Volume XX, No. 22 (No. 533)
Friday, April 19, 2019
A Biweekly Electronic Newsletter
As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising. If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900. You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Happy Passover. Happy Easter. Happy springtime.
Do you have a situation? We love situations. They come in all shapes and sizes. Call with yours, so many of you do. For a link down to the Headlines in the Attached Issue of Coverage Pointers, click here.
A relatively quiet issue, this time around, but always a few cases, in the attachment. For newbies, you can find the highlights below and the substance in the Coverage Pointers issue attached. In my column, there are a number of uninsured/underinsured opinions. Your take on the Farm Family case would be welcomed. Two cases involving Farm Family contain (what some consider) a tortured view of Condition “6” of the SUM endorsement, reducing recovery of SUM benefits by considering all the liability payments made to all the claimants, not only to the claimant making the SUM claim. It may be consistent with some of the previous case law, but, IMHO, does not do justice to the policy terms.
It’s time for a little R&R and within a few days, I’ll be on a Viking Cruise on the Danube, seeing the sites from Passau Germany to Vienna to Budapest. You can reach me, as always, by email ([email protected]) or by cell (716.445.2258) but remember I’ll be about six hours ahead of Eastern Time. If you need to reach one of our coverage team members you can ask for Steve Peiper, or Jen Ehman, or Agnes Wilewicz or anyone else on the team can provide you whatever you need to satisfy your coverage appetite.
I’ll then be attending the ADTA Annual Meeting in Scotland followed by client meetings in London.
As usual, our astute and dedicated editorial staff has offered you the best of the best, with their columns in the attached issue and their cover letters interspersed with our patent-pending 100 years ago stories (we know that many of you love them as much as the issue).
Love to hear about what people are reading. Drop me a note. I just started “Accidental Presidents” by Jared Cohen, a book about the eight men who were not elected president but assumed the presidency upon the death of the elected president. Pretty good read.
Hey, don’t forget to subscribe to our other publications:
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Labor Law Pointers: Hurwitz & Fine, P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe. If you haven’t read the most recent edition.
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Premises Pointers: This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court, and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!). Contact Jody Briandi at [email protected] to be added to the mailing list. Read the latest edition.
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Health Law Pointers: We recognize that changes in the Health Law field can have profound and often unanticipated implications for those in the medical businesses, which is why we publish the electronic newsletter Health Law Pointers. This newsletter was created to help keep our clients informed of the latest developments in this ever-evolving field. We summarize information from various legal news sources and provide tips that are of particular interest to those in the medical field. Larry Ross would be happy to include you as a subscriber: [email protected]. Here’s a link to the latest edition.
There is an archive of our past editions and that they are searchable.
Sex Lure Drapery?
The St. Bernard Voice
Arabi, Louisiana
19 Apr 1919
Will American Women Replace Service
Uniform With Sex Lure Drapery?
By ELIZABETH NEFF, W. C. T. U. Dress Campaign
Is the American girl going to slump back into prewar style-slavery? She has worthily worn a military uniform, she has won honors for service and bravery side by side with our soldiers; she has nursed the wounded and cheered the homesick; she has fought for great ideals. Now will she let herself degenerate into the mere female of her species? Will the American woman allow her service uniform to be replaced by the suggestive draperies of sex lure? Is she willing to be a living poster or a grotesque cartoon for the advertisement of manufacturers’ goods?
If she will not why does the American woman, supreme arbiter in other respects, submit meekly, abjectly to the wildest freak of fashion decreed by men—un-American men who have the continental conception of woman and dress her in the continental half-feudal character part?
Is it patriotic, when the physical development and health of our girls is a national asset, to invite disease by unhygienic clothing? Is it fair to the young manhood of our nation to suggest in our homes the very temptation from which we try to protect it on the street?
It is the American girl who must henceforth restore order out of chaos, must set the standard of purity, and to do it she must dress her part. What shall the new world leader, the American girl, wear? It is easy to say what she will not wear, and that is a homely uniform damned by the phrase "dress reform." If the art of all ages cannot design costumes for our pretty American girls that will be beautiful, graceful, comfortable, healthful and modest, then the art of all ages has failed, and it is up to this important young person to take the matter in hand herself. Therefore it is time for woman to set herself a new standard of modesty.
This is, in brief, the new campaign begun by the W. C. T. U. for the advancement of social purity. It is summarized in this official resolution:
"Whereas, Certain styles of women's dress are unhygienic, immodest, inconvenient and conducive to extravagance and immorality; therefore
Be it resolved, That the women of the W. C. T. U. use their influence, to demand simpler and more modest clothing for both day and evening wear and discourage the unseasonable wearing of summer furs, winter pumps, narrow skirts and open necks as well as constant changes of fashion.”
Editor’s Note: Most know that the WCTU was and is the Women’s Christian Temperance Union. While its membership has dwindled significantly (5,000 in 2012), 100 years ago, membership exceeded 300,000.
Jen’s Gems:
Greetings!
Hope all is well. Last weekend we celebrated my youngest daughter’s fourth birthday. Charlotte loved every minute of her birthday. About halfway through the day she even realized that since it was her birthday, we were more likely to say “yes” to pretty much anything. After that, we heard a lot of “can I have more cake, it’s my birthday,” “can I go first, it’s my birthday,” “can I stay up late, it’s my birthday” etc. Smart kid.
I am just also coming back from a DANY (The Defense Association of New York) CLE. I had the pleasure of presenting on a panel about insurance procurement and coverage issues. The presentation took place at a restaurant called Battery Gardens located in Battery Park overlooking the Statue of Liberty. I hope my presentation was as quarter as exciting as the view. My piece focused on “Life Post Burlington.” What has happened in the almost two years since that case was decided by the New York Court of Appeals? The CliffsNotes answer, not a ton except we do know that the appellate courts really want carriers to defend.
Until next issue…
Jen
Jennifer A. Ehman
[email protected]
Prior to the Curse of the Bambino:
Poughkeepsie Eagle-News
Poughkeepsie, New York
19 Apr 1919
Babe Ruth Makes
4 Homers in Game
Baltimore, Md., April 18.—“Babe” Ruth of the Boston Americans, who played left field in to-day’s exhibition game with the Baltimore Internationals, made four home runs in six times at the bat. The other two times he was given base on balls.
John’s Jersey Journal:
Robbery, carjacking, and UM Coverage. That’s the focus of today’s episode of Jersey Journal.
Imagine the following facts:
A woman entering her vehicle in a darkened parking lot is accosted by a stranger intent on stealing the vehicle. The thief pushes the woman into the vehicle and drives off with the victim as a passenger. The thief then crashes the vehicle into an object and runs from the scene, leaving the victim seriously injured. *
Would the woman, the owner of the vehicle, be able to collect uninsured motorist benefits?
The answer depends on whether New York or New Jersey law applies. New Jersey would allow recovery while New York would not.
New Jersey
In New Jersey, the Legislature has set forth certain provisions and defined key terms of the UM coverage by statute and regulation. The term, “uninsured motor vehicle” is defined by statute. What is not an “uninsured motor vehicle” is also defined, including that it “shall not include … a motor vehicle owned by … the named insured …” This provision would, at first blush, appear to unambiguously prevent the woman from claiming her vehicle was an uninsured vehicle at the time of the accident.
New Jersey courts, however, have deemed that to be an “absurd” result and stated that they do not believe such result was intended by the Legislature. The Wichot case, recently decided by the Appellative Division, holds that an insured can collect uninsured motorists benefits from a vehicle they insured with liability coverage. The insured would need to show the injuries resulted from the use or operation of the vehicle.
The woman in the hypothetical above would therefore be able to obtain uninsured motorists coverage from the vehicle she insured with liability coverage. Her vehicle—insured with liability coverage—is deemed an “uninsured motor vehicle”. Why? Because the Court says so. What about the statute? Court says their interpretation is what the Legislature intended, not the literal reading.
New York
In New York, the Insurance Department (now DFS) drafted and enacted the uninsured and underinsured endorsement (“SUM endorsement”). The Department of Financial Services is now responsible for any changes or modifications to the SUM endorsement.
That SUM endorsement is required to be the SUM endorsement in every New York policy. Any contrary provisions are invalidated.
The New York SUM endorsements defines the term “uninsured motor vehicle”. It also defines what an “uninsured motor vehicle” is not. As relevant here, the term “uninsured motor vehicle” “does not include a motor vehicle that is: … insured under the liability coverage of this policy.” Therefore, under New York law, an insured would not be entitled to UM benefits from their own car (provided the same policy insures the vehicle with liability coverage). Returning to the hypothetical above, New York law would not allow recovery of UM benefits.
Today’s Cases
The Wichot case from the New Jersey Appellate Division presents a rather unique set of facts. The insured was allegedly kidnapped by a “friend” and two other individuals, who held him at gunpoint and drove him in his own car to banks in order to withdraw money from his accounts. In the course of the incident, the three assailants repeatedly beat plaintiff, throwing him against the car and hitting him with the gun.
The Appellate Division found an issue of fact over whether the claimant’s injuries arose out of the use and operation of an automobile. More importantly, the Appellate Division allowed the claim to proceed forward, ratifying that a person may collect UM benefits from their own insured vehicle provided they can establish the link between the injury and the car. Read that again: may recovery uninsured benefits from their own insured vehicle. Paradox? The Appellate Division reached its ruling solely based upon public policy grounds.
When kidnapped and robbed at gunpoint by a friend, it is time to make new friends.
Finally, we have the American Plumbing case. The New Jersey Appellate Division held that the subrogation waivers contained in the AIA A201 construction contract are enforceable. As a published decision, it is binding authority upon future cases. Because the waivers of subrogation were enforceable and applied, an insurer’s $1.2 million subrogation action was barred.
These interesting cases are summarized in the attached issue.
John
John R. Ewell
[email protected]
* Hypothetical courtesy of the New Jersey Appellate Division.
Clinic for Drug Addicts (or as more popularly characterized, Drug Fiends), 100 years ago:
Democrat and Chronicle
Rochester, New York
19 Apr 1919
Clinics for Drug Fiends.
New York, April 18.—Clinics for drug addicts, similar to that just opened here by the Health Department, will be established throughout the state, according to plans announced here tonight by Walter R. Herrick, newly appointed head of the state narcotic commission who will assume his duties next Monday.
Peiper on Property and Potpourri:
This week’s issue brings a couple interesting decisions involving the often invoked suit limitation clause. That clause, found as a standard in fire policies since the very first inception of fire insurance, effectively shortens the statute of limitations for commencement of legal challenges against an insurer. For most breach of contract claims, a party has six years from the date of a breach to bring an action. This, for the most part, includes insurance policies as well. For liability policies, the six year limit almost always holds true.
