Volume XX, No. 18 (No. 529)
Friday, February 22, 2019
A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
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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.
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Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
We received some great feedback on our Special Edition on the Child Victims Act that was signed into law a week ago. If you missed it, that issue is available here and all of our 20+ year back issues, searchable, can be found from our website newsletter page. You can also find our other newsletters: Premises Pointers (subscribe by contacting Jody Briandi at [email protected]) and Labor Law Pointers (contact Dave Adams at [email protected]). For those involved in representing health care professionals, we also offer Health Law Pointers edited by Larry Ross ([email protected]).
Jerry Marti, who covers the Albany beat, is doing the follow up analysis on the Child Victims Act (Chapter 11 of the Laws of 2019). So, the way the new statute works, is that the statute of limitation is extended to age 55 for civil claims arising out of child abuse and incest. Moreover, if someone is over 55 now, he or she will have one year, starting on August 14, 2019, to commence an action.
How about insurance coverage for those claims? It may well depend upon the nature of the claims and, as always, the wording of the policy. Will negligent supervision claims be covered? Will the acts of one insured impact on the claims against another? That will require policy analysis. Many carriers (all?) have record retention policies that do not have the insurers keeping records of policies from 10, 20 or 50 years ago). Under the Act, a 65-year old man or woman who was victimized as a child in 1954 will be able to sue the man, woman or institution allegedly responsible.
OK, then what will courts do when a defendant claims that there was a policy in place covering him or her from 40 years ago? Jerry’s column reviews some of the case law on this subject and we urge you to take a look.
For those who belong to the New York Insurance Association (NYIA) stay tuned for a special presentation on the subject sometime next week. Watch your mailboxes.
Kudos to Steve Peiper on a well deserved win at the Second Department on a SuperStorm Sandy case. Attalawyer.
Lee’s Connecticut Chronicles
Find Lee Siegel’s first Connecticut Chronicle Column in this issue, covering Nutmeg State decisions. Lee is admitted to practice in both Connecticut and New York. Lee’s likely to cover some other topics, which are close to his heart, in future columns as the Connecticut courts don’t produce insurance coverage decisions as frequently as New York. We may tinker with the title of his column in the future.
Connecticut Magicians-to-Be Take Note:
Hartford Courant
Hartford, Connecticut
22 Feb 1919
MAGICIAN TOOLS—Will sell, or trade for any automobile with bonus, my magical and illusion tools; also very intelligent French poodle, 11 mos. old. Owner made $3,000 in 10 months. Cannot travel anymore because of poor health. Good opportunity for any person to become an A1 magician; up-to-date tricks; including trunk escape trick worth $275, one flag trick, never seen in this country, worth $235, and 100 others. Will give full description. For particulars write Magician, 34 Pratt St., Meriden, Conn. Tel. 331-4.
Editor’s Note: Curious as I am, I checked to see whether there was a magic shop at that address. Love Google Maps. Nope, Abracadabra, it vanished. Now it is a pretty park.
Lee’s Connecticut Chronicles:
Dear Readers:
Welcome to our inaugural Lee’s Connecticut Chronicles column. Here, we extend the Hurwitz & Fine reach into the Nutmeg State, providing you with insurance coverage news and nuggets directly from the Insurance Capital of the World. With experienced counsel located directly in the state, we are able to service all your Connecticut coverage and litigation needs. In today’s case summary, we touch on Connecticut’s views on the enforceability of suit limitations provisions, whether appraisal (or arbitration) requests are a “suit or action,” and prejudice for untimely notice – all in the same case. Keep checking Lee’s Connecticut Chronicles, and we’ll keep you up to date on the Connecticut coverage and bad faith landscape.
Lee
Lee S. Siegel
Beer Strike:
The Chattanooga News
Chattanooga, Tennessee
22 Feb 1919
BEER STRIKE JULY 1
Two Hundred Thousand Pledged,
Say Union Officials
New York, Feb. 22.—Over 200,000 workers affiliated with the Central Federated Union are pledged to go on strike July 1, if deprived of beer, according to figures given out by union officials today.
Six unions attached to the federation are on record today for a “no beer, no work” strike, following meetings here last night at which agreements were signed. Labor leaders say that 200,000 workers in other parts of the country have joined in the stand against national prohibition, making a total of 500,000 already lined up for the strike.
The New York list of prospective strikers included 20,000 iron workers, 20,000 engineers, 60,000 shipbuilders, 65,000 longshoremen and 38,000 miscellaneous workers. In making public these figures today Ernest Rohm, secretary of the Central Federated Union, predicted that the action would be followed by labor organizations throughout the United States.
Editor’s Note: Prohibition was new. The Eighteenth Amendment of the United States Constitution established the prohibition of "intoxicating liquors" in the United States. The amendment was proposed by Congress on December 18, 1917, and was ratified by the requisite number of states on January 16, 1919. The Eighteenth Amendment was repealed by the Twenty-first Amendment on December 5, 1933.
John’s Jersey Journal:
Dear Subscribers:
February isn’t exactly concert season, but nonetheless, Erin and I found a concert to go see, Andrew McMahon in the Wilderness came to Buffalo this past weekend. Stupid name for a band. But I tend to like music from bands with stupid names, including the Goo Goo Dolls and Wakey Wakey. It was a great concert. Andrew McMahon used to be a band member of Jack’s Mannequin and Something Corporate, so he had quite a few good songs. I hope all of you are finding ways to keep yourself entertained through the winter.
We have something unique in our column today. A case from New York. The New York Appellate Division, applying New Jersey law, held that the insurer was not estopped from denying coverage. Since it’s really a New Jersey law issue, the case is filed in my column.
New York Supreme Court, New York County, found coverage under Selective’s policy and awarded the New York State Insurance Fund nearly $1.5 million. Selective appealed to the Appellate Division, First Department. The key issue to the New York Appellate Division was whether or not Selective’s disclaimer was timely under New Jersey law. The New York Appellate Division reviewed New Jersey law and unanimously ruled that Selective’s disclaimer was not untimely and that coverage was barred by the employer liability exclusion. As such, the Court ruled that Selective did not owe coverage and vacated the one-and-a-half million-dollar judgment.
As our subscribers know, we appreciate when other attorneys do good work on behalf of carriers and the industry. We congratulate Michael Marone of McElroy Deutsch, Mulvaney, & Carpenter on his victory.
More in line with our typical offerings, we have an independent contractor case from the New Jersey Appellate Division. There, the Court ruled that the independent contractor exclusion was unambiguous and enforceable. The claimant was an employee of the insured’s subcontractor. A rather straight-forward application of the exclusion to the facts. What made the case unique, however, was that the insurance company, Evanston, months earlier had commenced a DJ and obtained a default judgment against the claimant.
Months later, the claimant commenced his own lawsuit and joined Evanston for discovery purposes. Evanston immediately moved for summary judgment on two bases: (1) Evanston had already obtained default judgment over the claimant; and (2) even if the court were to consider the case on the merits, the subcontractor employee exclusion applied.
Evanston won on both points. The default judgment was binding. The claimant had notice of the action and simply chose not to appear. Thus, there was no reason to address the merits. However, given how straightforward the merits of the case were, the Court addressed them and ruled that the subcontract exclusion applied barring coverage.
John
John R. Ewell
What Would Ann Landers Say Today if Asked the Same Question?
The Buffalo Times
Buffalo, New York
22 Feb 1919
DEAR ANNIE LAURIE:
We are three girls, 15, 16, 17 years of age, and would like you to give us some advice. We go with boys who are very dear friends of ours, and would like to know if it is proper to kiss them good night after returning from a party, as we were asked by them, but refused. They became angry and we would like to know how to regain their friendship, as we love them very much, and we are confident that our love is returned. And also, could you give us some advice on what to serve at a social gathering to be held the last of this month, and also some games to play?
BLONDY, BRUNETTE, BROWNIE
BLONDY, BRUNETTE, BROWNIE:
You certainly should not kiss the boys good night. Only the man you are engaged to should get your kisses. And any boy that will insist or become angry because a girl will not kiss him is not the right sort, and if I were you I shouldn’t try to regain his friendship. No, dears, you don’t “LOVE them,” for all of you are altogether too young to know what love means. You may have been good friends, but that is all.
My dears, you don’t state what kind of a gathering you want the menu for, but I think that sandwiches, coffee, ice cream and cake is a very nice little luncheon for an informal gathering. Of course, it is easy enough to add to this and make a very much more elaborate affair.
Peiper on Preclusion, Proximate Causation and Two-Minute Penalties:
Your author is proud to present a full, and quite varied, column this week. We start with a fairly important decision from the Second Department involving the Dominant and Efficient Cause of Loss Rule. As you may know, New York law has long rejected a concurrent causation test for first party losses. What this means, and which is endorsed by the Second Department, is that not only must the policyholder establish that a covered cause of loss occurred, it too must establish that the actual damage for which coverage is sought was resultant from the covered cause of loss.
One drop of rain, does not result in the flood.
Put another way, the Second Department’s ruling means that a carrier may still establish a policy defense even where there is a secondary, much more limited covered cause of loss. The inquiry is on what damage caused what loss, and in the case of two contributing losses, is there clearly a dominant reason? If so, that reason is dispositive.
We also review two change of venue cases. CPLR § 510 identifies the grounds for moving venue. The first, Section 510(1) is where venue is no longer appropriate because no party resides in the county where the matter is situated. This requires a motion, but only after a demand to change venue is promptly made. The motion, however, must be brought within 15 days of the demand to change venue.
Section 510(2) and 510(3), respectively, can be brought at any time during the litigation. Section 510(2) involves the impartiality of a potential jury pool, and Section 510(3) involves inconvenience to witnesses or when the interests of justice compel the movement of venue. It is this final section that should be particularly noted. The First Department, as reviewed below, will grant change of venue where the underlying incident/lawsuit, policy and policyholder all reside in a different county. This is quite different than the Fourth Department which appears to require, essentially, proof that a defense cannot be proffered due to the refusal of material witnesses to respond to a party’s outreach.
Majorly different standards on the same issue. That said, given that the authority in granting an application usually rests with the trial court, we don’t see the split being addressed at any time in the near future.
On the personal side, Squirt Hockey Playoffs start this week. Depending on the outcome of Sunday’s semi-final, we could be looking at less than a week of skating. While the defenseman who lives in my house is not yet exhausted, his driver to all things hockey is quite fatigued. Still looking for a win on Sunday, but my car and wallet are starting to entertain thoughts of a respite.
Optional skates, by the way, start again in June. Those of you who know this, well, you know this.
That’s it for this week. See you in two more.
Steve
Steven E. Peiper
A Tip of the London Hat – a Century Ago:
News-Press
Fort Myers, Florida
22 Feb 1919
WORRIED OVER HAT
Legislators Must Solve Problem
of Etiquette
Rules Governing Procedure of British
House of Commons Will Have
to be Radically Revised to
Fit New Times
Members of the British “Hothouse” of Commons stand self-accused, and women are beginning to understand why there was so much opposition on the question of their being allowed to sit in parliament.
“The House of Commons is not a fit and proper place for respectable women to sit in,” said Sir Hedworth Meuz, making a speech in regard to the proposal. “I oppose this resolution,” he contained, “not because I do not love the female sex, but because I adore women. But is it a proper thing for women to be sitting here until 11 o’clock at night? When we sit until 2 and 3 in the morning the historic cry of ‘Who goes home?’ will become ‘Who will take me home?’”
In the future the big strangers’ gallery will be open to women as well as men, but the ladies’ gallery will still continue to be restricted to the exclusive use of women, so that whatever of privileged sex position still remains in Parliament will be to the advantage of the gentle sex. Thus are the tables turned.
Many amusing queries are being pout to perplexed politicians. The concentrated wisdom of a thousand years has made rules, and the rules have been for men only.
One thing that becomes a problem is the etiquette of the hat. A rule in this connection is that if a member wishes to address the house he must remain “uncovered.” Male members now have visions of the new woman member standing up and removing her latest Paris creation. Of necessity she must have a mirror to arrange her disheveled locks.
