Volume XX, No. 19 (No. 530)
Friday, March 8, 2019
A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
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Fax: 716-855-0874
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© Hurwitz & Fine, P. C. 2019
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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.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
Thank you for all the birthday wishes on Facebook and otherwise. Every birthday is special; every day is special.
All kinds of interesting cases. Additional Insured cases are getting as prolific now as late notice cases were 15 years ago. We have three of them in this week’s issue. Each is worth reading. CP authors summarize their offerings in their cover notes below. You will undoubtedly find material of interest.
PLRB Claims Conference
For those who follow my twitter feed, @kohane (now there’s an original name) you would have seen this tweet earlier this week:
Indianapolis here we come. Attn: #insurance claims professionals: We will be presenting on #Contractual Indemnity and Additional #insured coverage at the @PLRBconf #ClaimsConference2019 #PLRB Monday 10:30 - 12:00 and Tuesday 1:30 - 3:00. See you there!
Hope to see you there.
If you haven’t subscribed to Labor Law Pointers ([email protected]) or Premises Pointers ([email protected]) you are missing out on superb publications.
Heading to Santa Ana for training on Sunday – no horse racing for me.
For those who are looking for solid continuing education in New York, watch this space for a great, basic, State Bar TICL Section program coming soon in venues throughout the state. Steve Peiper is the local chair in Buffalo and I’m likely showing up in a different venue, Albany, as part of the panel.
Thanks to those who sat in on the NYIA discussion about the Child Victim Act this past week. Interesting challenges ahead for the insurance industry.
Meeting the Family – Advice for the Lovesick:
The Buffalo Times
Buffalo, New York
08 Mar 1919
DEAR ANNIE LAURIE:
I am a young man of 16 and would like some advice from you. I live at present in Buffalo and I like a girl in New York City. Would it be right for me to correspond with her if I have not yet met her parents? We were good chums, still better, good friends back in New York.
PETE
PETE:
Why not write to the girl’s father or her guardian and tell them that you would like to correspond with his daughter, in a friendly way. Tell him that you knew her in New York and would like to keep up the friendship. I think that in that way they would know that you were the kind of a lad that they would want their daughter to correspond with.
Jen’s Gems:
Editor’s Note: She has a column in the issue this week. The Editor wanted to remind everyone that she has cute and intelligent children.
Jen
Jennifer A. Ehman
We Can Walk that Fast Now:
The New York Times
New York, New York
08 Mar 1919
By Airplane in 4 ½ Hours
from Dayton to Mineola
A new record for long distance flight in the United States was established yesterday when Major Reuben F. Fleet and Captain Earl F .White flew to Hazelhurst Field, Mineola, L.I., from Dayton, Ohio, a distance of 664 miles in four hours and 33 minutes. The air line between the two cities is only 540 miles, but the fliers were driven 100 miles off their course by storm.
The two officers, coming to the Aeronautical Exposition in Madison Square Garden, left Dayton at 10 A. M. in a De Haviland-4, equipped with a 400 horse power Liberty motor. On the way East they ran into a heavy fog and storm which compelled them to fly at a height of 10,000 feet.
They steered the entire way by compass.
John’s Jersey Journal:
Dear Subscribers:
One of the things that make New Jersey unique, besides the famous diners and the Jersey Shore, is the basic auto policy.
Unlike other states that have a single set of minimum coverage limits, state minimums for auto insurance in New Jersey depend on whether a standard or basic policy is purchased. The Standard Policy provides the following minimum limits: bodily injury liability coverage $15,000 per person and $30,000 per accident, $5,000 in property damage liability coverage, and $15,000 in first-party PIP benefits.
The Basic Policy provides, as it sounds, basic insurance benefits. It provides $5,000 in property damage liability coverage and $15,000 in first-party PIP benefits. Bodily injury liability coverage is NOT included. The insured can, at her/his option, elect to purchase $10,000 bodily injury liability coverage. It is not required.
That’s right! You can buy a New Jersey auto policy with ZERO bodily injury liability coverage and be compliant with state law. It is the perfect policy for a judgment-proof plaintiff who wants to ensure he has medical benefits for an accident.
The Legislature’s purpose for creating the Basic Policy was to make insurance more affordable. One side effect of the Basic Policy, however, was that it complicates uninsured claims where the tortfeasor has a Basic Policy without liability coverage.
Is a tortfeasor insured with a Basic Policy without liability insurance an uninsured vehicle or is it an underinsured vehicle?
The vehicle has insurance on it. It has property damage liability coverage, but it has no liability coverage.
The Legislature created the problem and they answered it. By statute, N.J.S.A. 17:28-1.1(e)(2), they deem that the term “uninsured motor vehicle” “shall not include an automobile covered by a basic automobile insurance policy.” The practical effect is the insured has an underinsurance claim—not an uninsured claim.
Why does this matter?
It matters when a person struck by a tortfeasor with a Basic Policy without bodily injury liability insurance seeks uninsured motorist benefits.
If the person only has uninsured motorist (“UM”) coverage, they will be unable to recover. An auto covered by a Basic Policy is not an uninsured motor vehicle. Why? Because the Legislature said so, and they make the rules. Today’s case is an example of this. It is discussed in further detail in the attached issue.
Where the claimant purchased underinsured motorist (“UIM”) coverage, however, it won’t be an issue. They have underinsured coverage.
We recently won on this issue in New York Supreme Court in a case where New Jersey law applied. The insured lived in New York, but the accident occurred in New Jersey. We received a very similarly worded order:
The New Jersey statute explicitly excludes vehicles with basic coverage from the category of "uninsured motor vehicle" (see NJSA 17:28-1.l[e]). Accordingly, although petitioner's policy provides . . . respondent with uninsured coverage, that coverage is inapplicable in this matter, since the other vehicle was not uninsured.
While the nature of the very limited coverage in [the insured’s] policy would have triggered underinsured motorist coverage, respondent did not purchase underinsurance coverage.
While the statute should be obvious, plaintiffs’ attorneys often try to go against the statute (typically citing case law from before the Basic Policy was created). I would have appreciated being able to cite to this case in my papers. This one is going in my file. Feel free to copy and paste it into your claims notes or your files.
For those who those of you who have occasion to drive through New Jersey, consider whether you have enough SUM coverage. The other driver may be driving a Mercedes or Lexus. But if he hits you, you might find out he has the Basic Policy (spent too much on the car).
John
John R. Ewell
Beer Not Here so Candy is Dandy – Prohibition Settles In:
The Brooklyn Daily Eagle
Brooklyn, New York
08 Mar 1919
BREWERS TO MAKE CANDY
Boston, March 8—Brewers of this city are planning to become candy makers after July 1. Officers of one company said today that they had applied to the Building Inspection Department for permission to make changes in their brewing plant at Roxbury to equip it for candy manufacture, and officers of two other brewing firms have filed certificates of incorporation as a chocolate company. Henry A. Reuter said today that this brewing organization would be maintained for a time in the hope that manufacture of light beers might be permitted, but that members of the firm were interested in the proposed candy-making business.
Peiper on Property and Potpourri:
After an uptick last issue, we’re back to a more modest offering this week. The First Department does revisit a troubling, but growing, line of cases creating potential liability for legal malpractice, and we review the same in this week’s column.
While we often discuss the relationship defense counsel must manage with the insurer from whom work is assigned, we rarely focus on counsel’s duties and obligations to his or her own client. Too many times in the past I’ve set in mediations, and listened to defense counsel and the carrier representative posture over the strength of their indemnity claim. It is in those situations that I have often reminded counsel that their caucus room was missing a very interested party. Indeed, while the carrier may bear the ultimate burden of a liability judgment, it is the defendant/client against whom such judgment is entered. Indicating that you’ll take a case to verdict to prove your indemnity point, might not be what your client had in mind.
This week’s case reminds all of us who make a living defending lawsuits that your fidelity must also rest with the client/insured’s best interests. This extends beyond what is covered in the policy that is paying for, and usually controlling, the defense. It also extends to defense counsel’s obligation to do just that…counsel. This includes the lawyer’s continued obligation to review potential risks to his or her client, and apprise them of excess and/or uninsured exposure. It also includes the obligation to manage the insured’s insurance portfolio, and often assist in seeking out coverage from other, sometimes unusual, sources. Failure to do so might result in the triggering of one’s own malpractice policy as a “source.”
That’s it for this week. As we’ll meet again after the start of the Madness, we wish all of you best of luck on your upcoming bracketology. When filing out your form in a little under two weeks, know that this whole thing started in 1977 at bar on Staten Island. The first 88 entrants in March Madness paid $10.00 for a winner take all tournament. Well, the tournament itself started in 1939, but let’s be honest it didn’t really start until brackets started showing up on the break room tables of every office across the company.
Today, of course, millions participate. Your odds of success, however, remain about the same.
Remember – dogs over cats; cats over people; people over objects. Blue always beats Red. Red over Green or Black.
We also note that last year this space warned all to avoid picking Arizona in the first round. We know you didn’t listen, and your dreams of buying doughnuts for the office crashed with the thrashing the Wildcats endured by a certain team from Upstate New York. You don’t have to look on the 13 line this year to find the Bulls of Buffalo (or “at Buffalo” I suppose). When you do find them, you’d be wise to consider writing it down a few times. ***Hint- we’re pretty good***
That’s all. Godspeed.
Steve
Steven E. Peiper
License Plates in Prison – Had to Start Sometime:
Star-Gazette
Elmira, New York
08 Mar 1919
PRISONS MAY MAKE PLATES
FOR MOTORS
Job of Manufacturing Million or More
License Plates for Automobiles Likely To Be
Turned Over to Prisons in the Near Future
Albany, N. Y., March 8.—The million or more automobile license plates which are required annually for use in this state may be manufactured in one of the state prisons in the near future. The State Commission of Prisons, which is authorized by law to assign industries to the various prisons, has recommended the establishment of such an industry to Superintendent of State Prisons Charles P. Rattigan who is said to favor the project. The Commission believes that such a plant would result in a saving to the state of $100,000 a year. The industry may be assigned to Auburn Prison.
The state is now issuing about 500,000 pairs of license plates a year through the Secretary of State’s office and the number is increasing. The plates for the current year were purchased from a Chicago concern at a cost of 28 7/8 cents a pair or a total of $144,475.
Hewitt’s Highlights:
Dear Subscribers:
March came in like a lion with two small snow storms on Long Island though not as big as predicted. My kids made their first, and probably last, snowman of the winter season. We had no snow at all December, January, and February other than some dustings.
On the serious injury front, we have several cases this edition. An interesting one is when the defendant’s own IME doctor’s report said the plaintiff’s injuries were caused or exacerbated by the accident and previous injuries had become asymptomatic until the accident. You cannot win presenting a report like that on summary judgment.
Don’t forget to spring forward with your clocks this weekend.
Until next issue,
Rob
Robert Hewitt
Life Worth $15,000:
The Brooklyn Daily Eagle
Brooklyn, New York
08 Mar 1919
$15,000 FOR HUSBAND’S LIFE
A jury before Supreme Court Justice Cropsey today awarded a verdict of $15,000 to Mrs. Elizabeth A. Herbert of 961 Fox St., the Bronx, whose husband, Patrolman Michael Herbert, was run down and killed by an automobile truck owned by a company at 1444 Lincoln PL. The accident occurred last August while Herbert was stationed on the Brooklyn bound roadway of the bridge. The patrolman had been 20 years on the force at the time of his death.
