Coverage Pointers - Volume XX, No. 16

Volume XX, No. 16 (No. 526)
Friday, January 25, 2019

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.

Don’t forget to subscribe to Labor Law Pointers (edited by Dave Adams, [email protected]) and Premises Pointers (spearheaded by Jody Briandi, [email protected]).  Great monthly newsletter published by fabulous teams of writers.

Happy Friday to all my friends and subscribers (and so many subscribers are friends; the rest should be).  We’re back from Scottsdale and immediately immersed in winter weather. I’m not happy about that state of affairs.

Today’s issue introduces our newest lawyer, Marina Barci, who has taken over the No Fault beat.  Rob Hewitt continues to handle the Serious Injury threshold cases but Marina has taken Jerry Marti’s column and we have renamed it, “Barci’s Basics (on No Fault)”.  Jerry has taken over the Albany legislative/regulatory offerings and you can now follow those interesting issues in his submission, “Marti’s (Legislative and Regulatory) Markers”.

We want to make sure that every aspect of New York and New Jersey insurance, and much more from around the country, comes before you on alternating Fridays.  We’ve been at it for over 20 years and we’re looking forward to many more.

Steve’s column has an interesting “potpourri” case, with the courts reminding us how important it is to try to find original policies – or coming up with an acceptable excuse if it is not offered – in coverage litigation.

For those who are attending the PLRB Claims Conference in Indianapolis March 31 to April 3, make sure you sign up for my risk transfer class.  We always have a good crowd and we’d love to see you there.  Click here for more information.

 

Pitchers and Catchers to Report, 100 Years Ago:

 

The Akron Beacon Journal

Akron, Ohio

25 Jan 1919

 

RADICAL CHANGES IN BASEBALL

NOT LIKELY THIS YEAR

 

August Hermann Says Outlook

for Sport in 1919 is Optimistic

 

JOHNSON ALSO PLEASED

 

NEW YORK, Jan. 24—Continuance of the present system of government is essential to the welfare of baseball, according to August Herrmann, chairman of the national commission.

The veteran “commissioner” takes a highly optimistic view regarding the comeback of the national pastime this year.  He believes that the deep-rooted interest of fandom remains intact and that the return of the game will be heartily welcomed.  In speaking of reconstruction, he advocates the time-honored customs of government as provided by the present national agreement.

Mr. Herrmann says no radical changes are necessary in the governmental or playing departments of baseball.  He does not mean that the official personnel of the governing body will not be changed, or that new methods of dealing with or in players will be necessary.  What he advocates is a three-man commission; practically the same working conditions between majors and minors and return to the customs of conducting pennant races and handling players that have been in vogue for many years.

 

Jen’s Gems:

In NYC today.

Jen

Jennifer A. Ehman

[email protected]

 

Object Matrimony:

 

The Tampa Times

Tampa, Florida

25 Jan 1919

 

YOUNG widow worth $500,000 wishes to hear from honorable gentlemen, object matrimony.  Address P. O. Box 1912, Jacksonville, Fla.

Editor’s note:  $500,000 in 1919 would be just under $7.5 million in 2019 dollars.  Wonder whether she is still looking.

 

John’s Jersey Journal:

Dear Subscribers:

Donald, our new puppy, does not love Buffalo weather. We had nearly a foot of snow dumped on us this past weekend. The snow was so high Donald could not walk through it. I shoveled out part of the yard for him, but as he surveyed his big yard that he could not run across, the poor guy just looked so defeated. With today’s warmer weather, he’s back to running circuits around his domain—instead of the living room.

New Jersey auto insurers take note of today’s decision. In a published decision, New Jersey’s Appellate Division ruled that an insurer may exclude underinsured motorist (UIM) coverage for an accident involving a vehicle owned by the insured but not listed on the Declarations.

Read: Auto insurer can exclude UIM coverage for owned vehicles for which no premium was paid.

Think: Motorcycles and other owned motor vehicles not listed in the Declarations.

Generally, UIM coverage follows the driver, not the vehicle. However, at least one carrier has found a way to limit their exposure under their UIM coverage to only vehicles owned by the insured and listed on the Declarations.

Plaintiff, Robert Katchen, was injured while riding his motorcycle. He obtained $25,000 from the other driver. He then sought UIM benefits under, among other policies, his personal auto policy with GEICO. His personal auto policy listed one vehicle on the Declarations: a Dodge truck. His motorcycle was not listed on this policy.

The personal auto policy contained an exclusion which excluded UIM coverage for “bodily injury sustained by an insured while occupying a motor vehicle owned by an insured and not described in the Declarations and not covered by the Bodily Injury and Property Damage liability coverages of this policy.” Simply put, there is no coverage for autos which the insured owns but does not list on his or her policy.

This would exclude coverage for cars, trucks, buses, vans, motorcycles, etc., owned by the insured that are not listed on the policy. The exclusion would not apply where the insured is operating a rental car or if the insured was struck by a vehicle while walking down the street.

The exclusion was challenged on a number of grounds, including claims that the exclusion was ambiguous and that the exclusion went against public policy. The trial court ruled that the exclusion was unambiguous and failed to comply with New Jersey law. On appeal, however, the case made a major U-turn with the Appellate Division declaring that the exclusion was unambiguous and did not contravene New Jersey law.

Other New Jersey auto insurers have found themselves stuck covering vehicles for which no premium was paid. Numerous insurers have found themselves covering motorcycles for UIM that were never listed on the policy. This decision allows New Jersey auto insurers to better control the risks they insure if they so choose, and because this is a published decision, it is binding authority in future coverage disputes.

John

John R. Ewell

[email protected]

 

Some Senators Did Not Like the Russians a Century Ago, Either:

 

New York Herald

New York, New York

25 Jan 1919

 

SENATORS CONDEMN

SOVIET RECOGNITION

 

Myers, King and Sherman

Indignant at Decision of Paris Council.

 

SEE HARM AS A RESULT

 

Doctrines of Bolsheviki Styled

as Foreign to Progress or Civilization.

 

Special Dispatch to The Sun.

 

WASHINGTON, Jan. 24.—The expressed willingness of the Paris conference to effect diplomatic relations with the Bolshevik government in Russia was discussed in the Senate today and sharp criticism of the action of the allied conferees was voiced by three Senators, two of whom, Myers (Mon.) and King (Utah), are recognized Administration Senators and throughout the year were sturdy adherents of every policy enunciated by the President.

The third Senator, Sherman (Ill.), all along has been one of the bitterest critics of the President’s policies, particularly of his person visit to Europe.

The Senatorial critics took the ground that there never should be effected any recognition of the Bolsheviki as a government and denounced the Russian Radicals vehemently.

“I cannot reconcile myself if the matter is to be voted on in this body directly or indirectly to the recognition of the present Bolshevist Government in Russia,” said Senator Sherman.  “The Bolshevist Government is admitted to be a godless government as well as a violent one.  They are only a little in advance of the Socialists of this country.  There is no thorough Socialist who admits any religious obligations.  He is purely a materialist and teaches there is no hereafter.

 

Peiper on Property and Potpourri

We’re back after a two week hiatus. Here’s hoping those of you in the Northeast have thawed out over the past few days.

This week’s issue brings with it some interesting reads. The first case reviewed below deals with yet another Hurricane Sandy case. This time dealing with business interruption to a law firm due to lost phone service. As a general rule, to prove a case for BI, the insured must establish a total cessation of business AND actual physical damage which was resultant from a Covered Cause of Loss. Off site damage is not usually sufficient to establish the physical damage component.

And so it follows that Zurich appropriately denied coverage where the damage that ultimately knocked out phone service, and thus closed plaintiff’s business, was offsite.  We note that issues related to total cessation were not part of the decision. Not that we have any experience, but lack of utilities DOES NOT excuse a Coverage Pointers’ scribe from his or her beat.   Phone service, schmone service.

As a side, this week’s cover note comes from yet another hockey barn.   I had planned on using my computer to prepare this week’s update, but it predictably crashed.

Hello, I-phone.

Phone service, schmone service indeed.

See you in two weeks.

 

Steve

Steven E. Peiper

[email protected]

 

Big Verdicts:

 

The Buffalo Enquirer

Buffalo, New York

25 Jan 1919

 

Woman Awarded $900 Damages

 

A jury in Part VII of Supreme Court yesterday returned a verdict of $900 in favor of Catherine Murray against the International Railway company.  She sued to recover damages for personal injuries received in a street car accident on May 30 last. 

