Coverage Pointers - Volume XX, No. 23

Volume XX, No. 23 (No. 534)

Friday, May 3, 2019

A Biweekly Electronic Newsletter


Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874


Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

© Hurwitz & Fine, P. C. 2019
All rights reserved

As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers. 


In some jurisdictions, newsletters such as this may be considered Attorney Advertising.


If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.


You will find back issues of Coverage Pointers on the firm website listed above.\


 Dear Coverage Pointers Subscribers:


Do you have a situation?  We love them, no matter where we are asked to help unravel them.


Greetings from St. Andrews, Scotland.  Chris and I have completed a Danube River cruise (Passau to Budapest) and now we are attending the Association of Defense Trial Attorneys meeting here in Scotland.  I had the pleasure of speaking on a panel with my good friends Don Myles and Ned Currie on a panel designed to help trial attorneys be aware of coverage issues and bad faith set ups, while they were defending their insured clients in civil litigation. We’ve continued to touch base with our friends and clients, that’s the beauty of cell phones.


There seems to be a rash of underinsured motorists stay decisions in this week’s edition.  For those unfamiliar with NY protocols, there is a reminder that an application – in court – to stay uninsured/underinsured motorists arbitration must be made within 20 days of the receipt of an arbitration demand.  Failure to do so will likely result in a waiver of the right to challenge the arbitrability of a SUM claim.  Confused? Just ask.


I congratulate Agnes Wilewicz on her promotion to shareholder status in the firm and Brian Mark for his elevation to firm membership.  The first continues to grow and strengthen.


A special thank you to Agnes for taking the laboring oar is preparing this edition.  The five-hour time difference becomes daunting when creating and sending out an issue.


Don’t forget to subscribe to our other publications:


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.


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. 


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] .


The Tampa Times

Tampa, Florida

03 May 1919




WILL some gentleman under 60 write

lonely widow owning large ranch and $15,000. 

Object matrimony.  Box 1355, Jacksonville, Fla.


Jen’s Gems:


Yesterday, I had a court appearance in the Southern District of New York.  As I was waiting for my conference to be called, I watched the sentencing of an individual involved with the underground drug website, the Silk Road.  The result was that after the conference, and since I had about four hours to kill at JFK airport, I got into a complete Google hole on this topic. 


If anyone else has kept up with this story, there has to be a movie planned because the story is wild.  If I get any facts wrong, DISCLAIMER, this whole thing was the result of an airport Google hole (pieces may have even come from Wikipedia).  The story goes the creator of the website was a self-proclaimed libertarian, ex-Eagle Scout who obtained a master’s degree in materials science and engineering, and then decided to create a marketplace for selling illegal drugs.  A forum that allowed users to buy drugs without the need to get in touch with a local drug dealer.  Simply click a button and they are delivered to your house.  The creator then got himself in too deep and started ordering hits on potential threats to his business.  By that point, the government had already infiltrated his organization and the orders were never acted upon.  Ultimately, he was arrested at the San Francisco Public Library.  During the arrest, the FBI had two agents pretend to be quarreling lovers as part of a diversion to distract him so they could grab his computer before he encrypted or deleted files.  In addition to his arrest, the FBI also arrested two federal agents on charges of attempting to profit from the investigation.  Movie material, right?   


Beyond that insight into my evening, if anyone is in Austin next week, I will be speaking at DRI’s Business Litigation Super Conference on the life-cycle of a Cyber claim.  Come say hi. 


Until next issue…



Jennifer A. Ehman

[email protected]


Buffalo Evening News

Buffalo, New York

03 May 1919





          Drug stores will close Sunday afternoon from 1 to 7 o’clock.  An announcement was made to that effect this morning by the Erie County Pharmaceutical association.  Persons in immediate need of medicine are advised to go to the druggist in their neighborhood with whom they are accustomed to deal and he will supply them.


          “The working hours of a druggist are much longer than those of the majority of men engaged in business,” says the announcement.  “The store is open seven days in the week and a proprietor who employs no clerk has no time for diversion or fresh air.”


John’s Jersey Journal:


Dear Subscribers:


Anyone know a good safe cracker?


Some coverage cases are more interesting than others and today we have such a case. Champion Trading Co. purchased a fairly impressive “torch, explosive, and tool resistant” safe. Apparently, the safe is certified to withstand a blow torch, thermal lance, TNT, and C-4 for more than 60 minutes. Champion then stored $4 million dollars’ worth of opals in the safe. One day they could not get the safe open so they contacted the seller.


The seller brought the safe back to its warehouse. After being unable to open the safe, the seller hired someone to open the safe using a blow torch. When the safe was opened, the opals had been destroyed or rendered useless. Champion sued the seller for damaging the opals, who reported the claim to its liability insurer. A coverage battle ensued whether coverage was barred under the exclusion for property in the care, custody, and control of the insured. It ended with a declaration of no coverage and the principal of the company fleeing the country.


The safe apparently lived up to its claim. It took several days to get the safe open. You can check out the safe here. The case is discussed in further detail in the attached issue.


Our second offering is a first-party claim where a municipal water-main broke, causing water to inundate the insured’s building. The New Jersey Appellate Division addressed whether the claim was excluded as “flood” or “surface water”. They concluded, as numerous other jurisdictions have, these exclusions did not apply. First, it was not a “flood”. The Appellate Division found that the term “flood” is commonly understood to involve the overflow of a body of water, whether natural or not, and held that a water main is not a body of water. It was not “surface water” either. The New Jersey Appellate Division found “surface water” to be an ambiguous term and construed the term against the insurer, ruling that it had not unambiguously excluded coverage for the claim.


Further, the exclusion for “water below the surface of the ground… [that] seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure” (“subsurface water exclusion”) did not apply either. In this case, when the water main broke, water shot a foot above the ground. It then pooled and inundated the insured’s building. As the water was above-ground, this exclusion did not apply.


Intersection of New Jersey and New York Law


In water-main-break cases, New York courts have generally held that the exclusions for flood and surface water are inapplicable. See, e.g., Novick v United Services Auto. Ass'n, 225 AD2d 676, 677 (2d Dept 1996). In one water-main-break case we found, the New York Court of Appeals enforced the subsurface water exclusion where water “below the surface of the ground” seeped into the insured’s basement. See, e.g., Platek v Town of Hamburg, 24 NY3d 688, 694 (2015).


I hope you found these cases to be, at least on the surface, worth reading.



John R. Ewell

[email protected]


Sadly, Lynching Still Commonplace, a Century Ago:


Democrat and Chronicle

Rochester, New York

03 May 1919





America Only Advanced national

Allowing That Disgraceful Evil


          New York, May 1.—The United States has been long been the only advanced national whose government has tolerated lynching, and in the last thirty years 3,224 persons have been killed by lynching mobs, according to a report just issued by the National Association for the Advancement of Colored People, entitled “Thirty Years of Lynching.”


          For the thirty-year period from 1880 through 1918, the North has had 219 victims, the South 2,834, the West 156 and Alaska and other localities 15.


          “Georgia leads in this unholy ascendancy with 386 victims,” says the report, “followed closely by Mississippi with 373 victims, Texas with 335, Louisiana with 313, Alabama with 276, Arkansas with 214, Tennessee with 196, Florida with 178 and Kentucky with 169.


          “Fifty colored women and 11 white women were lynched in fourteen states.  Thirteen of the fourteen statues in which women fell victims to mobs were Southern states, Nebraska being the only state outside the South which lynched women.  The North and West together have lynched 21 persons during the last five years’ period, whereas during the same time 304 persons were lynched in the South.”         


Peiper on Property and Potpourri:


A relatively short week was supplemented by a very nice trip to Central New York today.  I had the pleasure of participating in a Spring Roundtable with some very smart, creative claims professionals from across New York State.  It is always a pleasure to discuss some hot topics.  Mix in a few moments to lament the challenges we face on a daily basis as coverage purists, and you nearly have coverage nerd nirvana! 


