied the additional insured requirement of a written agreement requiring EPS to name Chelsea as an additional insured on its policies. First, it found that where the endorsement only required a written contract, and not a signed one, it was of no consequence that the Purchase Order was not signed. The court also found that where the Purchase Order made express reference to the property owners and stated that they were to be covered under the contractor’s general liability policy, this was sufficient to trigger the endorsement. In the court’s view, to interpret it as merely requiring EPS to procure coverage for itself, would render large portions of the agreement meaning.
The court then turned to the scope of coverage under the endorsement. It noted that the property owners failed to demonstrate entitlement to summary judgment with respect to indemnity. Citing the Burlington decision, the court found that without a determination that EPS or its subcontractor was a proximate cause of the injury, any request for indemnity was premature. With regard to the duty to defense however the found that the allegations in the complaint were sufficient to trigger that duty.
JERRY’S NO-FAULT NAVIGATION
Jerry Marti
11/23/18 New Millennium Medical Imaging, P.C. a/a/o Wang v. MVAIC
Supreme Court, Appellate Term, New York
Plaintiff Fails to Establish No-Fault Claim for Motorcycle Accident
After a bench trial, the Civil Court dismissed the complaint based on plaintiff’s failure to establish entitlement to no-fault benefits. The facts showed that the plaintiff’s assignor had been injured in a motor vehicle accident while driving a motorcycle. In particular, the Court found that motorcycle riders are not entitled to first-party no-fault benefits unless the injured party was driving a class C motorcycle. Since plaintiff’s assignor did not establish that the motorcycle was a class C motorcycle in the sworn NF-2 form, the plaintiff’s assignor did not establish its prima facie case for no-fault benefits.
12/04/18 Matter of Country-Wide Ins. Co. v. Bay Needle Acupuncture, P.C.
Appellate Division, First Department
Petitioner’s Submission Time-Barred after Failing to Establish Mallela Defense
The insurance carrier appealed after the master arbitrator affirmed the no-fault arbitrator’s refusal to accept its untimely opposition papers, which asserted a Mallela defense, i.e., fraudulent incorporation of the medical provider. Specifically, Petitioner asserted that the arbitration ruling was irrational and incorrect as a matter of law because the Mallela defense could not be waived or precluded on the ground of untimeliness. The Appellate Division, First Department disagreed, and found that the Petitioner had not established a Mallela defense, but a defense based on billed-services not being rendered by the provider. In looking at the facts, the Court noted that a guilty plea by the “de facto” owner did not amount to an admission of improper incorporation. As such, it was not a lack of coverage issue, which would have allowed a late submission.
BARNAS ON BAD FAITH
Brian D. Barnas
[email protected]
12/10/18 Clarke v. Liberty Mutual Insurance Company
United States District Court, Middle District of Pennsylvania
Insured’s Disagreement with the Insurer’s Valuation of her Claim was Insufficient to State a Claim for Bad Faith
On November 29, 2016, Mrs. Clarke was the owner and operator of a 2010 Toyota Corolla. She was insured by Liberty under a policy providing underinsured motorist benefits in the amount of $250,000.00 per person and $500,000.00 per accident. On that day, Mrs. Clarke was operating her vehicle southbound on State Route 115 in Chestnut Hill Township, Pennsylvania. As she attempted to enter a store parking lot, a vehicle driven by Isiah Howard crossed over into Plaintiff's lane of travel, striking her vehicle and causing her injuries.
Howard’s insurance policy had $15,000 in coverage. Plaintiff put Liberty on notice of an underinsured motorist claim, and advised that Howard’s carrier had tendered the policy limits. Liberty advised Plaintiff that they believed that the value of Plaintiff’s claim was within the value of the third-party settlement.
Thereafter, Plaintiff commenced an action against Liberty alleging breach of contract, bad faith, and loss of consortium. Liberty filed a motion to dismiss the bad faith claim, and the court dismissed. To recover in a bad faith action, the plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis.