For first party policies, however, the time limitations on bringing a suit against an insurer are almost always shortened. The clause, as it is usually found, directs that legal action against a carrier be commenced within the first two years from the loss date. That rule stems from the Standard New York Fire Policy which is memorialized by statute at Insurance Law 3404. As the Standard Fire Policy dictates the minimum coverages for fire loss, it establishes that any fire policy issued on a New York risk must provide at least a 24 month window to commence an action. Notably, when a fire policy provides for a shorter limitation period, Section 3404 will be invoked to extend the suit limitation period through the minimum two year deadline.
This protection, however, does not apply to all first party policies. Indeed, it does not even apply to all coverages within a home owner’s policy. Thus, while the most common limitation is two years, a party is free to contract any time period so long as it does not extend to the discrete extension for fire coverage. With this in mind, the First Department’s decision Jonas (reviewed herein) correctly applied a one year suit limitation clause in favor of the Lloyd’s manuscript policy at issue.
Not only is the shortened time period to commence legal action an absolute bar to recovery, Courts have been traditionally reluctant to save an insured who files beyond the deadline. This is the case even where the insured may not even have had the policy (and therefore its terms) within its disposal. Our second case, Anderson v. Allstate demonstrates this principle clearly. Ongoing negotiations with a carrier are also a poor excuse for missing the deadline.
As a practice pointer, ALWAYS check the suit limitation period when evaluating first party coverage. It might just be shorter than you think.
That’s it for this week. See you in May.
Steve
Steven E. Peiper
[email protected]
Play Ball:
New-York Tribune
New York, New York
19 Apr 1919
Dodgers Open Season
Today with Braves
By W. O. McGeehan
Boston, which staged the first formal tea party in the country, will stage another historic debut today, the opening of the National League baseball season of 1919, when the Brooklyn Dodgers and the Boston Braves will meet twice on Braves’ Field.
This pre-season opening was sanctioned because today is Patriots’ Day and because Squire Ebbets, of Flatbush, in a long speech to the schedule committee, pointed out that it would be fitting to have even such an exhibition as the Dodgers and Braves will stage on Patriots’ Day. The concluding sentence of Squire Ebbets got the committee. He said, “Patriots’ Day is a day on which patriots will loosen to see the great American game.”
There will be two games, one in the morning and one in the afternoon. Wilbert Robinson was undecided yesterday as to just which pitcher he would send after the scalps of the Braves. The changes are that Mamaux, Marquard, Pfeffer and Cadore will have a chance to wind up. All the members of this quartet worked well in the citrus series with the Yankees.
Editor’s note: For those interested in the outcome of that double header, click here. Charles “The Squire of Flatbush” Ebbets owned the Dodgers and the stadium was named after him. To read more about Mr. Ebbets, click here. The stadium was torn down in 1960. I grew up three blocks from the stadium and could see it from my apartment window on Carroll Street in Brooklyn.
Hewitt’s Highlights:
Dear Subscribers:
The Islanders just swept the first round of the playoffs so we are thrilled down here in the Melville office, especially big fan Brian Mark. Baseball season is continuing and it only seems like everyone on the Yankees is hurt. I believe it is eleven people on the disabled list. My oldest got his first hit the other day on his team, the Green Machine, and my youngest got on base twice on the Blue Eagles. However, he had to be hit in the head twice to get there. Luckily the helmets are pretty good these days.
As far as serious injury cases, there have been none issued since our last edition. Hopefully we will have more cases for you next time. Happy Easter and a Blessed Passover to those who celebrate.
Until next issue,
Rob
Robert E.B. Hewitt III
[email protected]
Failure to Pony Up the Costs:
Democrat and Chronicle
Rochester, New York
19 Apr 1919
HORSE’S HOTEL BILL
HELD UP IN COURT
Attorney Thinks That
It is Exorbitant
Geneva, April 18.—The attorneys who are defending the validity of the Zobrist will, which provides that the horse, “Frank,” be given the best of care during the remainder of his life and then be buried in a cemetery provided for that purpose, seem to think that Frank is being too well kept, so far as the compensation is concerned that is claimed for that purpose.
To-day a term of Surrogate Court was held in the City Hall by Judge Harry I. Dunton and a bill for the keeping, exclusive of the feed, amounting to $320 was presented by William Hoefler, who asked that he be paid at the rate of $20 for a period of sixteen weeks. Attorney W. Smith O’Brien, who is representing the heirs of the will, objected to the bill as being too high and requested that he be allowed to examine it, which postponed the payment of the claim. Another bill for $25 for opening the safe that was in the Zobrist residence was objected to by F. W. Whitwell as being exorbitant. This claim was presented by John Place.
Editor’s Note: I don’t think Frank the Horse is any relation to Frank the Cat, who lives, quite well, in our house.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
I understand that we have a number of new subscribers these days. Welcome! In my corner of CP, I cover (pun intended) Circuit Court coverage cases of interest and import. Typically these include those issued by the Second Circuit, namely from New York, Connecticut, and Vermont. However, when seminal cases come out in other Federal Circuit Courts, either in cyber liability or environmental contexts for instance, and they have a potential national impact, you’ll find those here as well. Indeed, I have a particular penchant for environmental coverage cases and case law, so I’m always on the look-out for changes and developments in that area of law. Got an environmental coverage situation? Give me a call.
Next issue will come to you from the ABA TIPS Section Conference in New York. It is shaping up to be a fantastic program and I’m really looking forward to connecting with everyone on my home turf. Drop me a line if you’ll be attending, or if you’d like more information about how to get involved with the ABA TIPS.
Now, this week in the Wide World of Coverage, we bring you an interesting car insurance one case. In Milligan v. CCC Information Systems, the Second Circuit addressed two things – one procedural, and one substantive. First, whether the parties were entitled to an interlocutory appeal from an order denying a motion to compel arbitration. Typically, there are no appeals permitted in federal court before a final determination of all of the issues in a case (usually a trial or dispositive motion decision). Interlocutory appeal is a special circumstance where the appellate court hears an issue before the final conclusion of a matter. Here, the court held that, like a denial of a motion to compel arbitration, the motion to compel appraisal was sufficiently final to confer jurisdiction. Its determination could conclude the case and thus the federal appellate court would hear it.
Second, on the issue of whether the GEICO demand for appraisal should even be compelled, this arose because the vehicle in question was a new car and New York has a regulation detailing how to pay insurance proceeds relative to same model year vehicles. The carrier, however, had used an outside vendor to determine its own value and paid that. When it was sued, it demanded an independent appraisal of the vehicle, pursuant to the policy terms. However, the court found this inappropriate. The demand was made untimely as it was sent after the lawsuit was filed, and after the claim was paid.
Check out the attached issue for a full summary of this case, and many others. Links to the full-text opinions are hyperlinked at the start of the case summaries.
Until next time!
Agnes
Agnes A. Wilewicz
[email protected]
Speaking of Travel to Europe …
The Vicksburg Herald
Vicksburg, Mississippi
19 Apr 1919
TOO MUCH IDLE
TRAVEL TO EUROPE
STATE DEPARTMENT ASKS
PUBLIC TO ABSTAIN
No More Passports Unless Urgent
Necessity for Visit Can be
Shown by Applicants
Washington, April 18.—The State Department reiterated today its request that the public abstain for the present from all unnecessary travel to European countries. The Department asserted that applications for passports to these countries were being received in such large and daily increasing numbers that it has been deemed necessary to emphasize the fact that passports cannot be issued for Great Britain, France, Switzerland or Italy unless positive documentary evidence is furnished by applicants who will satisfy the department of the urgent necessity of the visit to these countries.
Barnas on Bad Faith:
Hello again:
What a glorious time of year for sports. The Masters and NCAA Tournament just concluded, NBA and NHL playoffs are in full swing (go Raptors), the MLB season has started, and Champions and Premier League football is coming down to the wire. Not to mention that the NFL schedule is about to be released, and the NFL draft is coming up next week. If the weather wasn’t finally turning for the better, I would be hard pressed to find a reason to leave my couch!
The first case in my column this week is an interesting case from the Fifth Circuit applying Louisiana law. The insured brought a claim against his carrier arguing that it refused to defend and indemnify him in bad faith. The insurer won in state court. After an excess verdict, the insured assigned his rights to the plaintiff who sought to recover the excess verdict based on the insurer’s alleged failure to settle. The court concluded that the doctrine of issue preclusion barred the refusal to settle claim. By not violating the duty to defend the insurer had necessarily also not violated its duty to settle.
The second case is a New York General Business Law case. New York Business Law § 349 prohibits deceptive business practices in the state. In Hobish, the plaintiff alleged that the defendant misled elderly consumers into believing that they would not be targeted for premium increases, and subsequently substantially increased such premiums. The court concluded this was sufficient to state a cause of action and survive a motion to dismiss.
Signing off,
Brian
Brian D. Barnas
[email protected]
A Buck for a Policy:
Buffalo Evening News
Buffalo, New York
19 Apr 1919
AUTOMOBILE Insurance; get our rates before insuring your car; ask about our $2500 accident policy issued with automobile insurance for $1 per year. The Chas. F. Joyce Co., Inc., Liberty Bldg., 15 West Swan St.; phone Seneca 916.
Editor’s Note:
Off the Mark:
Happy Easter and Happy Passover. More next issue.
Brian
Brian F. Mark
[email protected]
Might have been Faster to Walk:
The Buffalo Times
Buffalo, New York
19 Apr 1919
Aviator Trying Non-Stop
Flight Chicago to N.Y.
By Associated Press
CHICAGO, April 19.—Captain E. F. White, an army aviator, left the ground at 9:50 o’clock this morning from Ashburn Field for a non- stop flight to New York.
White’s machine is a DeHaviland biplane with 12-cylinder Liberty motor. Its gasoline capacity is 194 gallons which the captain believed was sufficient to land him at the Mineola, L. I., field this afternoon.
GARY, Ind., April 19.—Captain White flew over this city at about 10 o’clock this morning.
Editor Note: White successfully completed the flight, flying at an average speed of 106.38 MPH for six hours and fifty minutes, covering 727 miles. Most of the flight he was traveling at an altitude of 12,000 feet.
Wandering Waters:
I hope all of you had a wonderful week and welcome to another edition of Wandering Waters.
The NBA regular season ended on a relatively high note for Wade fans across the globe. In his final game, Wade recorded a triple-double. No doubt, his performance demonstrated that he can still play at a high level in the NBA.
Wade has enjoyed a remarkable career and is considered not only the best player in Miami Heat history but also a top three shooting guard of all time in NBA history. Wade has also provided some remarkable performances. One that comes to mind is his 2006 NBA Finals performance in which he put up one of the greatest statistical performances of all time. Watching his last game was truly a mixture of emotions. On one hand, you are sad to see him go but also happy you had a chance to witness his great career from start to finish.