To those of you with whom I shared this opportunity, a major thank you again for including us in the discussion.  


Prior to the roundtable discussion, I had the privilege of seeing Jerry Marti’s presentation on the very likely, and very forthcoming, impact of the Child Victims Act…and maybe offer a few comments and observations along the way.  Jerry knows this issue stone cold, so if you have any questions he’s the guy to call.  


That’s it for this week.  See you in two more.



Steven E. Peiper

[email protected]


The Brooklyn Daily Eagle

Brooklyn, New York

03 May 1919




          The date that prohibition may make famous will not be a wholly dark day in the memory of Americans.  It will mark a return to the old two-cent stamps for one-ounce letter postage.  The rate has been three cents since November 2, 1917.  The increase was a war measure, strictly for additional revenue.  The preliminary announcement of the coming change by the Post office Department only follows the statutes. 


Hewitt’s Highlights: 


Dear Subscribers:


Greetings. I cannot believe it is already May. My youngest son just made his Communion and my oldest turns ten years old next week. Big milestones.


The Courts have not quite recovered from the Spring Holidays. There are two serious injury cases. The first involves the standard for finding an issue of fact as to whether there was significant disfigurement, a serious injury category. The second involved defendant’s doctor who noted significant range of motion limitations and failed to explain why plaintiff only complained of pain post-accident if the injuries were degenerative.


Until next issue,


Robert E.B. Hewitt III

[email protected]


The Intersection of Prohibition and Wine Crops:


New York Herald

New York, New York

03 May 1919





California Vineyard Owner

Asks Permanent Injunction.


          SAN FRANCISCO, May 2.—Permanent injunction to restrain Mrs. Annette a. Adams, United States Attorney, from enforcing provisions of the war time prohibition act of November 21, 1918, and the Sheppard prohibition amendment, was sought in the United States District Court here to-day in a petition filed by Theodore Bell, an attorney.


          The petition, filed by a winger maker and a vineyardist, recites that unless restrained by injunction action under these laws will wipe out the product of 177,000 acres in California, valued at $75,000,000.  It alleges the war time prohibition act, effective July 1, 1919, is unconstitutional and ineffective since the President in an address before Congress stated that “the war now comes to an end.”


          The petition charges that Department of Agriculture agents and State agents had encouraged the production of wine grapes and had established an experimental vineyard to encourage vineyardists to produce wine grapes.  The action is based upon an agreement by the vineyardist made to-day to furnish wine grapes to the wine maker. 


Wilewicz’ Wide-World of Coverage:


Dear Readers,


Greetings and salutations from the Big Apple! I’m currently attending the ABA TIPS Section Conference and, as expected, the programs are phenomenal. Yesterday there was a panel with no fewer than 15 seasoned trial attorneys from around the country, sharing tips from the files of “if I knew then what I know now”. Today there are back to back seminars on cutting edge issues, corporate counsel relationships, and “good faith” claims handling. Fascinating stuff. We have quite a large coverage contingent present and it has been nice to catch up with colleagues from around the country. Moreover, last night a friend and former colleague of mine (and Brian Mark’s) was honored with the Liberty Achievement Award for her career and contributions to the NYC community, and on her recent promotion as a Judge on the Queens Civil Court bench. Congrats again, Judge Ventura!


For those new readers that have recently subscribed – welcome! For old friends who have been following us for some time – welcome back! As you may know, my column in CP covers primarily Circuit Court (federal appellate level) decisions, such as the Second Circuit where New York is located, but I do have my ear to the ground for environmental cases in particular. Have an environmental law situation? Give me a ring.


Finally, in other news, I am beyond thrilled to have been offered a position as shareholder/equity partner here at Hurwitz & Fine (which I’ve accepted). This is the fourth law firm in my career path, and it will be the last. I know of few firms that exhibit such collegiality, cooperation, coverage experience, and collaboration as H&F. I’ve said it before and I’ll repeat it for the last time (maybe) – I’ve found my forever firm and I’m very much looking forward to many years to come with my team.


Until next time!       



Agnes A. Wilewicz

[email protected]



Elmira, New York

03 May 1919




Jury in Slander Action Favors

Plaintiff in Supreme Court Action

to Extent of $500.


          The jury in the slander action of Mrs. Bessie O. Bridgeman of South Main street against Mrs. Catherine Barry of West Henry street brought in a verdict at 4:30 o’clock yesterday afternoon of $500 for the plaintiff.  The latter had asked damages in the amount of $6,000, $2,000 for each of the three specific charges made in the complaint.


          Mrs. Bridgeman accused Mrs. Barry of spreading unfounded and slanderous stories concerning her relations with prominent Southside men, and sought to show malice on the part of the defendant, dating from the time the two had a dispute while the plaintiff was occupying a house owned by the defendant.


          At the conclusion of the Bridgeman-Barry case, Justice McCann excused the jurors until Monday morning at 10 o’clock.


Barnas on Bad Faith:


Hello again:


I bring you this note from JetBlue flight 423 on my way to Los Angeles and San Diego for a few days of baseball, sun, and relaxation.  Vladimir Guerrero Jr. has finally been called up to my Blue Jays, and I’m excited to see him play in the stadium where his father patrolled the outfield so brilliantly for many years.  I’ll also be catching the resurgent Padres against the Dodgers, who are the first team in the MLB to 20 wins this year.  It’s my first time in Los Angeles and San Diego, so if you have any recommendations on places to go or things to see please do let me know!


I have two interesting bad faith cases in my column this week.  The Shawnee Tabernacle Church decision is an interesting and somewhat surprising one.  There, the court found that the insurer acted in bad faith as a matter of law during a six- month period in the claim investigation and granted partial summary judgment in favor of the insured.  The court determined that the insurer had sufficient information to determine there was coverage in June 2015 and then failed to communicate or do any further investigation until it acknowledged coverage in December 2015.  At trial, the jury will be instructed that the insurer acted in bad faith during that six-month timeframe.


The Swanson case is a simpler and briefer decision under Florida law.  The court there plainly states the rule that Florida law does not recognize a common law cause of action for first party bad faith.  Thus, the insured’s complaint alleging a single cause of action based upon common law first party bad faith was dismissed.


Signing off,



Brian D. Barnas

[email protected]


Health Insurance Debate is Not New One:


The Buffalo Enquirer

Buffalo, New York

03 May 1919





          Resolutions setting forth the opposing position of the physicians' organization to the proposed state health Insurance measure were adopted at a special meeting of the Erie County Medical society at the University club last night. This meeting was the continuation of a meeting held two weeks ago, at which the platform considered was tabled. 


          A motion was introduced directing the appointment of a committee of fifteen to confer with committees of druggists, nurses and dentists of the county tor the purpose of establishing a state-wide protective organization. Dr. Nelson G. Russell was appointed chairman.  The meeting was largely attended. 


Off the Mark:


Dear Readers,


The weather on Long Island has been getting nicer by the week.  Last weekend, the family and I enjoyed a walk in the woods followed by some Italian ices.  They seemed to have fun and slept well that night.  I was even able to sneak in a few rides on my bike for some much needed exercise.  Of course, during my last trip I ended up covered in mud.  It was so nice in the afternoon, that I had forgotten that it rained earlier in the day.  Still worth it. 


This edition of “Off the Mark” discusses a recent construction defect case from the US Court of Appeals for the Eleventh Circuit.  In Southern-Owners Ins. Co. v. Mac Contrs. of Fla., LLC, the Court of Appeals examined the “Your Work” exclusion and held that where the underlying allegations, even though silent as to the timing of damages, can be reasonably construed to allege property damage that occurred during the policy period, "there is a potential for coverage."