Hewitt’s Highlights:
Dear Subscribers:
We have a few interesting cases this time around on the serious injury front. In one case, the court reminds us that motorcycle operators and passengers are not entitled to the $50,000 in no-fault benefits. On the plus side, they do not have to demonstrate a serious injury under the law to recover in a personal injury action. In another case, there is a reminder that any gap in treatment, along with any proof of degeneration, must be explained by plaintiff in her motion papers. Further, plaintiff cannot rely on an affidavit that states there is range of motion limitations without a citation of what objective tests were used to determine this, and their findings. Finally, the Appellate Division denied a motion for plaintiff on serious injury as premature when the plaintiff had not yet submitted medical records or authorizations so that defendant could not properly rebut the plaintiff’s motion.
On the home front, the ground hog has been mostly right, as the weather was mild for the last two weeks, except for yesterday when we got an inch of snow/ice on Long Island. With my children and wife on winter break from the schools, they would have enjoyed a bigger snow storm.
Until next issue,
Rob
Robert Hewitt
Baseball Season Approaching:
The Morning Chronicle
Manhattan, Kansas
22 Feb 1919
Cleveland.—The Cleveland American League Club has sent contracts to its players, nine of which have been mailed overseas. Manager Fohl intends to start for New Orleans with the first squad of pitchers and catchers on March 9. The second squad will leave March 16. Contracts forwarded across the Atlantic went to Lieut. Ed. Klepfer, Sergt. Joe Harris, Sergt. Lousi Guisto, Sergt. Clark Dickerson, Sergt. Elmer Smith, Sergt. Otis Lembeth, Corporal Chet Torkelson and Jess Petty.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
Greetings from a cold and rainy Phoenix! It’s not exactly the weather I expected or had hoped for out here, but at least the venue is nice. And it’s not snowing! I’m here at the ABA TIPS Insurance Coverage Litigation Midyear Conference, at the lovely Arizona Biltmore. The conference has only just begun, but already the presentations and business meetings have been engaging and informative. If you’re ever looking for a high-level, coverage-heavy few days, let me know. The Insurance Coverage Litigation Committee (ICLC) has a number of meetings throughout the year, just for us coverage geeks. Indeed, lots of great meetings and conferences coming down the pike so stay tuned and drop me a line for more info! Hopefully the weather is better going forward.
Now, the Second Circuit was quiet again this week in terms of coverage decisions. However, as you know, sometimes in the Wide World of Coverage we cover coverage from other Circuits as well. Since I’m presently within the jurisdiction of the Ninth Circuit, we bring you a recent decision from here that might be of interest. In Yahoo! v. National Union, the Ninth Circuit took a look at whether a CGL policy provided coverage under the personal and advertising injury for claims stemming from the federal Telephone Consumer Protection Act (TCPA). National Union had issued Yahoo! a number of policies and when they were sued for allegedly spamming people with text message advertisements, the coverage issue arose. Namely, whether this coverage includes claims or injuries solely to the right of seclusion. Unfortunately, it turned out that there was some dispute among the courts in California on the issue. On top of that, while a Circuit Court can look outside of its jurisdiction for guidance, the issue is up for debate throughout the country. In the end, they certified a question for the top court in California to mull and address. We’ll be monitoring this and will report back what they conclude.
Until next time!
Agnes
Agnes A. Wilewicz
Peace Bridge Plans Underway:
The Buffalo Enquirer
Buffalo, New York
22 Feb 1919
FORMULATE PLANS
FOR PEACE BRIDGE
West Side Business Men Hear of Scheme to Span Niagara
as Memorial – Canadians Give Their Views.
Buffalo and Fort Erie business men joined in expressing arguments for construction of a peace memorial bridge over Niagara River between this city and the Canadian village at a meeting of the West Side Business Men’s Association held last night at Mizpah Hall.
Among the speakers were Councilman Charles M. Heald, Peter A. Porter of Niagara Falls, Marcus Harmon, representing the chamber of Commerce; Harry T. Vars, Greater Buffalo Advertising club; George B. Bassett of the Engineers’ society, William A. Eckert, president of the West Side Business Men’s club; Capt. G. H. Norton, city engineer; C. E. Steele of the Port Colborne board of trade, W. F. Wilson, Fort Erie; W. F. Fawcett, president of the board of trade, Port Colborne; John T. James, Lewis Wilson, Milford Hershey, and others who heartily endorsed the project.
Councilman Heald said that the bridge should be restricted from steam railroad traffic as that would detract from its beauty and its value as a memorial by tending to commercialize it.
Mrs. Vars favored appointment of an international committee of twenty-five members to forward the bridge project. Mr. Eckert favored a high level bridge from Massachusetts Street to the Canadian shore opposite that point. That would bring the Canadian terminus at the Garrison road.
Henry G. Anderson presided at the meeting.
Editor’s Note: There was a 17-year discussion over the construction of the bridge. It wasn’t until 1926 when the Canadians and Americans finally started construction of what is now known as the Peace Bridge, spanning the Niagara River between Buffalo and Fort Erie (just about at the location discussed at the meeting). It opened in 1927. It does not carry railroad traffic as there is a separate span solely for the trains.
We noted above that prohibition was in place in the U.S. until 1933. It had ended in Canada a few months before the Peace Bridge opened and the press at the time (1927) noted that American citizens could easily travel to Fort Erie for alcohol.
Barnas on Bad Faith:
Hello again:
My Raptors made the trade that I was hoping for on deadline day, bringing in Marc Gasol to add some experience and skill to the frontcourt. The big Spaniard looked good in limited action before the NBA all-star break. Hopefully, with some time off, we will be able to get him fully immersed into our offense so that we can make a run at the top seed in the Eastern Conference.
Sticking with basketball, there is a huge game coming up this Saturday for my Syracuse Orange. #1 Duke is coming to town, and ESPN is bringing College Gameday back to the Carrier Dome for the first time since the first Cuse-Duke matchup as members of the ACC back in 2014 (an all-time classic regular season game and a Cuse win for those who don’t recall). Unknown at this point is whether Duke will have presumptive first overall pick Zion Williamson, after he left with a knee injury 36 seconds into Duke’s game against UNC when he slipped and fell awkwardly after his Nike sneaker exploded. This presents a bit of a conflict for me. On one hand, Syracuse could really use a second win over Duke for its NCAA Tournament hopes and/or seeding. On the other hand, I would really like to get the chance to see Zion play in person. Either way I’m looking forward to spending Saturday on the Hill and taking in Cuse-Duke as part of what will be the largest ever on-campus crowd for a college basketball game.
In my column this week I have a case from the Northern District of Oklahoma. It’s a collision coverage case where the insured and insurer disagreed by approximately $3,500 over the value of the insured’s damaged vehicle. The insured asked for appraisal, but he alleged that the insurer never responded to his request. He filed a lawsuit alleging breach of contract and bad faith. The motion to dismiss the bad faith claim was denied. Plaintiff’s specific allegations that the insurer denied his request for appraisal, failed to respond to his communications, and failed to conduct a proper investigation were sufficient to state a claim for bad faith.
Signing off,
Brian
Brian D. Barnas
Babe Ruth – Prize Fighter?
Star-Gazette
Elmira, New York
22 Feb 1919
“BABE” RUTH WOULD
BE A PRIZE FIGHTER
“Babe” Ruth, the big hard hitting pitcher-outfielder of the Boston Americans, announces that he is really in earnest about becoming a professional boxer. Ruth announced designs on the heavyweight championship when he saw that Jack Dempsey had been promised at last $27,000 for fighting Jess Willard, and that the champion had been assured of $100,000. Ruth likes money just two points more than he likes a home run, and that is the last word in liking. In addition, Ruth is not the most modest of men, and he really believes that if he took one healthy swing at the jaw of Jess, the Kansas behemoth would kiss the canvas. Therefore, Babe has fistic aspirations and he is going to learn to handle his mitts.
Editor’s Note: To see a video of the Babe engaging in his pugilistic endeavors and read a little more about his boxing desires, click here.
Off the Mark:
Dear Readers,
The kids have been enjoying their winter break this week. Yesterday, my parents took the boys go-karting. From what I was told, they had a blast, but their driving skills leave much to be desired. Luckily, we have plenty of time to work on that.
This edition of “Off the Mark” discusses a recent construction defect case from the US District Court for the Southern District of Florida. In Scottsdale Ins. Co. v. Granada Ins. Co., the Court examined the duty to defend an additional insured relative to a claim for damages first noticed after the construction project had been completed and the site had been put to its intended use. The Court held that the products-completed operations hazard exclusion barred coverage, despite the possibility that the damage may have occurred before the project had been completed. The Court noted that the damages arising from the construction defects materialized years later, when the underlying plaintiff learned of the faulty workmanship. The Court found that those damages unambiguously fell within the completed operations hazard. As such, the defendant carrier did not owe a duty to defend the plaintiff’s insured as an additional insured.
Until next time …
Brian
Brian F. Mark
[email protected]
Defective Government Ships? Tell Me it Ain’t True!:
New-York Tribune
New York, New York
22 Feb 1919
Government’s Ships Are
Defective, Hurley Told
Wooden Vessels Unfit for
Overseas Service, Insurance
Man Declares
WASHINGTON, Feb. 21.—Marine insurance brokers and underwriters have agreed to work out a plan for writing insurance on government ships and cargoes for submission to the Shipping board, Chairman Hurley was informed to-day by a committee of insurance men. Opposition to the establishment of any government agency to write marine insurance was voiced by members of the delegations, who said they would cooperate with the board to any extent necessary in making rates and placing policies.
Wandering Waters
Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.
The NBA had its annual All Star Game this past Sunday. Kevin Durant won the MVP with an amazing performance in the All Star Game. While the game was entertaining and relatively competitive, news outlets reported that viewership was down considerably from last year.
Nevertheless, viewership should return to normal with the NBA entering the stretch run tonight. With less than 30 games to play, the players are picking up the intensity in preparation for the playoffs. Many teams are still fighting for playoff spots. Currently, the Western Conference playoff race is so close that only a few games separate a team from securing the sixth seed and a team missing the playoffs entirely.
With the stretch run among us, all eyes are on the Lakers. After making the finals for eight years in a row, LeBron is in danger of missing the playoffs all together for the first time since his rookie year in the league.
With that being said, we have one case this week from the United States District Court, Northern District of New York.
Until next time….
Larry
Larry E. Waters
He Waited 50 Years (of Marriage) to Get Drunk:
The Tampa Times
Tampa, Florida
22 Feb 1919
Satisfied 50-Year-Old Longing
Kansas City, Mo., Feb. 22.—(I. N. S.)—All his married life of 50 years John O’Riley, 70, had been intending to get drunk, just to see how it would feel. Knowing nation-wife prohibition was coming, John decided delay was dangerous, so he carried out his long-cherished ambition. Mrs. O’Riley had him arrested. Husband and wife faced Judge Casimer Welch in the South Side court. John was a “good natured’ drunk, she said. “In that case I’ll release him,” said the judge. “I’ll never do it again, Judge; my curiosity has been satisfied,” O’Riley said.
Boron’s Benchmarks:
Dear Readers:
I have a lot of things to be thankful for, starting with the fact that I work with some of the top coverage attorneys anywhere, here at Hurwitz & Fine. This week, I am also hugely thankful for the run of incredibly beautiful weather Orlando, Florida, has been experiencing in recent days. I am here in Orlando this week with my wife, kids and my younger brother and my sister, who are twins, celebrating a “milestone” birthday of my siblings. It has been a laugh-fest, and so memorable.
I have selected for this edition of Boron’s Benchmarks a Supreme Court of Iowa decision holding damage to the City of West Liberty Iowa's electrical equipment was caused by arcing and, thus, came within policy's electrical-currents exclusion.
I hope all is well with you. I will be back in the office on Monday.
Regards,
Eric
Eric T. Boron
Converting War Policies:
The Tampa Times
Tampa, Florida
22 Feb 1919
TO CONVERT WAR
RISK POLICIES
Government Announces Plans
for Handling Insurance
Announcement of plans for the conversion of war risk insurance, a matter of great importance to all soldiers and sailors entering civil life again, had recently been announced by the bureau of war risk insurance. Many questions pertaining to the insurance have puzzled men in the service in the past are made clear by the war department announcement. Louis F. Savarese, representing the Equitable Life Assurance Society, Citizens Bank Building, said this morning the would gladly explain any point of the announcement to a discharged soldier or sailor and help him in any way possible at any time when he chose to convert his present policy.