Editor’s Notes:  That’s about $13,500 in today’s exchange. Not certain of her injuries but after all, she was hit by a train.

 

Hewitt’s Highlights: 

Dear Subscribers:

Welcome to our latest edition. I hope you are staying warm.  We hit a wind chill temperature of minus 17 this past week on Long Island.

On the serious injury front, the Courts are still proceeding slowly after the New Year. One of the cases is on the 90/180-day category. I wanted to highlight that to dismiss that category of serious injury, you really have to lock the plaintiff in at deposition as to exactly when they returned to work and what period of time after the accident they could not do the activities of daily living they could do before the accident. It is crucial to do that in order to knock out that claim.  Another case involves a usually futile effort to invalidate a jury’s verdict. Almost all of the time, if there were competing experts, a jury will be allowed to credit one expert over another, without the appellate court disturbing that verdict.                                                                                                             

Until next issue,

Rob
Robert Hewitt

[email protected]

 

Staten Island Subway?

New-York Tribune

New York, New York

25 Jan 1919

 

Staten Island Residents

Start Fight for Tube

 

The residents of Staten Island began a concerted fight for a subway connecting with Manhattan, at a meeting of the Staten Island Chamber of Commerce, at the Borough Hall, St. George, last night.  They promise that the campaign they intend waging will be as vigorous as that by which they got rid of the municipal garbage plant.

A committee of bankers, lawyers and business men and women was named by Louis A. Tribus, president of the Chamber of Commerce, to lay plans for the campaign and to prepare a tentative route for the proposed subway.  The committee consists of 110 members, ten of whom are women.

Calvin D. Van Name, Borough President of Richmond, was the principal speaker.  He declared the opportunity was never so good for Staten Island to get a subway. 

Editor’s Note:  Well, it didn’t work. Construction started on a subway in Staten Island but never completed.  According to Wiki, there was and is a Staten Island Tunnel, which is an abandoned, incomplete railway/subway. It was intended to connect railways on Staten Island (precursors to the modern-day Staten Island Railway) to the BMT Fourth Avenue Line of the New York City subway system.

Construction began in 1923, and the tunnel was excavated 150 feet (46 m) into the Narrows before New York City Mayor, a former BMT official canceled the project in 1925. Later proposals to complete the tunnel were never funded.

 

Wilewicz’ Wide-World of Coverage:

Dear Readers,

I’m slowly recovering here from yet another bout of illness that struck me in recent months. I am having no luck this year on the germ front, or the germs are having lots of luck with me? I’m not sure which is worse. In any event, I am very much looking forward to the warmth and sunshine of Arizona, coming right up to the ABA TIPS Insurance Coverage Litigation Midyear Conference. I have written about it previously, and now it is just a few weeks away. It should be a nice opportunity to soak up some vitamin D-supplying rays while networking with friends and colleagues from around the country and learning about the latest trends and hot topics in coverage law.

To that end, do drop me a line if you are planning on attending, or have any interest in learning more about the wonderful opportunities the American Bar Association has to offer coverage practitioners and industry folks alike. I have the honor and privilege to serve as a Vice-Chair of the Coverage Committee this year, and can attest to the fact that the networking and educational opportunities are unparalleled.

Now, the Second Circuit again has taken a hiatus on analyzing coverage cases in the past couple of weeks. We scoured every decision from the federal appellate court in the last 30 days (twice) and found no coverage decisions of interest to report on for this week’s issue. It looks like Larry Waters had some problems too – he covers the federal trial courts – perhaps due to the current partial government shut down the federal courts are more impacted than we thought? Most of the decisions we have found are dealing with criminal matters, which perhaps might take some precedence over contract and civil issues? That said, we invite you to take a look at the other columns we have on offer this week for a few rather interesting ones to tide you over until the next edition.

Until then!

Agnes

Agnes A. Wilewicz

[email protected]

 

What’s the Opposite of Life Insurance?”

 

New-York Tribune

New York, New York

25 Jan 1919

 

Soldier Reported Dead

Insurance Paid, Still Alive

 

William F. Lynch, of New York, Found by Y.M.C.A.

in Prison Camp; Happy News Brought to Mother

 

Usually when the government begins to pay his insurance to his family a soldier is unmistakably dead.  There is hardly a forlorn hope then.  And yet the War Risk Insurance bureau sent insurance checks to the mother of William F. Lynch, a soldier of 468 Second Avenue, only to learn, through the Y.M.C.A. checking system, that the man reported dead on the field of battle was alive and a prisoner in a German pen.  This was one instance in which the Y.M.C.A. system proved superior to that of the War Department and the Bureau of War Risk Insurance combined.

Lynch, a member of Company I, 308th Infantry, was officially reported killed in action last summer.  His mother was so notified , and after the customary investigation the War Risk Insurance Bureau began payment of his insurance. 

 

Barnas on Bad Faith:

Hello again:

It may be the middle of winter, but I’m already dreaming of baseball and summertime.  This week, the Baseball Hall of Fame announced its new class: Mariano Rivera, Edgar Martinez, Mike Mussina, and Roy Halladay.  Doc Halladay was my favorite baseball player growing up, and he still is my favorite player ever. When I was a kid playing baseball, I tried to be Roy Halladay.  I copied his windup, acted the way he did on the mound, and tried to throw the same pitches he did.  He was a star and a reason to watch a series of consistently mediocre Blue Jays teams from 2002-2009.  It’s a shame that his untimely death will prevent him from getting the chance to enjoy the ceremony and his accomplishment.  I’ve never been to the induction ceremony, despite it being only a couple hours down the 90 from Buffalo to Cooperstown, but I can’t wait to attend this year to celebrate Doc one more time.

I have a New York bad faith case in my column for the second week in a row.  This week’s case is a first party bad faith claim.  Plaintiff alleged that the insurer breached the insurance contract and breached the implied covenant of good faith and fair dealing.  The court described the issue on appeal as being “whether at the pleading stage, a claim for consequential damages arising from defendant’s processing of plaintiff’s insurance claim requires a detailed, factual description or explanation for why such damages, which do not directly flow from the breach, are also recoverable.”  The court concluded that no such detailed pleading was required.  Here, plaintiff fulfilled its pleading requirement by specifying the types of consequential damages claimed and alleging that such damages were reasonably contemplated by the parties prior to contracting.

Signing off,

Brian

Brian D. Barnas

[email protected]

 

Insurance Men on the Hot Seat:

 

New York Times

New York, New York

25 Jan 1919

 

ACCUSES INSURANCE MEN

 

Federal Grand Jury Indicts

Two, Who Deny Charged

 

Edward Meinel and William Y. Wemple of the firm of Meinel & Wemple, Inc., insurance brokers, who were arrested on Dec. 26, were indicted yesterday by the Federal Grand Jury for alleged violation of the Trading with the Enemy Act and were held in $10,000 bail each.  The defendants succeeded to the business of H. Mutzenbacher, Jr., a German concern, in October, 1917, as the American agents of the Salamanda Insurance Company and the Second Russian Insurance Company, Russian corporations.

The fifteen specific charges in the indictment are to the effect that the defendants have done business with one Paul Clausen of Copenhagen in the placing of reinsurance or property in this city for the account of Mutzenbacher, and have conducted business without having obtained a license, which was only possible with the consent of the President; and that they had sent abroad by mail corrections of real estate maps in this city showing how the insurance was placed. 

 

Off the Mark:

Dear Readers,

The weather on Long Island has been mild so far this winter, with a notable exception this past Monday where the temperature was well below zero with the wind-chill.  Luckily, the wife and kids were off and didn’t have to leave the house.  As I’m short on time this week, I’ll get right into it.

This edition of “Off the Mark” discusses a recent construction defect case from the US District Court for the Southern District of Georgia, Savannah Division.   In Cowart v Nautilus Ins. Co., the Court examined the duty to defend and held that where the underlying claims only pertained to workmanship and construction of a pool, rather than damage to some other separate property, the carrier was not required to defend its insured against such claims as such claims did not constitute “Property Damage” under the policy.  The Court further found that even if the claims were technically covered, they were nonetheless excluded from coverage by one or both of the policy's "business risk exclusions."

Brian

Brian F. Mark
[email protected]

 

How High Can You Fly?