Brian F. Mark
[email protected]


New-York Tribune

New York, New York

03 May 1919


Man Who Threatened

Morgan Gets 15 Months


Light Sentence Given Because

of Ridiculous Character

of the Letters


Special Correspondence


          DETROIT, Mich., May 2.—Fifteen months in Leavenworth penitentiary was the sentence given John B. Thorn, fifty-two years old, of Lansing to-day, following his conviction of misusing the United States mails in an attempt to extort money from J. Pierpoint Morgan and his daughter.


          In sentencing Thorn, Judge Killetts said he was giving light punishment because of the ridiculous character of the eleven letters written to Morgan.  He said the financier or his daughter did not enter into the case and the United States was not interested in whether they were assailed.  Thorn had violated the postal laws, and was not to believe he was being persecuted because he had assailed a wealthy man, the judge said. 


          Although neither Mr. Morgan nor Mrs. Nichols took an interest in the case, the former’s secretaries played a large part in the prosecution.


Wandering Waters:


I hope all of you had a wonderful week and welcome to another edition of Wandering Waters.   


The NBA playoffs are off to an excellent start.  The Spurs and the Nuggets battled in a thrilling seven-game series.  The Spurs showed their experience by taking the more talented Nuggets to seven games.  However, the young and upcoming Denver Nuggets showed grit and determination by winning a tough game seven. 


The first round also provided some memorable moments, including Damian Lillard of the Portland Trailblazers hitting a 30-foot dagger to eliminate the Oklahoma City Thunder from the first round. 


Now, the remaining eight teams are battling in the second round of the Playoffs.  The Celtics and the Bucks are split one game apiece, with each team winning their respective games by large margins.  Despite the Warriors losing DeMarcus Cousins for the near future and Steph Curry dealing with a nagging injury, the Warriors are up two games to zero against the Rockets.  The Warriors are able to keep the ship upright due to the phenomenal play of Kevin Durant.  Since Game Six of the first round, Durant has been playing on another level. 


With that said, we have one case from the Southern District of New York and one case from the Eastern District of New York. Until next time……



Larry E. Waters

[email protected]


Dental Health and Insurance:


New York Herald

New York, New York

03 May 1919





Employees of Metropolitan to

Have Dentistry Free


          Haley Fiske, president of the Metropolitan Life Insurance Company, directed yesterday that all employees in the home office of the company must have their teeth examined and cleaned twice a year.  The work may be done in the dental division maintained in the main offices or by a private dentist, but in the latter case the work must be done without expense to the company.


          Mr. Fiske said that the dental division has done such notable work since its establishment in 1915 improving the health of employees that he had decided to require all employees to get the benefit of attendance there.  The teeth are responsible for many other ailments, said Dr. T. P. Hyatt, director of the dental division. 


Boron’s Benchmarks:


Dear Subscribers:


Thank you for taking time out of your busy schedule to check in with Boron’s Benchmarks.  The issue of standing to sue was addressed by the Supreme Court of Rhode Island recently in the Christy’s Auto Rentals case which I cover in this issue.  Standing to sue is not a legal issue frequently addressed by written opinions of the high courts of the states on insurance cases.  The Rhode Island Supreme Court’s Opinion applies that High Court’s “venerable principles concerning standing” to settle a previously unsettled area of the law in that state.  At least that is what the Court’s opinion says.  It is not a long case to read, so go ahead and check out both the case and my write-up.  You’ll feel better for having done so.  Or I will.  Actually, we both will.


And remember, only at Boron’s Benchmarks can you find material you may consider while sitting to learn about standing.  (Insert, if you are so moved, your favorite comedy punch line rimshot sound effect here.)


On a serious note, I have recently celebrated a major work anniversary here at Hurwitz & Fine.  I count myself very fortunate to be working with interesting and learned insurance coverage folks.  Without the “interesting” part, the “learned” part wouldn’t be as impressive, but, thank goodness, my colleagues here have it all.  And, they put up with my propensity to insert commas, like, well, there’s no tomorrow!  And exclamation points, too! Thank you to my H&F coverage team members for being both interesting and learned!  See you all in two weeks. 



Eric T. Boron

[email protected]


Poughkeepsie Eagle-News

Poughkeepsie, New York

03 May 1919


$8 In Costs for

15 Cent Verdict


          An interesting law suit has just been decided by City Judge Edward A. Conger, in which Miss Sarah Melhado brought an action against Mrs. S. Hoffman for a balance of $3 on a cornet which she sold to Mrs. Hoffman’s son.  Mrs. Hoffman admitted she owed the money for the cornet, but entered a counter claim of $3.15 for work on a dress belonging to Miss Melhado.


          Miss Melhado did not deny having the work done, but she said Mrs. Hoffman had done it for her out of friendship and was not going to charge her.  Judge Conger allowed both claims, but attached the claims to Miss Melhado by which she will get 15 cents, but must pay about $8 court costs.


Marti's Legislative and Regulatory Markers:


Dear Subscribers,


This week, we had the pleasure of providing a presentation on the Child Victims Act (“CVA”) and insurance coverage issues to our friends at the Finger Lakes Insurance Council in Chittenango, New York.  We thank the FLIC for the invitation and their hospitality, especially Heidi Barron, Candice Brummer and the rest of the members.


As we continue through our series on the CVA, we take a look at a recent Supreme Court decision that discusses prejudice and late notice.  In this recent decision, the Court held there was a question of fact with respect to a late notice of claim after evidence suggested there had been notice of the underlying incident to the insurer.  For more, please read on.



Jerry Marti

[email protected]


Work Place Safety – 100 Years Ago:


The Brooklyn Daily Eagle

Brooklyn, New York 

03 May 1919





Brooklyn Industrial Insurance

Man Tells of Common Oversights

in Guarding Workers.


          Modern production methods, modern machinery and modern compensation insurance to protect the employer against loss when his employees are injured have all had their trials and met the test of time.  The employer has found that it means money in his pocket to keep up to date concerning all the latest devices which made his machinery proof against the inevitable carelessness or mistake that the most careful employee with fail, at some time, to guard against. 


          On the subject of accident prevention, C. S. Cavanagh, of Cavanagh & Kuhn, insurance exports, who have probably "sized up" more industrial plants than any firm in Brooklyn, says that many of the most modern factories often allow the grossest errors in safety equipment to escape unnoticed. "If the average successful manufacturer," said Mr. Cavanagh, "is asked whether he would rather spend money to properly guard his machinery and prevent Injuries to his employees, or take the chances of having them injured, he will undoubtedly say that he prefers to spend the money, and in most cases he tells the truth. "Yet to the man who spends most of his time inspecting manufacturing plants from the point of compensation insurance, it is surprising to see the great number of deficiencies and improperly guarded machines existing in large, modern plants.


Barci’s Basics (On No Fault):


Hello Subscribers!


April is finally over and it was probably one of the busiest months of my life, or at least the busiest month that I can recall to recent memory. It was also still very cold. Now that it is over though, I can turn to vacation planning and hope that summer is right around the corner! Unlikely here in Buffalo, but it will certainly be warm for my trip to Disney World in August, where heat is definitely promised and something to look forward to.  


On the no-fault front, I have three cases for you. They are all out of the NYC civil courts this edition, so I’ll be interested to track them and see if we get any higher court decisions on them down the road. First, we have a case that talks about the Notice of Claim as a condition precedent to coverage. Then, there is a lengthy discussion of a Kings County case that analyzes a conflicts of law and domicile issue in the context of a no-fault matter. Finally, there is a case that delves into attorney’s fee amounts after a positive no-fault decision for an insured.


That’s all folks,



Marina A. Barci

[email protected]


The Buffalo Times

Buffalo, New York

03 May 1919


Popular Lawyer, Clinton B. Gibbs,

Favors Changing Name of

“Main Street”


                                                                      CLINTON B. GIBBS,

                                                            Counselor-at-Law, Erie County

                                                                           Bank Building

                                                                      Buffalo, May 2, 1919


Editor.     The Buffalo TIMES.

               No. 193 Main Street,

               Buffalo, N.Y.