Editor’s Note: That’s about $225,000 in 2019 dollars. Still not very much.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
Enough about the weather! (Though, I’m going to talk about it anyway.) The other day a friend of mine tried to convince me to be optimistic in that March 1st was actually the start of Metrological Spring. But, I’m not convinced. It didn’t look like Spring in Phoenix, it didn’t feel like Spring in Atlanta, and we up here in Upstate New York, well... I guess I do take solace in the fact that we do lose an hour of winter this weekend as we Spring Forward. It’s the little things, right?
This week, the Second Circuit again stayed away from covering coverage. So again we’ve looked a little further afield to see some of the latest from other Circuit Courts from around the country. To that end, from the Fourth Circuit (handling appeals from Maryland, North Carolina, South Carolina, Virginia, and West Virginia District Courts), we bring you Gateway Residences v. Illinois Union. In that one, a 217-unit building owner sued its contractor when the generators they had installed caught fire, were destroyed, and ultimately held up the opening of the complex. The contractor defaulted and the building owner sued that carrier itself for coverage of the resulting damages. Unfortunately for the building owner, the contractor had purchased a claims-made and reported policy, but had never reported the potential claim during the relevant policy period. Rather, when the building owner finally notified the carrier of its intent to sue a year or so later, the insurer disclaimed as the matter was outside of its policy period. The only argument the owner tried to raise was that the disclaimer was late and thus the carrier had waived its right to deny coverage. However, as is the case in many states, timely disclaimer rules/statutes apply to exclusions and other waivable defenses, not scope of coverage issues. Where there is no coverage in the first instance (like here, something flat-out outside the policy period), otherwise strict time requirements on disclaimers do not apply.
Until next time!
Agnes
Agnes A. Wilewicz
Object Matrimony – Who Would Want a Dirty Soldier, Anyway?:
The Winnipeg Tribune
Winnipeg, Manitoba, Canada
08 Mar 1919
YOUNG LADY OF 20 YEARS, ALONE IN city, wishes to meet young gentleman, returned soldier preferred. Must be clean. Object matrimony. Box 9891 Tribune
Barnas on Bad Faith:
Hello again:
I willingly choose to live in Buffalo, so I try to keep my complaints about the winter weather to a minimum. However, I think I finally reached the breaking point this week. The calendar has flipped to March, and I am ready to be done with the winter weather. We’ve had blizzards; we’ve had zero degree temperatures; we’ve had hurricane strength winds; we’ve had flooding. I’m done with it all. Next time it snows, I’m letting it sit on my driveway until it melts.
Luckily for me, my end-of-winter blues are coinciding nicely with a trip down to Florida this weekend to watch some spring training baseball. Even if you’re someone who doesn’t love baseball, there are few things better than sitting outside in the sun relaxing with a beer while watching a baseball game in 80 degree weather in the middle of March. I particularly like when they announce the temperature at the start of the game and also tell you what the temperature is back at the ballpark up north. It usually is followed by enthusiastic applause from the paying customers. I’m particularly excited for Saturday afternoon in Clearwater when my Blue Jays will take on the Phillies in what will be Bryce Harper’s first game since signing a record-breaking deal. Baseball equals summer for me, and I’m ready for both.
I have a couple of cases in my column today. The 1009 Clinton Properties case from the Eastern District of Pennsylvania is particularly concerning to me. The reasoning in the decision suggests that insurer’s will have an extremely difficult time succeeding on a motion to dismiss a bad faith case based on Pennsylvania law in federal court. The complaint contained boiler plate allegations of bad faith, and the insurer moved to dismiss them. The court stopped short of saying that a bad faith claim will survive any time a breach of contract claim is plead, but it doesn’t stop far short. The court states that it is “virtually impossible” for a plaintiff to know whether an insurance company acted in bad faith at the pleading stage. It also reasons that it is “inequitable” for an insurance company to hold all of the facts relevant to a bad faith claim and then move to dismiss because the plaintiff did not have access to specific facts to plead bad faith.
The court goes even further though. It states that the discovery in a bad faith and breach of contract action is “the same” and that no extra discovery is needed to investigate a bad faith claim. The court also reasons that a bad faith claim in conjunction with a breach of contract claim does not change the facts or issues of the case. It’s hard to see how this can possibly be right since the issue in a bad faith case is not simply limited to whether the insured was entitled to the benefits of the policy. Indeed, the question on a bad faith case is whether the insurer had a reasonable basis for denying benefits under the policy and whether the insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim. This is an entirely separate issue that is irrelevant in a simple breach of contract case.
Finally, the court essentially attempted to lower the pleading standard in a bad faith case. The decision states that “some claims require more factual explanation than others to state a plausible claim for relief.” However, “an insurance bad faith claim is in the category of claims that require less factual explanation.”
If all courts were to follow this analysis, I have a hard time seeing how an insurer could ever successfully move to dismiss a bad faith cause of action. If all that is required are boiler plate allegations because the insurer holds all of the evidence of bad faith, then how can an insurer ever succeed? Other Pennsylvania district courts have held the exact opposite when it comes to conclusory allegations like the ones in this case, so hopefully this will not become a trend.
Brian
Brian D. Barnas
Heart Balm Lawsuits
The Buffalo Enquirer
Buffalo, New York
08 Mar 1919
KISSES AT A PENNY A DAY;
NO PROFITEERING, SAYS COURT
(By the International News Service.)
CAMBRIDGE, Mass., March 8.—Miss Margaret C. Lynch of Marlboro was awarded $100 heart balm for a courtship of twenty-two years, conducted by Michael J. Pomphrey of the same town. The county court jury thus decided that love in Miss Lynch’s case was valued at one penny a day.
Miss Lynch, who is now fifty-one years old, sued for $10,000 claiming that Pomphrey called upon her regularly six nights a week and twice on Sunday during that entire period of time, and that he then married a twenty-three-year-old girl.
So-called Heart Balm lawsuits were abolished in most state in the 1930’s and 1940’s. New York abolished these causes of action in 1935. For an interesting article involving the related tort of seduction, click here.
Off the Mark:
No cases to discuss this week as I’m busy preparing for a CLE presentation for the Defense Association of New York entitled Thoughts and Strategies in the Ever Evolving Product Liability Litigation. This presentation will be a two-part series, with the first installment scheduled for March 12, 2019, from 5:30 p.m. to 7:30 p.m. with cocktails and dinner to follow. Robert E.B. Hewitt III of Hewitt’s Highlights will be joining me on the panel as will a number of other esteemed members of the bar. If any of our readers are interested in earning some CLE credits, there is still time to register. If you already plan on attending, please stop by and say hello.
I’ll be back next edition to report on any new construction defect decisions.
Until next time …
Brian
Brian F. Mark
[email protected]
Arrest for Sordid Activity – Note the Last Paragraph:
The Buffalo Enquirer
Buffalo, New York
08 Mar 1919
COFFEE HOUSE RAID
NETS TWO ARRESTS
Proprietors Held After Waitress Tells
Sordid Tale of Being Forced Into
Unlawful Practices in Room Over Restaurant
The “treat-‘em-rough” squad last night raided a coffee house at No. 88 Broadway, arresting the two proprietors of the place, Dimitri Yovkoff, forty-four years old, and Joseph Miki, thirty-five years old, on open charges while a woman named Evan Bruno twenty years old, No. 101 East Eagle Street, is being held as a witness against the pair.
The woman made a signed statement to the police in which she alleges she was compelled by the two proprietors to practice unlawful business in a room above the restaurant. She is claimed to have further stated, it is alleged, that she gave part of her earnings in this manner to the owners.
It is claimed at headquarters that the woman is married and that her husband was aware of her carrying out the wishes of her employers. This latter statement is being carefully investigated.
Wandering Waters:
Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.
Despite the Lakers’ playoff hopes dwindling by the day, Staples Center had a lot to cheer about last night. LeBron passed Michael Jordan for fourth on the all-time scoring list. LeBron usually does not give into his emotions, but he could not hold back his joy last night. It was truly a great moment to witness live (on T.V. unfortunately).
Not quite as special as LeBron’s moment, but the Heat are officially in the eighth seed in the Eastern Conference. The win over the Charlotte Hornets not only moved the Heat into the eighth seed but also provided a crucial win over a team they are competing with for the last spot in the Eastern Conference playoff spot. I hope the Heat are able to hold onto the eighth seed, which would extend Dwayne Wade’s final season (his “Last Dance”).
With that being said, we have one case this week from the United States District Court, Northern District of New York.
Larry
Larry E. Waters
Play Ball! Almost:
New York Herald
New York, New York
08 Mar 1919
Signs of Early Spring and the Baseball Schedule.
With so many signs of spring in the air it must be disheartening to the major league club owners to realize that they may have made a mistake in cutting down their schedule to 140 games and providing for a late opening. Fourteen games more in April, with fine weather, would mean a lot to the owners—and spring undeniably is mighty close. Fred Lieb says he found two potato bugs on his window pane in the wilds of Yonkers yesterday. Wild geese are flying over Pennsylvania and Long Island.
The robin is singing in the wildwood back of the Central Park Zoo, the Japanese witch hazel is in blossom at Van Cortlandt Park and the peach blossoms are out down in Delaware. The crocus is on its way and the boys are playing marbles. The Fordham baseball squad has been playing outdoors for two weeks, the Yale, Navy, Harvard and Penn crews have been out on the river for weeks and weeks, and the horses at Gravesend have long since shed their winter coats and are breezing. Verily, spring is here! But there is no guarantee that if the baseball schedule called for opening the season early the weather man would not be on deck with an assortment of blizzards and gales. Take nothing for granted in baseball or in the weather. Keep that heavy coat on!
Boron’s Benchmarks:
Dear Subscribers:
Greetings from the Kings County Supreme Court Library. It’s not a fancy or spacious place, and parts of this library, such as the desk I am sitting at right now appear to have been here quite a while. I’ve deduced that because there’s a message scratched into the wooden desk top where I am sitting that says, “Mantle and Mays are good, but Snider is great”. In any event, I’m grateful for a quiet place to sit down, plug in, and type up my column. I am between morning and afternoon court appearances here in Downtown Brooklyn. It’s a really cold day here in Brooklyn. Sure hope it’s warmer wherever you are reading this.
I’ve selected a Supreme Court of Wisconsin decision for today’s column. It is a duty to defend case. A takeaway from this decision is that stories may be for juries, but not judges. Another takeaway is a reminder that the duty to defend is broader than the duty to indemnify because the duty to defend is triggered by merely arguable, as opposed to actual, coverage.
I hope this material may be helpful in or for your work, and by all means feel free to go on to review my full write-up of the case.
Hoping you have a great next couple of weeks.
Eric
Eric T. Boron
Baseball on the Sabbath:
The Buffalo Commercial
Buffalo, New York
08 Mar 1919
IS SURE SUNDAY BASEBALL
BILL WILL BE PASSED
ALBANY, March 8.—Senator Jimmy Walker is confident that his bill to legalize Sunday baseball on a local option basis will not only be reported out of committee, but will be passed by the senate when a vote upon it is taken. Any doubts that Senator Walker may have had regarding his measure were dissipated by the hearing before the joint committee on codes of the senate and assembly, held in the senate chamber last Wednesday.
As was to be expected, some opposition to the bill developed at the hearing. But the forces marshaled in support of the measure seemed the more formidable both in number and strength of argument.