The Court determined that the majority of Plaintiff’s bad faith allegations contained mere legal conclusions. When stripped of conclusory statements, the Complaint alleged as follows: (1) Plaintiff had an automobile insurance policy with Liberty; (2) Plaintiff suffered injuries in an automobile accident caused by Howard; (3) Howard tendered the limits of his $15,000.00 insurance policy; (4) Plaintiff provided notice of the underinsured motorist claim in March 2018 and complied with the terms of the Policy in seeking coverage; (5) Plaintiff demanded the limits of the Policy from Liberty in May 2018 and provided medical records and bills; and (6) within six (6) weeks, Liberty denied the claim for policy limits and did not offer to settle the claim on the basis that the value of Plaintiff’s claim was within the third-party $15,000.00 settlement. In essence, Plaintiff was claiming that Liberty acted in bad faith in valuing her claim differently than she did. Without any additional factual allegations, this was insufficient to allege that Liberty acted in bad faith.
JOHN’S JERSEY JOURNAL
John R. Ewell
12/04/18 New Jersey Transit Corporation v. Sanchez
New Jersey Superior Court, Appellate Division
In Published Decision, NJ Appellate Division Rules Workers Comp Carriers Have Subrogation Right against Third-Party Tortfeasors and Verbal Threshold Does Not Apply
In December of 2014, Mercogliano was involved in a motor vehicle collision during the course of his employment. The vehicle driven by Mercogliano was owned by NJ Transit. Sanchez was the driver and Smith was the owner of the other vehicle involved in the accident.
At the time of the collision, Mercogliano, Sanchez, and Smith maintained personal automobile insurance policies compliant with the Automobile Insurance Cost Reduction Act (AICRA). Mercogliano's policy provided $250,000 in Personal Injury Protection (PIP) benefits and the verbal threshold applied. The parties stipulated Mercogliano's injuries do not vault the verbal threshold because he did not sustain a permanent injury.
As a direct result of Mercogliano's injuries and lost wages, NJ Transit's workers' compensation carrier paid him $33,625.70 in workers' compensation benefits ($6694.04 in medical benefits, $3982.40 in temporary indemnity benefits, and $22,949.26 in permanent indemnity benefits). NJ Transit pursued subrogation action against the tortfeasors, Sanchez and Smith, pursuant to Section 40 of the WCA, which gives workers' compensation carriers the right to institute proceedings against third-party tortfeasors for recovery of damages paid to injured employees.
NJ Transit and defendants filed cross-motions for summary judgment on stipulated facts. Defendants argued that NJ Transit’s claim was barred by the verbal threshold requirement and AICRA. NJ Transit argued its right for reimbursement of paid workers’ compensation benefits is governed by the Workers’ Compensation Act (WCA), not AICRA, and the verbal threshold does not bar its claims for economic loss. The trial court accepted defendants’ arguments, denied NJ Transit’s summary judgment motion, and granted defendant’s motion. That is, the trial court ruled that NJ Transit’s claims were barred by the verbal threshold requirement and AICRA. NJ Transit appealed.
Under New Jersey law, where an employee's injuries were caused by a third-party and not the employer, the WCA gives the workers' compensation carrier an absolute right to seek reimbursement from the tortfeasor for the benefits it has paid to the injured employee. Under Section 40, "the workers' compensation carrier is entitled to reimbursement whether or not the employee is fully compensated."
AICRA's collateral source rule, N.J.S.A. 39:6A-6, "places the primary obligation to pay benefits covered by both workers' compensation and PIP on the employer rather than the PIP insurer." Therefore, "workers' compensation benefits are the primary source of recovery for injuries suffered by employees in a work-related automobile accident, and PIP insurers are relieved from the obligation to pay medical expenses under N.J.S.A. 39:6A-6."
There are three potential sources of reimbursement of medical expenses and wage loss incurred by an employee injured in a work-related motor vehicle accident: (1) workers' compensation benefits, (2) PIP benefits, and (3) recovery from the tortfeasor." Here, Mercogliano recovered those losses solely through workers' compensation benefits. He did not seek or obtain recovery from his PIP insurer or the tortfeasor.
Where only workers' compensation benefits and PIP benefits are available, the primary burden is placed on workers' compensation[,]" pursuant to the collateral source rule of N.J.S.A. 39:6A-6. "[W]hen only PIP benefits and tortfeasor liability are involved, the primary burden is placed . . . on the PIP carrier by N.J.S.A. 39:6A-12." However, "where both workers' compensation benefits and the proceeds of a tort action have been recovered, the tort recovery is primary" pursuant to Section 40.