          Dear Sir:--THE TIMES is to be highly commended for its efforts in bringing about the proposed change in the name of Main Street. There are many better names, and there should not be any difficulty in reaching the selection of a more appropriate one. From the many names already offered, by the process of elimination, one should be easily found. It seems to me it should be selected with reference to its association with geographical or historical matters.


          For instance, "Eastern Highway" would be very appropriate. The great street, before It reaches the intersection of Ferry Street, commences bending easterly, and continuing on we find it, running practically east and west towards Batavia and the Metropolis.


          Another suggestion is the "Presidents' Highway." Would not this name be well in order? Millard Fillmore lived in Buffalo, while he was President of the United States. Grover Cleveland, who resided here for-many years, left a high place at the Buffalo Bar to go to Washington, as President of the United States. William McKinley, was assassinated in Buffalo while he was President, and Theodore Roosevelt took the official oath of office here, as McKinley's successor. These historical reasons would make this name peculiarly appropriate.


          Another suggestion is. "Middle Line Avenue." This name would be easy to speak and would be indicative of the location of the, street, and its importance.


          I observe many of your letters on the subject suggest "Victory Avenue," "Peace Avenue" and "Hero Avenue." As every village and hamlet in the land will soon have "Victory" and "Peace" and "Hero" avenues, these names will soon be all too common. This street needs a name sui generis. A name which will be distinctive in character now and in the future. A name easily remembered and so linked with Buffalo that wherever it is spoken, it will be a synonym of "Buffalo" and not a duplication of a name of many other streets in the cities and villages of the nation.


                                                                      Yours truly,

                                                                      CLINTON B. GIBBS


Lee’s Connecticut Chronicles:


Dear Nutmeg Newsies:


Thank you, once for again, for scrolling all the way down to Lee’s Connecticut Chronicles. Well, thankfully the Connecticut Supreme Court was at it again – making law for all of us insurance junkies. So, we renew our Supreme Court streak at one. Check in next edition to see if we can stretch it to two. This edition’s case reminds us of the very special relationship between insurers and their TPAs and what can happen when that relationship goes sideways.



Lee S. Siegel

[email protected]


Headlines for this week’s issue:


Dan D. Kohane
[email protected]


  • Question of Fact as to Residency under Auto Policy but Bad Faith Claims Dismissed

  • Sufficient Proof to Demonstrate that Policy was Canceled and Uninsured Motorists Benefits Available
    Settling with Tortfeasor without SUM Carrier’s Consent Breaches the SUM Policy.  Hail to Condition 10.

  • Question of “Occupancy” for Purposes of SUM Coverage is for Court, Not Arbitrator



Robert E.B. Hewitt III

[email protected]


  • Issue of Fact as to whether Plaintiff Suffered Significant Disfigurement

  • Defendant’s Expert Report’s Finding That Injuries Were Degenerative Failed to Address Fact Plaintiff Never Complaint of Pain Prior to the Accident



Steven E. Peiper

[email protected]


  • Motion to Amend to Add Claims for Personal Property and ALE Denied when Sought After Note of Issue was Filed



Agnes A. Wilewicz

[email protected]


  • In NYC for ABA TIPS meetings.



Jennifer A. Ehman

[email protected]


  • Court Finds Student Resident of Mother’s Household Despite Significant Documentation Showing a Different Address



Brian D. Barnas

[email protected]


  • Insurer Acted in Bad Faith as a Matter of Law by not taking any Action on Covered Claim for Six Month Period

  • Florida Law does not Recognize a Common Law First Party Bad Faith Cause of Action


John R. Ewell

[email protected]


  • “Custody, Care, and Control” Exclusion Barred Coverage for $4 Million Worth of Damaged Opals Confirmed by New Jersey Appellate Division

  • Appellate Division Rules First-Party Property Claim Resulting From Water-Main Break Was Not Unambiguously Excluded, Allowing Case to Proceed



Lee S. Siegel

[email protected]


  • No Continuous Treatment Toll for TPA’s Negligence Post-Adjustment


Marti's Legislative and Regulatory Markers

Jerry Marti

[email protected]


  • Question of Fact Found as to Prejudice of Late Notice of Claim to Insurer


Brian F. Mark

[email protected]


  • US Court of Appeals Holds that where the Underlying Complaint is Silent as to the Timing of Damages and Could Reasonably be Construed to Allege “Property Damage” Occurring During Ongoing Operations, there is a Potential for Coverage



Larry E. Waters
[email protected]


  • Defendants’ Motion to Dismiss Denied Because the Court had Subject Matter Jurisdiction as the Citizenship of the Subrogee-Insurer and Not that of the Insured Determined Whether the Parties were Diverse

  • Defendants’ Motion for Partial Summary Judgment Granted as the “Lesser of Two Doctrine” Applies to an Insurer’s Damages-Only Subrogation



Eric T. Boron

[email protected]


  • Automobile Liability Insurance – In DJ Action Brought against Insurer, Summary Judgment Granted to Insurer Based upon Determination Plaintiff Christy’s Auto Rentals Lacked Standing to Sue



Marina A. Barci

[email protected]


  • Filing a Notice of Claim is a Mandatory Condition Precedent to Coverage

  • Insurer Wins Conflicts of Law Issue But Fails to Meet Summary Judgment Burden

  • Attorney’s Fees Reduced by Court Because Attorney Could Only Provide Estimates of Time Spent on Case 



Earl K. Cantwell
[email protected]


  • Is Loss of Funds “Physical Loss or Damage”?



That’s all there is.  Thanks to our wonderful staff for covering the fort while I am overseas and a special thank you to Agnes Wilewicz for her work on this issue.  We are here for you and will always be.  In the meantime, I’m giving you a taste of the North Sea.






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

Dan D. Kohane
[email protected]



Agnes A. Wilewicz

[email protected]



Jennifer A. Ehman

[email protected]


Dan D. Kohane, Chair
[email protected]


Steven E. Peiper, Co-Chair

[email protected]

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Lee S. Siegel

Brian D. Barnas

Brian F. Mark

John R. Ewell

Larry E. Waters

Jerry Marti

Eric T. Boron

Marina A. Barci

Diane F. Bosse

Joel R. Appelbaum


Steven E. Peiper, Team Leader
[email protected]


Michael F. Perley

Eric T. Boron

Brian D. Barnas

Larry E. Waters


Jennifer A. Ehman, Team Leader
[email protected]

Jerry Marti

Marina A. Barci


Jody E. Briandi, Team Leader
[email protected]


Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

John’s Jersey Journal

Lee’s Connecticut Chronicles

Marti's Legislative and Regulatory Markers

Off the Mark

Wandering Waters

Boron’s Benchmarks

Barci’s Basics (on No Fault)

Earl’s Pearls


Dan D. Kohane
[email protected]


05/01/19       Liang v. Progressive Casualty Insurance Company

Appellate Division, Second Department

Question of Fact as to Residency under Auto Policy but Bad Faith Claims Dismissed

In 2005, Liang and her husband, Lu, applied for automobile insurance with Progressive. The address Liang and Lu provided on the application was in Randolph, Vermont, and they were the only two people listed in the section for drivers and household residents. Progressive issued a Vermont policy which was renewed multiple times. The policy contained an uninsured/underinsured motorist provision, which applied to the named insureds, who are Liang and Lu, or a "relative." In relevant part, "relative" was defined in the policy to mean "a person residing in the same household" as the named insured and related by blood or marriage.


On April 25, 2012, Liang's mother, Guan, was struck and killed by an ambulette while crossing a street in Brooklyn. The ambulette allegedly was underinsured. At the time of her death, she lived on East 14th Street in Brooklyn, in a house owned by Liang and Lu (the “Brooklyn premises”).


In January 2014, the plaintiff commenced this action against Progressive alleging breach of contract and bad faith in denying benefits to the plaintiff under the underinsured motorist coverage of the policy arising from Progressive's refusal to pay underinsured motorist benefits for the decedent under the policy.