With that said, we have one case from the Southern District of New York. Until next time……
Larry
Larry E. Waters
[email protected]
No Drugs in Prison, Then or Now (oh sure):
New-York Tribune
New York, New York
19 Apr 1919
No Drug Traffic in
Sing Sing, Says Warden
OSSINING, N. Y., April 18.—Commenting on a statement attributed to Health Commissioner Royal S. Copeland that drug addicts informed him they got drugs while in Sing Sing prison, Warden Edward V. Brophy, who had just taken charge there, declared to-day that he had made inquiry to determine if drugs are distributed.
One of his first official acts was to inquire of Lieutenant Amos O. Squire, prison surgeon, as to whether there is any drug traffic in Sing Sing. “Dr. Squire told me,” said Warden Brophy, “that there has been no drug traffic. I have heard nothing of one myself.”
Dr. Copeland was quoted in the newspapers as saying a former Sing Sing prisoner, recently discharged after serving four years, informed him he was a drug addict and had got drugs while in the prison.
Boron’s Benchmarks:
Dear Subscribers:
“Location, location, location”. It’s a cliché often uttered by property experts when advising about the “three most important things” that determine the desirability or value of a property. Today, Boron’s Benchmarks presents you with an opportunity to consider and apply that old cliché to analysis of the issue of the calculation of the actual cash value (“ACV”) of a property loss. Yes, location may very well matter when calculating the ACV of a loss. This is because the high courts of various states around our country have applied significantly differing analyses and rulings to the issue of whether depreciation of labor costs is permissible when calculating the ACV of a loss. Of course, the pertinent policy language still has a place of high import in the analysis, but location can certainly make a difference in how the depreciation application issue may play out.
You might say that a conclusion reached on the depreciation of labor costs issue by the Supreme Court of Tennessee two days ago means, in effect, that if you are an insured, and you have policy language that is equivalent to that considered by the Tennessee Supreme Court, the value of your property damage claim in Tennessee will be worth more than if your property damage claim with those same policy provisions occurred in another state, such as Nebraska, for example. Interested in learning more, and why? Why not? Go ahead and pop over to the case write-ups in this issue of Coverage Pointers, and check out my write-up of Lammert v Auto-Owners (Mutual) Insurance Company.
And now, taking a step back from coverage issues to consider the bigger picture - usually a good thing to do every now and then - may I say on a personal note that I am thankful Passover and Easter are mere days away, and, I hope your next two weeks are especially joyous and fulfilling.
Eric
Eric T. Boron
[email protected]
Government Selling Insurance:
The Fort Wayne Sentinel
Fort Wayne, Indiana
19 Apr 1919
GOVERNMENT IS GOING
INTO INSURANCE BUSINESS
(By Louis Ludlow, Special Correspondence New and Sentinel.)
WASHINGTON, April 19.—The government of the United States is about to become the greatest peace-time insurance agent in the world.
Final arrangements have now been made for the conversion of insurance taken from the government by soldiers and sailors during the war into the more common forms of peace-time insurance. This conversion will be made on the basis of the premiums already paid so that the soldier will not lose a cent in making the conversion.
The government insurance will have some attractive features that are not carried by commercial companies. This is due, in the main, to the fact that the government will pay the cost of administration of the insurance department which private companies must pay out of the premiums of insured persons. The soldier and sailor will also get the benefit of the fact that no commissions will be paid to agents. No one except soldiers and sailors may take the insurance, the public, of course, not having the opportunity.
Marti's Legislative and Regulatory Markers:
Dear Subscribers,
In our last newsletter, we looked at the potential claims under the Child Victims Act, and what constitutes a reasonable excuse for a late notice of claim. This week, we take a closer look at the late notice issue in terms of when the duty to provide prompt notice of an incident is triggered under the policy.
In the context of the Child Victims Act, the courts will likely consider issues involving late notice disclaimers from insurers since the statute of limitations has been expanded to include incidents dating back years, if not decades. As can be seen in the discussed Paramount case, as well as other cases, the insured’s duty to provide notice of an incident to its insurance carrier is based on reasonableness and the facts at hand. Even if there are other factors suggesting otherwise, there is a duty to notify the insurer of an incident as long as there is a reasonable possibility that the incident may give rise to a claim.
For more details, please read on.
Jerry
Jerry Marti
[email protected]
Finally, Baseball and Movies on Sunday in New York:
Star-Gazette
Elmira, New York
19 Apr 1919
Sunday Movies-Baseball
Bill Signed by Governor
Albany, N. Y., April 19.—Governor Smith today signed the bills authorizing Sunday baseball and moving picture shows.
Under the two bills baseball games may be played and moving pictures exhibited on Sundays provided that consent is given by the local governing body. The bills were fought by the Lord's Day Alliance and other religious organizations but were supported by the State Federation of Labor and numerous business and political bodies. Opponents and proponents had a hearing before Governor Smith on Wednesday.
Barci’s Basics (On No Fault):
Hello Subscribers!
April has been a busy month, so I don’t have anything really fun to tell you. I will tell you that yesterday I had to wear my winter coat to work yesterday and today I was too warm being outside in my light sweater, but that is the Buffalo spring for you.
On the no-fault front I have an older case for you that deals with the dichotomy between the New York and New Jersey fee schedule for proper billing practice, or denial practice. While I don’t think it’s an issue you’ll see often, it is good to know that if an assignor is treating outside of NYS for an accident that occurred in NYS and they are receiving NY no-fault benefits, if the provider’s state has a fee schedule that will apply.
That’s all folks,
Marina
Marina A. Barci
[email protected]
Buffalo Teachers Fighting for a New Contract Then and Now:
Buffalo Morning Express and
Illustrate Buffalo Express
Buffalo, New York
19 Apr 1919
BUFFALO TEACHERS WIN THEIR
BATTLE FOR SALARY RAISE
Bill to fix minimum wage at $800
a year is passed by the senate
AFFECTS 200 IN THIS CITY
Application of law means that instructors will
receive eight increments of $100
COUNCIL OPPOSED TO INCREASE
Superintendent Hartwell says he believes it
should have had the endorsement of local officials
From a staff reporter
Albany, April 18.—Buffalo teachers today won their fight for a share in the benefits of the teachers’ minimum wage bill, when the measure, with Buffalo included in its provisions, was passed by the senate today. The measure is scheduled to go through the assembly tomorrow. In its practical application, it is claimed, the bill will immediately affect only about 200 teachers in Buffalo, since it establishes a minimum salary of $800 a year. Most of the Buffalo teachers are getting that now. It stipulates, however, that this minimum is to be increased by eight annual increments and where graduated increases are now in effect they shall remain in force. This means, that Buffalo will have to increase the teachers $100 a year for eight years.
Editor’s Note: (An inside joke to Buffalonians – according to my sources, Phil Rumore was president of the BTF, even then).
Lee’s Connecticut Chronicles:
Dear Nutmeg Newsies:
Welcome back to Lee’s Connecticut Chronicles. This is your one stop shopping for all things Connecticut insurance law. Well, our streak of reviewing Connecticut Supreme Court decisions ends at two in a row. Instead, in this edition we look at the more mundane but oft-repeating issue of whether an insured knowingly waived its rights to UIM limits equal to the limit of liability. Read on for the answer to the $1.45 million question.
Lee
Lee S. Siegel
[email protected]
Headlines in the Attached Issue of Coverage Pointers:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
-
Application of Waiver of Subrogation and Anti-Subrogation Rule
- No Valid Excuse for Failing to Notify Police of Hit-and-Run Accident within 24 Hours so Uninsured Motorist Arbitration Permanently Stayed
- Calculating Underinsured Motorist Benefits
- Same Accident and Ruling as Gonzalez, Above with Different Claimant
- Claimant Established Right to MVAIC Benefits
- In Proceeding against MVAIC, Hearing Necessary to Determine whether Driver of Car had Permission of Rental Agency or was, as Alleged, a Fraudster who Obtained the Car by Identity Theft
- Provisions of UM/SUM Endorsement Requiring Prompt Notice to Police of Hit and Run, are Not Waived by Insurer Employee Comments to the Contrary
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
- Check back next time.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
Property
- Two Year Suit Limitation From “Inception” of Loss Upheld
- One Year Suit Limitation Clause Upheld
Potpourri
- Where Vicarious Liability is Asserted, Third-Party Plaintiff Stated a Cause of Action for Common Law Indemnification
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
- Second Circuit Sides with Insured in Car Appraisal Dispute
JEN’S GEMS
Jennifer A. Ehman
- Court Finds Sufficient Evidence in Framed Issue Hearing that Vehicle was Being Operated without Owner’s Permission
- Motion to Reargue Granted in Part to Limit Insurers Defense Obligation to Certain Entities
- Trial Court Grants Carrier’s Motion for Summary Judgment on its Denial of Coverage Due to a Misrepresentation as to the Number of Dwellings at the Insured Location
BARNAS ON BAD FAITH
Brian D. Barnas
- Decision in State Court that Insurer did not Act in Bad Faith Barred subsequent Claim for Refusal to Settle on Assignment
- Plaintiff’s Allegation that Defendant Misled Elderly Consumers into Believing they would not be Targeted for Premium Increases and Subsequent Raising of Premiums was Sufficient to State a Claim for Violation of General Business Law § 349
JOHN’S JERSEY JOURNAL
John R. Ewell
- New Jersey Appellate Division Allows UM Claim to Proceed where “Uninsured Motor Vehicle” was Insured’s Own Car, Insured for Liability Coverage
- New Jersey Appellate Division Enforces Subrogation Waivers in AIA Contract to Defeat Insurer’s Subrogation Action
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
- Waiver of Lower UIM Limits a Question of Fact
Marti's Legislative and Regulatory Markers
Jerry Marti
- Insured’s Duty to Give Notice of Incident Arises When There is Reasonable Possibility of Policy’s Involvement
OFF THE MARK
Brian F. Mark
- Back on the mark in a few weeks.
WANDERING WATERS
Larry E. Waters
[email protected]
- Third Party-Plaintiff’s Motion to Dismiss without Prejudice Granted because Third-Party Plaintiff’s Motion was Proper Pursuant to the Two Lines of Authority Established by the Second Circuit
BORON’S BENCHMARKS
Eric T. Boron
- Homeowners Property Insurance – Tennessee Supreme Court Answers Certified Question In Favor of Insureds - Ambiguity in Policy Language Means Insureds’ Plausible Interpretation Prevails - Insurance Company Cannot Withhold a Portion of the Labor Costs as Depreciation When Calculating ACV
BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
- New Jersey Fee Schedule Trumps New York Fee Schedule in No-Fault Action
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- No Coverage for Connecticut Concrete Decay
That’s it – see you in a couple of weeks. Keep that feedback flowing.