 

Buffalo Courier

Buffalo, New York

25 Jan 1919

 

MONOPLANE MAKES ALTITUDE

RECORD, AMERICAN PILOT

 

Washington, Jan. 24.—A new record for altitude in a monoplane has been made by Maj. R. W. Schroeder, holder of the American altitude record.  The war department received a telegram today from the commandant at McCook field, Dayton, Ohio, that Maj. Schroeder with two passengers in a Loening monoplane climbed to a height of 19,500 feet in thirty-one minutes.  With him were George V. Elsy, and K. A. Craig, a mechanic.

The previous record for a machine of this type was said to be about 16,000 feet.  The plane was built by Grover C. Loening of Long Island, N. Y., and was powered with an eight-cylinder engine.  It has developed a speed of 145 miles per hour. 

 

Wandering Waters:

Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.

What a week for the NBA.  Last Saturday the Rockets and the Lakers played a thrilling Overtime game.  While the Lakers appear to be fading as a result of LeBron’s injury, the Rockets are picking up steam.  The Rockets squeaked by the Lakers in large part to James Harden’s exceptional play. Recently, Harden has been on a historic scoring run.  Harden has scored 30 or more points in 22 straight games, a feat not accomplished since the days of Wilt Chamberlain.  Yesterday Harden added to his historic run by scoring 61 points against the Knicks in Madison Square Garden.  NBA fans are in for a great treat for years to come if Harden is only scratching the surface of his talent.

While the NBA is heating up, the weather in Buffalo has taken a frigid turn.  Last weekend, Buffalo had its largest snowstorm of this winter season.  Some areas experienced more than a foot of snow.  I understand that this is normal for Buffalo, but I was enjoying the relatively mild winter.  Prior to last weekend, the temperatures were on the warmer side with Buffalo experiencing hardly any snowfall.  Now, Buffalo is expected to, once again, have lake effect snow with frigid temperatures heading into the weekend.

Appearing to follow the recent frigid weather in Buffalo, the New York federal courts have taken a cold approach to civil cases concerning insurance coverage issues. Sadly,  I have no decisions to report.

I hope that the federal trial courts and the Buffalo weather heat up before the next issue. 

Until next time….

Larry

Larry E. Waters

[email protected]

 

Dumb Clucks:

 

The Kingston Daily Freeman

Kingston, New York

25 Jan 1919

 

Treadmill for Chickens

 

To make chickens take exercise necessary for growth, an inventor has patented a feed box in front of which is a revolving platform over which they must scramble to get anything to eat.

 

Boron’s Benchmarks:

Dear Readers:

I hope all is well with you and yours, now more than three weeks into the New Year.  We’re all exercising more, eating better, and getting proper amounts of sleep now that the holidays are over, right?  Right!

Your well-rested, fitter, healthier bodies and minds are now primed to consider two cases I have selected for this Boron’s Benchmarks column.  One is a Supreme Court of Vermont decision holding a false pretense exclusion in a business-owner policy to be ambiguous.  The other is a Supreme Court of Rhode Island decision holding an auto liability insurer owes no duty to third-party liability claimants to act reasonably and in good faith in settling a claim.

Have a great two weeks at work, and enjoy the Super Bowl.

Regards,

Eric

Eric T. Boron

[email protected]

 

Home Run Baker to Retire?:

 

The Buffalo Enquirer

Buffalo, New York

25 Jan 1919

 

HOME RUN BAKER QUITS YANKS

FOR SEMI-PRO TEAM


J. Franklin Baker, third baseman of the New York Yankees, will not be with the team next season.  According to a statement made by Manager Mills of the Upland team of the Delaware County league, Baker has signed a contract with his club.  This is the second time Baker had quit organized baseball to play in the semi-professional ranks, having been with Upland in 1915, when he quit the Athletics.  If the report is true the pennant hopes of the Yanks have received a severe jolt.  The club has been greatly strengthened by new additions and Baker was counted on to cover the third corner.

Editor’s Note: Fake News.  He played the 1919 season, batting .293 with 10 homers.  He continued with the Yankees through 1922.  Known as the number one home run slugger of the dead ball era, the most four-baggers he hit in any season in the Majors was 12 in 1913. In fact, in 13 years in the bigs, he hit 96 home runs, an average of just over seven a year.

 

Marti's Legislative and Regulatory Markers:

Dear Subscribers,

What goes into the coverage limits for auto insurance policies issued to the everyday (non-commercial) drivers?  The New York State Legislature wants to take a closer look.

Currently, New York State law requires that motorists carry a minimum amount of liability insurance of $25,000 for bodily injury to one person, $50,000 for bodily injury to all persons, $50,000 for no-fault coverage, and $10,000 for property damage in any one accident.  In addition, motorists are required to maintain minimum death benefits, including $50,000 per person killed in an accident and $100,000 for all persons killed in an accident.  Some motorists carry higher liability limits and additional personal injury protection beyond the minimum benefits required by law. The law further requires all auto insurance policies to provide uninsured motorists coverage for bodily injury, subject to the same minimums.

These minimum coverage limits have remained on the books for quite some time.  But, change could be coming in the upcoming years.  The New York State Assembly has introduced a bill for the Department of Financial Services (“DFS”) to study the effects of increasing these minimum amounts.  The study would expect to be completed by 2021.  For further details on the bill, please read my column.

Jerry

Jerry Marti

[email protected]

 

People in Glass Houses:

 

The Morning News

Wilmington, Delaware

25 Jan 1919

 

NOTICE--$25.00 REWARD WILL BE paid to anyone furnishing US with information leading to the arrest and conviction of any person throwing, placing or depositing glass on or in the streets of the city of Wilmington.

 

DELAWARE AUTOMOBILE

ASSOCIATION

Chas. G. Guyer,

Secretary

 

Barci’s Basics (On No Fault):

Hello Subscribers!

It’s an exciting day for me as a new attorney at H&F – this is my first written contribution to Coverage Pointers! This note comes to you after a late night spent revising mock trial student’s work for their upcoming trial next weekend. If you have any suggestions on good themes or catchy lines for a rent control case, let me know because we are struggling to come up with any.

This week I have two no-fault cases for you. In the A&S v MVAIC case, we are confronted with the question of whether or not a provider has exhausted all other remedies against other potential carriers before tapping into any no-fault benefits.

Then, Pavlova v Allstate unpacks several common issues. First, it gives us all a good reminder that denial letters need to be sent timely in order to preserve a denial defense. Allstate here sent its denial letter 57 days after the EUO date passed, when it should have sent it within 30. Second, if an insurer is to be successful in claiming that an intentional, not accidental, loss took place, it must prove that the loss was intentional with more than just inconsistent party testimony. Third, the provider was able to establish their prima facie case for summary judgment with an affidavit from one of their employees and the bills disputed attached to their motion. The moral of the story? Make sure your denial letters are timely and you hire an investigator to prove foul play took place.

That’s all for now,

Marina

Marina A. Barci

[email protected]

 

US – Mexican Border Issues.  How to Solve Them:

 

The (Saint Paul, Minnesota) Appeal

January 25, 2019

 

SMUGGLING BY AIR

 

Powerful Airplanes Being Used on Mexican Border

 

Authorities Say That Contraband Traffic is Carried Across Rio Grande

 

Laredo, Tex.  – It is the firm conviction of Mexican customs officials on the lower Rio Grande border that systematic smuggling by means of powerful airplanes is being conducted between that country and the United States/  The American authorities are not yet convinced that contraband goods are being carried in this manner from one country to the other, although they freely admit that it is possible if not very probably that this is being done,

If evasion of the export and import duties by this means is not already being carried on it is only a question of time when the airplane will be brought into service for that purpose, it is predicted by customs officials here and at other places on the Mexican border.

It is recommended by the custom authorities of both Mexico and the United States who are on duty along the Rio Grande that airplane control service be established on both sides of the river at the earliest possible time.

Editor’s Note:  Did they consider a really, really tall border wall?  I wonder who would have paid for i?