There is no choice of law issue. In any case presenting a potential choice of law issue, the first step is to determine whether there is an actual conflict between the laws of the jurisdictions involved. There is no substantive conflict between the applicable laws of New York and Vermont in this case.


Progressive contends that Liang was one of the named insureds, and that the policy required her to reside in the same household as her mother, the decedent, in order for the decedent to be covered under the underinsured motorist provision. The terms "residing" and "household" are not defined in the policy, making the definition of "relative" ambiguous. An individual can have more than one residence for purposes of insurance coverage.


There are triable issues of fact as to whether the Brooklyn premises was Liang's household and whether she resided at the Brooklyn premises within the meaning of the policy. Although Liang averred in her affidavit in opposition to Progressive's motion that in 2002 she and Lu began living and working in Vermont, she also averred that she considered the Brooklyn premises her second residence. Liang testified at her deposition that, in addition to the decedent and Ms. Liang's father, her three sons lived in the Brooklyn premises until each son went to college and at various times thereafter. Liang and Lu each testified at their depositions that between 2002 and 2012, Liang would stay with their family in the Brooklyn premises on average about seven or eight times per year for around three days at a time, in addition to certain holidays and vacations. Liang testified that she kept clothes and other belongings at the Brooklyn premises. Although Liang had a Vermont driver's license, her tax returns during the relevant time period list the address for the Brooklyn premises, and she served as a juror in New York.


Progressive also failed to demonstrate its prima facie entitlement to judgment as a matter of law on the breach of contract cause of action based on an alleged material misrepresentation by Liang. "[T]o establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation" " A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. Here, contrary to Progressive's contention, it failed to establish that Liang made a misrepresentation on the application for insurance, as "household residents" was not defined in the application and was ambiguous under the circumstances here. Furthermore, the conclusory statement by Progressive's litigation underwriter that the policy premium "may have been increased" by the addition of another individual as a resident of their household was insufficient to establish materiality as a matter of law (see Parmar v. Hermitage Ins. Co., 21 AD3d at 541).


However, the Supreme Court should have granted that branch of Progressive's motion which was for summary judgment dismissing the bad faith in denying benefits cause of action. In order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer's conduct constituted a “gross disregard of the insured's interests" and that the "insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the interests of the insured”.


Here, Progressive established, prima facie, that it did not act in bad faith, since its conduct, under the circumstances, did not constitute a gross disregard of Liang's interests. Progressive conducted an investigation and had an arguable basis for disclaiming coverage.


04/26/19       Progressive Advanced Insurance Co. v. Jordan

Appellate Division, Fourth Department

Sufficient Proof to Demonstrate that Policy was Canceled and Uninsured Motorists Benefits Available

Another application to stay a SUM arbitration.


Edds rear-ended a car driven by Jordan.  When Jordan learned that Edds was uninsured, she pursued a claim for Supplemental Uninsured/Underinsured Motorists benefits from Progressive.


Progressive challenged the claim that American States, the company that had insured Edds, had properly canceled its policy.


In support of its petition, Progressive submitted records from the Department of Motor Vehicles (DMV) reflecting a pre-loss cancellation of Edds's insurance coverage for the vehicle, the police accident report reflecting that Edds had been driving the vehicle without insurance, and a pre-loss cancellation notice that Safeco sent to Edds, with an accompanying certificate of mailing. A prima facie showing that there was insurance coverage may be established by submitting a police accident report. Here, the materials submitted by petitioner, i.e., the police accident report and the DMV records along with the cancellation notice, indicated that Edds's vehicle was uninsured on the date of loss.


However, Progressive contended that the cancellation was improper because the certificate of mailing accompanying the cancellation notice was insufficient pursuant to Vehicle and Traffic Law § 313, and thus Edds's vehicle had insurance coverage at the time of the accident.


Vehicle and Traffic Law § 313 requires that an insurer send cancellation notices "to the named insured at the address shown on the policy . . . by regular mail, with a certificate of mailing, properly endorsed by the postal service" (§ 313 [1] [a]), and that "[e]very insurer shall retain a copy of the notice of termination mailed pursuant to this chapter and shall retain the certificate of mailing obtained from the postal service upon the mailing of the original of said notice. A copy of a notice of termination and the certificate of mailing, when kept in the regular course of the insurer's business, shall constitute conclusive proof of compliance with the mailing requirements of this chapter" (§ 313 [1] [b]). Thus, an insurer may effectively cancel its policy by mailing a notice of cancellation to the address shown on the policy, provided that it submits sufficient proof of mailing, regardless of whether notice is actually received by the insured.


The certificate of mailing submitted provides that Safeco made a bulk mailing on August 26, 2015, and lists Edds's name and address as an addressee of one of the mailed items. The certificate of mailing also bears a postmark from the post office. There is no requirement in Vehicle and Traffic Law § 313 that the page of the certificate of mailing bearing Edds's name must bear a postmark.


04/24/19       State Farm Fire and Casualty Company v. McLaurin

Appellate Division, Second Department
Settling with Tortfeasor without SUM Carrier’s Consent Breaches the SUM Policy.  Hail to Condition 10.

Yet another application to permanently stay Supplementary Uninsured/Underinsured Motorists (“SUM”) arbitration. McLaurin and Corbin were involved in a three-car collision on December 6, 2013. They were in a vehicle owned by Corbin and insured by State Farm. Corbin's vehicle collided with a vehicle owned and operated by Martinez. A third vehicle allegedly struck Corbin's vehicle, and the driver of that vehicle fled on foot.


Corbin's policy with State Farm included SUM coverage. McLaurin and Corbin made a demand, dated July 30, 2015, to arbitrate a claim for uninsured motorist benefits under the State Farm policy based on the involvement of the third vehicle. They also commenced an action to recover damages for personal injuries against Martinez and her husband (hereinafter the Martinez action). That action was settled by stipulation dated September 18, 2015, upon the execution of general releases in favor of Martinez and her husband, and payment by Martinez's insurance carrier of its policy limits.


McClarin and Corbin breached the SUM policy by not seeking State Farm’s consent.


Once the existence of a release in settlement of the relevant tort claim is established, the burden is on the insured to establish, by virtue of an express limitation in the release, or of a necessary implication arising from the circumstances of its execution, that the release did not operate to prejudice the subrogation rights of the insurer". Here, McLaurin and Corbin failed to establish that the release issued in the Martinez action did not operate to prejudice the subrogation rights of State Farm.


04/24/19       Progressive Insurance Company v.  Gartner         

Appellate Division, First Department

Question of “Occupancy” for Purposes of SUM Coverage is for Court, Not Arbitrator

If an individual seeks to recover for Supplemental Underinsured/Underinsured Motorist benefits (“SUM”), her or she must be the named insured, a resident relative of the named insured, or an “occupant” of the vehicle.  The issue of “occupancy” has always been an interesting one, because under case law, it is not necessary that the person be inside the car but “in or upon” it.


Who decides the question?


The First Department concluded that the issue of “occupancy” is a question for the court, not the arbitrator, as the answer determines arbitrability of the claim.  If the insurer believes that the SUM claimant is not an occupant, it must bring a claim to permanently stay arbitration within 20 days of the arbitration demand.  That question is not one for the arbitrator.



Robert E.B. Hewitt III

[email protected]


04/30/19       Feutcher v. Composite Transit

Appellate Division, First Department

Issue of Fact as to whether Plaintiff Suffered Significant Disfigurement

The Appellate Division held Defendants met their prima facie burden on their motion and cross motion for summary judgment dismissing plaintiff's claim under the significant disfigurement category of Insurance Law § 5102(d), with the affidavit of a plastic surgeon, who found that the hematoma at plaintiff's right temple was an area of "slightly increased prominence" of the soft tissues at her right temple that was "cosmetically acceptable," and with a photograph of the plaintiff, which showed a only a slight bump.