Marti's Legislative and Regulatory Markers:
Dear Subscribers,
In continuation of our multi-part series on the Child Victims Act, we report on the first lawsuit filed under the Act in Supreme Court, Erie County, on February 22, 2019. The plaintiff, Gail Holler-Kennedy, alleges various claims sounding in negligence and breach of duty as a result of sexual abuse dating back to 1978. The defendants named in the action include the Diocese of Buffalo, N.Y., Cardinal O’Hara High School, and other religious orders.
There are some important considerations to note as reflected in this case. The first consideration is the timing of the expected lawsuits within the next few months. Under Section 12 of the Bill, the Act takes effect immediately for claims under the new Statute of Limitations. As such, the Courts will likely find that these types of lawsuits can be filed before August 14, 2019, the first day in which claims can be filed under the revival provision.
The second consideration is the extent of the injuries that may be claimed under the Act. Pursuant to Section 2, the plaintiff is permitted to put forth claims for physical, psychological or other injury or condition as a result of the sexual abuse conduct. As the Complaint bears out, the plaintiff’s claims range in scope with respect to injuries and conditions.
The third consideration is the named defendants in these actions. As can be seen from the Complaint, and as permitted under the Act, the claims are not limited to the Church. They can include schools, religious orders, and others.
Lastly, insurers will need to address the coverage issues in such cases. In particular, old and possibly lost policies will need to be discovered or re-created in order to address their terms, conditions, and exclusions. Moreover, any disclaimer letters will remain subject to the requirement that they be sent out promptly.
For more details on the lawsuit, please read on.
Jerry
Jerry Marti
Wide-Awake Women and Sleeping Men Need Not Apply:
The Chattanooga News
Chattanooga, Tennessee
08 Mar 1919
HELP WANTED—MALE
HELP WANTED – A live, wide-awake young man with experience in selling real estate. First class opportunity for the right man. Write fully and furnish references. Address Box N, care News.
Barci’s Basics (On No Fault):
Hello Subscribers!
We are at the point in the winter season where it feels like it’s dragged on forever now and no end is in sight. The ground hog definitely lied to us when he said that winter would be short this year, as we are only 14 days away from the official start of spring and temperatures can’t seem to leave the teens here in Buffalo. There are rumors this weekend will hit almost 50, but I am skeptical…
That being said, this week I have three cases that hopefully warm you up, at least on the inside, as they are all positive decisions for the insurance carriers. First, an arbitrator’s decision to deny further coverage based on an IME was upheld by the First Department. Then the New York appellate term reiterates that defects in notice cannot be raised for the first time on appeal, and they discuss the right to file a late notice of claim.
That’s all folks.
Marina
Marina A. Barci
Smoking Banned in Utah?
Barring the Cigarette
Salt Lake Telegram
(Editorial)
March 8, 1919
The State Senate has seen fit in its wisdom, or otherwise, to adopt and send to the Assembly for ratification a bill forbidding the sale, possession or smoking of cigarettes within the State of Utah. It is held that cigarette smoking is harmful and should be barred. It is supposed to be a morality measure designed to save the cigarette smoker from himself and thus uplift the world.
It is, however vicious legislation, an attempt to hamper personal liberty beyond the limits of public good.
If we start out to legislate against everything that may be harmful, cranks and faddists will legislate us to death and then make it a crime to die…
Editor’s Note: The bill was voted down by the Assembly by a vote of 23-14. However, cigarettes were banned in that state from 1921 – 1923..
Lee’s Connecticut Chronicles
Dear Readers:
Welcome back to the Connecticut Chronicle. This edition’s case allows us the chance to take a look at the interplay of the Erie Doctrine when it meets Connecticut common law bad faith, in the context of a very important Connecticut issue – insurance coverage for crumbling residential concrete foundations. In December 2018, the Connecticut Supreme Court heard argument on the certified question: “what constitutes a ‘substantial impairment of structural integrity’ for purposes of applying the ‘collapse’ provision of this homeowners' insurance policy?” Once the Supreme Court rules, we’ll bring that news to you.
Lee
Lee S. Siegel
Headlines from this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
-
Carrier Misses Bite at the Apple
-
With Allegations in the Underlying Complaint and Proof that the Work of the Named Insured Contractor was a Proximate Cause of the Plaintiff’s Injuries, the Owner is Entitled to Additional Insured Coverage
-
Facts not to be Considered When Duty to Defend Determined. Thousands Ponder
-
Yet Another Additional Insured Case
-
Insured Lost the Issue of Fact in the Underlying Lawsuit and Cannot Relitigate it in the Coverage Action
-
Since UM Carrier Failed to Provide Proof to Stay Arbitration based on Lack of Physical Contact
-
Rare Title Insurance Case – Lien Created before Tax Sale Not Extinguished by Tax Sale; Title Insurance Company to Respond
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
-
Plaintiff’s Doctor’s Contention of a 33% Decrease in Lumbar Flexion Was Enough to Demonstrate an Issue of Fact
-
Plaintiff’s Plastic Surgeon who Diagnosed a Slight Nasal Fracture Was Enough for Serious Injury
-
Plaintiff’s Physician Demonstrated Issue of Fact through the Acknowledgment of Degenerative Condition but Opinion That It was Aggravated by Accident
-
Defendant’s IME Doctor Actually Supported that a Serious Injury Existed as it Found Significant Range of Motion Limitations and that Previous Injuries to the Same Area Had Resolved
-
Defendant Failed to Proffer a Non-Negligent Explanation for Hitting the Stopped Plaintiff’s Vehicle from the Rear
-
Plaintiff Failed to Raise Issue of Fact When Her Physician Failed to Set Forth Objective Tests Used to Measure Plaintiff’s Range of Motion
-
Plaintiff and Defendant’s Expert Disagreed on Whether Range of Motion Limitations Were Significant Leading to Issue of Fact
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
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Question of Fact Regarding Defense Firm’s Obligation to Notify its Client of Potential Excess Exposure
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
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Fourth Circuit Holds that Claims Asserted After Expiration of a Claims-Made and Reported Policy are Precluded from Coverage in Contractor Faulty Workmanship Case
JEN’S GEMS
Jennifer A. Ehman
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Court Finds Questions of Fact Exist Where Application Submitted to Insurer Included Alleged Misrepresentations
BARNAS ON BAD FAITH
Brian D. Barnas
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Pennsylvania Court Makes it far more Difficult for Insurers to Succeed on Motion to Dismiss a Bad Faith Claim
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Bad Faith Claim Failed where the Claim was Excluded by the Policy and the Insurer Conducted a Reasonable Investigation
JOHN’S JERSEY JOURNAL
John R. Ewell
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Under New Jersey Law, An Automobile Covered by a Basic Policy Without Liability Coverage is Not an Uninsured Motor Vehicle
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
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Home Owner Not Allowed to Amend Complaint to Add Common Law Bad Faith
Marti's Legislative and Regulatory Markers
Jerry Marti
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First Lawsuit Filed Under the Child Victims Act in New York State
OFF THE MARK
Brian F. Mark
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All quiet on the construction defect front.
WANDERING WATERS
Larry E. Waters
[email protected]
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Plaintiff’s Motion for Summary Judgment Granted as to Defendant’s Duty to Defend in the Personal Injury Actions Because the Allegations in Personal Injury Complaints Leave Open the Reasonable Possibility that the Alleged Injuries Were Suffered in a Location Used to Access the Insured’s Premises and the Insured’s Acts or Omissions Were the Proximate Cause of the Alleged Injury
BORON’S BENCHMARKS
Eric T. Boron
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Duty to Defend case - Court of Appeals’ Reversal of Circuit Court’s Grant of Summary Judgment for Insurer is Affirmed by Supreme Court of Wisconsin
BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
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Arbitrator’s Decisions are Upheld if They are Made in a Rational Manner
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Notice Defects Cannot be Raised for the First Time on Appeal
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No-Fault Benefits Denied to Non-Covered Person Who was Not Granted Leave to File a Late Notice of Claim
EARL’S PEARLS
Earl K. Cantwell
[email protected]
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Bad Faith Claim Upheld Due, in Part, to Ambiguous Policy Application Questions
All for now. Spring Ahead. Warmer weather and longer days ahead.
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]
03/08/19 American Medical Alert Corp. v. Evanston Insurance Company Appellate Division, First Department
Carrier Misses Bite at the Apple
Evanston sought to compel the deposition of an employee who was previously deposed in a related action to which Evanston was not a party. The appellate court affirmed the finding of the motion court. The motion court denied the motion on the ground that because the employee had been deposed in the related action, an examination by Evanston would be redundant.
We cannot tell from the decision what different questions the insurer would have asked in the DJ deposition.
Editor’s Note: Sometimes, the way to resolve this problem before it occurs is to join the underlying case and the declaratory judgment action for discovery purposes so that everyone gets a shot at the witness.
03/05/19 M & M Realty of New York, LLC v. The Burlington Insurance Co.
Appellate Division, First Department
With Allegations in the Underlying Complaint and Proof that the Work of the Named Insured Contractor was a Proximate Cause of the Plaintiff’s Injuries, the Owner is Entitled to Additional Insured Coverage
L & M Restoration (“Restoration”) was hired by defendant M & M Realty (“Realty”) to perform work at Realty’s. Restoration's insurance policy, issued by Burlington Insurance Company, provided additional insured coverage for loss caused, in whole or in part, by Restoration’s acts or omissions to any entity that L & M agreed in writing to name as an additional insured. Tower Insurance Company, Realty’s insurer, Realty’s defense of an action brought against it by an Restoration employee injured on the job, after Burlington refused Realty’s tender, and now seeks reimbursement from Burlington for costs it incurred defending and settling the underlying action.
The contract between Realty and Restoration is ambiguous was to whether L & M was required to name M & M as an additional insured under the Burlington policy. The extrinsic evidence properly considered by the motion court did not conclusively demonstrate the parties' intent in this regard but presented an issue of credibility to be determined by a factfinder.
If it is determined that Restoration intended to name Realty as an additional insured under the Burlington policy, then Burlington will be obligated to reimburse Tower for its defense costs, because the allegations of the underlying complaint and the known facts suggest a reasonable possibility of coverage, i.e., a reasonable possibility that the underlying injury was caused, in whole or in part, by L & M's acts or omissions. Moreover, Tower submitted evidence that demonstrates that the acts or omissions of L & M, which directed and controlled the underlying plaintiff's work, were a proximate cause of the plaintiff's injuries (see
The policy issued to Realty by Tower is excess over the Burlington policy.
Editor’s note: This decision is consistent with Burlington Ins. Co. v NYC Tr. Auth., 29 NY3d 313, 321-322 [2017]). Look to the allegations in the complaint (not the third party complaint – and the proof). Attalawyer Max Gershweir for this one and the next.
03/07/19 Paramount Insurance Company v. Federal Insurance Company
Appellate Division, First Department
Facts not to be Considered When Duty to Defend Determined. Thousands Ponder
In an underlying personal injury action, the injured plaintiff alleges that she fell at or near premises owned by Ellis and leased, managed and controlled by its tenant, Blue Water Grill. Paramount issued a policy to Ellis, and defendant Federal issued a policy to Blue Water Grill, covering David Ellis as an additional insured.
The court held that based upon a review of the amended complaint in the underlying action and the lease between Ellis and Blue Water Grill, and the Federal policy, that the allegations in the complaint triggered defendant's duty to defend since they "give rise to a reasonable possibility of recovery under the policy".
The court below had declined to consider facts adduced in the underlying action and the Appellate Division agreed. It held that "the courts of this State have refused to permit insurers to look beyond the complaint's allegations to avoid their obligation to defend”.
The court could not rule on primacy since all of the policies that provide coverage were not before the court.