 

Here are the Headlines for this week’s issue, which is attached:

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

 

  • Since there was a “Reasonable Possibility” of Coverage, Owner and General Contractor Entitled to Additional Insured Coverage under Subcontractor’s Policy.  Premature to Determine Duty to Indemnify

 

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

Robert E.B. Hewitt III

[email protected]

 

  • Plaintiff’s Physician’s Affirmation Led to Issue of Fact

  • 90/180-Day Claims Need to be Examined Carefully at Deposition

  • Plaintiff Can Rebut Defendant’s Prima Facie Case for Summary Judgment

  • Jury is Entitled to Find One Expert More Credible than Another in a Battle of the Experts at Trial

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

  • Business Income Claim Requires Cessation of Business Due to Covered Cause of Loss at the Insured’s Premises or Dependent Property; Neither of Which Occurred Here

 

Potpourri

  • Best Evidence Rule Requires the Production of Original Policy Relied Upon by Carrier at the Time of Denial

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Federal Courts quiet this week.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Allegations in Underlying Complaint Trigger Duty to Defend General Contractor and Property Owner

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • New York does not have a Heightened Pleading Requirement for Consequential Damages

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

  • New Jersey Appellate Divisions Rules that Auto Insurers Can Exclude UIM Coverage for Owned Vehicles Not Listed on Policy

 

Marti's Legislative and Regulatory Markers

Jerry Marti

[email protected]

 

  • Act to Study Impact of Minimum Coverage for Non-Commercial Auto Insurance

 

OFF THE MARK
Brian F. Mark

[email protected]

 

  • US District Court Finds No Duty to Defend Where Alleged Defective Workmanship did not Constitute “Property Damage”

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

  • Court quiet.

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

  • Coverage for Phishing Scam Loss Not Barred By Ambiguous False Pretense Exclusion (VT Law)

  • Insurer Owes No Duty to Third-Party Claimant to Act Reasonably and in Good Faith in Settling Claim (RI Law)

 

BARCI’S BASICS (ON NO FAULT)

Marina A. Barci

[email protected]

 

  • Provider Required to Exhaust All Remedies against Other Carriers before Seeking No-Fault Benefits

  • Insurer Failed to Demonstrate Any Viable Defenses; Provider Made Prima Facie Case to Recover No-Fault Benefits

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

  • Payment of Appraisal Award Precludes Bad Faith Claim (TX Law)

 

 

All the best from our home and office to yours.

 

 

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


NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR
Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR
Jennifer A. Ehman

[email protected]

 

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

 

Steven E. Peiper, Co-Chair
[email protected]

 

Michael F. Perley
Jennifer A. Ehman

Agnieszka A. Wilewicz
Lee S.  Siegel
Brian D. Barnas
Brian F. Mark
John R. Ewell
Larry E. Waters
Jerry Marti
Eric T. Boron
Larry E. Waters
Marina A. Barci
Diane F. Bosse
Joel R. Appelbaum

 

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

 

Michael F. Perley
Eric T. Boron

Brian D. Barnas
Larry E. Waters

 

NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
[email protected]
 

Jerry Marti
Marina A. Barci

 

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

 

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

John’s Jersey Journal

Marti's Legislative and Regulatory Markers

Off the Mark

Wandering Waters

Boron’s Benchmarks

Barci’s Basics (on No Fault)

Earl’s Pearls

 

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

 

01/22/19       Mt. Hawley Ins. Company v. American States Ins. Co.

Appellate Division, First Department

Since there was a “Reasonable Possibility” of Coverage, Owner and General Contractor Entitled to Additional Insured Coverage under Subcontractor’s Policy.  Premature to Determine Duty to Indemnify
In an underlying personal injury action, the injured plaintiff asserted negligence and Labor Law claims from injuries he sustained while he was working at a construction site owned by West 27th and for which Chatsworth was the general contractor. Chatsworth and West 27th commenced a third-party action against the subcontractor, J & R Glassworks, Inc. (“J & R”), alleging negligence and seeking indemnification and contribution.

J & R was insured by American States (“American”).  West 27th and Chatsworth tendered coverage to American claiming they were additional insureds under the policy. Because there was a reasonable possibility of coverage, and the underlying personal injury action was filed while the American policy was in effect, American has a duty to defend West 27th and Chatsworth as additional insureds, and is legally obligated at this time to pay West 27th and Chatsworth's defense costs in the underlying action.

Issues of fact as to liability in the underlying personal injury action render premature the conclusion that American has a duty to indemnify.

 

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

Robert E.B. Hewitt III

[email protected]

 

01/23/19       Kim v. Denicker

Appellate Division, Second Department

Plaintiff’s Physician’s Affirmation Led to Issue of Fact

The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. In opposition, however, the plaintiff raised a triable issue of fact as to whether she sustained a serious injury to the cervical region of her spine under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) as a result of the accident based upon the affirmation of her treating physician and the affidavit of her chiropractor.

 

01/23/19       Luque v. Flovictov Cab Corp.

Appellate Division, Second Department

90/180-Day Claims Need to be Examined Carefully at Deposition

The plaintiff commenced this action to recover damages for personal injuries that she alleges she sustained in a motor vehicle accident.  The defendant failed to meet its 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 accident. The papers submitted by the defendant failed to eliminate triable issues of fact regarding the plaintiff's claim, set forth in the bill of particulars, that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). While no facts are given, the 90/180-day category is a common category to fail in dismissing on a motion for summary judgment. It is crucial to ask the right questions at a deposition to pin the person down as to when they were able to return to work and their normal activities of daily life in order to knock out that claim out. Plaintiffs are often vague which can help them survive a motion.

 

01/23/19       Dodard v. Etienne

Appellate Division, Second Department

Plaintiff Can Rebut Defendant’s Prima Facie Case for Summary Judgment

The plaintiff commenced this action to recover damages for personal injuries that he alleges he sustained in a motor vehicle accident on March 14, 2010. The Appellate Division, without much analysis, determined that  defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine did not constitute serious injuries under either the permanent consequential limitation of use or the significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained serious injuries to the cervical and lumbar regions of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).

 

01/16/19       Aquino v. Merha

Appellate Division, Second Department

Jury is Entitled to Find One Expert More Credible than Another in a Battle of the Experts at Trial

Plaintiff moved to set aside a jury verdict finding no serious injury. At trial, the plaintiff's treating orthopedic surgeon testified that the plaintiff suffered from disc bulges in the C4-5 and C5-6 regions of his spine that impinged on the nerves, and that the disc bulges, in addition to the plaintiff's symptoms of neck pain radiating to the arm, were caused by the accident. The orthopedic surgeon performed an anterior cervical discectomy and fusion from the C4 through C6 vertebrae, and he testified that, although the surgery relieved the symptoms of cervical radiculopathy, the plaintiff's lingering neck pain and restricted neck movement were permanent. An expert in biomechanics also testified on behalf of the plaintiff and opined that the accident caused the injuries to the cervical region of the plaintiff's spine. The plaintiff testified that he never experienced neck pain prior to the accident.

The defendants presented the testimony of a neurologist and a radiologist. The neurologist testified that there was no objective evidence that the plaintiff suffered from cervical radiculopathy, and that an EMG study performed shortly after the accident ruled out that condition. Additionally, both the radiologist and the neurologist testified that the plaintiff's injuries were due to degeneration and that MRIs taken two years after the accident showed no evidence of traumatic injury.

The jury found that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The plaintiff moved pursuant to CPLR 4404(a) to set aside the verdict as contrary to the weight of the evidence and for a new trial on the issue of damages. The Appellate Division held that a jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached its verdict on any fair interpretation of the evidence. Where conflicting expert testimony is presented, the jury is entitled to accept one expert's opinion and reject that of another expert. Here, although the plaintiff presented evidence that he sustained a serious injury to the cervical region of his spine as a result of the accident, the defendants presented evidence that the plaintiff's alleged injury was caused by degenerative changes to the cervical region of his spine. This conflicting testimony presented credibility issues for the jury to resolve, and the jury's resolution of those credibility issues in favor of the defendants was held to be supported by a fair interpretation of the evidence.

 

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

01/23/19       Cohen & Slamowitz, LLP v. Zurich Am. Ins. Co.

Appellate Division, Second Department

Business Income Claim Requires Cessation of Business Due to Covered Cause of Loss at the Insured’s Premises or Dependent Property; Neither of Which Occurred Here

Plaintiff’s submitted a claim for business interruption resulting from the alleged loss of revenue caused by the failure of telephone service during Hurricane Sandy.  There was not a loss at the insured location, but rather the service provider’s switch center became disabled due to flood waters.  Zurich denied the claim on the basis that the loss did not arise from a Covered Cause of Loss at the plaintiff’s facility or a “dependent property.”