In opposition, however, plaintiff raised an issue of fact by submitting photographs taken in the month or two after the accident showing severe swelling and discoloration at her right temple and eye, and additional photographs taken two years after the accident which show, according to the affidavit of plaintiff's plastic surgeon, "swelling to the right temp[oral] region of [her] face [which] continues and causes a visible bump' to be present." Plaintiff's plastic surgeon further opined that, "[g]iven the length of time this facial cosmetic deformity has existed, . . . it is [a] permanent condition." Moreover, plaintiff's doctor also advised plaintiff that it would be tricky to do surgery to reduce the bump because of the nerves in the area and because it would leave a scar.


After reviewing the photographs, and considering all relevant factors, such as the location of the injury (here, the face), and the injured plaintiff's background the Appellate Division found that plaintiff demonstrated the existence of a factual issue requiring a trial on the question of "significant disfigurement," i.e. whether "a reasonable person would view the physical alteration as unattractive, objectionable, or . . . the subject of pity and scorn." 


04/26/19       Barnes v. Ochino

Appellate Division, Fourth Department

Defendant’s Expert Report’s Finding That Injuries Were Degenerative Failed to Address Fact Plaintiff Never Complaint of Pain Prior to the Accident

Defendants failed to meet their initial burden of establishing that plaintiff did not sustain a serious injury under the permanent consequential limitation of use and significant limitation of use categories inasmuch as their own submissions raised triable issues of fact with respect to those categories. Defendants submitted the affirmed report of a physician who conducted an examination of plaintiff on behalf of defendants. That report contains a review of plaintiff's imaging studies, which showed disc herniations, and plaintiff's medical records, which noted that plaintiff had significant limited range of motion as well as muscle spasms, thus raising a triable issue of fact whether there was objective evidence of an injury. Defendants' submissions in support of their motion also raised a triable issue of fact whether the motor vehicle accident caused plaintiff's alleged injuries. In the affirmed report of the same physician, he opined that the imaging studies showed only preexisting degenerative changes, but he failed to account for evidence that plaintiff had no complaints of pain prior to the accident. Defendants also failed to meet their initial burden of establishing that plaintiff did not sustain a serious injury under the significant disfigurement category. Defendants did not submit any evidence showing the severity of plaintiff's surgical scars.



Steven E. Peiper

[email protected]


04/24/19       Morand v. Farmers New Century Ins. Co.

Appellate Division, Second Department

Motion to Amend to Add Claims for Personal Property and ALE Denied when Sought After Note of Issue was Filed

Plaintiff commenced this action after negotiations to settle a loss arising out of Hurricane Sandy reached an impasse.  In the Complaint, plaintiff asserted claims for wind damage to the property which were either improperly denied or inadequately compensated by Farmers.  Nearly two years after the commencement of the lawsuit, plaintiff sought leave to amend seeking recoveries for personal property damages and additional living expenses.  Plaintiff also sought consequential and punitive damages. 


The Supreme Court denied the application, and the Appellate Division affirmed.  In so holding, the Court noted that leave to amend should be freely given UNTIL the matter is certified for trial. At that time, trial judges are instructed to review any motion to amend with a “discrete, circumspect, prudent and cautious” eye.  Here, the trial court refused to permit the amendment where the motion was two years post-suit, the information for the amendment was in the plaintiff’s possession at the time of the initial lawsuit, and there was no excuse offered by the plaintiff for his failure to include the proposed causes of action in the original pleading. 


In addition, the Appellate Division also noted that any claim for punitive damages was “palpably insufficient.”  In citing the landmark NYU v. Continental Ins. Co., the Court noted that breach of contract claims will “ordinarily be limited to the contract damages necessary to redress a private wrong.”  It is only where damages are necessary to vindicate a public right that a move towards to punitives is appropriate.  Such a move is necessitated only when the award will be said to  “deter the defendant and others like it from engaging in conduct that is ‘morally culpable,’ or is ‘actuated by evil and reprehensible motives’."



Agnes A. Wilewicz

[email protected]


In NYC for ABA TIPS meetings.



Jennifer A. Ehman

[email protected]


04/08/19       Ameriprise Ins. Co. v. Krutishinkiy

Supreme Court, Suffolk County

Hon. Denise F. Molia

Court Finds Student Resident of Mother’s Household Despite Significant Documentation Showing a Different Address

This decision follows a framed issued hearing by the court on the question of whether Respondent was a resident relative of this mother’s home.  Respondent was involved in a July 20, 2011 motor vehicle accident.  The respondent was operating his mother’s vehicle when it was “side-swiped” by an unknown vehicle.  He then filed a claim for uninsured motorist benefits under that policy.  Petitioner moved to permanently stay the arbitration on the basis that respondent was not a resident relative or alternatively for a framed issued hearing.  The carrier submitted that respondent resided in an apartment in Brooklyn, New York while his parents lived in Huntington.  Respondent took the position that he was a resident of both locations.  A permanent stay was denied, but a frame hearing granted.  The decision describes the following evidence on both sides:




  • W-2 and 1099 statements, two separate bank accounts, drivers license, and green card immigration papers work all indicated Brooklyn address.
  • Brooklyn apartment was leased by step-father and used a family summer home as well as a residence for his grandparents.
  • Vehicle was leased from an agent in Brooklyn, and served and maintained in Brooklyn.
  • The vehicle was owned by his mother and he was permitted to operate it for purposes of commuting, assisting his grandparents and traveling between the two locations.
  • Application for no-fault benefits mailed to Brooklyn.
  • He possessed no documentations identifying his address at the Huntington location.
  • Treating three times a week with various providers in Brooklyn.
  • Testified that he did not intend to make Brooklyn his permanent home upon the completion of college and grad school.
  • Medical devices mailed to Brooklyn.
  • Intended to reside at the Huntington address.


After hearing the testimony, the court concluded that she found respondent’s testimony credible.  He acknowledged that he resided in Brooklyn with his grandparents while he attended college in the area.  His actions were considered by the court consistent with that of a college student who designates the community his college is located as his temporary residence.  The court accepted respondent’s testimony that although he was temporarily residing in Brooklyn, he also maintained a residence with his mother and step-father in Huntington, and that it was always his intention to return to that address, which he had in fact done.  The court also focused on the fact that respondent had permission to the use the vehicle on the date of the accident.  Accordingly, it concluded that respondent was in fact a resident relative of his mother’s household. 



Brian D. Barnas

[email protected]


04/23/19       Shawnee Tabernacle Church v. Guideone Insurance

United States District Court, Eastern District of Pennsylvania

Insurer Acted in Bad Faith as a Matter of Law by not taking any Action on Covered Claim for Six Month Period

Plaintiff’s church and daycare building was insured by GuideOne.  On January 13, 2015, there was a water loss at the property and the case as reported to GuideOne.  GuideOne’s adjuster believed that the policy’s vacancy provision, which excluded coverage for water damage if less than 31% of the building was rented or used for customary operations, unless the property was under construction or renovation, may apply to the loss.  The property was inspected on January 15, 2016, and a reservation of rights on the vacancy provision was issued the same day.


GuideOne’s adjuster testified that he only saw minor evidence of construction or repair work at the property.  In contrast, Plaintiff argues that GuideOne knew that the church was in the process of fixing damage that the previous school tenant had caused, making the renovation exception applicable.  GuideOne also learned that its insured was facing economic pressure.  The school tenant had left the building ahead of the end of its ease and a notice of foreclosure was published in December 2014.  Importantly, GuideOne’s adjuster testified that he was aware that the church would suffer a loss of income during the time the building was not useable and that the building could not be rented if the damage wasn’t repaired.


During the course of the claim investigation, GuideOne did not send 45 day status updates as required by the policy and Pennsylvania law.  On May 28, 2015, EUOs were scheduled, and the EUOs were conducted on June 12, 2015.  Thereafter, GuideOne’s adjuster made a note that the EUOs were complete, that a reserve should be set, and that a decision on coverage would be forthcoming.  There were no notes in the claim log for two months after this.