Marti's Legislative and Regulatory Markers:
Dear Subscribers,
As part of our multi-part series on the Child Victims Act, we focus this week on the issue of lost or missing insurance policies. With the statute of limitations raised up to the age of 55 on civil claims, and a revival period of one year starting on August 14, 2019 for those over the age of 55, there could potentially be claims dating back many years, if not generations. In some cases, the insurance policies may have been destroyed in the normal course of business. Similarly, there may not be a log of the policies destroyed by the insurer.
In those instances, the courts will generally allow the insured to provide secondary evidence to prove the existence and terms of an insurance policy. While an original document is not necessarily required in the case of lost insurance policies, the secondary evidence is still subject to the general requirement of trustworthiness.
In addition, the plaintiff will have the burden of proof on the existence of the policy and its terms. In doing so, the courts have been reluctant to hold the plaintiff to the higher standard of proof, namely “clear and convincing evidence,” due to the concern that insurance carriers may destroy policies at an earlier point in time to prevent the insured from proving the existence and terms of the policy.
We continue this week with a look at two cases that shed further light with respect to the evidentiary rulings on lost insurance policies.
Jerry
Jerry Marti
California Considers Regulating Insurance Companies:
Santa Maria Times
Santa, Maria, California
22 Feb 1919
Bill Would Give State
Regulation Of Insurance Co’s
SACRAMENTO, Feb. 22.—The authority of the State Insurance Commission to regulate insurance companies, brokers and agents would be extended by a group of bills placed before the legislature by Senator Burnett. Other bills awaiting action affect fraternal casualty workmen’s compensation and automobile insurance.
Brokers or agents who misrepresent polices might be put out of business by the commissioner according to the previsions of one of Burnett’s bills.
Companies which habitually take every claim against them into court unless a ruinous compromise is made by the insured, would be hit by another Burnett bill which would give the Commissioner authority to revoke or suspend the certificates of such companies. Another bill would give the Commissioner power to require a relation between liabilities and reserves.
Barci’s Basics (On No Fault):
Hello Subscribers!
Last time I was here, I told you about my high school mock trial team’s preparation for their second competition. Sadly, I only have bad news to report. We lost that match as well and, therefore, were unable to move on to the next round of competition. While everyone was disappointed that competition season is over, the kids are very excited that their end-of-year banquet is earlier than usual. We go all out with a game of intense laser tag, a hibachi dinner, and ice cream to follow – which makes it all worth it, right?
This week I have three cases for you. They are all more procedural issues than no-fault issues, but equally as important in determining an action’s outcome.
That’s all folks,
Marina
Marina A. Barci
Things Don’t Change Very Much – Women’s Attire Takes Headline for Congressional Medal of Honor Winner’s Obit:
Ottawa Herald
Ottawa, Kansas
22 Feb 1919
LET HER WEAR TROUSERS.
Dr. Mary Walker, Civil War Surgeon,
Died at Bunker Hill, N.Y.
Watertown, N. Y., Feb. 22—Dr. Mary Walker, aged 87 years died at her home on Bunker Hill, near Oswego, at 8 o’clock last night after a long illness. She was a surgeon in the Civil War and was awarded a congressional medal of honor. She gained considerable fame by being the only woman allowed to appear in male attire by an act of Congress.
Jen’s Gems:
Playing with kids on vacation.
Jen
Jennifer A. Ehman
Headlines from Today’s Issue (attached):
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
-
Court Permits Action by Insurer to Proceed Seeking a Determination that it is Not Obligated to Pay No Fault Benefits Due to Material Misrepresentations in Application
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
-
Plaintiff Must Explain Any Gap in Treatment as well as Rebut Defendant’s Expert’s Claim of Degenerative Condition
-
Whether a Motorcycle Passenger Sustained a Serious Injury Is Immaterial as They Are Not a Covered Person under Section 5102
-
Plaintiff’s Treating Physician’s Affidavit Failed to Show Objective Tests Used in Determining there were Range of Motion Limitations
-
Plaintiff’s Motion for Summary Judgment on the Issue of Serious Injury Was Premature as She Had Not Provided Any Authorizations or Medical Records to Defendant Who Thus Could Not Properly Defend the Motion
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
Property
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Failure to Charge Jury with Dominant and Efficient Cause of Loss Standard Results in Reversible Error
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Trial Court Cannot Toll Accrual of Pre-Judgment Interest Even When Delay is Occasioned by Prevailing Plaintiff
Potpourri
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Disclosure of Party Statement on Eve of Trial Results in Preclusion Order
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Unsigned Deposition Transcript May Still Qualify as Competent Evidence without Challenge to Accuracy Raised by Opposing Party
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Discretionary Change of Venue is Appropriate where Loss, Policy and Insured all Reside in a Different County
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
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Ninth Circuit Sends Certified Question Regarding CGL Coverage to California Supreme Court, Dealing with Telephone Consumer Protection Act Claims
JEN’S GEMS
Jennifer A. Ehman
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With kinder on holiday.
BARNAS ON BAD FAITH
Brian D. Barnas
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Plaintiff’s Specific Allegations that Defendant Denied his Request for Appraisal, Failed to Respond to Communications, and Failed to Conduct a Proper Investigation Stated a Claim for Bad Faith
JOHN’S JERSEY JOURNAL
John R. Ewell
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New Jersey Appellate Division Affirms that Subcontractor Employee Exclusion Is Clear and Unambiguous, Barring Coverage for Injured Subcontractor
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New York Appellate Division, Applying New Jersey Law, Rules Insurer Not Estopped from Denying Coverage
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
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Late Notice Bars Coverage; Suit Limitations Provision Is Enforceable
Marti's Legislative and Regulatory Markers
Jerry Marti
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Insured Proved Existence of Lost Insurance Policies by Secondary Evidence
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Court Holds Plaintiff to Preponderance of the Evidence Standard
OFF THE MARK
Brian F. Mark
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US District Court Holds that the Products-Completed Operations Hazard Exclusion Bars Coverage Where the Project has been Completed and the Product or Site has been put to its Intended Use, Despite the Possibility that the Damage May have Occurred before the Project was Completed
WANDERING WATERS
Larry E. Waters
[email protected]
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Co-Defendant’s Motion for Partial Summary Judgment Denied Because the Materials Provided Constituted Sufficient Notice and Res Judicata Did Not Apply
BORON’S BENCHMARKS
Eric T. Boron
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Iowa Supreme Court Upholds Ruling in Squirrelly Insurance Case
BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
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Battle of the Courts: Declaratory Judgment Decided First Trumps Civil Court Action That was Commenced First
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Civil Court Appropriate Venue for Amount in Dispute That Did Not Exceed $25,000
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Carriers are Not Required to Provide a Reason for Their Demand to Conduct an EUO
EARL’S PEARLS
Earl K. Cantwell
[email protected]
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When is a Fire a Fire?
That’s all she wrote. Off to the Second Department in Brooklyn for an interesting appeal on policy reformation. Might be several months before we hear the outcome and you can be sure, you will read about in Coverage Pointers.
Dan
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
ASSISTANT EDITOR
Jennifer A. Ehman
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
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
Hewitt’s Highlights on Serious Injury
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Lee’s Connecticut Chronicles
Marti's Legislative and Regulatory Markers
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
02/20/19 State Farm Fire and Casualty Company v. Jewsbury
Appellate Division, Second Department
Court Permits Action by Insurer to Proceed Seeking a Determination that it is Not Obligated to Pay No Fault Benefits Due to Material Misrepresentations in Application
This was an action by State Farm, seeking a determination that it was not obligated to pay benefits under an auto policy because of alleged material misrepresentations in a policy application.
On February 5, 2016, Jewsbury was operating a State Farm insured car and was injured in an accident. He was treated for his injuries by the Dr. Parisien, a physician, and by other providers. After State Farm received and failed to pay first-party beneficiary claims submitted by Parisien, Parisien commenced two actions in the Civil Court of the City of New York for payment.
While those actions were pending, State Farm commenced this action in the Supreme Court seeking a judgment declaring that it is not required to pay any claims related to the accident on the policy it issued to Jewsbury, on the ground that Jewsbury had made material misrepresentations in his policy application. The carrier claimed that in order to obtain a lower policy premium, Jewsbury stated on the policy application that the car would be garaged in Albany when, in fact, Jewsbury garaged the vehicle in Kings County. State Farm named Parisien, Jewsbury and other providers that had provided Jewsbury with medical or no-fault treatment related to the accident.
Parisien moved to dismiss the lawsuit claiming that there was another action pending, that he had commenced. However, the Second Department held that the Civil Court did not have the power to grand declaratory relief and this proceeding involved other not only Dr. Parisien but also, other providers.
Editor’s Note: This one will be an interesting one to follow. Can this action be maintained on substantive grounds? Inquiring minds want to know. The provider should have no greater rights than the insured. If the injured party was not the policyholder, rescission would be more of a challenge.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
02/14/19 Ortiz v. Boamah
Appellate Division, First Department
Plaintiff Must Explain Any Gap in Treatment as well as Rebut Defendant’s Expert’s Claim of Degenerative Condition
On its motion for summary judgment, the Appellate Division held defendants prima facie established that plaintiff did not suffer a serious injury to her thoracic or lumbar spine as a result of the subject. Defendants submitted plaintiff's medical records and the affirmed report of an orthopedist who, following examination and review of the medical records, found that plaintiff had preexisting conditions and no evidence of injuries caused by trauma. No imaging had been conducted of plaintiff's thoracic spine and the orthopedist stated that his examination showed that the thoracic spine was normal, except for scoliosis. As to plaintiff's lumbar spine, the orthopedist stated that plaintiff's own MRI reports revealed degenerative stenosis and spondylosis and plaintiff's medical records revealed preexisting arthritis and scoliosis. The orthopedist opined that there was no indication that plaintiff suffered any separate injury to her lumbar spine or that her preexisting and degenerative conditions had been aggravated by the accident. Defendants also argued that plaintiff sought no treatment after the accident and failed to explain her gaps in treatment.
However, in opposition, the Appellate Division held that plaintiff raised a triable issue of fact that the injuries to, at least, her lumbar spine were caused by the underlying motor vehicle accident. She also adequately explained any gap in treatment. Plaintiff alleged that the accident "caused, created, exacerbated and/or reactivated" injuries to her lumbar spine. These injuries included various disc herniations and posterior spondylosis that eventually required an L4-5 laminectomy, interbody cage fusion, and pedicle screw fixation. Although she did not seek medical treatment by EMTs at the scene of the accident, plaintiff began experiencing neck and back pain a few days afterwards. Approximately three weeks after the accident, plaintiff sought treatment. An MRI revealed, inter alia, scoliosis, degenerative disc disease, and spondylolisthesis. Plaintiff continued treatment, which included physical therapy, until April 2011, when her treating physician recommended discontinuing the physical therapy, as it was no longer beneficial, and returning only when needed. At the time of discharge, however, her treating physician documented that plaintiff still experienced pain and there was tenderness on the lumbar spine.
In July 2012, plaintiff presented to a hospital's emergency department, where she reported experiencing chronic back pain for the prior two months. Subsequent medical imaging showed, inter alia, degenerative disc disease, spondylolisthesis, and multilevel disc bulges and herniations. She had surgery two months later in September.
Since plaintiff's own medical records showed evidence of a preexisting degenerative condition in her spine, she was required to address those findings and explain why her symptoms were not related to the preexisting condition. The Appellate Division held that an explanation that the plaintiff was previously asymptomatic and the accident aggravated an underlying pre-existing condition, rendering the plaintiff symptomatic, is sufficient to raise an issue of fact as to causation. Plaintiff submitted the reports of both her treating neurosurgeon and treating chiropractor, each of whom independently opined that because she had no history of symptoms or medical treatment for her spine before the accident, her injuries were caused, or at least aggravated by the motor vehicle accident. Plaintiff's neurosurgeon noted that although plaintiff has chronic degenerative spinal stenosis and spondylolisthesis, she had no prior history of back pain and leg pain. He opined that "[i]t is not unusual for such a chronic pathology to become aggravated by a relatively mild-to-moderate trauma." He further opined, within a reasonable degree of medical certainty, that the motor vehicle accident aggravated plaintiff's latent asymptomatic age related degenerative spine conditions and was the cause of her symptoms. Plaintiff's chiropractor also opined that because plaintiff did not seek medical treatment for her preexisting back conditions prior to the accident, the accident had activated, accelerated, or aggravated those conditions as well as causing additional damage. The Appellate Division stated this was enough to be an issue of fact as to causation.