The Appellate Division held that where workers' compensation benefits have been paid, but the injured employee has not sought or obtained recovery from the tortfeasor, the primary burden is placed on the tortfeasor.
The Court reasoned that:
AICRA was enacted eighty-seven years after the WCA. If the Legislature had intended to treat workers injured in automobile accidents differently from workers injured in any other manner, it would have unambiguously expressed such an intent. We find the same to be true with respect to rights of workers' compensation carriers to seek recovery pursuant to Section 40, which long pre-dated AICRA's enactment.
The Appellate Division ruled that allowing a workers compensation carrier to pursue reimbursement from a tortfeasor does not conflict with AICRA’s collateral source rule. As such, the Court further held that a workers’ compensation carrier is permitted to pursue its claim for reimbursement of worker’s compensation benefits paid to an injured party against third-party. Finally, the Appellate Division made clear that the verbal threshold does not apply to economic loss.
The Appellate Division reversed the summary judgment granted to defendants and remanded the matter for entry of partial summary judgment in favor of NJ Transit.
OFF THE MARK
Brian F. Mark
[email protected]
11/28/18 Probuilders Specialty Ins. Co. v. Phoenix Contr., Inc.
U.S. Court of Appeals for the Ninth Circuit
US Court of Appeals Affirms Finding that Insurer Owed no Duty to Defend or Indemnify its Insured where Insured Failed to Comply with an Endorsement Requiring the Insured to Obtain Indemnity Agreements and Certificates of Insurance from any Independent Contractors Performing Work (Oregon Law)
This appeal from the US District Court for the District of Oregon stems from the district court’s granting of summary judgment in favor of Probuilders Specialty Insurance Company (“Probuilders”), finding that ProBuilders had no duty to defend or indemnify its insured, Phoenix Contractors, Inc. (“Phoenix”), relative to an underlying action alleging that Phoenix negligently failed to properly oversee and check work performed by subcontractors.
The insurance policy issued by Probuilders to Phoenix provided that "as a condition precedent" to the policy's application to "any claim in whole or in part based upon work performed by [Phoenix's] independent contractors," Phoenix must have obtained specified indemnity agreements and insurance certificates from such contractors. The Court of Appeals held that this condition precedent (referred to as the Contractors Special Conditions endorsement) is not a condition of forfeiture, because it does not operate to "nullif[y] otherwise pre-existing coverage." Because there was no dispute that Phoenix failed to fulfill the condition precedent, the Court agreed with the district court that the insurance policy did not apply to the claims in the underlying complaint that Phoenix negligently and in violation of its construction contract failed "to properly oversee and check work done by subcontractors," which were the only claims asserted against Phoenix. The Court found no evidence in the record that the settlement between Phoenix and the underlying plaintiff involved any other claims. Therefore, the Court held that the declaration from Phoenix's expert suggesting that the underlying plaintiff could have brought claims against Phoenix for its own negligent work was irrelevant. Accordingly, the Court affirmed the district court’s holding that Probuilders had no duty to defend or indemnify Phoenix relative to the underlying action.
The Court of Appeals further held that the Contractors Special Conditions endorsement does not violate Oregon's anti-indemnity statute or Oregon's comparative negligence statute because it does not require subcontractors or their insurance companies to indemnify or defend a general contractor for the general contractor's own liability. The Court of Appeals also agreed with the district court that Probuilders may be entitled to seek reimbursement of the defense costs it incurred given that the district court expressed no opinion on the merits of such a reimbursement claim, and Phoenix cited no case law holding that such a reimbursement is prohibited under Oregon law.
WANDERING WATERS
Larry E. Waters
12/11/18 Liberty Mutual Fire Insurance Co. v. Hamilton Insurance Co.