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
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
Marti's Legislative and Regulatory Markers
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
04/18/19 Wilk v. Columbia University
Appellate Division, First Department
Application of Waiver of Subrogation and Anti-Subrogation Rule
The underlying action was commenced after the Wilk, employed by Breeze at a construction site, sustained fatal injuries falling through an elevator shaft window that fourth third-party plaintiff (ACT) had removed and covered with a plastic sheet. The subcontract between Breeze and ACT required ACT to obtain insurance naming, inter alia, Breeze as an additional insured and containing a waiver of subrogation clause in favor of Breeze. ACT obtained such a policy from Century Surety Company.
Summary judgment ultimately was granted to plaintiff on the Labor Law claims. In addition, it was determined that ACT was required to indemnify the building owner and construction manager of the project where the accident occurred because the accident arose out of ACT's work and thus fell within the broad language of the contractual indemnification agreement between ACT and Breeze (see Wilk v. Columbia Univ.). ACT then commenced the fourth third-party action asserting claims against Breeze for contribution and common-law and contractual indemnification.
Breeze's motion to amend its answer to include, inter alia, the affirmative defenses of waiver of subrogation and the antisubrogation rule was correctly granted. ACT failed to show that Breeze's reliance on the same subcontract that ACT relies on has "hindered [ACT] in the preparation of [its] case" or "prevented [it] from taking some measure in support of [its] position". Moreover, as a party to its subcontract with Breeze, ACT cannot claim surprise or prejudice.
The fourth third-party action was correctly dismissed on the ground of waiver of subrogation. Although ACT is the named fourth third-party plaintiff, Century, as its insurer, is the real party in interest, because it is covering ACT's defense and liability. Thus, the waiver of subrogation must apply to ACT's claims.
The complaint was correctly dismissed for the additional reason that permitting ACT to maintain a claim against Breeze, when both are insured by Century, would violate the antisubrogation rule.
04/17/19 Country-Wide Insurance Company v. Chaudry
Appellate Division, Second Department
No Valid Excuse for Failing to Notify Police of Hit-and-Run Accident within 24 Hours so Uninsured Motorist Arbitration Permanently Stayed
This was an application to stay underinsured motorist arbitration.
On or about December 8, 2014, Chaudry was crossing the street when he was struck by an unidentified hit-and-run vehicle. In a letter dated May 2, 2016, Chaudry advised Country-Wide that he would be making a claim for uninsured motorist benefits under an insurance policy it had issued. Country-wide denied coverage; Chaudry filed for arbitration and Country-Wide moved to stay arbitration.
The carrier’s position was that Chaudry failed to report the accident to the police, a peace or judicial officer, or the Commissioner of Motor Vehicles within 24 hours of the accident or as soon as reasonably possible thereafter, as required by the uninsured motorist provisions of the insurance policy. A framed-issue hearing was conducted and the lower court denied that branch of the petition which was to permanently stay arbitration.
Ultimately it was found that indeed Chaudry had failed to report the alleged hit-and-run accident to the police, a peace or judicial officer, or the Commissioner of Motor Vehicles within 24 hours of the accident or as soon as reasonably possible thereafter, as required. Additionally, Chaudry failed to provide written notice of his claim and to file a sworn statement within 90 days or as soon as practicable after the accident in accordance with the uninsured motorist provisions of the insurance policy. Absent a valid excuse, the failure to satisfy the notice requirement of an insurance policy vitiates coverage. Chaudry did not offer a valid excuse for his failure to provide timely notice.
04/17/19 Farm Family Casualty Insurance Company v. Gonzalez
Appellate Division, Second Department
Calculating Underinsured Motorist Benefits
This is another petition to permanently stay arbitration of a claim seeking supplemental uninsured/underinsured motorist (“SUM”) benefits following an automobile accident. Gonzalez and the two other occupants of the same vehicle received a total of $100,000 pursuant to the bodily injury liability provision of the tortfeasor's policy with Allstate, split equally among the three individuals.
The Supreme Court should not have compared the SUM limit in the petitioner's policy to the bodily injury liability limit in the Allstate policy. Under Insurance Law § 3420(f)(2), an insured's SUM coverage is triggered when the limit of the insured's bodily injury liability coverage is greater than the same coverage in the tortfeasor's policy. Because the Allstate policy provided bodily injury coverage which was less than the bodily injury coverage provided by the Farm Family, the SUM provision of the petitioner's policy was triggered.
However, Gonzalez is not entitled to receive SUM benefits. The purpose of SUM coverage is to provide the insured with the same level of protection he or she would provide to others were the insured a tortfeasor in a bodily injury accident. SUM coverage does not function as a stand-alone policy to fully compensate the insureds for their injuries. Condition six of the standard endorsement furthers this policy by setting a maximum SUM benefit limit. That condition states that, regardless of the number of insureds, the maximum payment under the SUM endorsement shall be the difference between the SUM limit (in this case $100,000) and the motor vehicle bodily injury liability insurance payments received by the insured from or on behalf of all persons that may be liable for the bodily injury sustained by the insured.
Here, the appellant, together with the other two insureds, received a total of $100,000 under the tortfeasor's Allstate policy. It was proper to offset the total received by all three insureds from Allstate against the SUM limit under the Farm Family policy, thereby precluding any recovery under the SUM endorsement.
04/17/19 Farm Family Casualty Insurance Company v. Portillo
Appellate Division, Second Department
Same Accident and Ruling as Gonzalez, Above with Different Claimant
04/11/19 Henry v. Phelps and MVAIC
Appellate Division, First Department
Claimant Established Right to MVAIC Benefits
In 2012, Henry sued the operators of motor vehicles for injures she sustained as a passenger in the Phelps vehicle in an accident which occurred on November 30, 2011. She sued another action against Phelps in March 2014 and took a default against that defendant, on liability, in October 2014 with a money judgment in May 2017.
By letter dated May 12, 2017, Phelps's insurance carrier denied coverage, stating that Phelps, a New Jersey resident, did not elect bodily injury coverage in her policy of insurance. By the instant motion dated August 14, 2017, Henry moved to compel MVAIC to defend Phelps in the action. The court vacated the money judgment entered on default against Phelps, and granted the motion to compel MVAIC to defend the action.
Henry demonstrated that she was a "qualified person" under Insurance Law Article 52. She also showed that she complied with the three requirements under Insurance Law § 5208(a)(3)(A). She established a meritorious claim, an absence of liability coverage on the part of the defendant and demonstrated that she had obtained a money judgment in her favor.
She showed that she had made reasonable efforts to ascertain insurance coverage. Plaintiff obtained Phelps' identity and vehicle information in 2011. She also had discovered that Phelps' vehicle was insured on the date of the accident. Although plaintiff was unable to ascertain liability coverage, we find that plaintiff was not required to. Here, the denial of coverage did not occur because of a "lack of a policy of insurance in effect at the time the cause of action arose" (Insurance Law § 5208[a][3][A][ii]).
04/17/19 Rosado v. Motor Vehicle Accident Indemnification Corporation
Appellate Division, Second Department
In Proceeding against MVAIC, Hearing Necessary to Determine whether Driver of Car had Permission of Rental Agency or was, as Alleged, a Fraudster who Obtained the Car by Identity Theft
This was an application to commence an action for benefits against MVAIC.
Rosado claims that while riding his bicycle, he was struck by a motor vehicle and sustained personal injuries. A witness observed the license plate number of the vehicle which had fled the scene of the accident. A search revealed that the vehicle was owned by EAN Holdings, LLC (“EAN”), a rental car company. The petitioner filed a claim with RIS Rental Insurance Services, Inc. (hereinafter RIS), which handled liability claims for EAN. RIS disclaimed coverage on the ground that the individual who allegedly rented the vehicle was a victim of identity theft, that the operator rented the vehicle fraudulently using a stolen identity and was not an authorized driver, and that the identity of the operator of the vehicle was unknown.
Article 52 of the Insurance Law, entitled the "Motor Vehicle Accident Indemnification Corporation Act," is intended to compensate, through MVAIC, innocent victims who, among other things, are involved in accidents caused by uninsured motor vehicles and who are involved in hit-and-run accidents where the culpable driver is never identified. The procedure for applying to a court for leave to bring an action against MVAIC in a hit-and-run case is set forth in Insurance Law § 5218.
That section provides that a court may permit an action to be brought against MVAIC if certain criteria are met, including demonstrating to the court that "all reasonable efforts have been made to ascertain the identity of the motor vehicle and of the owner and operator and either the identity of the motor vehicle and the owner and operator cannot be established, or the identity of the operator, who was operating the motor vehicle without the owner's consent, cannot be established" (Insurance Law § 5218[b][5]).
In granting the petition, the Supreme Court relied on evidence that constituted inadmissible hearsay, including a letter from RIS disclaiming coverage, the incident report of the Volusia County (Florida) Sheriff's Office generated at the request of the individual who allegedly rented the vehicle, in which that individual alleges that he was a victim of identity theft, and RIS's "confidential statement report" summarizing its investigation of the individual who allegedly rented the vehicle.
A hearing is mandated to determine by competent proof whether the identity of the operator of the motor vehicle was unknown and whether the operator was driving the vehicle without the permission of EAN.
04/10/19 Geico Insurance Company v. Silverio
Appellate Division, Second Department
Provisions of UM/SUM Endorsement Requiring Prompt Notice to Police of Hit and Run, are Not Waived by Insurer Employee Comments to the Contrary
This was an application to stay an underinsured motorist (“SUM”) arbitration.
Silverio was hurt in a car accident on November 17, 2014, when his vehicle was struck by a hit-an-run vehicle that fled the scene. He was insured by GEICO and demanded UM/UIM arbitration from GEICO on April 17.
On May 8, GEICO commenced this Article 75 proceeding to stay SUM arbitration, claiming that the Silverio failed to comply with a condition precedent to arbitration by notifying the police within 24 hours or as soon as reasonably possible. In response, Silverio submitted an affidavit saying that he called GEICO and was told that a police report was unnecessary.
GEICO was not estopped from relying upon the policy provisions. In order to establish a claim based upon equitable estoppel, Silverio was required to prove that his reliance upon the words or actions of GEICO was "justifiable" and that in consequence of such reliance, he prejudicially changed his position. In light of the express provisions in the policy requiring prompt police notice, and provisions in the policy indicating that the terms of the policy could not be waived or changed by endorsement, the claim for estoppel fails.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
Check back next time.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
Property
04/11/19 Anderson v. Allstate Ins. Co.