The term “dependent property” is defined in the policy as a premises on which the insured relied to “deliver materials or services …. (not including water, communications, or power supply services).  As the loss of business was caused due to the loss of communication services, it followed that there was not a Covered Cause of Loss to the insured’s premises or to “dependent property.”

 

Potpourri

01/16/19       Pennsylvania Lumbermans Mut. Ins. v. B&F Land Dev. Corp.

Appellate Division, Second Department

Best Evidence Rule Requires the Production of Original Policy Relied Upon by Carrier at the Time of Denial

This claim arises from a wrongful death action wherein the decedent fell through a skylight while working at a project owned by B&F Land Development.  Decedent’s Estate then filed an action under the Labor Law against B&F.  B&F tendered the suit to its liability carrier, PA Lumbermans, on April 15, 2009. Six weeks later, on June 22, 2009, PA Lumbermans denied the claim on the basis that the loss location was not identified on the policy.  The carrier also appears to have denied the claim on the basis of late notice and an exclusion, but those defenses appear to have been asserted in an untimely fashion.

PA Lumberman then commenced the instant Declaratory Judgment Action against B&F and Decedent’s Estate.  Although B&F defaulted, Decedent’s Estate timely appeared and the matter was ultimately set down for a trial.  At that time, PA Lumbermans only produced one witness, a VP of Claims, who attempted to put the policy into evidence.  On voir dire, however, it was determined that the policy constructed by PA Lumbermans’ witness was inconsistent with the language of the denial and the policy produced earlier in discovery.  Nevertheless, the trial court permitted the policy to be introduced as evidence, and ultimately ruled in favor of PA Lumbermans in upholding the denial.

On appeal, the Court noted that the original writing (i.e., the original policy) was the best evidence.  As such, the trial court should have not admitted a substitute for the best evidence without a sufficient explanation as to why the original document could not be produced.  This, as noted by the Appellate Division, is a heavy burden on the party seeking to introduce secondary evidence.  In this case, PA Lumbermans failed to offer any evidence of why it failed to produce the original policy.  Moreover, the evidence that was submitted did not match the writings found within the actual policy relied upon by PA Lumbermans at the time of the denial.  On this Record, the Second Department predictably reversed the trial court’s verdict, and remanded the matter back for a new trial. 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

Federal Courts quiet this week.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

01/07/19       Dynatec Contr., Inc. v. Burlington Ins. Co.

Supreme Court, New York County

Hon. Doris Ling-Cohan

Allegations in Underlying Complaint Trigger Duty to Defend General Contractor and Property Owner

This decision arises out of an injury on a construction site.  The owner of the project retained Dynatec to serve as the project’s general contractor.  Dynatec then retained NY Renaissance as a subcontractor to install exterior windows and panels, and Rock Scaffolding to build the project’s scaffolding.

At the time of the incident, Rock Scaffolding was insured under a policy of insurance issued by Burlington, and an excess policy issued by Mt. Hawley.

At some point during the project, the underlying injured plaintiff, an employee of NY Renaissance, allegedly sustained injury when he tripped over an uneven plank on a five-story exterior scaffolding installed by Rock Scaffolding.  He brought suit against Dynatec and the property owner.  Of note, in the Workers’ Compensation Claim Form completed shortly after the accident, it noted that plaintiff stated to have “tripped over materials that [were] not supposed to be there, while [he] was guiding the panel …”  At plaintiff’s deposition, he testified to have been guiding panels on a lift outside the building, using scaffolding attached to the exterior.  He then sustained injury while trying to grab a panel to prevent it from hitting the building, when he hit his foot on an uneven plank on the scaffold.

The owner and general then brought a third-party action against Rock Scaffolding seeking contribution, contractual indemnification or common law indemnification.

In addition, Colony, Dynatec’s general liability carrier, tendered the defense of Dynatec and the property owner to Rock Scaffolding and its insurers.  Colony submitted that based on the deposition testimony, the incident was caused by a board that was improperly placed on the scaffolding on which the injured plaintiff had been working.

Burlington denied the tender on a number of groups submitting that the subcontract was not fully executed.  It also asserted, pursuant to Rider H, Insurance Requirements, that Rock Scaffolding’s obligations were limited.  It pointed to language stating that Dynatec and all entities listed below shall be “named on the subcontractor’s liability policy as additional insured on the Certificate of Insurance;” however, no other entities were specifically identified.  Thus, Burlington submitted the property owner did not qualify as an additional insured.  Further, the contract only required that Dynatec be named on the Certificate of Insurance, not the subcontractor’s policy.  Burlington lastly submitted that notice was untimely.

Three months later, Burlington issued a supplemental letter to Colony further disclaiming coverage based on the Exclusion – Designated Operations provision in its policy that limited coverage to work done by Rock Scaffolding or on its behalf up to three stories.

This declaratory judgment action then resulted.  Plaintiffs moved for partial summary judgment and a declaration that they were entitled to a defense relative to the underlying action or, in the alternative, a declaration that Rock Scaffolding breached the subcontract.  Burlington disputed any obligation to defend on the basis that the unsigned, undated and unsworn subcontract did not grant plaintiffs additional insured status, and even if coverage existed, it was removed based upon the Work-Height Exclusion.

The court addressed Burlington’s challenge to coverage finding that the plaintiffs’ submission included a fully executed copy of the subcontract, and found that Rock Scaffolding’s obligation to procure comprehensive liability coverage for Dynatec and the property could not be disputed.  The court rejected Burlington’s argument that the subcontract only required that Dynatec be named on the certificate.

The court further highlighted the express language in the subcontract that it would be subject to the General Conditions of AIA Document A201, which requires additional insurance coverage for the owner.  The court then reviewed the Additional Insured Endorsement in the Burlington policy which did not include a privity requirement. 

The court next cited to the allegations in the underlying complaint which alleged negligence against plaintiffs and Rock Scaffolding.  These allegations, in the court’s view, were sufficient to suggest the possibility of coverage, and Burlington failed to raise a triable issue of fact.  Specifically, the court held that the Work-Height exclusion was not raised as soon as is reasonably possible as required by Insurance Law § 3420(d).  In turn, Burlington was precluded from relying upon the exclusion, and the court rejected Burlington’s assertion that the delay was based upon the need to conduct investigation on the exclusion.

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

01/17/19       D.K. Property, Inc. v. National Union Fire Ins. Company

Appellate Division, First Department

New York does not have a Heightened Pleading Requirement for Consequential Damages

Plaintiff purchased a policy from defendant covering direct physical loss or damage to plaintiff's building, located at 40 Prince Street in Manhattan.  After certain construction work began in an adjoining building, plaintiff's building began to shift and exhibit structural damage, including cracks.  In October 2014, plaintiff filed a timely insurance claim with defendant. Defendant, however, did not pay the claim, nor did it disclaim coverage.

Plaintiff filed a lawsuit with causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.  Plaintiff sought consequential damages in connection with each cause of action and legal fees solely in connection with its bad faith cause of action.

The complaint alleged that rather than pay the claim, defendant made unreasonable and increasingly burdensome information demands throughout the three year period since the property damage occurred.  Plaintiff contended that this was a tactic by defendant to make the claim so expensive to pursue that plaintiff would abandon it altogether.  Plaintiff further alleged that defendant's investigatory process had taken so long and become so attenuated that the structural damage to the building worsened. Among the consequential damages alleged were engineering costs, painting, repairs, monitoring equipment, and moisture abatement to address water intrusion, loss of rents, and other expenses attributable to mitigating further damage to the property.

Plaintiff also alleged that despite substantial documentation of the cause and extent of the damage to plaintiff's building, not only by plaintiff's engineer, but also an engineer that defendant hired, who inspected the building several times, defendant persisted in demanding further, unnecessary monitoring, data collection, inspections, and reinspections.  In addition, although defendant had not yet paid the loss or denied the claim, defendant nonetheless sought to intervene as plaintiff's subrogor under the policy when plaintiff sued the owner of the adjoining property.

The court allowed the claim for consequential damages to stand.  A plaintiff may sue for consequential damages resulting from an insurer's failure to provide coverage if such damages (risks) were foreseen or should have been foreseen when the contract was made.  Although proof of such consequential damages will ultimately rest on what liability the insurer is found to have assumed consciously, or from the plaintiff's point of view, have warranted the plaintiff to reasonably suppose the insurer assumed when the insurance contract was made, a determination of whether such damages were, in fact, foreseeable should not be decided on a motion to dismiss and must await a fully developed record.