Additionally the Appellate Division held that plaintiff has adequately explained any gap in treatment, holding that plaintiff sought continuous, albeit different modalities of treatment since the accident, including chiropractic care for four years following her surgery. The only possible gap in treatment occurred during the 15 month period from the first time plaintiff stopped physical therapy until the time she was treated in the hospital emergency department for back pain. However, plaintiff has provided a reasonable explanation for this gap in treatment. In 2011, her condition, while improved, had not completely abated but her physician saw no further benefit to continuing physical therapy.
02/13/19 Jung v. Glover
Appellate Division, Second Department
Whether a Motorcycle Passenger Sustained a Serious Injury Is Immaterial as They Are Not a Covered Person under Section 5102
The plaintiff was a passenger on a motorcycle that was in an accident with a van. Prior to the collision, the motorcycle was being driven straight in a southerly direction, and the van driver, who was driving the van in a northerly direction, was attempting to make a left turn. The Appellate Division held that the Supreme Court should have granted that branch of the plaintiff's motion which was for summary judgment on the issue of liability against the van driver. In support of the motion, the plaintiff submitted, inter alia, the deposition testimony of the parties and a witness, the van driver was negligent in attempting to make a left turn when the turn could not be made with reasonable safety, in violation of Vehicle and Traffic Law §§ 1141 and 1126. The right of the plaintiff, as an innocent passenger, to summary judgment is not "restricted by potential issues of comparative negligence" which may exist as between the two defendants. The plaintiff also established, prima facie, that as a passenger of a motorcycle, she was not a covered person who was entitled to recover first-party benefits under the Insurance Law, and that the issue of whether she had sustained a serious injury was immaterial. New York’s No-Fault coverage of $50,000 is not available to an operator or passenger of a motorcycle, and motorcycles are also excluded from the Serious Injury requirements. They can recover for damages in their personal injury case without showing they fall into any serious injury category.
02/13/19 Skuret v. Yo Yo Cab Company
Appellate Division, Second Department
Plaintiff’s Treating Physician’s Affidavit Failed to Show Objective Tests Used in Determining there were Range of Motion Limitations
The Appellate Division held defendant met his prima facie burden of showing that the plaintiff did not suffer a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. Defendant 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 the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d) . In opposition, the plaintiff failed to raise a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of his spine constituted a serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). The plaintiff submitted an affidavit from his treating physician, who concluded that the cervical and lumbar regions of the plaintiff's spine sustained range-of-motion limitations as a result of the subject accident. However, the affidavit failed to identify the objective tests which were utilized to measure range of motion and, thus, was not enough to rebut the prima facie case.
02/07/19 Estate of Bachman v. Hong
Appellate Division, Second Department
Plaintiff’s Motion for Summary Judgment on the Issue of Serious Injury Was Premature as She Had Not Provided Any Authorizations or Medical Records to Defendant Who Thus Could Not Properly Defend the Motion
In this action arising from a motor vehicle accident, plaintiff established prima facie entitlement to partial summary judgment against defendant on the issue of liability, by submitting her affidavit averring that, at the time of the accident, she was a passenger in a car driven by defendant, and that defendant caused the accident by failing to stop at a steady red light at an intersection and hitting a second vehicle. In opposition, defendant did not submit any affidavit or other evidence concerning how the accident occurred that would raise an issue of fact. Her speculation that the other driver could also have been at fault was insufficient to deny plaintiff's motion for summary judgment against defendant, given the uncontested showing of negligence. Although discovery had not yet been taken, the motion was not premature as to liability because defendant, as the driver, has knowledge of how the accident occurred and did not show any need for discovery on that issue.
On the other hand, plaintiff failed to meet her prima facie evidence on the serious injury issue because she neglected to submit admissible evidence supporting her allegation that she suffered a fractured finger and sternum Although plaintiff's hospital records were submitted on reply, that did not provide defendant with any opportunity to submit medical evidence in opposition or to address whether the records supported the injuries alleged in the complaint. Further, the motion was premature because defendant had not received those documents or conducted any discovery on the serious injury issue before the motion was made.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
Property
02/20/19 Greenberg v. Privilege Underwriters Reciprocal Exchange
Appellate Division, Second Department
Failure to Charge Jury with Dominant and Efficient Cause of Loss Standard Results in Reversible Error
This decision arises out of a first party trial involving SuperStorm Sandy. Plaintiff’s home was damaged when water from the storm surge inundated the basement and garage of the residence. It was alleged that the water then spawned mold which traveled throughout the house causing it to become a total loss. During trial, proof was presented by plaintiff that some water had entered the basement through the pressurized sump pump backup. Defendant countered that the all, or certainly the very vast majority of the water, entered due to the storm surge breaking out windows and doors which left water to pour into the basement. Ultimately, the basement was filled to just beneath the first floor.
The distinction is important because the policy contained the general exclusion for surface and ground water which included flood, tidal overflow, waves, etc. However, the policy also provided a coverage extension for damage resulting from water which backed up through sewers and drains. In addition, coverage was potentially extended for loss due to damage resultant from overflowed sumps.
At the charge conference, the trial court advised that the jury would be instructed “that if the plaintiffs' home ‘was damaged by two or more conditions or events, any one of which is covered under the insurance policy . . . then [the defendant] may be liable if . . . the conditions or events acted together to cause the damage to the [plaintiffs'] home’." Defense counsel vehemently objected on the basis that the trial court was presenting the wrong causation standard to the jury. Over counsel’s objection, the jury received the instruction and issued judgment against the carrier.
On appeal, the Appellate Division began its analysis by noting the two competing theories of causation in first party cases. Some jurisdictions around the country employ a concurrent causation test which, essentially, rules that if two causes of loss contribute to damage then coverage is confirmed even though one of the causes of loss might be excluded. The Appellate Division noted that while this theory of causation existed, it was not followed by New York courts. Rather, New York follows the dominant and efficient cause of loss theory. Accordingly, where two causes of loss are identified, it is only the proximate, dominant and efficient cause which governs whether coverage triggers.
The trial court’s failure to recognize this distinction, and its subsequent decision to charge concurrent causation was reversible error. Accordingly, the matter was remanded to Kings County Supreme Court for a new trial. In so holding, the Court reiterated that the water exclusion relied upon by the carrier was not ambiguous.
02/08/19 Gibbs v. State Farm Fire & Cas. Co.
Appellate Division, Fourth Department
Trial Court Cannot Toll Accrual of Pre-Judgment Interest Even When Delay is Occasioned by Prevailing Plaintiff
State Farm denied plaintiff’s claims for damages to the premises and additional living expenses. At the conclusion of trial, the jury found for the plaintiff and awarded damages. In response to State Farm’s challenge to the damages, and the trial court opined that plaintiff could (a) stipulate to a lower damages amount or (b) re-try the case.
Plaintiff, apparently, selected the second option which resulted in her counsel moving to withdraw prior to the second trial. The trial court granted the application to withdraw, and also stayed the accrual of any pre-judgment interest until the damages trial actually started.
Plaintiff appealed giving rise to the current decision. As an initial matter, the Record established that plaintiff failed to serve outgoing counsel with the appeal. Thus, although it was properly filed with the Fourth Department, outgoing counsel never had an opportunity to present a brief in opposition to the Court. The failure to serve, though not initially fatal (due to the timely filing), ultimately resulted in the dismissal of claim against the outgoing law firm. Where, as here, a party is not permitted an opportunity to participate due to a service error, the Court exercised its discretion and struck that portion of the argument.
The plaintiff’s appeal of the tolling of pre-judgment interest, however, was ripe for the Court’s consideration. In reversing the trial court, the Appellate Division noted “[a]ny delay of the new trial on damages attributable to plaintiff on the basis that she caused former counsel to withdraw for just cause is of no moment inasmuch as ‘prejudgment interest must be calculated from the date that liability is established regardless of which party is responsible for the delay, if any, in the assessment of the plaintiff's damages’."
Potpourri
02/21/19 Fowler v. Buffa
Appellate Division, First Department
Disclosure of Party Statement on Eve of Trial Results in Preclusion Order
At some point during the litigation, plaintiff obtained a disability insurance form which, allegedly, contained a statement against interest that was made by one of the defendants. The document, however, was not disclosed until the eve of trial.
It is doubtless that CPLR 3101 requires a party to disclose statements of other parties to the litigation. Here, when the document was not produced in routine discovery, and no reasonable excuse was offered as to why it was disclosed on the eve of trial, the trial court precluded its production. On appeal, the Appellate Division affirmed the trial court’s discretionary imposition of the preclusion sanction.
02/21/19 Arthur v. Liberty Mut. Auto and Home Services, LLC
Appellate Division, First Department
Unsigned Deposition Transcript May Still Qualify as Competent Evidence without Challenge to Accuracy Raised by Opposing Party
This appeal arises out of defendant’s attempt to move the venue from New York County Supreme Court to Nassau County Supreme Court. The matter, as it was initially styled, was properly commenced in New York County given Liberty Mutual’s business office located within the county. However, when Liberty Mutual was dismissed from the action, the matter was left with no connection to the court where it was initially sued.
Defendant Cassar made a demand to move the matter to Nassau County, and subsequently filed a motion under CPLR § 510(1) to do so. In that motion, defendant attached her deposition transcript which established her residency within the county sought. Plaintiff opposed the motion on the ground that defendant had not proffered evidence in admissible form of her residency because the deposition transcript had not been signed. The motion was denied, and defendant made a motion to renew with evidence of her residency, and that of plaintiff’s, was unequivocally placed before the court.
In granting the motion to renew, the trial court noted the unsigned deposition transcript was still admissible evidence where the document was certified by the court reporter and no challenge to its veracity was presented by plaintiff. The Appellate Division affirmed that the trial providently exercised its discretion by granting the motion to renew and, ultimately, the motion to change venue.
02/07/19 Country-Wide Ins. Co. v Melia
Appellate Division, First Department
Discretionary Change of Venue is Appropriate where Loss, Policy and Insured all Reside in a Different County
Plaintiff appropriately commenced this action in New York County where it maintains its office. As a result, defendant could not bring a motion to change venue due to an improper county being selected. Plaintiff elected to move under CPLR § 510(3) seeking a discretionary change of venue due to witness inconvenience and in the interests of justice.
Defendant argued that the underlying lawsuits, the policy at issue, and the defendant were found within Queens County. The trial court agreed, and the Appellate Division affirmed, that the interests of justice would better be served shipping this case across the East River.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
01/16/19 Yahoo! Inc. v. National Union Fire Insurance Company
United States Court of Appeals, Ninth Circuit
Ninth Circuit Sends Certified Question Regarding CGL Coverage to California Supreme Court, Dealing with Telephone Consumer Protection Act Claims
Many commercial general liability insurance policies provide coverage for “injury arising out of oral or written publication of material that violates a person’s right to privacy”. However, courts around the country are divided as to whether this includes injury solely to the right of seclusion. In particular, this can be where the insured’s unsolicited advertising message disturbs the recipient’s privacy but does not reveal a third party’s private information. The federal Telephone Consumer Protection Act of 1991 (TCPA) presents such a situation, where the statute generally prohibits the use of “any device to send, to a telephone facsimile machine, an unsolicited advertisement”. As the Ninth Circuit wrote, “Because the TCPA does not implicate violations of the right to secrecy, insurance coverage of TCPA liability turns on whether ‘publication of material that violates a person’s right to privacy’ applies to the right to secrecy, seclusion, or both”.
Here, National Union sold Yahoo! five consecutive CGL policies, which contained standard provisions and coverage for “personal and advertising injury”. This included coverage for injury arising out of any of seven specified offences, such as “oral or written publication, in any manner, of material that violates a person’s right to privacy”. When they were sued in five putative class actions, they sought coverage. Those cases claimed injury based upon Yahoo!’s alleged violations of the TCPA by transmitting unsolicited text message advertisements to class members.