Editor’s Note: Surely, if the named insured’s carrier was able to establish, from extrinsic facts, that it could have no obligation to indemnify, it should have been allowed to do so. An insurer’s obligation to defend would end if the insurer establishes that there is no obligation to indemnify. Your editor suggests this precedent, with most citations omitted:
An insurer's duty to defend is broader than its duty to indemnify, such that an insurer may be obligated to defend its insured even if, at the conclusion of an underlying action, it is found to have no obligation to indemnify its insured … An insurer must defend its insured whenever the allegations of a complaint in an underlying action “‘suggest ... a reasonable possibility of coverage’ ”
The duty to defend is not triggered, however, when, “as a matter of law ... there is no possible factual or legal basis upon which the insurer might eventually be held to be obligated to indemnify the claimant under any provision of the insurance policy” (Bruckner Realty, LLC v. County Oil Co., Inc., 40 A.D.3d at 900, … or when the only interpretation of the allegations against the insured is that the factual predicate for the claim falls wholly within a policy exclusion ….
Glob. Const. Co., LLC v Essex Ins. Co., 52 AD3d 655, 655-56 [2d Dept 2008]
03/07/19 Rivera v. Tribeca White Street, LLC
Appellate Division, First Department
Yet Another Additional Insured Case
The lower court held that Everest was is an additional insured under the policy issued to R & S Construction Contracting, Inc. by defendant State National Insurance Company (“Clarendon”) and that Clarendon is required to defend R & S in the underlying action.
The First Department affirmed because the allegations of the underlying personal injury complaint suggest "a reasonable possibility of coverage”.
Editor’s Note: That’s the right pleading to examine when making that determination. Not sure what was in there, though.
03/05/19 Tower Insurance Company v. Artisan Silkscreen, etc.
Appellate Division, First Department
Insured Lost the Issue of Fact in the Underlying Lawsuit and Cannot Relitigate it in the Coverage Action
The defendant Artisan was barred from relitigating the issues of the employee exclusion in this proceeding, as this issue, in addition to the "leased contract" exception to the exclusion, was fully litigated in the related third-party action.
03/05/19 Progressive Specialty Ins. Co. v. Guzmarino
Appellate Division, First Department
Since UM Carrier Failed to Provide Proof to Stay Arbitration based on Lack of Physical Contact
Guzmarino was hit by an unidentified motor vehicle while he was bicycling on a bike path. Following his demand for uninsured motorist arbitration, Progressive commenced this proceeding to stay the arbitration. Progressive alleged that Guzmarino had failed to establish physical contact with an unidentified vehicle as required by the policy, and that he failed to notify the police within 24 hours of the event or as soon as was reasonably possible.
On the initial application for a stay of arbitration, the burden rests on the party seeking the stay to establish the existence of evidentiary facts, sufficient to conclude that there is a genuine preliminary issue. Here, Progressive failed to meet its burden because its submissions consisted of mere conclusory allegations.
Editor’s Note: What proof was submitted, we do not know. How do you provide proof of no contact?
02/27/19 Buroker v. Phillips
Appellate Division, Second Department
Rare Title Insurance Case – Lien Created before Tax Sale Not Extinguished by Tax Sale; Title Insurance Company to Respond
In 2006, Buroker bought two unimproved lots of property from Seymour. In addition to the description of the real property, the deed conveyed "an easement and right of way" to a private road owned by the Seymour defendants, known as Mountainview Lane, the only way for the plaintiffs to access their property from the nearest public road. In connection with the transaction, the Buroker purchased a policy of title insurance from the defendant Old Republic. The policy specifically insured against losses or damages sustained as a result of the plaintiffs' "[l]ack of a right of access to and from the land." The policy excluded from coverage "[d]efects, liens, encumbrances, adverse claims, or other matters . . . attaching or created subsequent to Date of Policy."
From 2010 to 2012, the Seymour defendants failed to pay taxes on Mountainview Lane and the County of Otsego filed a petition and notice of foreclosure upon the tax liens. Foreclosure was completed and the title to Mountainview Lane was transferred to the County of Otsego. Later Phillips acquired title to the servient estate by quitclaim deed from the County of Otsego dated September 16, 2013.
Two year later, Phillips erected a fence and locked gate over Mountainview Lane, blocking the Buroker’s access to their property. They made a claim with Old Republic, which Old Republic denied. Shortly thereafter, the Buroker filed a claim seeking damages from Phillips and Seymour plaintiffs commenced this action seeking a defense and indemnification from Old Republic, and to recover damages from the Phillips defendants as well as the Seymour defendants.
If the Buroker acquired a valid easement from the Seymour defendants in 2007, such easement would not have been extinguished by the 2013 tax sale. Thus, Old Republic's contention that the 2013 tax sale constituted a defect, lien, encumbrance, adverse claim or other matter "attaching or created subsequent to Date of Policy" within the meaning of the relevant policy exclusion is without merit, and cannot serve to establish Old Republic's prima facie entitlement to judgment as a matter of law.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
03/06/19 Munoz v. Salcedo
Appellate Division, Second Department
Plaintiff’s Doctor’s Contention of a 33% Decrease in Lumbar Flexion Was Enough to Demonstrate an Issue of Fact
On March 17, 2011, the plaintiff was a passenger in a vehicle that collided with another vehicle. In the bill of particulars, the plaintiff alleged injuries to, inter alia, the lumbar region of his spine. Defendants moved for summary judgment on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. In support, they submitted the affirmed report of an orthopedic surgeon, who examined the plaintiff and measured the range of motion of the plaintiff's thoracolumbar spine, using a goniometer, and compared the results to what would be considered normal range of motion. He found the plaintiff to have full range of motion. The Salcedo defendants also submitted the affirmed report of a radiologist who reviewed an MRI film of the plaintiff's lumbar spine taken approximately two weeks after the accident. The radiologist's report noted evidence of degenerative disc disease, but did not rule out trauma as the cause of any injury to the plaintiff's lumbar spine. The other defendants separately moved for summary judgment on the issue of serious injury one day after such a motion was due. Their counsel stated in an affirmation that this was due to an administrative error, and noted that the first defendants' motion for summary judgment on the same issue was already pending before the court. In support of their motion, the second defendants submitted the affirmed report of another orthopedic surgeon, who examined the plaintiff on October 15, 2015. The second orthopedic surgeon measured the range of motion of the plaintiff's lumbar spine, using a goniometer, and compared the results to what would be considered normal range of motion. He found the results to be normal.
In opposition, the plaintiff submitted the affirmed report of a neurologist who examined the plaintiff on March 2, 2015. The neurologist measured the range of motion of the plaintiff's lumbar spine, using a goniometer, and compared the results to what would be considered normal range of motion. He found that the plaintiff had a 33% restriction in lumbar flexion.
The Appellate Division found that because the first motion was made on nearly identical grounds, it could consider the one day late second motion. Turning to the merits, the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident The defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the plaintiff's spine did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiff submitted evidence raising a triable issue of fact as to whether he sustained serious injuries to the lumbar region of his spine by the contention there was a 33% decrease in range of motion.
03/05/19 Seidel v. Rabassa
Appellate Division, First Department
Plaintiff’s Plastic Surgeon who Diagnosed a Slight Nasal Fracture Was Enough for Serious Injury
The Appellate Division held defendants established their prima facie entitlement to judgment as a matter of law by demonstrating that plaintiff did not sustain a serious injury causally related to the accident. Defendants submitted, inter alia, the emergency room report, CT scans and the reports of a neurologist, a plastic surgeon and an otolaryngologist, all of who examined plaintiff and found that she did not sustain a serious injury within the purview of Insurance Law § 5102(d).
However, in opposition, plaintiff submitted objective medical evidence to raise a triable issue of fact as to whether she sustained a nasal fracture. Her plastic surgeon, who performed a nasal endoscopy, diagnosed a slight nasal fracture, which he observed during the procedure. His report and affidavit were based on the procedure he performed and his observations, and were sufficient objective medical evidence to support his opinion.
03/05/19 Munoz v. Robinson
Appellate Division, First Department
Plaintiff’s Physician Demonstrated Issue of Fact through the Acknowledgment of Degenerative Condition but Opinion That It was Aggravated by Accident
Defendants established prima facie that plaintiff did not suffer a serious injury to her left knee as a result of the subject accident through the affirmed reports of their experts, who examined plaintiff, documented normal range of motion, and attributed plaintiff's complaints to a preexisting degenerative condition. In opposition, plaintiff raised an issue of fact through the affirmed narrative report of her treating orthopedic surgeon, who documented limitations in plaintiff's range of motion, acknowledged plaintiff's preexisting degenerative condition, and concluded, based on a full review of the medical history, physical examination and observations during surgery, that the accident had severely aggravated plaintiff's condition, necessitating surgery for an acute meniscal tear.
02/28/19 Kesick v. Burns-Allen
Appellate Division, Third Department
Defendant’s IME Doctor Actually Supported that a Serious Injury Existed as it Found Significant Range of Motion Limitations and that Previous Injuries to the Same Area Had Resolved
Plaintiff, a state trooper, was operating his police vehicle when he pulled over onto the shoulder of the roadway and activated his emergency lights, intending to make a U-turn to assist another police officer who was involved in a traffic stop in the eastbound lane of travel. After coming to a stop, plaintiff's vehicle was rear-ended in a chain reaction collision involving two other vehicles, one operated by defendant Glenn Thompson and the other operated by defendant Sharon Burns-Leader and owned by defendant Bread Alone. As a result of the rear-end collision, plaintiff sustained injuries to his shoulder and neck.
Plaintiff thereafter commenced this action against defendants to recover for the injuries that he allegedly sustained in the accident. Turning to the issue of serious injury, plaintiff alleged in his bill of particulars that he sustained a serious injury to his cervical spine within the meaning of Insurance Law § 5102 (d) under the permanent, consequential limitation, and/or significant limitation of use categories. As the proponents of the underlying motions for summary judgment, it was defendants' burden to establish through competent medical evidence that plaintiff's cervical spine injury did not constitute a serious injury caused by the accident. In support of their motions, defendants proffered, among other things, plaintiff's deposition testimony and the independent medical examination report of orthopedic surgeon Harvey Seigel, who reviewed plaintiff's medical records and performed an independent medical evaluation. The proffered evidence established that, following the August 2012 accident, plaintiff complained of and sought treatment for neck pain and associated numbness and tingling in his arms and radiating pain down his neck. In his evaluation, Seigel noted plaintiff's consistent complaints of chronic neck pain since the accident and, upon examination, observed significant decreased range of motion in plaintiff's cervical spine. Although Seigel noted that plaintiff's medical records also demonstrated that he had complained of neck pain on two occasions prior to the subject accident — following a work-related incident in April 2009 and a work-related car accident in June 2009 — these complaints had resolved prior to the subject accident. In any event, such injuries were distinguishable from his present complaints as they did not include symptoms such as numbness, tingling and radiating pain that plaintiff complained of after the subject accident. Moreover, Seigel noted in his report that plaintiff had undergone a pre-accident CT scan in February 2012 — six months before the subject accident — that revealed only "minor degenerative disc disease at C6-7 and minimal disease at C5-6." Seigel also reviewed a post-accident MRI of plaintiff's cervical spine performed in March 2016 that, in contrast, revealed "multiple levels of degenerative changes" — including "a large right-sided C5-C6 disc herniation with foraminal stenosis and nerve root compression" and "a larger disc herniation [at C6-C7] eccentric to the left with significant left-sided foraminal stenosis and left C7 nerve root compression" — that were not present in pre-accident imaging. Seigel ultimately opined that, as a result of the August 2012 accident, plaintiff sustained a "[c]ervical sprain/strain, superimposed on pre-existing degenerative changes." Based on the foregoing, the Appellate Division found that the objective findings in Seigel's report, his attribution of the cervical spine injury to the August 2012 accident, and the indicated diminished range of motion in plaintiff's cervical spine, actually serve to support plaintiff's claim of a serious injury such that defendants' were not entitled to summary judgment dismissing plaintiff's claim of serious injury to his cervical spine.