In Mid-July, a supervisor specifically instructed the handling adjuster to resolve the case with a compromise settlement.  Despite this, the EUO transcripts were not reviewed until September.  The adjuster was again instructed to resolve the case, but he did not.  On October 5, 2015, the claim was reassigned to a new adjuster to be handled on the merits.  Negotiations resumed, but GuideOne did not acknowledge coverage during this time.


On December 11, 2015, GuideOne conceded that the claim was covered.  The court noted that in the six months preceding the coverage decision, GuideOne had sought no other information about whether coverage existed.  Plaintiff commenced a lawsuit seeking damages for breach of contract and bad faith.


With respect to the breach of contract cause of action, GuideOne conceded that it was obligated to provide coverage under the policy.  However, there remained a dispute as to the amount of damage.


However, the court concluded that GuideOne acted in bad faith in handling the claim from June 2015 through December 2015 as a matter of law and granted Plaintiff’s motion for summary judgment.  To establish bad faith in Pennsylvania, the plaintiff must present clear and convincing evidence that the insurer did not have a reasonable basis for denying benefits under the policy and that the insurer knew of or recklessly disregarded its lack of a reasonable basis.  The court concluded that “GuideOne acted in bad faith when it abandoned the investigation and resolution of Plaintiffs' claim between June 16, 2015 and October 5, 2015, and then further delayed a determination of coverage until December 11, 2015, despite the fact that it possessed all relevant information about the vacancy provision once the EUOs were complete.”


GuideOne argued that its failure to work on the claim constituted mere negligence or mistake because the assigned adjuster was moved to a new team in July 2015 and did not work on the claim because of his other responsibilities.  The court rejected this argument stating that the insurer’s obligation is to its insured, which is separate from how it chooses to manage its workforce.  The adjuster did not mistakenly think the delay was appropriate; he stopped working on the claim altogether. 


The court also found that there was no reasonable basis for not settling the claim between the time the new adjuster was assigned in October 2015 through the time that coverage was acknowledged.  In addition, the court held that GuideOne knew or recklessly disregarded the lack of a reasonable basis for not paying the benefits.  The insurer possessed sufficient information to settle the claim in July 2015, but did not communicate with the insured as required or take any additional steps to investigate coverage.


Thus, the court ruled that GuideOne acted in bad faith in its handling of the claim between June 16, 2015 and December 11, 2015.


04/22/19       Swanson v. State Farm Mutual Automobile Insurance Company

United States District Court, Middle District of Florida

Florida Law does not Recognize a Common Law First Party Bad Faith Cause of Action

Swanson was insured by State Farm.  Swanson sued State Farm alleging an improper denial of benefits.  According to Swanson, State Farm engaged in misconduct during those proceedings, which resulted in a mistrial.  Swanson then filed this matter alleging a single cause of action for willful bad faith.


State Farm moved to dismiss, and its motion was granted.  Florida law recognizes first and third party causes of action against insurers.  A common law cause of action in third party bad faith claims has long been recognized by Florida law.  In the first party context, a plaintiff may assert a statutory bad faith claim against an insurer pursuant to Fla. Stat. § 624.155.


Plaintiff argued that Florida law recognizes a common law first party bad faith claim where the insurer’s actions are so egregious and outrageous it elevates what would have been an ordinary bad faith cause of action into an independent, willful tort action.  The court rejected this argument.  The Florida Supreme Court has repeatedly held that the state does not recognize a common law first party bad faith action.  Thus, Plaintiff’s lawsuit was dismissed because she had no case law or arguments sufficient to overcome the Florida Supreme Court case law.


John R. Ewell

[email protected]


04/08/19       Harleysville Ins. Co. of NJ v. Mega Security

New Jersey Superior Court, Appellate Division

“Custody, Care, and Control” Exclusion Barred Coverage for $4 Million Worth of Damaged Opals Confirmed by New Jersey Appellate Division

Companion Trading Co. (Companion) purchased a torch, explosive, and tool resistant safe from Mega Security Corp. (Mega) for the storage of valuables, including semi-precious stones. The safe is able survive attacks from tools, torches and explosives like a thermal lance, nitro-glycerine, and C-4 for more than 60 minutes.


Companion was unable to unlock the safe. Mega sent a technician to try to unlock the safe. The technician decided the safe needed to be transported to Mega’s warehouse. Mega took possession of the safe and its contents pursuant to a formal bill of lading printed on Mega letterhead. Companion paid Mega $2500 to transport the safe from its place of business to Mega’s warehouse.


With the safe in its custody and care, Mega spent several days attempting to open the safe. Mega hired an independent contractor, Charles DeBellis, to assist it in unlocking the safe. DeBellis, working with Mega employees, opened the safe using a blow torch. The safe never left Mega’s warehouse during the five or six days it took to unlock the safe. At all times, DeBellis was supervised by Mega employees.


Mega employees returned the unlocked safe and its contents to Companion. Companion alleged over $4 million worth of opals were damaged during Mega’s efforts to open the safe. Companion sued Mega, demanding compensation for the damaged opals. Companion alleged breach of bailment, negligence, and breach of contract. Companion alleged Mega “had actual and/or constructive custody, care and control of the [s]afe and opals . . . .” Harleysville disclaimed coverage citing the custody, care, and control exclusion in its policies, but nonetheless, provided Mega with a courtesy defense.


Harleysville filed a declaratory judgment action, seeking to be relieved of defending and indemnifying Mega in the underlying action. Harleysville alleged the policies issued to Mega excluded coverage for damage to property in Mega's care, custody, and control, and therefore Harleysville owed no duty to defend or indemnify Mega. Harleysville moved for summary judgment, which was granted. The trial judge determined the policies issued to Mega contained a clear and unambiguous exclusion of coverage for damage to “personal property in the care, custody or control of the insured.” Mega appealed (and Mega’s principal fled the country).


Under New Jersey law, where “the property that is damaged is under the direct and continuous supervision of the insured and is a necessary element of the work involved, the property will be deemed in the care, custody or control of the insured.”


The safe was transported by Mega to its place of business. Companion ceded the care, custody, and control of the safe and its contents to Mega for the five or six days the safe remained in Mega’s warehouse. The opals were damaged while the safe was in Mega’s possession, at Mega’s warehouse, and during the period that Mega employees and an independent contractor worked to open the safe.


The Appellate Division was unpersuaded by Mega’s arguments that the safe was in the care, custody, and control of the independent contractor, stating” the use of an independent contractor to aid Mega in its quest to access the safe does not change the ‘care, custody and control’ analysis.” Mega supervised the work performed by the independent contractor, and Mega employees were present at all times and assisted with the opening of the safe.


The Appellate Division concurred that the safe was in the “care, custody or control” of Mega. In accordance with the plain and unambiguous language in Harleysville's policies, the court ruled that there was no coverage for the underlying claim and lawsuit. Summary judgment to the carrier affirmed.

Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.

04/24/19       Sosa v. Massachusetts Bay Ins. Co.

New Jersey Superior Court, Appellate Division

Appellate Division Rules First-Party Property Claim Resulting From Water-Main Break Was Not Unambiguously Excluded, Allowing Case to Proceed

A municipal water main broke under a public street and inundated plaintiff’s home.

The pavement buckled on the side of the street opposite plaintiff's home and water gushed about a foot into the air. The water flowed from the street into plaintiff's driveway and then into the garage and basement apartment of his home. About a foot of water filled the downstairs floor. Plaintiff claimed damages to his real property. He submitted a claim to his insurer, Massachusetts Bay, who concluded that the damage resulted from “surface and ground water intrusion” and disclaimed coverage.