“The standard [Yahoo!] policy excluded personal and advertising injury arising from the distribution of material in violation of the TCPA. The endorsement modified this coverage in three key ways. First, it deleted the express exclusion of injuries arising from TCPA violations. Second, it limited the scope of coverage to “personal injury,” which it defined as injury arising out of any of five offenses: a. False arrest, detention, or imprisonment; b. Malicious prosecution; c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or e. Oral or written publication, in any manner, of material that violates a person’s right of privacy. Third, the endorsement excluded coverage of “advertising injury,” which it defined as injury arising from any of four offenses: a. Oral or written publication, in any manner, of material in your “advertisement” that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; b. Oral or written publication, in any manner, of material in your “advertisement” that violates a person’s right of privacy; c. The use of another’s advertising idea in your “advertisement”; or d. Infringing upon another’s copyright, trade dress or slogan in your “advertisement.””
At issue therefore was whether the policy’s coverage for personal injury arising out of publication of material that violates a person’s right of privacy did or did not apply to Yahoo!’s TCPA liability. While the carrier won at the lower court, in California different appellate courts have construed the coverage question differently. Thus, at times a Circuit Court might look to precedent outside of its jurisdiction to answer a particular question. Here, however, the differences of opinions around the country fail to provide the guidance needed. Instead, the Circuit Court certified the following question: “Does a commercial liability policy that covers “personal injury,” defined as “injury . . . arising out of . . . [o]ral or written publication . . . of material that violates a person’s right of privacy,” trigger the insurer’s duty to defend the insured against a claim that the insured violated the Telephone Consumer Protection Act by sending unsolicited text message advertisements that did not reveal any private information?” Stay tuned for the answer!
Jennifer A. Ehman
With the kiddies on vacation.
Brian D. Barnas
02/12/19 Walmer v. Bristol West Insurance Company
United States District Court, Northern District of Oklahoma
Plaintiff’s Specific Allegations that Defendant Denied his Request for Appraisal, Failed to Respond to Communications, and Failed to Conduct a Proper Investigation Stated a Claim for Bad Faith
Plaintiff and a third-party were involved in a motor vehicle accident. At the time of the accident, Plaintiff’s vehicle was covered under an insurance policy with collision coverage, which was written by the Defendant Bristol West. Plaintiff submitted a claim under his insurance policy for damage to his vehicle. Bristol West responded by requesting that Plaintiff send pictures of his vehicle as a means for Bristol West to calculate a quote for damages.
While waiting to receive Bristol West’s damage estimate, Plaintiff obtained a $10,000 estimate for repairs from Bill Knight Ford. Nine days after Plaintiff’s accident, Bristol West sent Plaintiff a damage estimate amounting to $4,507.33 and a check for $3,507.33 to cover the damage to his vehicle minus Plaintiff’s deductible. Plaintiff expressed his dissatisfaction with Bristol West’s estimate, claiming that Bill Knight Ford valued the damage to his vehicle significantly higher. In response, Bristol West completed a second evaluation of Plaintiff’s vehicle via photograph. Bristol West determined Plaintiff’s vehicle was a “total loss,” with a cash value of $6,552. Bristol West offered to settle the claim for a total of $5,952.92.
Plaintiff remained dissatisfied with Bristol West’s valuation of his damages and vehicle. The insurance policy contained a resolution procedure in the event of a dispute over the amount of loss. The procedure involved submission of an appraisal to a third-party umpire who would ultimately determine the correct value of the vehicle. Once Plaintiff learned of this option, he attempted to begin the process with Bristol West, but Bristol West never responded to his attempts to initiate the resolution process.
Plaintiff then filed a lawsuit alleging claims for breach of contract and bad faith. Bristol West sought dismissal of the claims for bad faith and punitive damages. Under Oklahoma law, a prima facie case against an insurance company for a bad faith delay in payment requires plaintiffs to establish: (1) the claimant was entitled to coverage under the insurance policy at issue; (2) the insurer had no reasonable basis for delaying payment; (3) the insurer did not deal fairly and in good faith with the claimant; and (4) the insurer’s violation of its duty of good faith and fair dealing was the direct cause of the claimant’s injury.
Plaintiff alleged that Bristol West’s conduct amounted to bad faith because Bristol West failed to fully pay Plaintiff the benefits he was entitled to under the policy of insurance at a time when Defendant knew Plaintiff was entitled to those benefits. Plaintiff further asserted that Bristol West did not conduct a proper investigation and unreasonably delayed payment of benefits without reasonable basis.
The court concluded that Plaintiff had stated a claim for insurance bad faith. His pleading provided the specific facts and amounts offered in comparison to the damage appraisal that Plaintiff obtained, and his complaint set out the alleged chronology of events and ultimately Bristol West’s refusal to enter into the dispute resolution process under the policy. Plaintiff also alleged more than disparity in payment. For example, Plaintiff asserted that he was entitled to the benefit of a third-party appraisal option under the insurance policy, which he did not receive. Plaintiff also alleged that Bristol West failed to comply with his attempts to contact them regarding the third-party appraisal option. In addition, Plaintiff’s pleading alleged specific facts regarding Bristol West’s alleged failure to conduct an appropriate investigation, as well as an alleged delay in payment.
JOHN’S JERSEY JOURNAL
John R. Ewell
02/19/19 Evanston Ins. Co. v. A & R Homes et al
New Jersey Superior Court, Appellate Division
New Jersey Appellate Division Affirms that Subcontractor Employee Exclusion Is Clear and Unambiguous, Barring Coverage for Injured Subcontractor
A&R, a general contractor, was hired by defendants the Tsengs to build an apartment building. A&R retained YVPV Construction, LLC, (YVPV) as a subcontractor for the project. Sharkey, an employee of YVPV, was working at the construction site when he fell and sustained bodily injuries. Sharkey sued, among others, the Tsengs and A&R alleging negligence.
A&R was insured under a CGL policy issued by Evanston Insurance Company. The policy contains a common declarations page, which explains that the policy includes the "declarations, together with the Common Policy Conditions and Coverage Form(s) and any Endorsement(s) . . . ." Immediately following the declarations page is a schedule of attached forms. Under the general liability section, Evanston explicitly identified the following form as part of the policy: "EXCLUSION – EMPLOYER'S LIABILITY AND BODILY INJURY TO CONTRACTORS OR SUBCONTRACTORS" (the “subcontractor employee exclusion”).
The subcontractor employee exclusion provides that the Evanston policy does not apply to:
"Bodily Injury" to any:
(1) Contractor or subcontractor while working on behalf of any insured;
(2) Employee, volunteer worker, leased employee or temporary worker of such contractor or subcontractor; or
***
A&R submitted Sharkey's complaint to Evanston and requested a defense and indemnity. Relying on the subcontractor employee exclusion, Evanston agreed to defend A&R under a reservation of rights and cautioned A&R that to the extent Sharkey could be considered an employee of A&R or an employee of a contractor or subcontractor, there would be no coverage for the Sharkey Lawsuit.
Evanston's investigation confirmed that Sharkey was employed by YVPV to perform construction work at the Jersey City project. Accordingly, it filed a complaint pursuant to the Declaratory Judgment Act, N.J.S.A. 2A:16-50 to -62, naming all defendants, and sought an order that it was not obligated to defend or indemnify A&R for the Sharkey lawsuit because coverage was barred pursuant to the subcontractor employee exclusion. Evanston also named Sharkey as an interested party and served the declaratory judgment complaint upon him.
When all defendants failed to answer the complaint, Evanston moved for default judgment. The court granted Evanston's motion and ordered that Evanston owed no coverage obligation to A&R for any claims asserted by Sharkey. Despite receiving notice of Evanston's motion, Sharkey did not object to the court entering the default judgment.
Several months after the default judgment was entered, Sharkey sought discovery from Evanston. Thereafter, Evanston moved for summary judgment against Sharkey. Sharkey opposed the motion and cross-moved for summary judgment, seeking an order declaring that the Evanston policy provides coverage to A&R for Sharkey’s bodily injury claim.
Evanston made two arguments in support of summary judgment. First, it argued that the default judgment resolved any insurance coverage issues related to Sharkey's claims and Sharkey was bound by that judgment. Second, Evanston maintained that the policy unambiguously excluded Sharkey's claims because he sustained "bodily injury" while an "employee" of a "subcontractor" of A&R.
In opposing Evanston's motion, and in support of his request for a declaratory judgment, Sharkey claimed that he was not bound by the default judgment. Additionally, Sharkey argued that he had a reasonable expectation of coverage because the declarations page of the Evanston policy confirmed that A&R obtained commercial general liability coverage, but the declarations page did not refer to any exclusion limiting that broad coverage. Sharkey also asserted that the subcontractor employee exclusion was ambiguous and unenforceable, as its title, "Employer's Liability . . . ," suggested that it related only to A&R's worker's compensation liability. Finally, Sharkey contended that the subcontractor employee exclusion did not apply, as YVPV was not working "on behalf of" A&R.
After hearing oral arguments, the court entered granted Evanston's motion and denied Sharkey's cross-motion. In its decision, the court held that the default judgment was binding on Sharkey, as he could have "objected or otherwise intervened on the motion for default judgment as a party to this declaratory action."
The court also considered Sharkey's substantive arguments and determined that the Evanston policy's declarations page "did not create any reasonable expectations of coverage, notwithstanding the fact that a non-party to the insurance policy has asserted such an expectation." In examining the subcontractor employee exclusion, the court explained that the language is "clear, unambiguous, and thus, enforceable." Finally, the court noted that YVPV was hired by A&R as a subcontractor, and was therefore working "on behalf of" A&R. Sharkey appealed.
On appeal, Sharkey raised two primary arguments. First, he maintained that he is not bound by the default judgment because his joinder under the Declaratory Judgment Act permitted him to seek an adjudication that his claim was covered by the Evanston policy.
Second, he argued, as he did in the trial court, that the declarations page in the Evanston policy created a reasonable expectation that a standard commercial general liability policy would cover a subcontractor's employee's claims. Specifically, Sharkey asserted that the declarations page expressly listed multiple risks that were "not covered," but failed to mention the subcontractor employee exclusion, which suggested coverage was extended for that risk.
The Appellate Division disagreed with Sharkey's assertion that the default judgment was not binding on him. Pursuant to N.J.S.A. 2A:16-56, "[w]hen declaratory relief is sought, all persons having or claiming any interest which would be affected by the declaration shall be made parties to the proceeding." The Court found that Evanston properly joined Sharkey as an interested party to the declaratory judgment action, as he was the party injured in his underlying negligence action. The Appellate Division ruled that Sharkey was bound by the court's default judgment pursuant to the Declaratory Judgment Act.
Even if the default judgment was not binding on Sharkey, the Appellate Division concluded that the trial court properly granted Evanston's motion on the merits. The Appellate Division rejected Sharkey’s argument that the policy was ambiguous. The declarations page clearly states that the policy includes the "declarations, together with the Common Policy Conditions and Coverage Form(s) and any Endorsement(s) . . . ." On the next two pages of the policy, Evanston, in capitalized letters, listed the forms schedule and explicitly identified the subcontractor employee exclusion. Even though the declarations page lacked any reference to the subcontractor employee exclusion, it clearly identified the exclusion in capitalized letters in the form schedule.
Accordingly, The Appellate Division concluded that no ambiguity exists in the policy because the declarations page and the policy's terms and exclusions clearly alert the average policyholder to the "boundaries of coverage." Summary judgment affirmed for the carrier.
Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.
02/21/17 The State Insurance Fund v. Selective Insurance Company
New York Appellate Division, First Department
New York Appellate Division, Applying New Jersey Law, Rules Insurer Not Estopped from Denying Coverage
Due to the employer's liability endorsement, which is clear and unambiguous, the umbrella policy issued by Selective did not cover All Waste Interiors LLC.
Both sides agreed that New Jersey law governs the issue of whether defendant should be estopped from denying coverage to All Waste. The State Insurance Fund contended that Selective’ s reservation of rights was untimely and, as such, Selective should be estopped from denying coverage to All Waste.
Under New Jersey law, an unreasonable delay in disclaiming coverage can estop an insurer from later repudiating responsibility under the insurance policy. Griggs v Bertram (88 NJ 347, 443 A2d 163 [1982]. This is true even where an insurer neither assumes actual control of a case nor undertakes the preparation of any defense. When an insurer fails to inform its insured of the possibility of a disclaimer of coverage within an unreasonable period of time, it can be estopped from denying coverage.