Appellate Division, Third Department
Two Year Suit Limitation From “Inception” of Loss Upheld
Plaintiff filed a claim for coverage with Allstate after a rental premises she owned was burglarized and stripped of its hot water heater, plumbing fixtures and copper piping. In addition, the premises also sustained additional damage throughout the interior. Allstate denied the claim on September 18, 2014, therein asserting the exclusions for water damage and theft.
Plaintiff, in turn, commenced the instant lawsuit on October 19, 2016. Allstate moved to dismiss the lawsuit on the basis of a two year suit limitation clause. The clause, in particular, provided that any suit for recovery must be made within 24 months of the “inception” of the loss.
In affirming the trial court’s dismissal, the Appellate Division noted that the statute of limitations for a typical breach of contract claim was six years. However, the Court noted that parties are free to shorten the period in which a suit can be commenced. The Court also explained that the term “inception” has generally been construed to mean the date of the loss. Here, Allstate denied the claim in September of 2014. Thus, the loss had to have occurred prior to the denial, and, as such, more than two years from the date of the suit in October of 2016.
In opposition, plaintiff argued that Allstate should have been equitably estopped from relying upon the suit limitation clause because they never issued a copy of the policy. Without a copy of the policy, plaintiff reasoned that she should not be precluded by operation of a provision which she never had opportunity to review. The Court rejected this argument by noting that plaintiff’s own motion papers demonstrate that she possessed a copy of the policy at issue. Moreover, regardless of when the policy was issued, plaintiff failed to establish that Allstate willfully withheld production. As such, plaintiff failed to demonstrate how Allstate’s actions “lulled” plaintiff into a period of inactivity.
Plaintiff also argued that the statute of limitations should be extended by operation of CPLR 2004 which enables a court to extend deadlines. The Court noted that the CPLR cannot be used to extend a statute of limitations (contractual or otherwise), and rejected plaintiff’s argument accordingly.
04/09/19 Jonas v. National Life Ins. Co.
Appellate Division, First Department
One Year Suit Limitation Clause Upheld
Plaintiff was insured under a manuscript policy issued by Certain Underwriters at Lloyd’s London. The decision does not indicate what type of policy was issued, but we learn that the insurance contract contained a one year suit limitation clause.
In this case, Underwriters denied plaintiff’s claim on June 29, 2009. Underwriters revisited its coverage position, and again denied the claim on December 2, 2010.
Plaintiff, in turn, filed the instant lawsuit on May 13, 2013. Thus, the suit was filed, at a minimum, 17 months after Underwriters’ final denial letter. The Court noted that parties are free to contractually establish a shortened statute of limitations. Here, having done so, plaintiff’s claim was contractually barred.
Potpourri
04/16/19 J.H. an Infant Under the Age of Fourteen v. 1288, LLC
Appellate Division, First Department
Where Vicarious Liability is Asserted, Third-Party Plaintiff Stated a Cause of Action for Common Law Indemnification
Plaintiff sustained injury when his apartment was infested with bed bugs. He, thereafter, commenced this action against Chestnut who is the current owner of the building. Chestnut, in turn, commenced a Third-Party Action against the former owner of the building, BX, on the basis that it was their sole responsibility to eradicate the infestation.
BX moved to dismiss the Third-Party Action for common law contribution/indemnity, therein arguing that the Third-Party Complaint failed to state a cause of action. In affirming the trial court, the First Department noted that Chestnut’s allegation that any liability attributed to it was purely vicarious due to the negligence of BX was sufficient to state a cause of action for common law indemnification. Further, the Court noted that Chestnut appropriately asserted that if negligence was assigned against them, Chestnut was still entitled to an apportionment of negligence against BX.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
04/03/19 Lorena M. Milligan v. CC Information Systems and GEICO
United States Court of Appeals, Second Circuit
Second Circuit Sides with Insured in Car Appraisal Dispute
GEICO insured Lorena Milligan had leased a 2015 Lexus in March 2015. The lease valued the purchase price of the car at $51,400. About two months after leasing the vehicle, Milligan was involved in an accident that totaled the car. Shortly thereafter, she submitted the claim to GEICO, which obtained a Market Valuation Report from CCC Information Services (a GEICO contractor). CCC valued the car at $45,924 and GEICO paid that amount to Milligan’s lienholder on the claim.
In January 2016, Milligan filed a putative class action suit against GEICO and CCC for breach of contract, negligence, unjust enrichment, and various violations of New York law. In particular, the complaint alleged a violation of Regulation 64, a New York insurance regulation which requires insurers (in cases of total losses of a current model year vehicle) to reimburse an owner for the reasonable purchase price less any deductible and depreciation allowances. In particular, the Regulation states:
A private passenger automobile of the current model year means a current model year automobile that has not been superseded in the marketplace by an officially introduced succeeding model, or an automobile of the previous model year purchased new within 90 days prior to the date of loss. If the insured vehicle is a private passenger automobile of the current model year, the insurer shall pay the insured the reasonable purchase price to the insured on the date of loss of a new identical vehicle, less any applicable deductible and an allowance for depreciation in accordance with [a set schedule], except [under circumstances not relevant here].
Milligan asserted that her car had been of the “current model year” as defined by this Regulation. However, she contended that rather than paying her the reasonable purchase price of a new identical vehicle, GEICO paid the amount they determined based upon CCC’s Market Valuation Report. That report had calculated her loss by using the average of three similar dealer vehicles that were available or recently sold in the marketplace at the time of the valuation. Milligan’s complaint asserted that this practice affected many GEICO insureds.
In response to the complaint, GEICO’s counsel sent Milligan a demand for appraisal, according to the terms of her policy. This provided:
APPRAISAL
If we and the insured do not agree on the amount of loss, either may, within 60 days after proof of loss is filed, demand an appraisal of the loss. In that event, we and the insured will each select a competent appraiser. The appraiser will select a competent and disinterested umpire. The appraisers will state separately the actual cash value and the amount of the loss. If they fail to agree, they will submit the dispute to the umpire. An award in writing of any two will determine the amount of loss. We and the insured will each pay his chosen appraiser and will bear equally the other expenses of the appraisal and umpire.
We will not waive our rights by any of our acts relating to appraisal.
The letter also demanded suspension of the lawsuit and Milligan’s identification of an appraiser to participate in the appraisal process. In response, Milligan’s counsel promptly asserted that the demand was untimely; noting that the suit was already filed and pending at the time of GEICO’s letter and that GEICO had previously already paid their calculated value to the leasing company. Milligan’s counsel further disputed the correct amount owed under the policy.
At issue before the court were two main things: namely, whether there was even jurisdiction for this interlocutory appeal (as any appeals in federal court must typically await a final determination, usually the end of a trial), and whether appraisal should be compelled. First, with regard to jurisdiction, the Second Circuit held that the Order in the case that denied the motion to compel was a “final” order, sufficient to confer jurisdiction. Like an order compelling arbitration, the order here could be construed as final in that it would lead to an ultimate, binding solution. Thus, the appellate court had authority to review it.
Second, on the issue of whether GEICO’s demand for appraisal should be compelled, the Circuit Court cited precedent that held that “an appraiser may not resolve coverage disputes raising legal questions about the interpretation of an insurance policy. That principle had been applied in several cases decided under New York law.” An appraisal “is appropriate not to resolve legal questions, but rather to address ‘factual disputes over the amount of loss for which an insurer is liable’”. The dispute here involved the legal issue of the meaning and interpretation of Regulation 64. By not using that to calculate the damage but using its own market valuation, it was alleged that GEICO failed to comply with the statute, which was incorporated into the policy (i.e. the breach of contract). This was a question of law for the lower court to decide.
Jennifer A. Ehman
04/05/19 Matter of American Tr. Ins. Co. v. Ramirez
Supreme Court, Bronx County
Hon. Llinet Rosado
Court Finds Sufficient Evidence in Framed Issue Hearing that Vehicle was Being Operated without Owner’s Permission
The current matter arises from an incident on August 11, 2017. Darlene Ramirez (Respondent) was a passenger in a vehicle owned by Sheriff Cessay. Cessay’s vehicle was insured by petitioner, American Transit Insurance Company (ATIC). The vehicle the Respondent was riding in was struck by an automobile that was owned by Mariluz Diaz (Diaz). Diaz was not driving the vehicle at the time of the incident. Diaz’s vehicle was insured by Progressive Advanced Insurance Company (Progressive).
Following the accident, Respondent requested arbitration under the supplemental underinsured/uninsured motorist (SUM) from ATIC. In response, ATIC moved for a judgment staying the arbitration demand on the grounds that the offending vehicle was insured at the time of accident. ATIC established that the offending vehicle was insured under a policy issued by Progressive, at which time the burden shifted to Progressive to show that the driver of the vehicle at the time of the accident was not an authorized user.
The Court held a framed issue hearing where Diaz provided police reports and testified that she did not give Jose Perez, the man believed to be the driver involved in the accident, permission to take her vehicle. The Court found Diaz’s testimony credible and determined that ATIC was precluded from disclaiming coverage and their motion to stay arbitration was denied.
04/03/19 Zurich Am. Ins. Co. v. Liberty Mut. Fire Ins. Co.
Supreme Court, New York County
Hon. Anthony Cannataro
Motion to Reargue Granted in Part to Limit Insurers Defense Obligation to Certain Entities
Plaintiffs, Zurich American Insurance Company, Stahl Real Estate Company, 227 Park Avenue, LLC, and Cassidy Turley New York, Inc. (collectively “Plaintiffs”) brought this action seeking additional insured status under a policy issued by Liberty Mutual Fire Insurance Company (Liberty Mutual) to JP Morgan Chase Bank (Chase). Plaintiffs assert that defendants had a duty to defend in the action of Brian Gray v. Stanley Stahl.
Liberty Mutual moved to reargue a prior determination that it was liable for the defense cost in the underlying action. Liberty Mutual asserted that the Court failed to take into account that Plaintiffs were not entitled to a declaration regarding a duty to defend Stahl Real Estate Company. Additionally, Liberty Mutual argued that the Court overlooked their argument concerning the policy deductible provision in its agreement with Chase.
Plaintiffs brought a separate motion to reargue, claiming that the Court misapplied relevant case law when it denied their summary judgment motion regarding defendant’s duty to defend plaintiffs. Following reargument, the Court determined that Liberty Mutual only owed a duty to 277 Park Avenue and Cassidy Turley and was responsible to reimburse Zurich Insurance Company for the defense costs for those two parties. As to the second portion of Liberty Mutual’s motion for reargument, the Court held that Liberty Mutual and Chase share the duty to defend plaintiffs 277 Park Avenue and Cassidy Turley. The Court found that Chase would be liable for the defense cost regarding the deductible because there was a lease agreement in effect between Chase, 277 Park Avenue and Cassidy Turley.