United States District, Southern District of New York
Defendant’s Duty to Defend not Absolved when Additional Insured Under the Policy Refused to Accept Defense Counsel Provided by the Insurer
The current decision stems from an accident that took place at a work site in the Bronx July 7, 2010. The Dormitory Authority of the State of New York (“DASNY”) owned the work site. DASNY hired Preferred Builders, Inc. (“Preferred”), to perform foundation work on the project. In addition, DASNY hired Gilbane Building Company (“Gilbane”) to serve as Construction Manager. The contract between DASNY and Preferred required Preferred to obtain insurance coverage naming both DASNY and Gilbane (the construction manager) as additional insureds and specifically to afford primary coverage to each additional insured. Similarly, the contract between DASNY and Gilbane required that Gilbane obtain insurance coverage naming DASNY as an additional insured, for which the policy would provide primary coverage. A falling concrete wall while working at a work site on July 7, 2010, injured Angel Siguencia, an employee of Preferred. Preferred was the only contractor at the work site at the time of the accident.
Prior to the accident, Preferred obtained an insurance policy from defendant Hamilton Insurance Co. (“Hamilton”). The policy issued by Hamilton listed DASNY and Gilbane as additional insureds (the “Hamilton Policy.”) The Hamilton Policy also provided that such insurance to additional insureds would apply as primary and not contributing with any insurance carried by such additional insureds as required by written contract. Similarly, Gilbane obtained an insurance policy from Plaintiff Liberty Mutual Fire Insurance Co. (“Liberty Mutual”). The policy issued by Liberty Mutual listed DASNY as an additional insured (the “Liberty Mutual Policy”). The Liberty Mutual Policy also provided that “coverage would be excess of any other valid and collectable insurance unless the agreement between the insured and additional insured requires this insurance to be primary.”
Following the accident, Mr. Siguencia filed suit In Bronx County against Gilbane and others (the “underlying action”). Preferred was not named as a defendant in the underlying action. On three separate occasions, including prior to the filing of the filing of the underlying action, Gilbane’s counsel tendered Gilbane’s defense, indemnification, and additional insured status in the underlying action to Hamilton. On October 21, 2011, Hamilton denied coverage for Gilbane on the basis that there was no direct contractual privity between Gilbane and Preferred (i.e. Hamilton’s insured).
However, on October 11, 2013, Hamilton agreed to assume Gilbane’s defense under a full reservation of rights, which Hamilton reserved its right to appoint new defense counsel for Gilbane. Liberty Mutual objected to Hamilton’s request to change Gilbane’s defense counsel as Liberty Mutual argued that Hamilton was subject to a potential conflict of interest. According, to Liberty Mutual the conflict flowed from the combination of Hamilton’s existing representation of Preferred and its recently expressed position limiting Gilbane’s coverage to harm caused by Preferred’s negligence. On January 14, 2014, Hamilton requested unsuccessfully that Gilbane “dismiss the third party complaint that Gilbane recently served upon Preferred in order to avoid additional, unnecessary costs for all.”
After settling the underlying action, Liberty Mutual brought this current action against Hamilton to recover the costs that Liberty Mutual incurred to defend Gilbane in the Underlying Action, on March 31, 2017. Both parties cross-moved for summary judgment.
The following will discuss the Court’s decision as to the timeliness of the claim and the duty to defend issues.
As a threshold matter, the Court began its analysis with Hamilton’s contention that Liberty Mutual’s claim was untimely. In opposition, Liberty Mutual argued that its claim did not accrue until the Underlying Action terminated, which occurred via settlement on November 13, 2014, well within the limitations period. In support, Liberty Mutual relied on the Second Department decision in Ghaly v. First American Title Ins. Co., which held that “[a] cause of action based on an insurer’s alleged breach of a contractual duty to defend accrues only when the litigation brought against the insured has been finally terminated and the insurer can no longer defend the insured even if it chooses to do so.” The Court agreed with Liberty Mutual. The Court concluded that since New York law imposes a six-year limitations period for breach of contract claims and New York law is clear that a claim for failure to defend accrues when the underlying action terminates; Liberty Mutual’s action was timely.