The New York Appellate Division, First Department, reviewed the Record and found that none of the situations mentioned in Griggs v Bertram applied to this case. According, the Court reversed, declared that there was no coverage under Selective’s policy and vacated the nearly $1.5 million dollar judgment against Selective.
Lee S. Siegel
02/08/19 Discuillo v. Allstate Ins. Co.
United States District Court, District of Connecticut
Late Notice Bars Coverage; Suit Limitations Provision Is Enforceable
Property insurance policies require that an insured give prompt notice of loss to the insurer. Many jurisdictions, like Connecticut, require the insurer to demonstrate material prejudice as a result of the late notice in order to avoid coverage. In Discuillo, the district court found that a 14-month delay by the homeowner-insured in reporting a water intrusion loss was untimely notice that prejudiced the carrier.
Connecticut requires, absent waiver, an unexcused, unreasonable notification delay and resulting material prejudice to the insurer. Discuillo claimed that a February 2015 storm breached her roof and the resulting water intrusion damaged a bathroom and two bedrooms. However, in the mistaken belief that she needed to “save up” the money for her deductible, the homeowner waited over a year to contact Allstate. She finally reported the claim in April 2016. Notwithstanding the delay, Allstate investigated the loss, estimated the repair costs at just over $9,000 and paid Discuillo $4,591.64 after depreciation and deductible. Unsatisfied with the payment, Discuillo sued Allstate, but not until in January 2017, to compel arbitration and for breach of contract.
Allstate moved for summary judgment, arguing that the insured did not comply with the policy conditions, that it was prejudiced by the late notice, and that the suit was, in any event, outside the policy’s 18-moth suit limitations provision. The district court agreed with Allstate on each point.
The court held that a 14-month delay in notice was not prompt. “Under no circumstances could such notice be said to have been given ‘promptly.” Next, the court concluded that “prejudice to the defendant is manifest.” With timely notice, the court reasoned, Allstate could have investigated sooner to assess the then-existing damage and prevent further loss to the property. Moreover, the district court determined that Connecticut courts find suit limitation provisions binding and that an insured’s failure to comply with such provisions is a defense to an action. Here, the suit limitations provision required that the insured be in full compliance with the policy conditions and that she bring suit within 18 months of the loss. Discuillo did neither; she did not report the claim promptly, she did not protect the property from further loss, and she waited more than 18 months to sue. Discuillo argued that her demand to compel arbitration was not a suit or action and, therefore, not subject to the provision. The court disagreed, holding that a suit demanding arbitration clearly falls within the suit limitations provision.
Editor’s Note: The insured, surprisingly, conceded every major point to the carrier, including the lack of reasonable excuse and prejudice. Most notably, however, the insured did not argue and the court did not address whether Allstate’s investigation and payment of the loss, without apparent reservation of rights, constituted the insurer’s waiver of late notice.
Marti's Legislative and Regulatory Markers
Jerry Marti
08/16/02 Burt Rigid Box, Inc. v. Travelers Property Cas. Corp.
United States Court of Appeals, Second Circuit
Insured Proved Existence of Lost Insurance Policies by Secondary Evidence
In this action, Plaintiff sought a declaration that Defendant Travelers (formerly known as Aetna Casualty Insurance Company) was obligated to provide insurance coverage under lost insurance policies issued to Burt’s former parent company. Burt sought coverage related to toxic waste claims dating back to the 1960s and early 1970s at four sites near Buffalo, New York. In response, Aetna refused to provide a defense or indemnification because it was unable to verify that Burt was an insured under the alleged policies. The District Court held that an insured seeking coverage under a “lost” policy must prove the existence and terms of the policy by a preponderance of the evidence.
The Circuit Court of Appeals noted that the insured could rely on secondary evidence to prove the existence and terms of an insurance policy only “where the insured demonstrates that it has made a ‘diligent but unsuccessful search and inquiry for the missing policy.’” This requirement stems from the Best Evidence rule under Rule 1004 of the Federal Rules of Evidence. New York has an analogous rule (which requires an original writing where its contents are in dispute and sought to be proven unless the proponent of the substitute has sufficiently explained the unavailability of the primary evidence).
To prove the existence and terms of the policies at issue, Burt submitted the following secondary evidence: 1) business documents showing Aetna policy numbers with dates of coverage; 2) acknowledgement from Aetna claims representative that he recognized the policy numbers; 3) financial statements indicating that Burt allocated funds for the policies with reference to the policy numbers; 4) testimony by Aetna’s Claims Counsel stating that Aetna has records of claims and payments by Moore (the parent company to Burt) referencing policy numbers and a general liability policy; 6) testimony from Moore’s Corporate Risk and Insurance Manager that Moore had insured all of its subsidiaries under its insurance policies; 7) an excess policy listing Burt as named insured and Aetna as the underlying insurance carrier; and 8) other testimony from current officers of Moore, Moore’s insurance agency, and Burt corroborating the above. Aetna failed to offer anything to contradict the secondary evidence.
While not deciding the standard to be applied to the burden of proof, the Court held that Burt had nonetheless proved the existence and terms of the policies by clear and convincing evidence based on the secondary proof.
07/24/97 Gold Fields American Corp. v. Aetna Cas. and Sur. Co.
Supreme Court, New York County
Court Holds Plaintiff to Preponderance of the Evidence Standard
In this action, Plaintiff sought a declaratory judgment of entitlement to indemnity and defense by the various defendant insurance carriers, collectively known as “Home.” Defendants moved for summary judgment on the grounds that plaintiff could not prove the existence or terms of the insurance policies at issue.
As a preliminary matter, the court noted that the plaintiff had the burden of proof to establish the existence of the policy and its terms. But, the court rejected placing the higher standard of “clear and convincing evidence” on the insured since it would encourage carriers to destroy policies sooner in the hopes that the insured would not be able to produce the policy. Instead, the court held that the plaintiff would need to prove the existence and terms of an insurance policy under the usual “preponderance of the evidence” standard.
In denying the motion for summary judgment, the court concluded that plaintiff had sufficient proof to meet this test. In particular, plaintiff produced settlement checks and stubs with policy numbers reflecting the payment of claims. In addition, there were invoices referring to a premium audit with the same policy number as one of the settlement checks, as well as an indication of a returned overpayment on a premium. Likewise, the proof of payment on premiums was shown by settlement checks dated years after the end of the policy periods. Moreover, Home was a member of the National Bureau of Casualty Underwriters (NBCU”) in the 1950’s and 1960’s. The NBCU issued specimen forms for policies during the periods at issue. As such, the court also permitted the use of specimen forms to show the terms of the policy.
OFF THE MARK
Brian F. Mark
02/05/19 Scottsdale Ins. Co. v. Granada Ins. Co.
U.S. District Court for the Southern District of Florida
US District Court Holds that the Products-Completed Operations Hazard Exclusion Bars Coverage Where the Project has been Completed and the Product or Site has been put to its Intended Use, Despite the Possibility that the Damage May have Occurred before the Project was Completed
This declaratory-judgment action arises out of an underlying construction defects action related to the repair and restoration of a pool, Jacuzzi, pool decks, clubhouse decks, and a garage area of a condominium. On October 29, 2010, Eldorado Towers Condominium Association, Inc. ("Association") entered into a contract with National Concrete Preservation, Inc. ("National Concrete"). National Concrete agreed to serve as the contractor for the repair and restoration work at the condominium.
At the time the work was performed, National Concrete was insured under three general liability policies issued to it by the plaintiff, Scottsdale Insurance Company (“Scottsdale”). The Amendment to Other Insurance Condition Endorsement contained in the Scottsdale policies provides National Concrete insurance that "is excess over any other insurance, whether primary, excess, contingent or any other basis." Therefore, if there is "valid and collectible insurance available . . . under any other policy," Scottsdale has "no duty to defend . . . the insured against any 'suit.'" Under the Scottsdale policies, "[i]f no other insurer defends, [Scottsdale] will undertake to do so, but [is] entitled to the insured's rights against all those other insurers.
In August 2011, National Concrete retained Rosmel Pools, Inc. ("Rosmel") to serve as one of its subcontractors on the project. In the contract, Rosmel agreed to name National Concrete as an additional insured and designate its retained insurance as primary over any other insurance policy.
Rosmel was insured by the defendant, Granada Insurance Company (“Granada”) under commercial lines policies that contained commercial general liability coverage. The Granada policies contain an Additional Insured — Owners, Lessees or Contractors — Scheduled Person or Organization Endorsement, which provides:
A. Section II — Who Is An Insured is amended to
include as an additional insured the person(s) or
organization(s) shown in the Schedule, but only
with respect to liability for . . . "property damage" . .
. caused, in whole or in part by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on
your behalf; in the performance of your
ongoing operations for the additional insured(s)
at the location(s) designated above.
B. With respect to the insurance afforded to these
additional insureds, the following additional
exclusions apply:
This insurance does not apply to "bodily injury"
or "property damage" . . . occurring after:
1. All work, including materials, parts or
equipment furnished in connection with
such work on the project (other than
service, maintenance, or repairs) to be
performed by you or on your behalf for the
additional insured(s) at the location of the
covered operations has been completed;
or
2. That portion of "your work" out of which
the injury or damage arises has been put
to its intended use by any person or
organization other than [*5] another
contractor or subcontractor engaged in
performing operations for a principal as a
part of the same project.
The policies issued to Rosmel also contain the following endorsement:
CLASSIFICATION LIMITATION ENDORSEMENT
THIS ENDORSEMENT MODIFIES INSURANCE
PROVIDED UNDER THE FOLLOWING:
Commercial General Liability Coverage part
Owners and Contractors Liability Coverage part
Products/Completed Operations Liability Coverage
part
Coverage under this policy is specifically
limited to those operations described in the
declarations under "CLASSIFICATION
SCHEDULE"
NO OTHER OPERATIONS BY THE INSURED OR
BY ANYONE FOR WHOSE ACTIONS THE
INSURED IS RESPONSIBLE ARE COVERED.
A "products-completed operations hazard" in Defendant's policies is defined as:
16. "Products-completed operations hazard":
a. Includes all "bodily injury" and "property damage"
occurring away from premises you own or rent and
arising out of "your product" or "your work" except:
1. Products that are still in your [*6] physical
possession; or
2. Work that has not yet been completed or
abandoned. However, "your work" will be
deemed completed at the earliest of the
following times:
(a) When all of the work called for in your
contract has been completed.
(b) When all of the work to be done at the
job site has been completed if your
contract calls for work at more than one
job site.
(c) When that part of the work done at a
job site has been put to its intended use by
any person or organization other than
another contractor working on the same
project.
Work that may need service, maintenance,
correction, repair or replacement, but
which is otherwise complete, will be
treated as completed.
In contrast, an "occurrence" under the policy is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
In October 2015, nearly five years after National Concrete and Rosmel began working on the project, the Association filed an underlying action against National Concrete, alleging claims of breach of contract and negligence. The final amended complaint sought damages for defects and deficiencies resulting from the 2010 project. Said complaint alleged that the project was completed in 2012 and that following the completion of National Concrete's work, the Association learned of and/or noticed various leaks, spalling, and rust stains below the pool deck at the project. Notices of claim were sent by the Association to National Concrete on May 9, 2016 and August 10, 2016. The amended complaint also alleged that National Concrete breached the 2010 contract by performing defective work and that National Concrete was negligent and breached its duty of care by failing to make sure that the Association's pool, pool deck and garage were reasonably and adequately installed and/or were otherwise free of defects.
Scottsdale agreed to provide a defense to National Concrete for the allegations in the underlying action under a reservation of rights to later decline coverage for any damages not triggering coverage under the policies. On September 26, 2014 and January 4, 2015, Scottsdale’s independent adjuster sent letters to Rosmel stating Rosmel's defective work had caused residual leaks that damaged the concrete structure below. The letters placed Rosmel on notice of the claim and demanded Rosmel provide a defense to National Concrete as an additional insured and contractual indemnitee. On July 2, 2015, Granada sent a reservation of rights letter to Scottsdale declining to provide a defense to National Concrete as an additional insured. National Concrete later filed third-party complaints in the underlying action against Rosmel for common law indemnification, contractual indemnity, breach of contract, subrogation and negligence, alleging defects and deficiencies in Rosmel's scope of work on the project, which resulted in property damage as defined in the policies. In March and December 2017, Granada reiterated it was declining to provide a defense and indemnity to National Concrete as an additional insured.