Here, plaintiff's allegations met the pleading requirements of the CPLR with respect to consequential damages, whether in connection with the first cause of action or the second cause of action for breach of the covenant of good faith and fair dealing in the context of an insurance contract.  The court rejected defendant's argument that there is a heightened pleading standard requiring plaintiff to explain or describe how and why the "specific" categories of consequential damages alleged were reasonable and foreseeable at the time of contract.  Rather, the court stated that there is no heightened pleading requirement for consequential damages.

The court also noted that a claim for breach of contract and one for bad faith handling of an insurance claim are not necessarily duplicative. Indeed, the first and second causes of action pled different conduct by defendant.

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

01/22/19       Katchen v. GEICO et al.

New Jersey Superior Court, Appellate Division

New Jersey Appellate Divisions Rules that Auto Insurers Can Exclude UIM Coverage for Owned Vehicles Not Listed on Policy

In 2015, plaintiff suffered injuries in a motor vehicle accident while operating his Harley Davidson motorcycle. Prior to settling with the other driver for his policy limit of $25,000, plaintiff submitted a UIM claim under three insurance policies he maintained: a motorcycle policy issued by defendant Rider Insurance Company (Rider), a commercial auto policy issued by defendant Farmers Insurance Company of Flemington (Farmers), and a personal auto policy issued by defendant Government Employees Insurance Company (GEICO).

The Rider policy provided $100,000 of UIM coverage, the Farmers policy provided $1,000,000 in UIM coverage, and the GEICO policy provided UIM coverage of $250,000.

GEICO disclaimed coverage based upon an exclusion in its policy.  Section IV of GEICO's policy, which addresses both UM and UIM coverages, provides, in relevant part:

LOSSES WE PAY

We will pay damages for bodily injury and property damage caused by an accident which the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle arising out of the ownership, maintenance[,] or use of that vehicle.

However, Section IV excludes coverage for "bodily injury sustained by an insured while occupying a motor vehicle owned by an insured and not described in the Declarations and not covered by the Bodily Injury and Property Damage liability coverages of this policy." Because the motorcycle, although owned by plaintiff, was not listed on the policy it issued, GEICO determined it did not constitute an "owned auto," which the policy defined as a "vehicle described in this policy for which a premium charge is shown for these coverages." Based upon this determination, GEICO denied plaintiff's claim.

Upon receiving GEICO's disclaimer, plaintiff filed a complaint against all three defendant insurance carriers, seeking a declaratory judgment that the UIM coverage of all three carriers applied to the subject accident. GEICO then filed a motion for a declaratory judgment, urging the court to find its owned-motor-vehicle exclusion "valid, unambiguous, and enforceable." The motion court denied GEICO's motion, viewing the language of GEICO's policy as ambiguous, and holding that GEICO failed "to comply with the statutory requirements [of] N.J.S.A. 17:28-1.1."

The parties thereafter came to an agreement that Rider and Farmers would pay their pro-rata share of the $975,000 in UIM coverage owed to plaintiff, and GEICO would take this appeal; if GEICO does not prevail, it would pay its pro-rata share as well. Plaintiff, Rider, and Farmers (hereinafter “respondents”) all opposed GEICO's appeal.

On appeal, GEICO argued the motion judge incorrectly found the subject policy ambiguous and in violation of N.J.S.A. 17:28-1.1. GEICO asserted its exclusion unambiguously bars UIM coverage for a loss sustained by plaintiff while operating a motor vehicle he owned but did not insure under GEICO's policy.

Respondents argued GEICO's policy, which addresses both UM and UIM coverage in the same section, violates the statutory mandate that all motor vehicle liability policies, except basic automobile insurance policies, shall include coverage "for payment of all or part of the sums which the insured or his legal representative shall be legally entitled to recover as damages from the operator or owner of an uninsured motor vehicle . . . ." N.J.S.A. 17:28-1.1. Respondents asserted this violation of the statutory mandate regarding UM coverage, renders the entire section ambiguous.

However the Court found that Respondents’ arguments lacked merit. Particularly, since this case does not involve UM coverage. As such, the Court reasoned that “whether the clause is ambiguous as to the UM benefits has no bearing on whether the clause is ambiguous in regards to UIM benefits.”

More importantly, the Appellate Division did not find the policy's exclusion ambiguous. In New Jersey, clear language in an insurance policy should be interpreted as written. The policy excludes UIM coverage when an insured suffers injuries in a "motor vehicle" owned by the insured but not covered by the policy.

The Court reasoned that: “The challenged exclusion explicitly states UIM coverage is not provided for an insured's injuries sustained in a motor vehicle owned by the insured but not covered by the policy. Any ordinary reasonable person understands a motorcycle is a type of motor vehicle.”

The Court found the exclusion to be unambiguous. Applying the facts to the exclusion, the Court found that GEICO’s declaration page does not list the subject Harley Davidson as a vehicle insured under the policy. Instead, the policy only listed a Dodge Ram. Since the exclusion clearly applied, the Appellate Division reversed, granting summary judgment in favor of GEICO.

 

Marti's Legislative and Regulatory Markers

Jerry Marti

[email protected]

 

01/09/19       Bill A00251    

New York State Assembly         

Act to Study Impact of Minimum Coverage for Non-Commercial Auto Insurance

Assemblyman Kevin A. Cahill from Assembly District 103 in Kingston, New York introduced a bill to require the Department of Financial Services (“DFS”) to conduct a study to determine the impact of raising the minimum coverage limits of automobile insurance coverage.  The review of minimum coverage would include liability, uninsured motorist, no-fault, and additional coverage options, including but not limited to comprehensive collision, and supplemental uninsured/underinsured motorist coverage.

In addition, DFS is required to issue a report to various legislators no later than April 15, 2021 detailing its findings and recommendations as to whether the required minimum coverage amounts for liability, uninsured motorist coverage, and no-fault should be increased, the extent to which such coverage should be increased, and the impact this would have on premiums.  The study will be created in consultation with the relevant stakeholders, including insurance companies, insurance providers, consumer advocacy groups, and any other person or entity DFS deems necessary.

 

OFF THE MARK
Brian F. Mark

[email protected]

01/17/19       Cowart v. Nautilus Ins. Co.

U.S. District Court for the Southern District of Georgia, Savannah Division
US District Court Finds No Duty to Defend Where Alleged Defective Workmanship did not Constitute “Property Damage”

This declaratory-judgment action arises out of an underlying construction defects action related to the construction of a pool, hot tub, and deck.  Defendant Audrey Manes (“Manes”) hired the plaintiff, Delma Cowart (“Cowart”), to construct a pool, hot tub, and deck in her backyard.  Despite being aware that the County required certain permits to be obtained for this kind of work and that the county would likely issue a "stop work" order if it discovered such work was being done without proper permits, Cowart neglected to obtain any permits before proceeding with construction.  He also neglected to request any of the required inspections by the county of the work as it progressed.  After performing approximately 80% of the work, the County Building Safety Department issued a "Stop Work Order" due to the lack of permitting for the project.  Around the same time as the stop work order, Manes became concerned with the quality of Cowart's work on the pool.  She claimed, the work had not been done in a "safe, good and workmanlike manner and [was] defective," and because he had failed to obtain a permit prior to beginning the work. The alleged defects included insufficient thickness and composition of the shell of the pool, improper bonding of the pool, insufficient drainage for the pool, improperly installed lighting in the pool, and crooked and unsafe steps.

At the time he performed the pool construction work for Manes, Cowart, d/b/a Structures Unlimited, was insured by Nautilus Insurance Company ("Nautilus").  The Policy defines "property damage" as: “a. Physical injury to tangible property, including all resulting loss of use of that property.  All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured.  All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.”

The Policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."  The Policy also contains exclusions that Nautilus seeks to rely upon in its Motion for Summary Judgment.  Specifically, pursuant to exclusion (j), there is no coverage for "property damage" to: ... “(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations; or

(6) That particular part of any property that must be restored, repaired or replaced because "your work was incorrectly performed on it. ... Paragraph (6) of this exclusion does not apply to "property damage" included in the "products completed operations hazard."