Regarding Plaintiffs’ cross-motion to reargue, the Court found that Chase’s insurance policy with Liberty Mutual covers actions arising out of Chase’s own negligence. However, the Court did note that there were possible outcomes where Chase could bear responsibility for indemnification payments and therefore held that the denial of summary judgment was proper.
02/06/19 Micle v. MIC Gen. Ins. Corp., Northeast Agencies Inc.
Supreme Court, Queens County
Hon. Robert I. Caloras
Trial Court Grants Carrier’s Motion for Summary Judgment on its Denial of Coverage Due to a Misrepresentation as to the Number of Dwellings at the Insured Location
This decision arises from a matter involving MIC General Insurance Corporation’s (MIC) denial of coverage to Vasile Micle and Angelina Micle (Plaintiffs). Plaintiffs made a claim of fire damage for property located at 94-34 133d Avenue, Ozone Park, New York. MIC alleged that coverage was denied based upon a material misrepresentation made during the application process. Within the Policy Declaration the home was listed as two-family dwelling however the dwelling was actually a three family home.
Plaintiffs acknowledged that at the time of the fire, the home was a three family dwelling. Plaintiffs challenged the motion by asserting that there was no misrepresentation made to MIC. Plaintiff claimed that they submitted an application for insurance through another carrier and not MIC. The evidence presented showed that Plaintiffs submitted an application for coverage of a two-family dwelling to CastlePoint Insurance Company (CastlePoint) and renewed their Policy each year. In 2015, the company underwriting the Policy changed from CastlePoint to MIC. Furthermore, Plaintiffs claimed that the co-defendants were agents of MIC and were aware that the home was converted into a three family dwelling when they inspected the property prior to the date of the fire.
The Court began its analysis by discussing the standard for granting summary judgment. The Court noted that a party’s motion should be granted when “on papers alone, that there are no material issues and requires judgment in its favor”. As it follows, the Court determined that MIC had presented sufficient evidence to show that the provisions within the Policy were not ambiguous in that it defined the insured location as a two-family dwelling. Given that neither party disputed that the home was a three family dwelling at the time of the fire, the Court determined that MIC had sufficient grounds to disclaim coverage. Moreover, to Plaintiffs’ point regarding the co-defendants being agents of MIC, the Court disagreed with this position and held that brokers are deemed to be agents of the insured party. The Court did not believe that further discovery would present evidence to defeat the summary judgment motion and therefore granted the Defendant’s motion.
Brian D. Barnas
04/10/19 Smith v. Shelter Mutual Insurance Company
United States Court of Appeals, Fifth Circuit
Decision in State Court that Insurer did not Act in Bad Faith Barred subsequent Claim for Refusal to Settle on Assignment
In 2001, Paul Babin, whom Shelter insured, hit Smith while driving his car. After the incident, Smith sued Babin in state court. Babin then brought a crossclaim against Shelter alleging that Shelter had refused to defend or indemnify him in bad faith and seeking damages for Shelter’s alleged policy misrepresentations.
Following a bifurcated trial in state court, the court found that (1) Shelter did not have a duty to defend Babin and that (2) Shelter was not in bad faith in making its decision that it did not have coverage.as there was no failure in any part of the duties of the insurer. Accordingly, the court dismissed the crossclaims with prejudice.
After the state court proceedings concluded, Smith brought the instant action in federal court against Shelter on an assignment of Babin’s rights. Smith, standing in Babin’s shoes, sought to recover bad faith damages and the excess amount of the state court judgment beyond Babin’s insurance policy limits, alleging that Shelter misrepresented its policy and unreasonably failed to settle.
The court concluded that the failure to settle claim was barred by issue preclusion because Shelter’s obligation to exercise good faith in defending Babin also included its duty to settle within the policy limits. The insurance contract contains an implied term that an insurer that undertakes to defend its insured must make the determination whether to settle the case in good faith and without negligence. As such, the state court’s ruling—that Shelter did not violate its duty to defend—also then necessarily decided that Shelter did not violate its duty to settle.
04/09/19 Hobish v. AXA Equitable Life Insurance Company
Appellate Division, First Department
Plaintiff’s Allegation that Defendant Misled Elderly Consumers into Believing they would not be Targeted for Premium Increases and Subsequent Raising of Premiums was Sufficient to State a Claim for Violation of General Business Law § 349
The complaint alleged that defendant misled elderly consumers into believing that they would not be targeted for premium increases, and subsequently substantially increased such premiums. Toby Hobish alleged that this impacted her estate planning by forcing her to surrender the face value of the policy purchased from defendant.
Given that plaintiff has alleged both a monetary loss stemming from defendant's deceptive practices and an independent loss derived from defendant's failure to deliver contracted for services, the court concluded that the General Business Law claim was not duplicative of plaintiffs' breach of contract claim.
The court also concluded that the complaint sufficiently alleged deception. Plaintiff contended that the policy at issue did not define the term "a given class," the group for which defendant is contractually permitted to raise insurance rates. The Complaint also asserted that the policy did not address whether, when, or how an insured person can be reclassified. Finally, Plaintiff alleged that defendant targeted elderly individuals and raised their premiums to a degree that they were forced to surrender their insurance. Such collective conduct met the standard for deception, because the insurer's acts were likely to mislead a reasonable consumer acting reasonably under the circumstances.
JOHN’S JERSEY JOURNAL
John R. Ewell
04/03/19 Wichot v. Allstate New Jersey Property & Casualty Ins. Co.
New Jersey Superior Court, Appellate Division
New Jersey Appellate Division Allows UM Claim to Proceed where “Uninsured Motor Vehicle” was Insured’s Own Car, Insured for Liability Coverage
Plaintiff, Jeffrey Wichot was insured under an automobile insurance policy issued by defendant, Allstate New Jersey which provided plaintiff with uninsured motorist (UM) coverage. On April 9, 2012, plaintiff was involved in an incident wherein he sustained injuries for which he sought UM benefits from Allstate. He was allegedly kidnapped by a friend and two other individuals, who held plaintiff at gunpoint and drove plaintiff in his own car to banks in order to withdraw money from his accounts. In the course of the incident, the three assailants repeatedly beat plaintiff, throwing him against the car and hitting him with the gun. The three assailants were not insured, so plaintiff notified defendant of his UM claim. Allstate rejected the claim.
Plaintiff then sued for declaratory judgment. The trial court ruled that the instrumentality of the kidnapping and robbery was the gun, and that there was no substantial nexus between plaintiff’s post-traumatic stress and the vehicle to warrant UM benefits. The trial judge granted summary judgment to Allstate.
Under New Jersey law, “an insured who seeks UM benefits must satisfy a two-prong test: first, the insured must demonstrate that his or her injuries were caused by an 'accident;' and, second, the insured must prove that the accident arose from the ownership, maintenance, operation or use of an uninsured vehicle." The New Jersey Supreme Court extended UM coverage to injuries caused by the intentional acts of a tortfeasor.
Under the facts presented in this case, the Appellate Division held that:
[E]xtending coverage to insureds who sustain injuries during the course of an attack where there are injuries caused by an accident and the accident “arose from the ownership, maintenance, operation or use of an uninsured vehicle,” would not violate the UM statute’s legislative purpose or previous case law.
Giving plaintiff the benefit of all reasonable inferences, the Appellate Division found that:
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Plaintiff was kidnapped by being placed in the vehicle and locked inside.
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The assailants then drove erratically and treacherously with plaintiff inside the vehicle.
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After removing plaintiff from the vehicle, the attackers threw plaintiff against the car.
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At the conclusion of the attack, the assailant who was driving crashed the car into a wall and it started to smoke. At that point, plaintiff was able to escape from the car and seek assistance.
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Without the automobile, this incident arguably never could have happened, and the three assailants could not have held plaintiff prisoner in the same fashion that they did.
Based upon the above, the Appellate Division determined that there was a question of fact whether there was a substantial nexus between the vehicle and plaintiff’s injuries. Therefore, the Appellate Division reversed the grant of summary judgment to the insurer and remanded the case for trial before a different trial judge.
Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.
04/04/19 Ace American Ins. Co. v. American Medical Plumbing, Inc.
New Jersey Superior Court, Appellate Division
New Jersey Appellate Division Enforces Subrogation Waivers in AIA Contract to Defeat Insurer’s Subrogation Action
ACE’s insured, Equinox contracted with Grace Construction to build the “core and shell” of a health club in Summit, New Jersey. The contract was a widely used construction contract form, AIA form A201 – 2007 General Conditions of the Contract for Construction (“A201”). American was a plumbing subcontractor. After the work was completed, a water main failed and flooded the health club.
When the flood occurred, ACE provided Equinox with blanket all-risk insurance. Among other coverages, the policy insured Equinox’s interest in its real and personal property, including “[p]roperty while in the course of construction and/or during erection, assembly and/or installation.” It also included any interests of contractors and sub-contractors for which Equinox would assume liability by contract. Regarding subrogation, the policy stated, “In the event of any payment under this policy, except where subrogation rights have been waived, the Insurer shall be subrogated to the extent of such payment to all the Insured's rights of recovery therefore.”
ACE paid Equinox almost $1.2 million for the net damages to its real and personal property. Less than $8,000 was for repairs to the "core and shell" construction covered by the A201 contract. The rest was apparently for damage to internal construction, furnishings and equipment. ACE filed suit against American, claiming it was at fault for the water-main break and seeking recovery of its payments to Equinox. American answered, invoking A201’s subrogation-waiver provisions. Soon thereafter, American filed its motion for summary judgment, which the trial court granted. ACE appealed.
The Court began its analysis by discussing A201’s overall scheme, including the insurance procurement requirements and waivers of subrogation. The waiver-of-subrogation clause bars recovery of damages from the owner, contractor, and subcontractors “to the extent” the damages are covered by two forms of property insurance. The first is property insurance an owner obtains “pursuant to” section 11.3, which includes the builder's risk insurance that section 11.3.1 references. Equinox maintained builder’s risk coverage with Ace applicable to all Equinox construction sites.
The second is any “other property insurance applicable to the Work” that the contract does not require.
Section 11.3.5 extends the waiver of subrogation to damages that additional, optional insurance policies may cover. The waiver extension applies to two forms of insurance policies. The first is an insurance policy procured “during the Project construction period,” which covers real or personal property at or adjacent to the Project site, and is "separate" from the policy insuring the Project. A201 § 11.3.5. The second is an insurance policy provided “after final payment,” which covers the completed Project, and is “other than” the policy that insured the project during construction.