Scottsdale then commenced a declaratory-judgment action in March 2018 seeking a declaration that Granada’s policy provides coverage to, including a duty to defend, National Concrete as an additional insured on a primary and non-contributory basis for the allegations in the underlying action.
Both parties filed summary judgment motions regarding the duty to defend National Concrete as an additional insured in the underlying action. There was no dispute that the allegation in the underlying action that National Concrete's (and by extension, Rosmel's) defective work caused damage to the project, is an "occurrence" of "property damage" under Granada’s policies. The parties therefore did not dispute that Granada owed National Concrete a duty to a primary and noncontributory defense as an additional insured, barring the application of any exclusions in Defendant's policies to Rosmel. The Court noted that if an exclusion did not apply, Granada would owe National Concrete a duty to defend it as an additional insured.
In support of its motion, Scottsdale argued that the underlying amended complaint did not specifically allege whether the property damage occurred during Rosmel's ongoing operations or during the products-completed operations hazard — after Rosmel's work was completed. Because the property damage may have occurred during Rosmel's ongoing operations, Scottsdale argued that Granada owed National Concrete a duty to defend as an additional insured. In response, Granada argued that the completed operations hazard exclusion barred coverage to an additional insured "for damage that occurs after the named insured has left the job" and pointed out that the 2010 project was completed by 2012 and that the underlying amended complaint alleged that following completion of the project, the Association learned of and noticed various leaks, spalling, and rust stains. It was not until 2015, three years after the 2010 project was completed and put to its intended use, that the Association filed the underlying action. As such, Granada argued that these circumstances clearly made the claim at issue a completed operations hazard and therefore precluded National Concrete from qualifying as an additional insured under the policies.
Scottsdale argued that Granada’s duty to defend, under Florida law, is triggered not when property damage is manifested or discovered, but rather when property damage actually takes place. Consistent with the injury-in-fact trigger, Scottsdale argued because the property damage "may have begun during Rosmel's ongoing operations for National Concrete, . . . trigger[ing] coverage to National Concrete as an additional insured," the completed-operations hazard exclusion did not apply.
In response, Granada stated that it was not contesting whether there was an occurrence under its policies, but rather, even if there was an "occurrence" to trigger coverage, the plain meaning of the completed operations exclusion provision precluded coverage. In support of its position, Granada relied on the plain meaning of its policies and stated that because the definition of completed operations "focuses on the state or timing of the completion of the work" and not the "timing of damages," Scottsdale’s emphasis on damage trigger theories was misplaced. Granada argued that given "the timeframe after the work its insured performed at the job site was completed and the project was put to its intended use," the products-completed operation hazard exclusion precluded its coverage to National Concrete as an additional insured.
The Court concluded the completed-operations hazard exclusion in Granada’s policies barred additional insured coverage for the Association's claims against National Concrete in the underlying action. In reaching its determination, the Court examined the language of the exclusion and relied on a number of Florida decisions emphasizing the contractor's completion of the project and the fact the owner had put the product to its intended use. The Court stated that when assessing completed-operations hazard exclusions, the relevant timeframe under Florida law is when the project is completed, and not when latent damage may have occurred. Where a latent defect might have caused damages during the policy period, but the damage materializes after a project is complete and the site or product is put to its intended use, the completed-operations hazard exclusion bars coverage.
The Court pointed out that the underlying amended complaint alleged following the completion of National Concrete's work on the Project, the Association "learned of and/or noticed the claimed damages. As such, the Court held that because the preexisting defects allegedly did not materialize until after the project was completed and turned over to the Association to put the site to its intended use, the completed-operations hazard exclusion applied.
Scottsdale did not dispute that the Association's condominium complex was complete in 2012 and put to its intended use. The damages arising from Rosmel's construction defects materialized years later, when the Association learned of the faulty workmanship. Accordingly, those damages unambiguously fell within the completed operations hazard. As such, Granada did not owe a duty to defend National Concrete as an additional insured.
That Florida may be an injury-in-fact jurisdiction is immaterial to whether a completed-operations hazard exclusion provision applies. Whether there is an "occurrence" under a policy is a threshold question used to determine whether damages occur during a policy period. That coverage falls within a policy period does not negate the application of an exclusionary provision. And again, Granada did not dispute the Association's damages may have occurred during the policy periods contained in its policies to Rosmel.
Larry E. Waters
[email protected]
02/19/19 Lamorak Ins. Co. v. Fulton Boilers Works, Inc.
United States District, Northern District of New York
Co-Defendant’s Motion for Partial Summary Judgment Denied Because the Materials Provided Constituted Sufficient Notice and Res Judicata Did Not Apply
Plaintiff Lamorak Insurance Company (“Lamorak”), commenced this action on
December 11, 2013, against defendants Fulton Boiler Works, Inc. (“Fulton”), Employers Insurance Company of Wausau and Nationwide Mutual Insurance Company (“Wausau”) and Travelers Casualty and Surety Company (“Travelers”) seeking contribution for litigation costs incurred over periods of time when Fulton was uninsured or covered by one or more policies.
Prior to this action, Fulton, Lamorak, Wausau and Travelers were all parties to a declaratory judgment action involving the same insurance policies at issues. From 1949 through the mid-1970’s, Fulton manufactured boilers, which allegedly contained asbestos. As a result, Fulton was sued in thousands of cases involving asbestos exposure. During the prior litigation, Fulton made available approximately one-hundred boxes of documents and pleadings and provided Travelers with a list of asbestos lawsuits pending in New York.
In addition, during the prior litigation that court in 2010 held Fulton was entitled to all its defense costs related to the underlying lawsuits that had been brought to date and deferred the question of whether Fulton must contribute to defense costs until the underlying lawsuits are shown to involve occurrences during self-insured periods.
Subsequently, in 2011 that court held that the 2010 decision had no bearing on indemnity allocation and to allocate properly the indemnity costs, the underlying lawsuits must be considered as multiple independent occurrences rather than grouped into a broad single occurrence. Further, the 2011 decision ordered that “for claims of which Travelers received within a reasonable time, a complaint and/or letter identifying Fulton as the insured and any reasonably obtainable information regarding the injured parties and the nature of the occurrences, ‘Travelers must contribute its pro rata share of defense and indemnity costs.’”
This current decision is exclusively from Lamorak one claim pending against Travelers where it alleges that Travelers has refused to pay or reimburse Lamorak for amounts paid toward the defense and indemnity of Fulton in certain underlying lawsuits covered by the Travelers’ policy but for which Travelers has refused to contribute due to untimely notice.
Now, Fulton moves for partial summary judgment against Travelers, arguing that Travelers cannot assert late notice as a defense. In turn, Travelers moves for partial summary judgment against Fulton, arguing that res judicata precludes Fulton from litigating the notice issue and that under the decision in the prior litigation, the alleged notices are substantively defection. The following will discuss the court’s decision regarding Traveler’s Late-Notice Defense.
The Court began its analysis with a discussion on Travelers’ late notice defense. The Court noted that timeliness is measured from the time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage.
Fulton argued that the September 2008 list, the boxes of lists and pleadings made available to Travelers (together the “2008/2009 materials”) and the August 2, 2012 list constituted proper timely notice. Specifically, Fulton argued that the materials constituted proper timely notice because the 2011 decision found such materials provided proper notice when they included the names of the plaintiffs who filled the claims, the associated docket numbers, and the dates they were filed. The Court accepted Fulton’s position.
In its reasoning, the Court noted that Travelers did not repudiate liability in the typical sense such as by declaring that Fulton’s claims were not covered by an existing policy, rather Travelers denied the existence of any such policy. As such, the Court opined from Fulton’s perspective, there would have been no grounds upon which to submit notice. In addition, the Court noted that it would be contrary to reason and principles of equity to require that an insured comply with the notice requirements of a policy that the insurer claims does not even exist.
Further, the Court noted that because in April 2009, Travelers conceded coverage of the years 1976 to 1979, which was before the 2008 list was provided and shortly after which the 2009 index and boxes were provided, the Court found that such documents constituted proper timely notice of the underlying claims therein contained. Therefore, the court concluded that it was not reasonably possible for Fulton to give such notice where no contractual instrument has been identified.
Nevertheless, the Court would not declare whether each and every claim described in the documents had been properly noticed or that Travelers failed to disclaim any of the same. Rather, the court provided the following guidelines to the parties:
Since Travelers acknowledged coverage from 1979-1980 in 2004, to the extent that any claims arose before such acknowledgment, notice in the 2008 or 2009 materials is untimely. Notice of claims that arose prior to 2004 covered by the 1979-1980 policy years must have been noticed within a reasonable period from the time of acknowledgment and 2008 is far too late. The 2008 and 2009 materials constitute proper notice of claims covered from 1976-1979 because these materials contained the information required by the 2011 decision and were provided to Travelers within a reasonable time of acknowledgment (in some cases before acknowledgment). For the 2012 materials, any claims duplicative of the 2008 or 2009 materials are irrelevant and need not be addressed by the Court. For any new claims in the 2012 materials, the parties should endeavor to resolve whether each individual claim, on a case-by-case basis, was timely noticed and/or disclaimed, consistent with this Court’s holding.
Next, the Court Travelers’ argument regarding res judicata. Travelers argued that Fulton’s alleged notice was procedurally deficient because it relied upon documents available during the previous litigation. In addition, Travelers argued that Fulton was attempting to use the current summary judgment as a motion for reconsideration in disguise to re-litigate issues that have already been decided.
The Court rejected Travelers’ argument. First, the Court noted that Travelers’ argument regarding preclusion misstated the scope of res judicata. Pursuant to the well-established New York case law, res judicata precludes subsequent litigation both of issues actually decided in determining the claim asserted in the first action and of issues that could have been raised in the adjudication of that claim. In this matter, the Court noted that the 2011 decision in fact left open the case-by-case analysis of which claims have been appropriately noticed and that the 2011 decision dealt only with whether Travelers had any obligation to contribute. Further, the current task before the Court was to determine for which of the underlying asbestos claims Travelers had an obligation to contribute. According to the Court, fact, since there has been no litigation on this separate issue, res judicata simply did not apply. Further, the Court noted that because the issues presently contested were not the same as those in the prior litigation, nothing prevented the parties from using documents that were available during the prior litigation.
As such, the court denied Travelers’ motion for partial summary judgment regarding Travelers’ notice defense and granted Fulton’s motion for partial summary judgment regarding Travelers’ notice defense.
Please let me know if you would like a copy of this decision.
Eric T. Boron
02/01/19 City of West Liberty v Employers Mutual Casualty Company
Supreme Court of Iowa
Iowa Supreme Court Upholds Ruling in Squirrelly Insurance Case
No kidding - that’s what the headline said in the Des Moines Register newspaper after the Iowa Supreme Court’s decision was issued.
The factual/procedural/decisional background is as follows. A squirrel found its way onto an electrical transformer owned by the City of West Liberty, triggering an electrical arc that killed the squirrel and caused substantial damage to the municipality's property. The City brought an action against Employer’s Mutual, issuer of the City's all-risks insurance policy, seeking a declaration of coverage and damages. The District Court granted summary judgment for Employer’s Mutual. The City appealed. The Court of Appeals affirmed. The City then sought further review, from Iowa’s highest court.
The opinion of Justice Manfield of the Iowa Supreme Court issued February 1, 2019 captures the reader’s imagination immediately, as it begins, “In a story that probably would not have been written by Beatrix Potter…”
The policy at issue was an all-risks insurance policy, which in relevant part stated as follows:
PROPERTY COVERED
“We” cover the following property unless the property is excluded or subject to limitations.
“We” cover direct physical loss to covered property at a “covered location” caused by a covered peril.
....
PERILS COVERED
“We” cover risks of direct physical loss unless the loss is limited or caused by a peril that is excluded.
....
PERILS EXCLUDED
1. “We” do not pay for loss or damage caused directly or indirectly by one or more of the following excluded causes or events. Such loss or damage is excluded regardless of other causes or events that contribute to or aggravate the loss, whether such causes or events act to produce the loss before, at the same time as, or after the excluded causes or events.