The Policy defines "your work" as, among other things, "[w]ork or operations performed by [the insured] or on [the insured's] behalf."  The "products completed operations hazard" includes "'property damage' occurring away from premises [the insured] own[s] or rent[s] and arising out of . . . '[the insured's] work' except . . . [w]ork that has not yet been completed or abandoned.”

After being placed on notice by Cowart, Nautilus sent Manes' counsel a letter stating that it had "concluded its investigation" and had determined there was no coverage for Manes' claim.

Manes then filed suit against Cowart.  The Manes complaint alleged that Manes was entitled to damages because "the partial work that has been performed by [Cowart] to date is defective, has not been completed in a reasonable, safe, good and workmanlike manner, in accordance with sound construction practices and industry standards, and was performed illegally and without [Cowart's] compliance with all applicable regulatory, building code, permitting and inspection requirements."  She also alleged that Cowart wrongfully refused to return to her the money that she had already paid him in connection with the project.  The complaint alleged negligence and breach of contract and sought the return of monies paid by Manes and attorneys’ fees.

After being served with Manes' complaint, Cowart tendered his defense to Nautilus.  Following Nautilus's refusal to defend him in the Manes lawsuit, Plaintiff Cowart filed this declaratory-judgment action.

Nautilus filed a motion for summary judgment on the grounds that Manes' claims against Cowart did not constitute claims for "property damage" as defined by the policy and were therefore not covered by it.  Nautilus also argued that even if the claims qualified as claims for "property damage," coverage was nonetheless excluded by one or more exclusion provisions in the policy.

Specifically, Nautilus argued that because Manes only alleged defects concerning the workmanship and construction of the pool that she hired Cowart to build, rather than damage to some other separate property, Nautilus was not required to defend Cowart on these claims per the policy.  The Court agreed that the claims against Cowart were not for "property damage" as defined by the policy.

The Court noted that it is well-settled in Georgia that the "property damage" requirement in policies such as the one at issue "limit[s] coverage in faulty workmanship cases to instances in which the faulty workmanship has damaged other, nondefective property or work"; that is, "damage beyond mere faulty workmanship" on the work the insured was hired to perform.

The Court rejected Cowart’s claim that the property damage did not result from defective or faulty workmanship of the defendant but rather from Cowart's alleged negligence in failing to obtain a construction permit, finding that such actions were prerequisites to the project's successful completion.  The controlling factor is whether the Manes complaint (or any of Manes' correspondence reviewed by Nautilus) alleged or implied that Cowart's partial performance of the pool project caused damage to, or loss of use of, property unrelated to the pool project itself.  As there was no evidence of any such allegation in the record, the Court held that Manes' claims were not covered by the policy.  Accordingly, the Court found that Manes did not allege claims for any harm to property qualifying as "property damage" pursuant to the policy.  Thus, Nautilus had no duty to defend or indemnify Cowart in the Manes lawsuit.

Nautilus further argued that even if Manes could be found to have alleged a claim for something qualifying as "property damage" covered by the policy, the policy's "business risk exclusions" require the Court to hold that Nautilus was not bound to defend Cowart against Manes' claims.  The Court agreed finding that both the j(5) and j(6) exclusions were applicable and barred coverage.  The Court found that all of the alleged shortcomings indisputably arose out of Cowart's "operations" on the project, triggering the (j)(5) exclusion provision.  Manes did not allege or imply that Cowart's work on the pool project caused damage to persons or property unrelated to the project.  Moreover, the requested and foreseeable damages associated with such defects— the costs associated with the necessary demolition and replacement of the pool—are also clearly excluded from coverage under the (j)(6) exclusion provision.  Accordingly, because none of Manes' allegations even arguably implicated damages beyond those arising out of, or necessary to remediate, the issues with the pool, the (j)(5) and (j)(6) exclusions applied and Nautilus had no duty to defend Cowart in the Manes lawsuit.

In light of the above, the Court held that Manes' claims against Cowart were not covered by the Nautilus policy and, even if they were technically covered, they were nonetheless excluded from coverage by one or both of the exclusions discussed above.  Accordingly, the Court granted Nautilus's motion for summary judgment.

With regard to the bad faith and attorneys’ fees claims, the Court held that its determination that Nautilus was not obligated to defend or indemnify Cowart precluded any finding of bad faith, stubborn litigiousness or unnecessary trouble and expense, which is necessary for such recovery.

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

Court quiet.

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

12/28/18       Rainforest Chocolate, LLC v Sentinel Insurance Company, Ltd.

Supreme Court of Vermont

Coverage for Phishing Scam Loss Not Barred By Ambiguous False Pretense Exclusion (VT Law)

The Supreme Court of Vermont, reversing a grant of summary judgment to Sentinel Insurance, concluded recently that the False Pretense exclusion of a business-owner policy was ambiguous, given the policy’s use of the undefined terms “physical loss” and “physical damage” as well as “loss and damage” in provisions sprinkled throughout the policy.

The background facts are as follows.  It seems the “phish” were biting in Vermont in May 2016, when Rainforest’s employee read an email purporting to be from his manager directing the employee to transfer $19,875.00 from a Rainforest account to an outside bank account.  The email was a phishing scam, but the duped employee did not realize it at the time, and made the requested electronic funds transfer.  Upon realizing it had been hoodwinked, Rainforest reported the loss to both its bank and Sentinel.  Luckily, Rainforest’s bank was able to freeze Rainforest’s account to the extent of limiting the phishing scam loss to $10,261.36.

Rainforest asserted to its insurer Sentinel that the phishing scam loss should be covered under its business-owner policy’s provisions providing coverage for losses due to Forgery and/or Computer Fraud and/or Theft of money or securities.  Sentinel disagreed, ultimately citing the applicability of the False Pretense exclusion of the policy as a bar to coverage for Rainforest’s phishing scam loss.

The business-owner policy at issue set forth, in pertinent part, a False Pretense exclusion as follows:

2.       We will not pay for physical loss or physical damage caused by or resulting from:

f.        False Pretense:  Voluntarily parting with any property by you or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.

Rainforest made the predictable insured argument, that is, that the False Pretense exclusion was inapplicable to its loss because it only expressly excludes

“physical loss or physical damages”, and the purely monetary loss here was not a “physical” loss.  Sentinel argued in opposition that because the insured had lost physical control and possession of the bank account money it was tricked into transferring away, the loss was in fact a “physical loss” falling within the False Pretense exclusion

The Vermont Supreme Court’s analysis and decision relied heavily upon the analysis and decision set forth in an opinion issued by a Montana federal district court just three months earlier, in Ad Advert Design, Inc. v. Sentinel Insurance Company, __ F.Supp.3d __, 2018 WL 4621744 (D. Mont. September 26, 2018) in a nearly identical business email phishing attack case.  Sentinel’s insured Ad Advert in that case had also suffered a loss of money when it unwittingly transferred money electronically to a fraudster as a result of a phishing scam. The District Court of Montana held Sentinel’s False Pretense exclusion to be ambiguous and construed it against Sentinel, finding the exclusion did not bar coverage for Ad Advert’s phishing scam loss.

The Vermont Supreme Court made the following point in declaring the False Pretense exclusion of Rainforest’s business-owner policy to be ambiguous: “The policy uses the two distinct phrases—‘physical loss and physical damage” and “loss and damage”—within different sections throughout the policy, sometimes switching between the two sentence to sentence, which would lead the average reader to assume there was some difference between them.  But, the policy itself does not define or explain the difference between the two phrases. The trial court dismissed this as “sloppy drafting” but sloppiness should not excuse an insurer from covering losses that a reasonable insured party would expect to be covered, based on a reasonable reading and interpretation of the policy language.”     

 

01/15/19       Summit Insurance Company v Stricklett

Supreme Court of Rhode Island 

Insurer Owes No Duty to Third-Party Claimant to Act Reasonably and in Good Faith in Settling Claim (RI Law)

In this declaratory judgment action relative to automobile liability insurance, the Supreme Court of Rhode Island affirmed nine days ago the Superior Court’s judgment in favor of Summit Insurance Company.  Held: the insurer owed no duty to an eleven-year-old pedestrian boy and his parents to act in a reasonable manner and in good faith in settling their third-party liability claim against its insured.