Second, the Court considered whether Hamilton owed Gilbane a duty to defend in the underlying action. The Court concluded that Hamilton owed Gilbane a duty to defend in the underlying action. In support, the Court noted that the underlying action alleged that Gilbane was the general contractor for DASNY’s construction project and that Mr. Siguencia was injured by falling concrete wall panel at the construction site. In addition, the Court found since the Hamilton Policy named Gilbane as an additional insured and there was no dispute that Mr. Siguencia’s injury arise out of Preferred’s work, Hamilton had a duty to defend. Further, the court recognized that the language of the additional endorsement in the Hamilton Policy did not require a separate contract between a named insured and an additional insured. Rather, all that was required under the Hamilton Policy to trigger the additional insured endorsement coverage for Gilbane was Preferred’s contract with DASNY. As such, the Court concluded that Hamilton owed a duty to defend to Gilbane.
Third, the court considered whether Gilbane’s refusal to replace its counsel with counsel selected by Hamilton absolved Hamilton of its duty to defend. Hamilton argued that any obligation to defend on its part was waived by Gilbane’s refusal to accept a defense from Hamilton, which included a right to replace its defense counsel. In opposition, Liberty Mutual argued that a full reservation of rights regarding a duty to indemnify generally does require waiver of the insurer’s right to control the defense and choose counsel. The Court disagreed with Liberty Mutual’s position. The Court noted that under New York law a mere reservation of rights does not waive the right to control the insured’s defense merely by undertaking a duty to defend with a full reservation of rights.
Nevertheless, the court recognized that a conflict between the insurer and the insured may strip the insurer of its right to choose counsel for the insured. Here, the Court concluded that a conflict existed. The Court found that a conflict existed because Gilbane’s cross-claim and third-party action persisted even if the conflict posed by the limitations on Hamilton’s liability had evaporated by 2013. Further, the Court noted that the repeated and unsuccessful attempts to persuade Gilbane to drop the cross-claim and third-party action indicated an apparent conflict of interest between Hamilton and Gilbane. As such, the Court concluded that the conflict entitled Gilbane to counsel of its own choosing. Therefore, Gilbane’s refusal to accept Hamilton’s offer of defense under the condition of a change of counsel did not absolve Hamilton of its duty to defend.
BORON’S BENCHMARKS
Eric T. Boron
[email protected]
12/06/18 Dahms v Nodak Mutual Insurance Company
Supreme Court of North Dakota
Summary Judgment Grant to Insurer – Homeowners Property Insurance – Deck Connecting Dwelling to Detached Garage Constituted Clear Space, Making Garage Subject to Policy Limits for Other Structures Rather Than for Dwelling
The Supreme Court of North Dakota affirmed on appeal last week the District Court’s grant of summary judgment to Nodak dismissing the insureds’ action seeking to obtain additional insurance payments after a fire loss.
The background facts are as follows. In April 2013, Scott and Sharon Dahms owned a two-story residence with a detached two-story carriage house used as a garage. Situated between the detached carriage house/garage and the dwelling was a “fairly elaborate deck” attached to both the garage and the house. The detached carriage house/garage was destroyed by fire, with estimated damage exceeding $87,000.00. The Nodak homeowners policy of the Dahms set forth property coverage provisions labeled Coverage A and Coverage B. The policy provided:
A. Coverage A – Dwelling
1. We cover:
a. The dwelling on the “residence premises” shown in the Declarations, including structures attached to the dwelling; and
b. Materials and supplies located on or next to the “residence premises” used to construct, alter or repair the dwelling or other structures on the “residence premises”.
2. We do not cover land, including land on which the dwelling is located.
B. Coverage B – Other Structures
1. We cover other structures on the “residence premises” set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.
The limit of insurance for Coverage A was $348,907, and the limit of insurance for Coverage B was $34,891. Nodak determined Coverage B applied and paid the Dahms the Coverage B policy limit of $34,891. The Dahms’ suit against Nodak asserted Coverage A applied because, in their view, the garage that had burned was attached to their dwelling by the deck in between the two.
The opinion of the Supreme Court of North Dakota in Dahms cited the importance of interpreting insurance contracts as a whole to give meaning and effect to each clause, noting that each clause may be used to interpret others in the policy. The court determined that the Dahms’ argument that because their deck attached to both their dwelling and their garage, Coverage A – with its higher policy limits – was (should be) invoked, “would render Coverage B policy limits meaningless”. The court concluded as a matter of law that the Dahms’ deck constituted “clear space” which set apart the garage as an “other structure” from the “dwelling”, notwithstanding that the deck between the dwelling and garage was indisputably attached to both.