02/27/19 Buchanan v. Keller
Appellate Division, Second Department
Defendant Failed to Proffer a Non-Negligent Explanation for Hitting the Stopped Plaintiff’s Vehicle from the Rear
The Appellate Division held that the Supreme Court should have granted the plaintiff's motion for summary judgment on the issue of liability. A plaintiff is no longer required to show freedom from comparative fault in order to establish her or his prima facie entitlement to judgment as a matter of law on the issue of liability. Plaintiff was hit from the rear by defendant. A driver of a vehicle approaching another vehicle from the rear is required to maintain a reasonably safe distance and rate of speed under the prevailing conditions to avoid colliding with the other. A rear-end collision with a stopped or stopping vehicle establishes a prima facie case of negligence on the part of the operator of the rear vehicle, thereby requiring that operator to rebut the inference of negligence by providing a non-negligent explanation for the collision. Although a sudden stop of the lead vehicle may constitute a non-negligent explanation for a rear-end collision, vehicle stops which are foreseeable under the prevailing traffic conditions, even if sudden and frequent, must be anticipated by the driver who follows. The plaintiff testified at her deposition that her vehicle was stopped at a red light when it was struck in the rear by the defendants' vehicle. This testimony established, prima facie, that the defendant driver's negligence was a proximate cause of the accident. The defendant driver testified that before the accident occurred, the light turned green, and the plaintiff began to slowly move forward. The defendant driver began to accelerate, then he saw the plaintiff's brake lights go on. He testified that he "hit the brakes and hit her." In essence, his testimony amounted to a claim that the plaintiff's vehicle came to a sudden stop which, standing alone, was insufficient to rebut the presumption of negligence on the part of the defendants' vehicle.
02/27/19 Rojas v. Linton
Appellate Division, Second Department
Plaintiff Failed to Raise Issue of Fact When Her Physician Failed to Set Forth Objective Tests Used to Measure Plaintiff’s Range of Motion
The plaintiff and the defendant were involved in a motor vehicle collision at the intersection of Vermont Street and Riverdale Avenue in Brooklyn. The plaintiff commenced suit to recover damages for his injuries. In the bill of particulars, the plaintiff alleged injuries to the cervical and lumbar regions of his spine, and to his left shoulder. He also alleged that he sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d).The defendant moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). In support, she submitted the affirmed report of an orthopedic surgeon, who measured the range of motion of the cervical and lumbar regions of the plaintiff's spine, and of the plaintiff's left shoulder, and compared those results to what would be considered normal range of motion. He concluded that the plaintiff had full range of motion. The defendant also submitted a transcript of the plaintiff's deposition testimony in support of her motion. The plaintiff testified that he did not miss any work as a result of the accident.
In opposition, the plaintiff submitted the affirmed report of a physician who had recently measured the range of motion of the cervical and lumbar regions of his spine, and found significant deficits. The plaintiff's physician did not identify the objective test he used to measure the plaintiff's range of motion. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine, and to the plaintiff's left shoulder, did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). The defendant also submitted evidence demonstrating that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d). In opposition, the plaintiff failed to raise a triable issue of fact.
02/27/19 Han v. Karimzada
Appellate Division, Second Department
Plaintiff and Defendant’s Expert Disagreed on Whether Range of Motion Limitations Were Significant Leading to Issue of Fact
The Appellate Division found defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant submitted competent medical evidence establishing, prima facie, that any limitations of range of motion were not significant. In opposition, however, the plaintiff submitted competent evidence of significant loss of range of motion in the lumbar region of her spine and her right shoulder, which raised a triable issue of fact.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
02/26/19 Eurotech Constr. v. Fischetti & Pesce, LLP
Appellate Division, First Department
Question of Fact Regarding Defense Firm’s Obligation to Notify its Client of Potential Excess Exposure
Plaintiff’s motion to renew was denied where it failed to proffer any new evidence at the time of the second submission. The claim, for legal malpractice, centered around defense counsel’s alleged failure to timely apprise its client of developments in an underlying litigation. Because notice was not provided of information learned in the underlying plaintiff’s bill of particulars and deposition, it is alleged that Eurotech failed to timely notify its excess carrier of a potential exposure.
Although it denied the motion to renew, the Court also addressed the merits of the claim stating that plaintiff’s malpractice claim was still subject to questions of fact regarding the timing of communications between lawyer and client, the “agreed upon scope of the representation” and when the lawyer’s professional skill and knowledge should have informed him of the potential excess exposure. The Appellate Division continued by advising that expert testimony would have been useful in this case where the standards governing counsel’s conduct are beyond the ordinary experience of non-lawyers.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
02/28/19 Gateway Residences at Exchange v. Illinois Union Ins. Co.
United States Court of Appeals, Fourth Circuit
Fourth Circuit Holds that Claims Asserted After Expiration of a Claims-Made and Reported Policy are Precluded from Coverage in Contractor Faulty Workmanship Case
Gateway Residences at Exchange LLC (“Gateway”) owned a building in Alexandria, Virginia. They hired a local contractor, Mechanical Design Group (“MDG”) to provide various engineering and design services. Among those, MDG was to install two “life and safety power generators” in the garage. Apparently they do so, but not very well, as when they started up them up in August 2014, they caught fire. As a result, the generators were destroyed and the opening of the 217-unit building was delayed. Gateway sued MDG and was awarded over $900,000 in damages. MDG eventually went out of business.
MDG had procured an insurance policy with Illinois Union that covered the period of February 1, 2014, to February 1, 2015. However, it was a claims-made and reported policy. While in its policy Illinois Union agreed to indemnify MDG for any legal claims that might arise out of the Gateway project, the policy also expressly stated that the coverage was provided “ON A CLAIMS-MADE AND REPORTED BASIS,” meaning that it covered “ONLY CLAIMS FIRST MADE AGAINST THE INSURED AND REPORTED TO THE INSURER, IN WRITING, DURING THE POLICY PERIOD” (emphasis in original). To further stress the point, the policy made it a “condition precedent to coverage” that any claim be reported to the insurer during the policy period.
MDG apparently never told Illinois Union about the potential claim before its policy expired in February 1, 2015. Instead, the carrier learned about it in September 2016, when Gateway notified MDG’s carriers that it intended to sue. Illinois Union thereafter disclaimed coverage on the basis of its policy provisions. In that letter, they explained that since the claim was first made outside of the policy period, there was no coverage in the first instance and there was “no coverage for this matter as no claims were made and reported during the policy period”. In the meantime, Gateway’s litigation against MDG proceeded and they ultimately received a default judgement of over $900k.
Gateway next tried to sue Illinois Union directly. From the procedural standpoint, the carrier properly removed the matter to Federal Court. While Gateway tried to remand it back down to state court, there was diversity among the parties which provided jurisdiction, and there was no valid argument to hold otherwise. As a substantive matter, however, Gateway’s only argument for coverage was that the carrier’s denial letter had been untimely sent. Thus, they asserted that the carrier had waived its coverage defenses and had to pay the claim.
In Virginia, like in many other states, there is a statutory provision relative to a carrier’s responsibilities when disclaiming coverage. Virginia Code Section 38.2-2226 states, in pertinent part: “Whenever any insurer on a policy of liability insurance discovers a breach of the terms or conditions of the insurance contract by the insured, the insurer shall notify the claimant or the claimant’s counsel of the breach. Notification shall be given within forty-five days after discovery by the insurer of the breach or of the claim, whichever is later.” Thus, a carrier is required to provide notice or risk waiver.
Here, however, the Circuit Court correctly pointed out that the statute “makes two things clear: it covers denials based on the insured’s ‘breach’ of the terms and conditions of the policy and applies to arguments properly characterized as waivable ‘defenses’”. Yet in this case, the crux of the matter did not have to do with breaches or defenses, but rather scope of coverage. Since the claim was outside of the scope of coverage in the first instance, there clearly was no legal duty to incur uncovered claims and the 45-day rule did not apply.
Jennifer A. Ehman
02/11/19 Great American Ins. Co. of New York v. L. Knife & Son, Inc.
Supreme Court, New York County
Hon. Saliann Scarpulla
Court Finds Questions of Fact Exist Where Application Submitted to Insurer Included Alleged Misrepresentations
The policyholder in this action is a beer distributor with a warehouse in Brooklyn, New York. In 2007, the policyholder contacted its retail insurance broker, TGA Cross (“TGA”), to purchase flood insurance for the warehouse. TGA, in turn, contacted a wholesale insurance broker, Swett & Crawford (“Swett”), to market the risk to the insurance marketplace. Swett then solicited flood coverage from Great American. The initial application that TGA submitted to Swett requested $4,000,000 in coverage for the building and $2,500,000 in coverage for the contents of the premises. The line titled "contents value" was left blank.
As part of its underwriting, Great American requested information concerning the
total insurable value ("TIV") of the insured property from Swett, as well as information regarding the policyholder’s flood prevention measures. TGA provided certain information in an email to Swett. Thereafter, on December 6, 2007, Swett relayed the information to Great American in a separate email, adding that the value of the contents of the premises was $3,000,000: the "insured has confirmed the following: ... Total contents value is $3M". In later depositions, Swett and TGA disputed the source of this number.
A quote was then provided by Great American noting the "Premium is based on $7,000,000 [total insurable value] ($4,500,000 and $3,000,000 Contents)," and the policy was later bound. Great American conducted an inspection of the premises shortly after issuing the policy, and no changes were made to the policy.
After four renewals, Super Storm Sandy struck New York, and the warehouse sustained significant damage. The policyholder submitted a claim totaling $5,000,000 in damage the following day. Great American denied coverage for the claim on the basis that the policyholder had made a material misrepresentation on its application for insurance. Great American then commenced this action against the policyholder seeking a declaration that the insurance policy was void ab initio, based on the alleged "material misrepresentation" on the hand-written application that TGA had provided to Swett. In September 2014, the policyholder filed a third-party complaint against TGA, its retail broker, asserting negligence and breach of contract.
In 2015, Great American moved for summary judgment. The motion was denied as "[t]he issue of whether defendants materially misrepresented any facts such as would void the policy remain[ed] a question of fact".
In April 2016, TGA filed a second third-party complaint against Swett asserting two causes of action. Swett then moved for summary judgment dismissing the breach of contract cause of action on the ground that there was no contract between the two companies. In this decision, the court agreed finding that throughout discovery in this action no one was able to produce a contract.
However, with respect to the negligence cause of action, TGA alleged that Swett "undertook to assist TGA Cross in obtaining excess flood insurance coverage" for the policyholder, "owed a duty to TGA Cross and [the policyholder],'' and "held itself out to TGA Cross as an expert." Swett argued in its motion that this negligence cause of action must be dismissed because there was no evidence showing that Swett had breached its duty of care to TGA. An insurance agent or broker owes no common-law duty to its customer other than to obtain the policy requested within a reasonable period of time, or to inform the customer that it could not do so. Here, Swett’s "customer" was TGA, the retail broker.