By way of background, on April 26, 2002, a car operated by Mr. Stricklett struck and injured Scott Alves, who was eleven years old at the time. Scott suffered a fractured tibia and fibula and underwent three surgeries to repair the fractures. At the time of the incident, Mr. Stricklett's vehicle was insured by Summit under a policy with a $25,000 per person, $50,000 per accident coverage limit.

Notably for this case, Scott and his parents, the third-party claimants, were not assignees of the rights of the insured driver Mr. Stricklett whom the third-party claimants contended was liable for the boy’s injuries and resultant medical bills. The insured Mr. Stricklett basically stayed out of the argument. Though far from immediately, eventually Summit tendered the liability insurance policy limit in an attempt to settle the third-party claim. The third-party claimants rejected the policy limit settlement offer, and contended Summit had not acted in a reasonable manner or in good faith as to settling the third-party claim against its insured.

The Supreme Court of Rhode Island’s opinion issued January 15 discussed and clarified prior decisions (which this columnist will refer to in the interest of time constraints as Auclair, Asermely, and DeMarco, respectively) issued by the court and cited by the third-party claimants in support of the third-party claimants’ argument that legal precedent had been established in Rhode Island such that an insurer owes a duty of good faith and fair dealing to third-party claimants, regardless of whether there has been an assignment of the insured’s rights to the third-party claimant.  The Supreme Court rejected this argument of the third-party claimants, stating: “As this Court held in Auclair, the relationship between an insurer and a third party is adversarial, “giving rise to no fiduciary obligation on the part of such insurance carrier to the claimant. Auclair, 505 A.2d at 431. Accordingly, “there is no duty on the part of an insurance carrier for a third party to settle promptly with a claimant.” Id. Therefore, far from aligning with the Alveses' contentions, our precedent dictates that “[a]ny obligation to deal with settlement offers in good faith runs only to the insured,” id., or, as in Asermely and DeMarco, “to a party to whom the insureds have assigned their rights.”

Because the third-party claimants had never obtained any assignment of the insured’s rights, they had no basis to contend or expect Summit owed them any duty of good faith and fair dealing in the negotiation of a settlement of the third-party claim.  

 

BARCI’S BASICS (ON NO FAULT)

Marina A. Barci

[email protected]

 

01/11/19       A & S Med. Supply, Inc. v. MVAIC Ins. Co.

Supreme Court, Appellate Term, New York

Provider Required to Exhaust All Remedies against Other Carriers before Seeking No-Fault Benefits

A non-jury trial was commenced by plaintiff provider to recover assigned first-party no-fault benefits from MVAIC Ins. Co. It was stipulated that the sole issue was whether or not plaintiff had exhausted its remedies. If MVAIC could prove that there was potential coverage through the assignor’s son, who lived with him on the date of the loss, MVAIC would not have to pay the claims because plaintiff would not have exhausted all its remedies first.

The only witness presented at trial testified that a document he reviewed in the course of his work appeared to be an insurance policy from Long Island Insurance Company (LIIC) to a person living at the same address as the assignor with the same name as the assignor’s son on it. The lower court would not admit the documents as a business record, but did find this witnesses testimony credible. However, because the alleged insurance policy was inadmissible, the lower court found MVAIC failed to sustain its burden to prove there was coverage at the time of the accident, and therefore was required to pay the claims from the provider. MVAIC appealed.

The court found 1) that the LIIC records were admissible, and 2) that since the pretrial stipulation only required MVAIC to prove there was potential coverage, MVAIC sustained its burden. Plaintiff, therefore, was required to exhaust its remedies against all potential insurance carriers before seeking relief from MVAIC, which they did not demonstrate they completed here.

 

01/02/19       Pavlova v. Allstate Ins. Co.

Civil Court of the City of New York

Insurer Failed to Demonstrate Any Viable Defenses; Provider Made Prima Facie Case to Recover No-Fault Benefits

Plaintiff provider moved for summary judgment against Allstate to recover assigned first party no-fault benefits. Allstate cross-moved for summary judgment based up plaintiff assignor’s purported failed to appear for 4 EUO’s, or alternatively, based upon their belief that the alleged accident was an intentional loss and therefore not a covered event.

When an insurer moves for summary judgment on the ground that an assignor failed to appear for an EUO, the insurer needs to establish that it twice demanded an EUO and twice the assignor failed to appear, and thereafter the insurer timely denied the provider’s claims. Upon review of the EUO no-show defense, the court found that the denials issued were untimely as they were issued on February 2, 2016 and the last EUO was scheduled on December 7, 2015. Allstate had 30 days from the last EUO to pay or deny the claims and since they did not do so in this case, the defense is precluded.

For an insurer to establish that an intentional loss or staged collision occurred, they must submit admissible evidence of “fact or founded belief that the alleged injury did not arise out of an insured incident.” This evidence will often be circumstantial, so the court must examine the facts and circumstances of the incident to determine whether they give rise to a logical inference of lack of coverage. The evidence Allstate offered to show an intentional loss were EUO transcripts of passengers in the car and the assignor. Allstate proffered that the transcripts demonstrated the incident was a purposeful collision, not an accident, based on inconsistent testimony of the parties. The court reviewed the transcripts and noted that while the testimonies were vague and at times, inconsistent, their recollections were not sufficient to demonstrate that a purposeful collision occurred. Moreover, Allstate did not proffer any affidavit from an investigator who could elaborate on why the inconsistencies demonstrate intentional losses. Without a cogent and detailed investigative summary of this type, the testimonies given do not rise to the level of a founded belief that the accident was staged. As such, Allstate’s proof was insufficient to raise a triable issue of fact.

Plaintiff, on the other hand, established its prima facie case through the affidavit of one of their employees and the bills annexed to the motion. Therefore, based upon the foregoing, plaintiff's motion for summary judgment is granted and Allstate’s cross-motion for summary judgment is denied.

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

08/16/18       Biasatti v. Guideone National Insurance Company

Texas Court of Appeals

Payment of Appraisal Award Precludes Bad Faith Claim (TX Law)

This case arises out of a wind and hail damage claim to property belonging to the insured. Guideone estimated the cost to repair at less than $2000, and since this amount was less than the policy deductible, they informed the insured that no payment would be made on the claim. Litigation was initiated wherein and courts directed the parties to proceed to appraisal which, somewhat remarkably, set the amount of the loss at nearly $170,000. The insurance company issued an appropriate payment to the insured for the amount of the appraisal award less deductible and depreciation. The issue remaining in the case was whether the insured can maintain any of its other claims against the insurance company, and the courts concluded that there were no other viable claims.

Guideone essentially contended that the insured cannot succeed on its remaining claims because they had paid the appraisal award, and that without a viable contract claim the insured’s other claims, including for bad faith, must also fail. Although there was a substantial difference between the appraisal award and the initial damage estimate, because Guideone had paid the insured the benefits available under the policy the courts ruled there was no material issue of fact supporting the remaining claims.

Guideone further argued that payment of the appraisal award precluded any additional claims against the insurance company under “bad faith” causes of action and extra-contractual liability. This claim was denied based on authority in Texas which states that an insured can recover actual damages caused by a statutory violation or bad faith conduct only if the damages are separate and different from the benefits under the policy. The courts here held that the “independent injury” requirement had not been met because the policy benefits had already been paid. The insured received the benefits it was entitled to under the policy, and not shown any damages or injury independent of its policy claim/benefits.

This case emphasizes the strategic and practical importance of following claims procedures and policy language to not only quickly and properly resolve claims, but also prevent extra-contractual and bad faith claims. One can never go wrong by applying the policy language, claims procedures, and good claims practices in resolving a claim, which will also frustrate bad faith and similar allegations.

In this case, there was indeed a wide discrepancy between the initial estimate of damage and the appraisal award which may have turned on some technical issues as to whether some damage was pre-existing and the extent of the alleged wind and hail damage. However, the courts actually had to grant the insurance company’s motion to compel appraisal, and paying the appraisal award was consistent with the policy procedure, closed the claim, and prevented any further bad faith and extra-contractual claims. In essence, both the Trial Court and the Appellate Court held that, when the insurance company paid the appraisal award, the insured had received the benefits it was entitled to under the policy, and could not show any claim or damages “independent” of its claim for policy benefits.

This case also represents the importance of variable state-by-state case law and statutes, with respect to bad faith and extra-contractual claims. Here, the insured could not allege or prove a claim and damages independent and different from policy benefits as required under Texas law. 

 

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