....
2. “We” do not pay for loss or damage that is caused by or results from one or more of the following excluded causes or events:
*2 ....
g. Electrical Currents—“We” do not pay for loss caused by arcing or by electrical currents other than lightning. But if arcing or electrical currents other than lightning result in fire, “we” cover the loss or damage caused by that fire.
The City argued numerous, evolving theories over the course of the litigation. First, the City invoked the fire exception to the electrical-currents exclusion in arguing for coverage. Later, the City apparently conceded that no part of the $213,524.76 loss was due to fire. Instead, in its summary judgment memorandum, the City argued a theory of concurrent causation based on Iowa case law. Thereafter, in its summary judgment reply, the City landed on efficient proximate cause as its theory of choice, following principally Qualls v. Farm Bureau Mutual Insurance Co. See Qualls, 184 N.W.2d 710 (Iowa 1971).
The district court found that the only event that caused damages was the electrical arc, noting the squirrel did no damage to West Liberty's property “such as gnawing on a power line or digging for nuts in a dangerous area.” The district court held:
The Court cannot conclude that the “squirrel's actions” were a cause of the damages because the squirrel did not actually do anything to cause damages; it merely touched some things it should not have touched. The arc caused all of the damages. Had the squirrel done what it had done and the arc not occurred, there would be no damages. Because there are not two different damage-causing events, the Court need not engage in an efficient proximate cause analysis. If an efficient proximate cause analysis was appropriate, the Court would find that the arcing was the dominant cause.
The district court ultimately concluded in ruling on the parties competing summary judgment motions that because the electrical arc was the “sole cause” of damage and the policy excludes coverage for damages caused by electrical arcing, Employer’s Mutual was not required to cover the City's claim. The court of appeals affirmed, likewise holding that the City’s loss fell within the electrical-currents exclusion.
The Supreme Court of Iowa found the electrical-currents exclusion language to be “straightforward”, and as such opined, “[I]f arcing caused the loss, the loss is excluded, unless the arcing led to fire. Because arcing caused the loss here, and the arcing didn't lead to a fire, West Liberty's claim appears to be foreclosed by the express terms of the policy.”
The City’s argument that the squirrel was an efficient proximate cause of its loss was rejected by the Supreme Court. Analyzing and addressing the City’s argument, the Supreme Court held:
“The efficient proximate cause doctrine can apply when two or more causes, at least one covered by an insurance policy and at least one excluded, contribute to a loss. 7 Steven Plitt, et al., Couch on Insurance 3d § 101:45, at 101-84 to 101-85 (Revised ed. 2013) [hereafter Couch on Insurance 3d]. “When insurance policies lack ... an anticoncurrent-cause provision, we have held an accident that has two independent causes, one of which is covered and one excluded, is covered unless the excluded cause is the sole proximate cause of injury.” Amish Connection, 861 N.W.2d at 241. West Liberty points out that there is an anticoncurrent-cause provision in numbered paragraph 1 of the “Perils Excluded,” as quoted above, but not in numbered paragraph 2—the paragraph at issue here.1
*4 Qualls illustrates the efficient proximate cause doctrine. See Qualls, 184 N.W.2d at 713. In Qualls, an insurance policy provided coverage for loss of livestock by “attack by dogs or wild animals.” Id. at 712. A wild animal carrying the pseudorabies virus either bit Qualls's heifers or bit Qualls's hogs which then bit the heifers. Id. In any event, an original wild animal bite was the source of the pseudorabies disease. Id. Subsequently, fourteen of Qualls's heifers died of pseudorabies. Id. at 711–12. We found the loss was covered, reasoning,
In insurance law it is generally understood that where the peril insured against sets other causes in motion which, in an unbroken sequence and connection between the act and final loss, produces the result for which recovery is sought, the insured peril is regarded as the proximate cause of the entire loss.
Importantly, though, Qualls did not involve an exclusion. See id.
11Although Qualls didn't involve an exclusion, West Liberty relies on it here. Specifically, West Liberty argues that the squirrel—not the arcing—was the efficient proximate cause of its loss. Thus, it is irrelevant, according to West Liberty, that the EMC policy excludes arcing from coverage.
12We disagree. This is not a case of two independent causes, one of which was covered and one excluded. See Amish Connection, 861 N.W.2d at 241. “The efficient proximate cause doctrine is only applicable where the causes are independent.” First Specialty Ins. v. Am. Home Assur. Co., 558 F.3d 97, 105 (1st Cir. 2009); see also Swenson v. State Farm Fire & Cas. Co., 891 F.Supp.2d 1101, 1109 (D.S.D. 2012) (“One limit to the efficient proximate cause doctrine, however, is that it is only applied ‘where two separate or distinct perils could have occurred independently of the other and caused damage.’ ” (quoting Cain v. Fortis Ins., 694 N.W.2d 709, 714 (S.D. 2005) ) ); 7 Couch on Insurance 3d § 101:45, at 101-85 (“Under any circumstances, in order for the efficient proximate cause doctrine to apply, there must be at least two potential causes of the subject loss.”); 5 New Appleman on Insurance Law Library Edition § 44.03[9], at 44-22.1 (Jeffrey E. Thomas & Susan Lyons, eds., 2018) (“When the evidence shows the loss was in fact caused by only a single cause, even if susceptible to various characterizations, the efficient proximate cause analysis does not apply.”).
The squirrel did not independently contribute to the $213,524.76 loss, i.e., other than through the arcing. As the district court put it, ‘The squirrel by itself did not cause any damage.’ Rather, the squirrel was inextricably tied to the arcing and was the immediate reason why the arcing happened.”
Electrical arcing is always going to have some cause. Policy language excluding an event would be meaningless if an insured could avoid the exclusion simply by pointing out that the event itself had a cause.”
After comparing and discussing numerous cases from other jurisdictions to support its analysis and decision against the City here, the Supreme Court of Iowa concluded by making this point:
“the electrical-currents exclusion has an express carve-out where ‘lightning’ is the source of the electrical currents or arcing. In that event, the exclusion does not apply. But if an insured could always avoid the electrical-currents exclusion by arguing that something else was the efficient proximate cause of the electrical current or arcing, the lightning exception would seem unnecessary.”
Rest in peace, squirrel…
Marina A. Barci
02/08/19 Atlantic Chiropractic, P.C. v. Utica Mutual Ins. Co.
Supreme Court, Appellate Term, Second Department
Battle of the Courts: Declaratory Judgment Decided First Trumps Civil Court Action That was Commenced First
In August 2011, plaintiff commenced an action to recover first-party no-fault benefits in Civil Court. In November 2011, the insurer commenced a declaratory judgment action in Supreme Court, and then entered an answer to the Civil Court action in December. The plaintiff defaulted in the declaratory judgment action, so in May 2013 the Supreme Court declared that the insurer was not required to pay no-fault benefits to the provider or its assignor on the grounds that the alleged accident was staged and therefore not covered under the policy.
Thereafter, the insurer moved in Civil Court for leave to amend its answer to include the affirmative defense of res judicata and essentially asking for dismissal of the complaint based on the declaratory judgment action. Res judicata means that if a claim has already been decided on its merits, re-litigation is precluded if all the claims arise out of the same transactions or occurrences. In December 2014, the Civil Court denied the insurer’s motion, finding that they waived any res judicata defense because they submitted their answer after filing the declaratory judgment action.
Generally, leave to amend a pleading should be granted if there is no significant prejudice or surprise to the opposing party and where proof is submitted in support of the motion that indicates the amendment has merit. In opposition to the motion to amend, plaintiff here failed to demonstrate any prejudice, while the insurer showed that the new defense had merit.
The Civil Court was incorrect in deciding that the insurer waived its res judicata defense because the insurer had no basis to assert that defense before May 2013 when the declaratory judgment was entered by the Supreme Court. Therefore, the insurer’s amended answer stands and summary judgment dismissing the complaint as barred was granted. Any other result in favor of the plaintiff in the Civil Court action would have directly impaired or destroyed the rights or interests established by the declaratory judgment granted to the insurer.
02/13/19 Country-Wide Ins. Co. v. Yao Jian Ping
Supreme Court, Appellate Term, First Department
Civil Court Appropriate Venue for Amount in Dispute That Did Not Exceed $25,000
This action, seeking a de novo adjudication of a no-fault claim following a master arbitrator’s award in excess of $5,000, was properly commenced in Civil Court, since the amount in dispute did not exceed $25,000.
02/08/19 Dynamic Balance Acupuncture, P.C. v. State Farm Ins. Co.
Supreme Court, Appellate Term, Second Department
Carriers are Not Required to Provide a Reason for Their Demand to Conduct an EUO
State Farm established that they timely and properly mailed the EUO scheduling letters and the denial of claim forms, as well as the fact that the assignor failed to appear for the EUO’s. Based on this evidence, the insurer made a prima facie showing of their entitlement to summary judgment seeking dismissal of the complaint based on the failure to appear for an EUO.
Plaintiff did not present any evidence to rebut State Farm’s case, and instead argued that the EUO requests were unreasonable because State Farm did not respond to plaintiff’s letter demanding good faith reasons for requesting plaintiff’s EUO. However, plaintiff failed to present proof of mailing this letter, and in any event this argument lacks basis because carriers are not required to provide a reason for their EUO demands in response to an objection to them from a plaintiff. Therefore, the court granted State Farm’s request for summary judgment dismissing the complaint.
Earl K. Cantwell
[email protected]
09/26/18 National Liability and Fire Insurance Company v. Jablonowski
District Court of Connecticut
When is a Fire a Fire?
The insured presented a claim under a Yacht Policy for an alleged electrical fire concerning his boat which involved the shore power cord connection which cut off electricity to an on board space heater. This allegedly caused consequential property damage in the form of mold and mildew growth in the boat interior, for which the insured claimed $90,000 and that the boat was allegedly a total loss. The insured also subsequently submitted a vandalism claim which he alleged also spread mold throughout the boat making the boat a constructive total loss. The insurance company denied the claims and filed for a declaratory judgment.
With respect to the “fire” claim, the insured admitted he never saw any smoke but contended that a fire at the electric cord connection was ongoing during the Winter of 2015-2016. The civil authorities apparently concluded that it was “an electrical issue” and caused arcing and burning of the power cord. The insurance company’s expert concluded that there was no fire although there was a poor contact and arcing of the leads of the boat connector. The conclusion was that no “fire” occurred on the connector or plugs, and the further comment was made that this was a direct result of poor maintenance on the part of the insured.
The Court reviewed the policy provisions and further noted an exclusion that the insurance did not cover any loss caused directly or indirectly by wear and tear and “mechanical or electrical breakdown”. The insurance company argued that, while there may have been some electrical arcing, no ignition or combustion occurred and therefore there was no coverage and the exclusion also applied. The insured contended that the mold damage was result of fire damage to the shore power cord which stopped operation of the heaters on the vessel. The insured asserted that there was “slow burn” that occurred in the power cord which constituted a “fire” for legal purposes.
The Court ruled that there must exist a fire which is the effect of combustion and the equivalent of ignition or burning. The policy language implies accidental combustion accompanied by visible flame or glow. The insurance company’s expert report concluded that the event was always at a pre-ignition stage that never evolved to the point of actual combustion. Summary judgment was therefore granted in favor of the insurance company. The Court also summary judgment in favor of the insurance company with respect to the vandalism claim.
This case emphasizes the importance of policy definitions, which in this case were somewhat supplemented by trade usage and common terms. Although there may have been electrical arcing and even melting, there was no “fire” within the meaning of the policy. In any event, the exclusion might also apply denying coverage for “electrical breakdown” even under the insured’s loss scenario.
It would appear that the insurance company in this case performed good claims investigation since they had an on-point expert report and also conducted an examination of the insured.
It is interesting that the term “fire” was not defined in the policy, and it appears from the opinion that the insured did not aggressively offer much in a way of alternative definitions. It would seem that significant electrical arcing and melting would certainly occur at high temperatures, and there might in fact have been a “glow” or visible signs of high temperature that melted the power cord connectors. It seems that alternative common sense definitions of a “fire” might have been offered to at least raise an issue of fact or ambiguity in terms of the policy language. There may well have been a “visible flame or glow” which was hidden within the connector box or power cord or just not visible for someone to see.