The court denied this piece of the motion finding questions of fact concerning the source of the $3 million figure on the application.
TGA also moved to dismiss the policyholder’s third-party complaint on, among other things, the law of the case doctrine and the economic loss doctrine. TGA argued that prior decisions in this matter established that Great American's "decision to issue the policy and the premium charged was not tethered to the TIV."
The Court however held that this was a mischaracterization of a prior First Department decision issued in this case. While the First Department affirmed the denial of Great American's motion for summary judgment because Great American "failed to establish as a matter of law that defendant [policyholder] made any misrepresentation" and that Great American failed to show that any such misrepresentation was material, its comment that "[a]fter plaintiff issued the policy, its own investigation of the property, which could have uncovered the TIV of the property and its contents, resulted in no underwriting activity, and other internal insurance company documents suggest that the decision to issue the policy and the premium charged were not tethered to the TIV," was dicta. And, under the law of the case doctrine, dicta in a court opinion does not constitute a holding.
Similarly, TGA’s argument based upon the economic loss rule was denied. The economic loss rule "denies the purchaser of a defective product a tort action against sellers, manufacturers, installers and servicers for purely economic losses sustained as a result of the defective product." Here, as this was not a products liability action, the economic loss doctrine was inapplicable.
Next, Swett moved to dismiss the policyholder’s claims based on the statute of limitations. The court agreed finding the claims were governed by a three year statute of limitations, which had passed.
Lastly, the court considered the policyholder’s Counterclaims for Attorneys' Fees and Other Extra-Contractual Damages asserted against Great American. The court dismissed these claims findings: (1) an insured may not recover the expenses incurred in bringing an affirmative action against an insurer; (2) the policyholder’s breach of the duty of good faith and fair dealing claim was redundant of its breach of contract claim; (3) the policyholder did not identify any specific acts performed by Great American that would constitute bad faith; (4) the policyholder could not identify any other damages suffered besides those associated with the breach of contract in order to claim consequential loss; and (5) punitive damages are not ordinarily available for a breach of contract claims.
Brian D. Barnas
03/04/19 1009 Clinton Properties v. State Farm Fire and Casualty Co.
United States District Court, Eastern District of Pennsylvania
Pennsylvania Court Makes it far more Difficult for Insurers to Succeed on Motion to Dismiss a Bad Faith Claim
State Farm issued a rental dwelling policy to Plaintiff covering Plaintiff’s property located in Philadelphia. Plaintiff suffered a loss on January 18, 2018, which it alleged was covered under the policy. Plaintiff alleged further that it reported the claim and complied with the terms of the policy, but that State Farm refused to pay benefits under the policy without justification. Plaintiff initiated a lawsuit alleging breach of contract and bad faith.
Plaintiff made the following bad faith allegations against State Farm:
a. Sending correspondence falsely representing that Plaintiff's loss caused by a peril insured against under the Policy was not entitled to benefits due and owing under the Policy;
b. In failing to complete a prompt and thorough investigation of Plaintiff's claim before representing that such claim is not covered under the Policy;
c. In failing to pay Plaintiff's covered loss in a prompt and timely manner;
d. In failing to objectively and fairly evaluate Plaintiff's claim;
e. In conducting an unfair and unreasonable investigation of Plaintiff's claim;
f. In asserting Policy defenses without a reasonable basis in fact;
g. In flatly misrepresenting pertinent facts or policy provisions relating to coverages at issue and placing unduly restrictive interpretations on the Policy and/or claim forms;
h. In failing to keep Plaintiff or their representatives fairly and adequately advised as to the status of the claim;
i. In unreasonably valuing the loss and failing to fairly negotiate the amount of the loss with Plaintiff and their representatives;
j. In failing to promptly provide a reasonable factual explanation of the basis for the denial of Plaintiff's claim;
k. In unreasonably withholding policy benefits;
l. In acting unreasonably and unfairly in response to Plaintiff's claim;
m. In unnecessarily and unreasonably compelling Plaintiff to institute this lawsuit to obtain policy benefits for a covered loss, that Defendant should have paid promptly and without the necessity of litigation.
State Farm moved to dismiss arguing that the Complaint was devoid of factual allegations to support a bad faith claim and only contained boiler-plate allegations. To succeed on a bad faith claim in Pennsylvania, a plaintiff must demonstrate that 1) the insurer did not have a reasonable basis for denying benefits under the policy and 2) the insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim.
The court concluded that Plaintiff’s allegations were sufficient to survive the motion to dismiss. The court stated that in a bad faith claim it must “do away with a robotic reading of Twombly and Iqbal and instead use its common sense when addressing whether a bad faith claim can survive a motion to dismiss.” Using that common sense analysis, the court concluded that a claim had been stated.
The court noted that bad faith claims are inherently intertwined with breach of contract claims. It reasoned that it is virtually impossible for a plaintiff to know whether an insurance company acted in bad faith when denying the plaintiff’s claim. A plaintiff is not in a position to factually plead facts that go to the second element because those facts go to the insurer’s state of mind, which is not available to the plaintiff at the time of the filing of the complaint. Other than the length of time it took for the insurer to deny the claim, the insurer holds all of the evidence of bad faith until discovery is completed. Thus, the court stated that it is “inequitable” for an insurance company to hold all of the fats pertaining to a bad faith claim and then move to dismiss the claim because the plaintiff does not have access to specific facts to plead bad faith.
The court also reasoned that if a bad faith claim survives a motion to dismiss there would be no greater burden on the parties because the discovery needed to flesh out the breach of insurance contract claim is the same discovery needed to investigate the bad faith claim. According to the court, the bad faith claim does not change the facts or issues of the case; normally the facts alleging the breach of insurance contract supports a plaintiff’s allegation that the defendant acted in bad faith.
In fact, the court went so far as to state that “an insurance bad faith claim is in the category of claims that require less factual explanation” to state a plausible cause of action.
02/22/19 Walker v. State Farm Mutual Automobile Insurance Company
United States Court of Appeals, Ninth Circuit
Bad Faith Claim Failed where the Claim was Excluded by the Policy and the Insurer Conducted a Reasonable Investigation
Travis Walker was riding an ATV on sand dunes in Nevada when his ATV stalled. He kneeled beside the ATV to insect the problem and was hit by a sandrail. Walker died at the scene.
Walker’s widow opened a claim under her own policies with State Farm because the driver of the sandrail was uninsured. State Farm authorized payment for funeral costs, but it denied coverage for UM benefits based on the policy’s off-road vehicle exclusion. Walker sued State Farm for breach of contract, violation of the Unfair Claims Settlement Practices Act, and bad faith, among other things.
State Farm did not waive its right to the exclusion defense based on its payment of funeral costs because it did not intentionally relinquish a known right. From the outset, State Farm questioned whether the sandrail qualified as an uninsured motor vehicle under the policy because it appeared to be an off-road vehicle and the accident occurred off public roads. Indeed, State Farm issued a letter reserving its rights to deny coverage because it had a concern regarding the nature of the
sandrail.
The court concluded that State Farm conducted a reasonable investigation and therefore was not liable under the Nevada Unfair Claims Settlement Practices Act. State Farm investigated the sandrail and the nature of the accident, and considered whether the sandrail fell within the policy’s exclusion for off-road vehicles. Ms. Walker argued that State Farm should have conducted a more thorough investigation but did not argue that a more thorough investigation would have led to the conclusion that the sandrail was not primarily an off-road vehicle.
In addition, State Farm did not violate the covenant of good faith and fair dealing. To establish a prima facie case of bad-faith refusal to pay an insurance claim in Nevada, the plaintiff must establish that the insurer had no reasonable basis for disputing coverage and that the insurer knew or recklessly disregarded the fact that there was no reasonable basis for disputing coverage. Plaintiff failed to raise a genuine issue of material fact as to whether State Farm had a reasonable basis for denying coverage. The policy clearly excludes coverage for an accident involving an off-road vehicle if the accident occurred off public roads. State Farm’s reasonable investigation revealed that Travis Walker was involved in an accident with an off-road vehicle while on a sand dune. Thus, State Farm had a reasonable basis for denying coverage and the insured’s bad faith claim failed.
JOHN’S JERSEY JOURNAL
John R. Ewell
02/21/19 Joseph v. Williams and Onyx Ins. Co.
New Jersey Superior Court, Appellate Division
Under New Jersey Law, An Automobile Covered by a Basic Policy Without Liability Coverage is Not an Uninsured Motor Vehicle
Plaintiff, Leo Joseph, appealed summary judgment dismissal of his complaint that sought uninsured motorist (UM) coverage from defendant, Onyx Insurance Company, for injuries plaintiff sustained in an automobile accident.
The accident occurred when a Ford Explorer driven by defendant, Reginald T. Williams, struck the Crown Victoria taxicab plaintiff was driving. Williams' Ford Explorer was insured under an Allstate New Jersey Insurance Company "basic policy" that did not provide liability coverage. The taxicab plaintiff was driving was insured under an Onyx Business Auto Policy, which included UM limits of $15,000 per person.
The trial court determined the Onyx policy's UM insurance did not provide coverage for plaintiff. The court based its decision on the plain language of N.J.S.A. 17:28-1.1(e)(2), which states in pertinent part: "'Uninsured motor vehicle' shall not include an automobile covered by a basic automobile insurance policy."
The Appellate Division ruled that the statute is dispositive and affirmed the dismissal of the complaint. In New Jersey, an automobile covered by a basic policy without liability coverage is not an uninsured motor vehicle. It is an underinsured motor vehicle.
Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.
Lee S. Siegel
02/28/19 Moura v. Harleysville Preferred Ins. Co.
United States District Court, District of Connecticut
Home Owner Not Allowed to Amend Complaint to Add Common Law Bad Faith
The Moura family is experiencing a Connecticut epidemic, crumbling concrete foundations. They bought, in 2009, a home that was constructed in 1998. By March 2017, they noticed cracks in their basement walls. The Mouras concluded that it was likely due to a form of concrete that oxidizes, expands, and breaks the bonds of the concrete, speculating that the concrete was produced by notorious Connecticut concrete manufacturer J.J. Mottes Concrete Company. Asserting that it is “only a question of time until the basement walls collapse,” the Mouras filed a homeowner’s claim with their carriers. When Liberty denied the claim and Harleysville did not issue a coverage decision, the Mouras brought suit in Connecticut Superior Court, claiming breach of contract and violation of the Connecticut Unfair Insurance Practices Act (CUIPA) and the Connecticut Unfair Trade Practices Act (CUTPA). The carriers removed.
Post-removal, but pre-answer, Harleysville denied coverage and the Mouras sought leave to amend their complaint to address the denial and to add causes of action for bad faith. Under the Erie doctrine, the courts look to state court opinions to determine the contours of the implied covenant of good faith and fair dealing. In Connecticut, the implied covenant of good faith and fair dealing arises entirely from common law. The district court noted, and the parties agreed, that most Connecticut state courts “would ‘typically’ reject the Plaintiffs' claims” because the state courts have not found the insurers’ conduct in concrete decay claims sufficient to state a claim for bad faith. But, some federal district courts have held otherwise.
Marti's Legislative and Regulatory Markers
Jerry Marti
02/22/19 Gail Holler-Kennedy v. The Diocese of Buffalo, N.Y., et al
Supreme Court, Erie County
First Lawsuit Filed Under the Child Victims Act in New York State
Plaintiff, Gail Holler-Kennedy, filed the first lawsuit against multiple defendants, including the Diocese of Buffalo, N.Y., Cardinal O’Hara High School and multiple religious orders, claiming injuries and conditions as a result of sexual abuse by Father Mark S. Andrzejuk while he was employed as a priest and teacher at Cardinal O’Hara High School. The acts are claimed to have occurred in between 1978 through 1981 while Ms. Holler-Kennedy was a minor.