ACE argued that its claim against American is not the kind that A201 subjects to a subrogation waiver. ACE contended that the subrogation waiver under section 11.3.7 has a spatial limit, applying only to claims for damage to the Work itself but not adjacent property, as well as a temporal limit, applying only to claims arising before construction is complete. Since the bulk of the water damage affected not the health club's “core and shell” but its internal construction and furnishings, and since the claim here arose after the Work was completed, ACE concludes that section 11.3.7 does not restrict it from suing American.
Alternatively, ACE contended that even if its policy qualified as post-completion coverage governed by section 11.3.5, that section refers back to section 11.3.7 – “the Owner shall waive all rights in accordance with the terms of Section 11.3.7” – and section 11.3.7 does not apply to claims for damage to non-Work property.
The Court was unpersuaded by these arguments and deemed Ace to have misconstrued the two subrogation-waiver provisions. The Court reviewed the A201 and explained that:
Section 11.3.7 applies the waiver to any insured damage, whether occurring during or after construction, whether to the Work, to the Project, or to other insured property – so long as the policy covering the damage falls within one of the two categories identified: “property insurance obtained pursuant to this Section 11.3” or “other property insurance applicable to the Work.” Augmenting section 11.3.7, section 11.3.5 extends the waiver even to damage insured by a discrete policy. Thus, the waiver applies “[i]f during the Project construction period the Owner insures properties, real or personal or both, at or adjacent to the site by property insurance under policies separate from those insuring the Project.”
The waiver also applies “if after final payment, property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period.”
ACE's blanket all-risk policy fell within both categories of coverage subject to section 11.3.7. Its builder’s risk coverage constituted “property insurance obtained pursuant to this section 11.3” because it met the builder's risk insurance requirement.
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Moreover, inasmuch as the ACE policy exceeded the coverage required by section 11.3.1, it was also “other property insurance applicable to the Work.”
Since the all-risk coverage both satisfied A201’s insurance requirement and was “applicable to the Work,” the Appellate Division held that Ace’s insured waived all claims for damages “to the extent covered" by the policy.
Therefore, if one of the two identified policies provides coverage for the loss, then subrogation is waived, even if the policy provides broader coverage than required.
Thus, even where the damages are almost entirely non-Work-related, the subrogation waiver applies because the policy also covered the Work-related damages.
The Court supported its opinion stating that this interpretation was supported by reading sections 11.3.5 and 11.3.7 together as well as numerous out-of-state decisions. Finally, the Court rejected Ace’s temporal limit argument stating that no temporal limit was stated in A201. Finally, the Court explained that the A201’s clear purpose is to transfer risk of construction-related losses to insurers and preclude lawsuits among the contracting parties. Therefore, the Appellate Division enforced the subrogation waivers contained in the A201 (2007 edition) to bar the insurer’s subrogation action.
Lee S. Siegel
03/08/19 Estavien v. Progressive Cas. Ins. Co.
Superior Court, Fairfield County
Waiver of Lower UIM Limits a Question of Fact
Is the UIM limit $50,000 or $1.5 million? That was the question before the Superior Court on Progressive’s summary judgment motion. The plaintiff’s grandfather insured a 2007 Chevrolet Express G3500 cargo van he used for his business, under a commercial auto policy. For years, the vehicle had Connecticut minimum limits of $20/$40,000 for liability and UIM. But, to comply with Connecticut business law, he increased the coverage to $1.5 million (and we wonder why it’s so expensive to live in Connecticut). Following a recorded phone call from the Named Insured’s broker, Progressive increased the liability limit to $1.5 million and increased the UIM limit to $50,000. Progressive then sent the Named Insured an informed consent to execute, pursuant to General Statutes § 38a-336(a)(2), confirming the waiver of UIM limits equal to the liability limits. The Named Insured signed the form and returned it to Progressive. End of story, right? Well, not so fast.
Ms. Estavien, the Named Insured’s granddaughter and resident relative, got into a bad wreck while driving the cargo van. After obtaining $120,000 from the tortfeasor and her own UIM, she made a claim to Progressive and that’s when the coverage fun ensued. It turns out that the grandfather “was not comfortable speaking English” and he did not know what UIM coverage is, and Progressive did not send the consent form to the broker but instead directly to the Named Insured.
Progressive argued that since this was a commercial auto policy, the statute’s equal limits requirement did not apply and, moreover, it had the named insured’s informed consent to a lower UIM limit. The trial court was not persuaded. First, the court concluded that the commercial limitation to the statute only applies to fleet and garage policies insuring multiple vehicles. Here, the Named Insured had only one vehicle and the policy was issued to him as a natural person. Second, the court found that there are disputed issues of material fact as to whether the grandfather gave an informed consent. The trial court held that the Named Insured’s alleged lack of knowledge of English created a question of fact as to whether his consent was valid under the statute.
According to the United States Census Bureau, as of 2017, based on residents older than five years of age, there are some 41 million Spanish speakers in the United States and 66.5 million people who do not speak any English. Given such large numbers of Spanish speakers in the country, it behooves insurance company compliance departments to promulgate these critical forms in both Spanish and English.
Marti's Legislative and Regulatory Markers
Jerry Marti
10/28/96 Paramount Ins. Co. v. Rosedale Gardens, Inc.
Appellate Division, First Department
Insured’s Duty to Give Notice of Incident Arises When There is Reasonable Possibility of Policy’s Involvement
On May 16, 1999, Jose Escobar slipped and fell down a third-floor stairway located at his residence, Rosedale Gardens, Inc. (“Rosedale”). After the fall, Mr. Escobar notified the Superintendent of the building, Kungel Persaud, and called Rosedale’s emergency number to report the accident. In turn, Mr. Persaud notified Arco Gold Management’s site manager at Rosedale, Arnold Cohen. After his investigation concluded that it was an unsubstantiated claim, Mr. Cohen decided not to notify the insurance broker of the incident.
Seven months later, Mr. Escobar commenced an action to recover for personal injuries against Rosedale. Upon receipt of the summons and complaint, Rosedale forwarded the papers to its insurance broker, who then forwarded it to Paramount Insurance Company (“Paramount”).
Paramount insured Rosedale Gardens under a general liability and an umbrella policy for negligence claims arising out of Rosedale’s ownership, operation and control of the residential building. After an investigation, Paramount disclaimed coverage based on the lack of timely notice.
The Court noted that the obligation to give notice “as soon as practicable” of an occurrence that may result in a claim is based on reasonableness. In particular, the duty to give notice arises when an insured could glean a reasonable possibility of the policy’s involvement from the information available relative to an accident. In other words, a reasonable possibility – even if there are factors that tend to suggest the opposite – is enough to trigger the duty to notify an insurer of an incident.
Here, there was no notice provided to Paramount of the incident despite the reasonable possibility of a claim. Accordingly, the Court granted the plaintiff’s motion for summary judgment and a declaration that plaintiff had no duty to defend or to indemnify Rosedale against the claimed asserted by Mr. Escobar in the underlying action.
Editor’s Note: We offer this case with an eye on Child Victims cases. Yes, this is a 1996 decision but we can expect that insureds who have not given prompt notice of sexual abuse incidents will offer a host of excuses for their failure to do so. This case reflects the New York standard.
OFF THE MARK
Brian F. Mark
Back on the mark in a few weeks.
Larry E. Waters
[email protected]
04/16/19 Golden Insurance Company v. Elite Parking Area Maintenance
United States District Court, Eastern District of New York
Third Party-Plaintiff’s Motion to Dismiss without Prejudice Granted because Third-Party Plaintiff’s Motion was Proper Pursuant to the Two Lines of Authority Established by the Second Circuit
Plaintiff Golden Insurance Company (“Golden Insurance”) commenced the current action against defendants Elite Parking Area Maintenance, Inc. (“Elite Parking”) and Elite Snow, Inc. (“Elite Snow”) (collectively the “Elite Defendants”). Golden Insurance sought to void an insurance policy issued to the Elite Defendants due to alleged material misrepresentation and fraud by the Elite Defendants in the procurement of the Policy. In turn, the Elite Defendants commenced a third-party action against their insurance broker, James F. Sutton Agency, LTD (“Sutton”), alleging Sutton engaged in negligent and/or intentional failures and misrepresentations in connection with the Elite Defendants’ policy application.
Following the commencement of the third-party action, on July 3, 2018, Golden Insurance and Elite Defendants executed a written agreement memorializing the terms of their settlement. On July 6, 2018, Golden Insurance submitted a Stipulation of Dismissal with prejudice relating to the main action only and requested that the stipulation be “so ordered” by the Court pursuant to Federal Rules of Civil Procedure 41(a)(2). In turn, Sutton filed a letter opposing the stipulation and requested that the Court either reject the stipulation or grant an involuntary dismissal of the claims asserted by the Elite Defendants against Sutton.
Next, the Elite Defendants filed a letter requesting voluntary dismissal of the third-party claims without prejudice. Sutton opposed the application. Thereafter, the Elite Defendants filed a formal motion to dismiss without prejudice under Rule 41(a)(2) but the Court denied. The Court directed both Golden Insurance and the Elite Defendants to refile their respective motions to dismiss as joint formal motions with consolidated briefing.
In considering the pending motions, the court began its analysis with the legal standard for Rule 41(a). The Court noted that generally a voluntarily dismissal without prejudice will be allowed if the defendant will not be prejudiced thereby. The Court recognized that the Second Circuit has established two lines of authority under which a dismissal without prejudice might be improper. The first line of authority establishes that such a dismissal would be improper if “the defendant would suffer some plain legal prejudice other than the mere prospect of a second lawsuit.”
The second line of authority establishes a test for dismissal without prejudice based upon several considerations of various factors (the “Zagano factors”). The Zagano factors include: (1) the plaintiff’s diligence in bringing the motion; (2) any undue vexatious on the plaintiff’s part; (3) the extent to which the suit has progressed, including the defendant’s efforts and expense in preparation for trial; (4) the duplicative expense of relitigation; and (5) the adequacy of the plaintiff’s explanation for the need to dismiss. Nevertheless, the Court noted that the Zagano factors “are not necessarily exhaustive and on one of them, singly or combination with another, is dispositive.”
After explaining the legal standard, the Court next applied the relevant facts to the two lines of authority to determine whether a dismissal without prejudice was warranted in the pending action. Since Sutton did not oppose Golden Insurance’s request to dismiss the main action, the Court had to only determine whether the Elite Defendants should be permitted to voluntarily discontinue their claims without prejudice.