The Dahms opinion cites and discusses decisions of courts in other jurisdictions construing similar policy language and concluding decks and concrete patios connected to a dwelling and other structures constitute “clear space”, rending Coverage B limits (only) applicable. Those of you who deal with New York coverage issues involving homeowners policies may wish to surf their way over the good-old-internet to review the extended discussion of the issue set forth in Porco v. Lexington Ins. Co., 679 F.Supp.2d 432 (S.D.N.Y. 2009), which, applying New York law, similarly denied the insured Coverage A policy limits on the insured’s swimming pool damage claim. In Porco, the damaged swimming pool was connected to a dwelling by a patio, stairs, and a pool deck. Porco’s swimming pool was determined to be an “other structure” by the Southern District of New York court.
Have a situation such as Nodak had with the Dahms’ claim, or Lexington had with Porco’s claim, and looking for someone to discuss it with? If so, give us a call. We’d love to help you think through the issues.
EARL’S PEARLS
Earl K. Cantwell
03/15/18 Suffolk Construction Co. v Rodriguez & Quiroga Architects
District Court, Southern District of Florida
Florida Expands Potential Design Professional Liability
In this action, the Court ruled that a contractor relying on a design professional’s plans, even absent contract privity, stated a potential claim if the design professional has “control” over the project outcome and liability to the contractor for plan omissions / defects.
This dispute arose over a project to develop a science museum in Miami, Florida, alleging that project design issues caused increased costs and delays. Contractors sued the project designers for negligence, although none of the contractors were in contractual privity with the project design team. The design professionals argued that, since they had no direct contract with the contractors, they had no legal duty to them, but this argument did not prevail, at least on a preliminary motion to dismiss.
Florida law provides that to prove negligence, the plaintiff must show a legal duty requiring the other parties to protect it from unreasonable risk, a breach of that duty, a causal connection between the conduct and the injury, and damages. The design professionals moved to dismiss these claims, arguing that they did not owe a legal duty because they were not in contractual privity, and none of them had a “supervisory role” or control over the contractors. Control is one of the key issues. The Florida Supreme Court had previously ruled that a supervising architect might owe a duty to a general contractor despite the lack of privity of contract, because of the amount of control the supervising architect would have over the contractor which might permit a cause of action for alleged negligence, notwithstanding the absence of privity.
In this case, the Court reviewed whether the design professionals had control based on whether they had supervisory duties or roles, or acted with knowledge that the contractor, would rely upon their designs. The Court concluded that it was reasonable to assume that the design professionals’ plans would be used by the contractor in the construction of the contract, potentially placing the contractor within a “foreseeable zone of risk”, such that a duty might be imposed under the law. The Court therefore denied the design professionals’ motion to dismiss, but with the expectation that at the next level the contractors might have to provide sufficient evidence of the level and amount of “control” the design professionals exerted over them and the project.
This case in concept is somewhat of an anomaly because it essentially asserts that there is a duty of care owed to third parties arising from contractual duties, not by relationship or common law. Although the Florida Supreme Court had previously determined that a supervising architect might have a sufficient level of control so as to be subject to liability absent privity of contract, this case potentially applies that reasoning to design professionals who were not supervising the project, merely provided plans for the project, and were not actively supervising the contractors. Theoretically, this represents an expansion of liability, since in almost every case of a design professional it is assumed that the contractors will rely on their plans. This Court did not explain how the supervisory control theory would apply to a lesser action of a design professional’s duty not to produce a defective design.
Another important point is that the contract between the owner and the design professional might contain numerous contractual waiver and exculpatory clauses, such as a waiver of consequential damages, limitations on liability, waiver of subrogation, and other measures intended to limit liability and protect the design professional. However, a contractor suing the design professional in “negligence” can potentially avoid such contractual defenses that would be available against the owner in a lawsuit or claim involving design errors. In a “negligence” cause of action by one of the contractors, a design professional might not be able to invoke various risk-shifting and design-limiting clauses that might appear in the contract in chief with the owner. This represents another potential “expansion” of design professional liability, not to the owner but to the general contractor or contractors on the project.
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