In particular, the allegations as set forth in the Complaint are as follows: Negligent Hiring/Retention/Supervision/Direction; Negligence/Gross Negligence; Breach of Fiduciary Duty; Breach of Non-Delegable Duty; Negligent Infliction of Emotional Distress, Breach of Duty in Loco Parentis; Breach of Statutory Duty to Report Abuse under Soc. Serv. Law §§ 413, 420.
The Plaintiff seeks $50M in compensatory damages and $250M in punitive damages. As of the time of this publication, the Complaint is subject to the approval of the County Clerk.
OFF THE MARK
Brian F. Mark
All quiet on the construction defect front.
Larry E. Waters
[email protected]
03/05/19 Kookmin Best Ins. Co. v. Foremost Insurance Company
United States District Court, Southern District of New York
Plaintiff’s Motion for Summary Judgment Granted as to Defendant’s Duty to Defend in the Personal Injury Actions Because the Allegations in Personal Injury Complaints Leave Open the Reasonable Possibility that the Alleged Injuries Were Suffered in a Location Used to Access the Insured’s Premises and the Insured’s Acts or Omissions Were the Proximate Cause of the Alleged Injury
This action stems from an alleged personal injury sustained by Omar Ore (“Ore”) at a property owned by 660 Realty Corp. (“660 Realty”) on February 21, 2015. Ore also alleged that 660 Realty leased the premises to Queens Optometric Care PLLC d/b/a Bronx Eye Associates (“Bronx Eye”) before the date of the alleged accident. As a result of the alleged personal injury sustained by Ore, two identical lawsuits were brought in New York State Supreme Court, Bronx County. In that action, Ore alleged that both 660 Realty and Bronx Eye caused his accident by negligently owning, maintaining, and repairing the premises. Despite obtaining a default judgment against 660 Realty in the first personal injury action, Ore agreed to withdraw or vacate that judgment after he commenced the second identical personal injury action. Both actions are currently pending.
660 Realty and Bronx Eye first entered into a written lease agreement on October 1, 2006. At the time of the alleged accident, the written lease agreement was in full effect. Over the years however, there have been modifications to the lease agreement. On January 1, 2015, 660 Realty and Bronx Eye entered into a rider to the lease, which extended the terms of the lease to December 31, 2024 and described the premises as “First Floor-Suite 103 and Suite 104. A few weeks before the alleged injury, 660 Realty and Bronx Eye entered into a modification lease agreement which provided that “[660 Realty] shall keep the sidewalk and related curb areas in clean condition, free of debris, snow and ice . . . [and] [Bronx Eye] shall make any and all repairs to the said sidewalk required as a result of the tenant’s acts or omissions. . . .”
Sometime prior to the alleged injury, defendant Foremost Insurance Company (“Foremost”) issued a commercial general liability policy to Bronx Eye, which was in effect at the time of the alleged injury (the “Foremost Policy”). Among the provisions, the Foremost Policy contained an Additional Insured Endorsement, which listed 660 Realty as an additional insured entity. In relevant part, the Additional Insured Endorsement in the Foremost Policy provided:
5. Other Insurance
If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:
3 a. Primary Insurance
This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in c. below.
b. Excess Insurance
This insurance is excess over:
(1) Any of the other insurance, whether primary, excess, contingent or on any other basis:
(a) That is Fire, Extended Coverage Builder’s Risk, Installation Risk of similar coverage for “your work”; That insures for direct physical
(b) loss to premises rented to you or temporarily occupied by you with permission of the owner;
Similarly, Plaintiff Kookmin Best Insurance Company, Ltd (“Kookmin”), through its predecessor Leading Insurance Group Insurance Company, Ltd, issued a business owners policy to 660 Realty (the “Kookmin Policy”). The Kookmin Policy had effective dates of July 9, 2014 to July 9, 2015. The Kookmin Policy provided that Business Liability Coverage is excess over “[a]ny other insurance that insurers for direct physical loss or damage” or “[a]ny other primary insurance available to [660 Realty] covering liability for damages out of the premises or operations for which [660 Realty] ha[s] been added as an additional insured by an attachment or an endorsement.”
On August 21, 2017, Kookmin tendered 660 Realty’s defense and indemnity to Foremost. On October 23, 2017 Foremost denied the tender, taking the position that it was not obligated to afford coverage to 660 Realty.
Thereafter, Kookmin commenced this current action, which was removed subsequently to this Court. Kookmin moved for summary judgment on its claim for declaratory relief and Foremost filed its cross-motion for summary judgment.
The Court began its analysis with whether Foremost has a duty to defend 660 Realty in the underlying personal injury actions. Foremost first argued that 660 Realty does not qualify as an additional insured because Ore’s alleged accident did not occur at a covered location. In support of its argument, Foremost highlighted that Ore’s alleged injuries occurred outside “Suite 2”, on the sidewalk adjacent to the building in which Bronx Eye operates. As such, Foremost reasoned that an accident on the sidewalk did not trigger a duty to defend under the Foremost Policy because the sidewalk is not a covered location.
The Court rejected Foremost’s argument. The Court began by recognizing that New York courts have repeatedly held that “in the context of liability insurance coverage disputes, if a sidewalk is “necessarily used for access in and out of the premises,” it is considered, “by implication, part of the premises.” While the Court noted it may conclude that injuries did not arise out of the operation of the premises where a plaintiff alleges that [they] suffered injuries on a portion of a sidewalk that was near but not necessary to access the premises, the Court concluded that this was not the circumstances in this matter. Rather, the Court noted that Foremost’s argument fails “if Ore’s alleged injuries occurred on a part of the sidewalk that is necessarily used to access Bronx Eye’s premises, the site of the injury would be deemed part of the premises covered by the Foremost Policy.” Here, the Court found that the since Ore’s allegations were ambiguous as to the sidewalk where he fell, Foremost could not meet their heavy burden “that there is no possibility” of coverage. That is, the Court concluded the ambiguity in Ore’s allegations left open the reasonable possibility that he suffered his alleged injuries in a location necessarily used to access Bronx Eye’s premises—and therefore, considered part of the premises. Therefore, the Court rejected Foremost’s first argument.
In the alternative, Foremost argued that its duty to defend 660 Realty was not triggered because Ore did not allege that his accident was caused by the operations of the named insured, Bronx Eye. In support of this alterative argument, Foremost turned to the policy which limits coverage to an injury caused “in whole or in part” by the “acts or omissions” of a named insured. As such, the duty to defend exists if the named insured’s conduct is the proximate cause of the injuries alleged in the underlying lawsuit. Further, Foremost turned to the 2015 rider to the lease in support of its alternative argument. Foremost argued that 660 Realty and not Bronx Eye were obligated to maintain the sidewalk, on which Ore allegedly sustained injuries.
The Court once again rejected Foremost’s argument. The Court found that the leasing documents made it clear that Bronx Eye had some obligations with respect to the sidewalk in certain circumstances. In fact, the Court referenced said document, which stated Bronx Eye was required to “make any and all repairs to the said sidewalks required as a result of [its] acts or omissions.” Further, the Court found that the broad allegations in Ore’s complaints that Bronx Eye’s negligent ownership, leasing, operation and maintenance of the sidewalk caused his injuries were enough to establish a reasonable possibility that Bronx Eye’s negligence conduct caused his injuries. Therefore, the Court determined that such a possibility created a reasonable possibility of coverage, which triggered Foremost’s duty to defend.
After holding Foremost had a duty to defend 660 Realty in the personal injury actions, the Court next considered whether Foremost’s coverage obligation is primary to Kookmin’s obligations, such that Foremost must reimburse Kookmin for expenses associated with defending against the underlying personal injury actions.
In its analysis, the Court began by noting that established New York law required that “[i]f the two policies contain irreconcilable ‘other insurance’ clauses, the clauses ‘cancel each other out and the companies must apportion the costs of defending and indemnifying . . . on a pro rata basis.’” However, the Court noted that New York law establishes as well if the policies contain reconcilable “other insurance” clauses, the Court must enforce coverage priority to the terms of the insurance policies.
Next, the Court turned to the two policies at issue. The Court found that the Kookmin Policy’s “other insurance” clause expressly provides that it is excess over “[a]ny other primary insurance available to [660 Realty] covering liability for damages arising out of the premises of operations for which [660 Realty has] been added as an additional insured by attachment of an endorsement. In addition, the Court found that there was no dispute that the Foremost Policy named 660 Realty as an additional insured. Further the Court found that the Foremost’s reliance that the “other insurance” in the Foremost Policy render Foremost’s coverage excess was misplaced. In rejecting Foremost’s contention, the Court noted that the insurance claims at issue did not involve direct physical loss to the premises, which would render the coverage excess as well. Rather, the Court concluded the insurance claims at issue in this matter involved liability coverage based on Ore’s actions seeking recovery for alleged personal injury. As such, the Court concluded that Foremost’s coverage obligation to 660 Realty was not excess relative to Kookmin’s Coverage and therefore, Foremost’s coverage obligation was primary.
Eric T. Boron
02/28/19 West Bend Mutual Ins Co v. Ixthus Medical Supply, Inc. et al.
Supreme Court of Wisconsin
Duty to Defend case - Court of Appeals’ Reversal of Circuit Court’s Grant of Summary Judgment for Insurer is Affirmed by Supreme Court of Wisconsin
The background facts can be summarized as follows. Ixthus, a medical supply company operating in Wisconsin, was insured under a commercial general liability insurance (“CGL”) policy with West Bend, which provided coverage for “personal and advertising injury.” Specifically, the CGL policy provided:
2. COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal and advertising injury” to which this insurance does not apply....
b. This insurance applies to “personal and advertising injury” caused by an offense arising out of your business but only if the offense was committed in the “coverage territory” during the policy period.
“SECTION V—DEFINITIONS” of the CGL policy defines “advertisement” and “personal and advertising injury” as:
1. “Advertisement” means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:
a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and
b. Regarding web-sites, only that part of a website that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.
....
14. “Personal and advertising injury” means injury, including consequential “bodily injury,” arising out of one or more of the following offenses:
....
f. The use of another's advertising idea in your advertisement,” or
g. Infringing upon another's copyright, trade dress or slogan in your “advertisement.”
Under “COVERAGE B,” the CGL policy contains exclusions for both “Knowing Violation of Rights of Another” and “Criminal Acts”:
2. Exclusions
This insurance does not apply to:
a. Knowing Violation of Rights of Another
“Personal and advertising injury” caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict “personal and advertising injury.”
....
d. Criminal Acts
“Personal and advertising injury” arising out of a criminal act committed by or at the direction of the insured.
....
In a lawsuit filed in New York federal court in 2015, Abbott, a health care company that manufactures and sells blood glucose test strips in both the domestic and international markets, sued Ixthus along with over 100 other defendants, asserting thirteen federal statutory and common law claims for relief arising from Abbott’s belief that the “defendants” were “import[ing], advertis[ing] and subsequent[ly] distribut[ing]” boxes of Abbott's international test strips in the United States. The thirteen claims alleged against Ixthus and the other defendants were: (1) Federal Trademark Infringement under Section 32 of the Lanham Act; 15 U.S.C. § 1114(1); (2) Federal Unfair Competition under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(i)(A); (3) Common Law Unfair Competition (New York law); (4) Federal Trademark Dilution under Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c); (5) State Law (New York) Trademark Dilution; (6) State Law (New York) Deceptive Business Practices; (7) Unjust Enrichment; (8) Violation of Federal RICO, 18 U.S.C. § 1962(c); (9) Conspiracy to Violate Federal RICO, 18 U.S.C. § 1962(d); (10) Importation of Goods Bearing Infringing Marks under 15 U.S.C. § 1124; (11) Fraud and Fraudulent Inducement; (12) Aiding and Abetting Fraud; and (13) Contributory Trademark Infringement.