As for the first standard, the Court concluded permitting the Elite Defendants’ voluntarily dismissal would not prejudice Sutton. In fact, the court rejected Sutton’s argument that the third-party action falls under an exception to the rule, “which provides that when a cause has preceded so far that the defendant is in a position to demand on the pleadings an opportunity to seek ‘affirmative relief’ and therefore would be prejudiced by being remitted to a separate action.” In support of its position, the Court highlighted that Sutton incorrectly conflated its belief that it will succeed on the merits with the possibility to obtain an affirmative relief. Further, the Court reasoned “[b]ecause Sutton does not seek to recover for any alleged injury caused by Elite Defendants, it is not pursing ‘affirmative relief’ as contemplated by the exception Sutton [incorrectly] relied on.” Moreover, the court reasoned to agree with Sutton’s position would permit the exception to swallow the rule as defendants could defeat voluntary dismissal under Rule 41(a)(2) by mere belief that they will prevail in the suit. As such, the Court concluded the dismissal of the third-party action without prejudice would be proper under the first line of authority.
Next, the Court considered whether permitting the Elite Defendants’ dismissal without prejudice would be proper under the second line of authority established by the Second Circuit. Applying the Zagano factors, the Court concluded that the first Zagano factor favored the Elite Defendants because they initially moved for voluntary dismissal of the third-party action less than a week after consummating the written settlement of the main action. In addition, the Court determined the second Zagano factor favored the Elite Defendants because there was no reason to believe the Elite Defendants brought the third-party action to harass Sutton or that the Elite Defendants had any ill motive. Further, the Court determined that the third Zagano factor favored the Elite Defendants as discovery remained open, neither party had yet to move for summary judgment, and no pre-trial conference had been held or trial date had been set. The Court determined also the fourth factor favored the Elite Defendants as the additional time and expense incurred by defending the third-party claims in the pending state court action would not be especially onerous. Lastly, the Court determined the fifth factor favored the Elite Defendants as the Elite Defendants purported reason for seeking dismissal is “to stanch the formidable legal fees incurred by them” was factually acceptable. However, the Court recognized Sutton had an argument as to the fifth factor. Nevertheless, the Court found the balance of the Zagano factors weighs in favor of dismissal without prejudice regardless of the Court’s determination of the fifth factor.
In sum, the Court granted Gold Insurance and the Elite Defendants motions in their entirely and dismissed the main action with prejudice and the third-party action without prejudice.
Eric T. Boron
04/15/19 Lammert v. Auto-Owners (Mutual) Insurance Company
Supreme Court of Tennessee
Homeowners Property Insurance – Tennessee Supreme Court Answers Certified Question In Favor of Insureds - Ambiguity in Policy Language Means Insureds’ Plausible Interpretation Prevails - Insurance Company Cannot Withhold a Portion of the Labor Costs as Depreciation When Calculating ACV
The United States District Court for the Middle District of Tennessee submitted a two-pronged certified question of law to the Supreme Court of Tennessee regarding the interpretation of two insurance policies, as follows:
“Under Tennessee law, may an insurer in making an actual cash value payment withhold a portion of repair labor as depreciation when the policy (1) defines actual cash value as ‘the cost to replace damaged property with new property of similar quality and features reduced by the amount of depreciation applicable to the damaged property immediately prior to the loss,’ or (2) states that ‘actual cash value includes a deduction for depreciation?’”
There were two different policies to be considered by the court with respect to two different property loss claims. The Lammerts’ structures were damaged by hail in 2016. The Reasons’ home was damage by hail in 2016 and wind in 2017. The Lammerts had a “Dwelling Insurance Policy” with Auto-Owners; the Reasons had a “Homeowners Insurance Policy” with Auto-Owners. The two respective policies contain different language as to ACV.
The Lammerts' policy defines actual cash value as “the cost to replace damaged property with new property of similar quality and features reduced by the amount of depreciation applicable to the damaged property immediately prior to the loss,” while the Reasons' policy does not define actual cash value, but states that actual cash value includes a deduction for depreciation.
In any event, the insureds and insurer alike agreed that under both policies, the method used to calculate the ACV is replacement-cost-less-depreciation. However, they disagreed as to whether depreciation applies only to the materials (as the insureds argued), or, to both materials and labor (as the insurer argued) on property losses.
Notably, neither policy specifically mentions labor costs.
The issue of whether the cost of repair and replacement labor should be depreciated when calculating the ACV of a property loss using the replacement-cost-less-depreciation method of calculation has bubbled up to high courts of numerous states in recent years, as well as to a number of federal district and appeal courts. ACV may loosely be defined as a calculation intended to reflect the estimated cost in dollars of indemnifying an insured, that is, the cost of putting the insured in the same position she or he would have been in had no loss occurred. Depreciation of physical material replacement costs is easy to understand, and no one argues about its applicability. After all, when your seventeen-year-old roof has its shingles blown off, it makes no sense to try and find another set of used, seventeen-year-old shingles to replace the old ones that blew off.
The Supreme Court of Tennessee recapped in its Lammert decision of two days ago a number of decisions of other high courts which addressed either head on or at a glance the issue of on whether the cost of repair and replacement labor should be depreciated when calculating the ACV of a property loss. Rulings of the Supreme Courts of Oklahoma (2002), Arkansas (2013), Minnesota (2016), and Nebraska (2018) were analyzed and considered. In addition, recent federal cases applying Kentucky law, and state insurance regulations and state insurance department opinions from California, Vermont, and Mississippi were cited. If you handle property loss claims in any of (or more than one of) those states, it will be well worth your time in reviewing this week’s Lammert decision.
The Tennessee Supreme Court’s decision ultimately was based upon the following analysis, grounded in the court’s finding that the language regarding depreciation in the Auto-Owners policies at issue is ambiguous:
this case turns on our standard for interpreting insurance contracts because both parties have presented plausible interpretations of the policies, neither of which explicitly states whether labor expenses are depreciable when calculating the actual cash value. On the one hand, the homeowners' position that labor is not depreciable is well-taken. “Depreciation in insurance law is not the type that is charged off the books of a business establishment, but rather it is the actual deterioration of a structure by reason of age, and physical wear and tear, computed at the time of the loss” (quoting the Oklahoma Supreme Court’s decision in Redcorn v. State Farm Fire & Cas. Co., 55 P.3d 1017 1017, 1020 [2002]). With this understanding, it is reasonable that a homeowner would understand that depreciation would only be applicable to material goods that can age and experience wear and tear. It is also reasonable that a homeowner, knowing that replacement costs include both labor and materials to rebuild a roof, would believe that the insurance company would only apply depreciation to the physical materials, those things that actually deteriorated.
The argument of Auto-Owners that the insureds' interpretation is not reasonable because depreciation is a numerical factor to be applied to the replacement cost to calculate the actual cash value and is not reflective of literal deterioration, while also considered “plausible” by the Tennessee high court, could not prevail, due to the ambiguity of the policy language at issue. As the Court stated,
Ultimately, it is not necessary for this Court to reach the decision of whether labor can logically depreciate or whether indemnity is accomplished. It is enough that we find the contracts ambiguous and that under our standard of review, the interpretation of the insured must prevail. We conclude that the answer to the district court’s certified question is no, the insurance company cannot withhold a portion of the labor costs as depreciation under either policy.
Now, no matter your location, dear reader, you no doubt have difficult coverage questions which come up - let’s call them “situations” - from time to time. No reason to feel you have to go it alone. We love situations. We’re here to help you consider, understand, interpret, and then proceed forward with confidence. Until our next situation together, be well, and enjoy your spring holiday of choice!
BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
10/08/15 Surgicare Surgical Assoc. v National Interstate Ins. Co.
Supreme Court, Appellate Term, First Department
New Jersey Fee Schedule Trumps New York Fee Schedule in No-Fault Action
I recently dealt with a no-fault arbitration where the underlying accident occurred in New York, so New York no-fault benefits applied, but the assignor was treating in New Jersey with a New Jersey provider. I had not encountered this issue before, so thought a little no-fault choice of law would be interesting for you all.
This case informs us that 11 N.Y.C.R.R. § 68.6 provides that where a health service reimbursable under New York Insurance Law § 5102(a)(1), for services that are performed outside New York State, the permissible charge for such service shall be the prevailing fee in the geographic location of the provider. The Court further concluded that by applying § 68.6 as interpreted by the Superintendent of Insurance, the “prevailing fee in the geographic location of a provider” is the “permissible” reimbursement rate authorized in the foreign jurisdiction.
Therefore in my case, the prevailing fee was to be calculated under the New Jersey Fee Schedule (N.J.A.C. 11:3-29). Interestingly, in New Jersey the location is determined by the county the provider is in and then those counties are classified in the Northern or Southern region and paid accordingly. My case should have been billed under the Northern region schedule in case you were curious.
Earl K. Cantwell
[email protected]
12/04/18 Hyde v. Allstate Insurance Company
District Court of Connecticut
No Coverage for Connecticut Concrete Decay
Several years ago, many homes in Connecticut were (apparently) constructed with a certain type of concrete which may suffer damaging corrosive chemical reaction. Insureds are seeking coverage for the property damage from their insurance companies, as in this case. The claim was that the property had been constructed with defective concrete, resulting in “pattern cracking” and other structural defects.
Allstate denied the claim under policy language that they will cover “sudden and accidental direct physical loss” to covered property, and also by an exclusion that the policy does not cover loss caused by rust or other corrosion, settling, cracking, shrinking of pavement, etc. Additionally, the policies would not cover “collapse” except in the event of an entire collapse, which also must be sudden and accidental. For good measure, the Plaintiff also alleged that Allstate’s participation in ISO somehow constituted a violation of Connecticut consumer protection laws. The federal court noted that several courts had apparently analyzed this question in the “concrete decay context” and dismissed similar claims with a finding of no coverage.
Allstate argued that the restriction of coverage to “sudden and accidental” losses rendered the gradual concrete decay damage outside of the policy. Allstate also cited several policy exclusions. The Court agreed that “sudden and accidental” required unexpectedness as well as temporal abruptness. Therefore, the damage and decay was not covered. The Court also noted the limitation that any coverage for “collapse” also had to be both entire and sudden and accidental.
The Court ruled that the term “sudden” was not ambiguous, and its use did not render the policy or the provisions with respect to “collapse” ambiguous. A process of hidden decay does not trigger coverage until a sudden collapse occurs. The Complaint in this case clearly alleged that the decay process occurred over the course of years and was not sudden. Furthermore, the allegations fell within the policy exclusion with respect to corrosion, cracking of foundations, etc. The Court also dismissed claims under the Connecticut consumer protection statutes because, where an insurer’s interpretation of an insurance policy is correct, there can be no statutory violation.
This case represents an example of insurance policy language being defined and interpreted by plain and ordinary meanings which are held not to be ambiguous. Allstate’s case was also bolstered by the fact that this concrete decay problem is apparently widespread in Connecticut, and several other courts had addressed the same or similar policy language and determined that there was no coverage for this concrete decay.
This case also represents an example of good use of motion practice in the context of a coverage case to put the relevant policy and policy language before the court in an effort to obtain a definitive ruling whether or not there is coverage.
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