Upon being served with Abbott’s 2015 federal court complaint, Ixthus tendered its defense to its CGL insurer West Bend. In a March 2016 letter to Ixthus, West Bend denied Ixthus's tender, and explained why it took the position that the Abbott lawsuit was not covered by the CGL policy. In August 2016, West Bend filed a complaint in the circuit court seeking a declaratory judgment that West Bend had no duty to defend or indemnify Ixthus in Abbott's lawsuit. In March 2017, West Bend filed a motion for summary judgment. The circuit court granted West Bend's motion, concluding that although the allegations in Abbott's complaint fell within the initial grant of coverage, the knowing violation exclusion applied, thereby eliminating any duty West Bend had to defend Ixthus in Abbott’s federal court action.
The Court of Appeals reversed the Circuit Court's grant of summary judgment to West Bend. The Court of Appeals agreed with the Circuit Court that the allegations in Abbott's complaint fell within the initial grant of coverage, but disagreed with the Circuit Court as to the applicability of the knowing violation exclusion. See West Bend Mut. Ins. Co. v. Ixthus Med. Supply, Inc., No. 2017AP909, unpublished slip op., ¶¶ 10, 12-14, 381 Wis.2d 472, 2018 WL 1583124 (Wis. Ct. App. Mar. 28, 2018) (per curiam). The Court of Appeals concluded the knowing violation exclusion did not apply because several of the claims alleged in the complaint could be established without having to prove Ixthus's actions were intentional. As such, the Court of Appeals held that Abbott’s complaint asserted potentially covered claims not consumed by the knowing violation exclusion, and concluded West Bend had a duty to defend Ixthus. Id.,
The sole issue preserved for consideration of the Supreme Court of Wisconsin was the duty to defend issue. Supreme Court set forth the three-step process it utilizes when analyzing duty-to-defend cases:
(1) “First, a reviewing court determines whether the policy language grants initial coverage for the allegations set forth in the complaint. If the allegations set forth in the complaint do not fall within an initial grant of coverage, the inquiry ends.”
(2) Second, “if the allegations fall within an initial grant of coverage, the court next considers whether any coverage exclusions in the policy apply.”
(3) Third, “[i]f any exclusion applies, the court next considers whether an exception to the exclusion applies to restore coverage.
The Wisconsin Supreme Court’s decision stated it had determined the allegations in Abbott's complaint very plainly alleged that Ixthus, as a “Defendant,” engaged in advertising that caused substantial injury to Abbott. Supreme Court went on to note that fleshing out the factual allegations at trial may affect indemnification under the policy, but at the duty-to-defend stage, the court liberally construes the allegations in the complaint, and makes all reasonable inferences from the allegations.
Having concluded the allegations in the complaint fell within the initial grant of coverage under the personal and advertising provision of the CGL policy, Supreme Court next applied the second step in the duty-to-defend analysis to determine whether any of the exclusions in the CGL policy applied to eliminate West Bend's duty to defend Ixthus.
Supreme Court stated the knowing violation exclusion will preclude coverage at the duty-to-defend stage only when every claim alleged in the complaint requires the plaintiff to prove the insured acted with knowledge that its actions “would violate the rights of another and would inflict ‘personal and advertising injury.’ ” If the complaint alleges any claims that can be proven without such a showing, the insurer will be required to provide a defense. The Supreme Court rejected West Bend’s argument that the knowing exclusion should be applied to bar any duty to defend because the “story” told by Abbott’s 156-page complaint told the reader that Ixthus “deliberately and willfully” participated in a “fraudulent scheme”, saying, “[W]e do not base insurance coverage decisions on stories or themes. We apply the law, and applicable law in this case requires us to compare the allegations in the complaint to the words of the exclusion to ascertain whether Abbott makes any claims that do not base liability on a showing of a knowing violation of another's rights and infliction of advertising injury.” The Supreme Court went on to reiterate that unless an exclusion knocks out every pleaded claim, leaving no potentially covered advertising-injury claim for which the insured could be liable, the duty to defend remains.
Here, according to the Supreme Court, Abbott's voluminous claims in the complaint include multiple claims that fall within West Bend's personal and advertising injury coverage provision and do not require proof that Ixthus acted with knowledge or with intent to violate Abbott's rights and inflict injury, citing as examples Abbott’s claims of violations of federal and state trademark statutes. Abbott's federal and state law causes of action for trademark dilution included allegations that Ixthus infringed upon Abbott's trade dress in Ixthus'
advertisements, thereby alleging covered claims for personal and advertising injury which do not require proof of knowing or intentional action on the part of Ixthus. Supreme Court emphasized that in this 156-page complaint when “even one covered offense is alleged in the underlying complaint, the insurance company has a duty to defend”, in affirming the Court of Appeals, and confirming West Bend has a duty to defend its insured in Abbott’s federal action.
The Supreme Court of Wisconsin’s decision was presumably a rather bitter pill for West Bend to swallow given the insurer had won summary judgment at the Circuit Court level. Not to mention that the magnitude of Abbott’s federal court litigation potentially may involve conducting or even sitting through depositions of over a hundred named defendants located all around the world, something likely to result in a substantial defense counsel legal bill being generated just for discovery in the case.
Marina A. Barci
03/05/19 Matter of Miller v. Elrac, LLC
Supreme Court, Appellate Division, First Department
Arbitrator’s Decisions are Upheld if They are Made in a Rational Manner
A master arbitrator was required to review the no-fault arbitrator’s determination. The master arbitrator agreed with the arbitrator that the sworn independent medical examination report established both a factual and medical basis for the conclusion that no further treatment for the assignor was required because the conditions had resolved and there was no objective evidence of disability. The treating doctor submitted an affidavit of a subsequent surgery, which was considered by the arbitrator but ultimately rejected as a factual and credibility determination, which was within the discretion of the arbitrator to make.
Decisions by arbitrators must be supported by sufficient evidence that allows the determination of the arbitrator to have been made on a rational basis that is not arbitrary or capricious. If the arbitrators award is supported by evidence or other basis in reason as it appears in the record, upon judicial review it must be upheld. Because the factual and credibility determinations between the two doctors here were made in a rational manner by the arbitrator, the decision was upheld.
02/22/19 Preferred Ortho Prods., Inc. v. 21st Century Ins. Co.
Supreme Court, Appellate Term, New York
Notice Defects Cannot be Raised for the First Time on Appeal
The insurance company moved for summary judgment based on the assignor’s failure to appear for the scheduled independent medical examinations. On appeal, plaintiff’s only contention was that the independent medical examination scheduling letters improperly included an apartment number that did not appear on the claim forms. However, because the appeal was the first time plaintiff raised this issue, it would not be considered and therefore the trial court’s decision was affirmed.
02/22/19 Starlight Acupuncture, P.C. v. MVAIC
Supreme Court, Appellate Term, New York
No-Fault Benefits Denied to Non-Covered Person Who was Not Granted Leave to File a Late Notice of Claim
MVAIC established that the filing of the notice of claim was not timely and that the plaintiff’s assignor was not a covered person. Because MVAIC established this, the conditions precedent required for plaintiff’s right to apply for payment of no-fault benefits were not satisfied. Plaintiff failed to establish that leave had been obtained to file a late notice of claim or otherwise raise a triable issue of fact.
Earl K. Cantwell
[email protected]
11/09/18 Hayes v. Metropolitan Property & Casualty Insurance Company
United States Court of Appeals, Eighth Circuit
Bad Faith Claim Upheld Due, in Part, to Ambiguous Policy Application Questions
This case arises out of a property that had mixed uses. Mr. Hayes used a detached garage as part of a “home base” for a plumbing business. In addition to living at the house, he also rented out part of the property to a tenant. The crux of the dispute was that Metropolitan argued that Mr. Hayes had indicated on his insurance application that the premises were not used to conduct business and were not used as rental property. However, the application was not totally clear on either of these questions. In addition, the insured testified that he did not recall personally completing the application, but rather an independent insurance agent may have filled it out with information from his sister because only his signature “stamp” was used and she had authorization to use the stamp.
In January 2013, the home was destroyed by a fire. When Hayes filed the claim with Metropolitan, there apparently was some concern that the fire may have been intentionally set. By January 2013, Metropolitan knew that Hayes was operating part of his business at the detached garage on the premises, and that he leased upper portions to tenants. In February 2013, Metropolitan issued a reservation of rights letter. In September 2013, investigators concluded there was insufficient evidence to charge anyone with arson in connection with the fire. In January 2014, Metropolitan concluded that Hayes made material misrepresentations on the 2007 insurance application, denied the claim, and purported to cancel the policy for material misrepresentations.
Mr. Hayes alleged that he did not “run” his business out of the premises, and that he had not made a claim with regard to his shop or business as a result of the fire.
Procedurally, Hayes sued Metropolitan on October 2014 in state court, and Metropolitan removed the matter to federal court on the basis of diversity jurisdiction. The breach of contract claim was dismissed as time barred, but the District Court entered a judgment for Hayes on the bad faith claim. The Court concluded that the forms contained ambiguous questions, and there was a lack of evidence that Hayes had knowingly provided false answers on the insurance application with an intent to deceive. The total amount awarded by the District Court was $493,455, to which were added counsel fees to the amount of $86,160. Metropolitan appealed alleging numerous errors, but the primary one being the contention that the bad faith claim could not exist without the time-barred breach of contract claim (which had earlier been dismissed).
On appeal, the Eight Circuit first of all established that Nebraska law applied to the case. However, the Court held that Hayes met his burden of proving the elements of bad faith as defined by the Nebraska courts, and the existence or underlying basis of the insurance contract was not a material part of that cause of action. A bad faith claim under Nebraska law was established when an insured could show that there was no reasonable basis for denying the claim, and the insurance company knew of, or recklessly disregarded, the lack of any reasonable basis for denying the claim. This is a common law, almost quasi-tort, claim and is not predicated on breach of contract.
The Appellate Court also found that the calculation of the attorneys’ fees was proper as an element of damages as well, and the decision of the District Court was affirmed.
The first item of note in this case is that it was brought on the basis of diversity jurisdiction which made Nebraska law the relevant legal standard for substantive purposes. Nebraska law essentially makes a bad faith claim a quasi-tort claim based on a “reasonable” standard and not a breach of contract theory.
This case also encourages insurance companies to periodically review their forms, applications, and underwriting documents to be clear, straightforward, and avoid misinterpretation or “subjective” responses. Clearly wrong and deviant answers to these questions are necessary to show material misrepresentation sufficient to rescind a policy or decline coverage. For example, one question here asked whether the residence was held exclusively for rental, the insured answered no, and in the context of the use of this property that was not a clearly erroneous response. The form also asked whether any farming or other business was conducted on the premises, and the insured stated that he not really run the plumbing business out of the premises although customers would occasionally contact him there about doing a plumbing job, and he did also apparently store some plumbing equipment on site. Ambiguous questions like this lead to less than straightforward answers, which cause confusion, and ultimately may be interpreted in favor of the insured.