The policy provided “all risk” coverage for damage to the dwelling and other structures. The policy contained an exclusion for “Water” that modified by an endorsement entitled “Water Back-Up and Sump Discharge or Overflow” (“Sump Endorsement”). The Sump Endorsement replaced “water damage” with “water” and modified the exclusion’s reach. Consistent with its title, the endorsement expanded coverage to include damages caused by water from sewers, drains, sumps, sump pumps or related equipment, except if caused by flood. However, the endorsement also revised the water damage exclusion in other respects having nothing to do with the subject of its title. Notably, it explained that the exclusion “applie[d] regardless of whether” the water was “caused by an act of nature or [was] otherwise caused.”

As revised by the endorsement (additions in bold), the policy excluded coverage for losses caused by:

(1) Flood, surface water, waves, including tidal wave and tsunami, tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind, including storm surge ("Exclusion 1");

(3) Water below the surface of the ground, including water which exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio foundation, swimming pool or other structure ("Exclusion 2");

Following discovery, the parties cross-moved for summary judgment. They only disputed the meaning of the water damage exclusion. The trial court granted the insurer’s motion for summary judgment, ruling that Exclusion 1 precluded recovery and suggested that Exclusion 2 would apply if the first did not. Plaintiff’s summary judgment was denied as he failed to establish his damages. Plaintiff appealed.

Massachusetts Bay contended that Exclusion 1 applies, because the water that caused the damage was "a flood or surface water." Massachusetts Bay also asserted that Exclusion 2 applied, because below-ground water “exert[ed] pressure on, . . . seep[ed], leak[ed], or flow[ed] through a building, sidewalk . . . driveway . . . or other structure.” Massachusetts Bay highlighted the provision that the “[e]xclusion applies regardless of whether any of the above . . . is caused by an act of nature or is otherwise caused.”

Exclusion 1

The Court first considered Exclusion 1 and the meaning of “flood” and “surface water”.

1. Flood


The Appellate Division held that “flood” connotes a great inundation or deluge affecting a broad area, and not the kind of localized water damage that a water-main break causes. It reached this definition relying on out-of-state authority, including New York, that “flood” is commonly understood to involve the overflow of a body of water, whether natural or not, and a water main is not a body of water.

2. Surface Water

“Surface water” is the second form of water addressed in Exclusion 1. The policy does not define “surface water.” Plaintiff, relying on a dictionary definition, contended that “surface water” is natural water that has not penetrated much below the surface of the ground. Massachusetts Bay contended essentially, that any water found on the surface of land, regardless of its source or its properties, is “surface water”; and, citing the Sump Endorsement, such “surface water” need not occur naturally, but may result from human behavior.

Given these two competing but plausible meanings of the term, the Court concluded “surface water” is ambiguous and resolved the ambiguity against the insurer. Thus, the Court held that the water from the water-main break did not qualify as “surface water.”

3. Otherwise Caused

Massachusetts Bay argued that any ambiguity in the meaning of “flood” or “surface water” is resolved by the Sump Endorsement’s provision that the water exclusion “applies regardless of whether any of the above, in [Exclusions 1 and 2] is caused by an act of nature or is otherwise caused” (“Proviso”). The court was unpersuaded.

The Court questioned whether the Proviso was enforceable, stating that they felt it was buried in an endorsement that, by its title, leads the reader to believe it pertains only to “Water Back-up and Sump Discharge or Overflow.

Assuming that the Proviso is enforceable in, it did not alter the Court’s conclusion that the water that entered and damaged plaintiff’s property was neither “flood” water nor “surface water.” As set forth above, the Court ruled that “flood” involved the overflow of a body of water. And even if “surface water” may be caused by other than “an act of nature,” water from a water-main break is not unambiguously, surface water.  Therefore, the Appellate Division concluded that Exclusion 1 did not bar plaintiff’s claim for coverage.

Exclusion 2

The Appellate Division also held that Exclusion 2 did not bar plaintiff’s claim either. The policy excludes coverage for damages from “water below the surface of the ground, including water which exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure.” The Appellate Division held that the exclusion was in applicable because the water that damaged plaintiff’s home was no longer “below the surface of the ground" when it reached his property. It was above ground. By its plain meaning, the provision does not address damage caused by above-ground water.

Since the Court concluded that Exclusions 1 and 2 do not bar plaintiff's claim, the Appellate Division reversed summary judgment in favor of Massachusetts Bay. The court affirmed the denial of the insured’s summary judgment motion as he failed to establish his damages.


Lee S. Siegel

[email protected]


04/23/19       Essex Insurance Company v. William Kramer & Associates, LLC

Connecticut Supreme Court

No Continuous Treatment Toll for TPA’s Negligence Post-Adjustment

The Connecticut Supreme Court, answering certified questions from the Second Circuit Court of Appeals, held that the statute of limitations for negligence brought by an insurance carrier against its third-party administrator does not toll for “continuous treatment.” The plaintiff insurer, Essex Insurance Company, brought a negligence action against claims adjuster William Kramer & Associates, LLC, alleging that the defendant failed to advise the plaintiff of a mortgage on the insured property. Essex issued payment to the property owner for hurricane damage, without listing the mortgage holder as a payee, causing the plaintiff to incur a $1 million liability to the mortgagee and expend almost $250,000 in litigation costs. The TPA was active in assisting Essex in the defense of the action by the mortgagee.


Essex sued the TPA in 2013, but it had issued its final payment to its insured in 2007. The suit was commenced well outside Connecticut’s three-year statute of limitations for negligence actions. The matter went to trial where the jury determined that the TPA “engaged in a continuing course of conduct such that [the defendant's] duty to [the plaintiff] continued in a manner that tolled the statute of limitations for enough time that [the plaintiff's] claim is not time barred ....” On post-trial motions the district court set aside the jury’s finding. On appeal, the Second Circuit sought guidance from the Connecticut Supreme Court.


The Connecticut Court agreed with the trial court that the continuous course of conduct exception to the statute of limitations was inapplicable to these facts. “[T]o support a finding of a continuing course of conduct ... there must be evidence of the breach of a duty that remained in existence after commission of the original wrong.” Essex argued that its TPA had a continuing duty to disclose the existence of the mortgage, and that the relationship between insurer and adjuster is a qualifying special relationship arising out of agency. Essex claimed that the TPA’s fiduciary duty carried forward beyond the final payment to the insured and included the TPA’s assistance during the litigation brought by the mortgagee.

The Supreme Court disagreed. “None of the defendant's actions after [the final payment], reasonably could be considered further performance of any of the full adjustment services previously delineated and, thus, a further continuation of that fiduciary relationship.” Moreover, none of the litigation assistance activities bore the hallmark of agency. At that point, Essex no longer has the right to control the TPA.


[Editor’s Note: Many of our clients utilize TPA and outside adjusting services to assist in claims management. And, many of our clients are TPA services. This case serves as an important reminder that, at least in Connecticut, the relationship between carrier and TPA is a special relationship, founded in agency, in which the TPA owes the insurer a fiduciary duty. The negligent performance of adjusting services is a breach of duty which allows the insurer to seek redress from the TPA for damages, which include both payments to an insured and the insurer’s costs and expenses.] 


Marti's Legislative and Regulatory Markers

Jerry Marti

[email protected]


04/19/19       Evanston Insurance Company v. P.S. Bruckel, Inc.

Supreme Court, Suffolk County         

Question of Fact Found as to Prejudice of Late Notice of Claim to Insurer

This is a declaratory judgment arising from a worksite accident that occurred on July 8, 2008, when Henrique Staveski, an employee of P.S. Bruckel (“Bruckel”), fell from scaffolding.  Bruckel had been contacted by the State of New York to repaint highway bridges, including the bridge where Staveski fell.  Staveski and his wife, Izabel Camargo, brought a personal injury action against the State in the Court of Claims alleging that the State had been negligent and reckless in maintaining the worksite and had violated §§ 200, 240 and 241 of the Labor Law.  Evanston Insurance Company (“Evanston”) denied the State’s claim for coverage for the claims asserted against it by Staveski (“the “Staveski claims”) under insurance policies that Bruckel had procured for itself or for the State.  In turn, the State commenced an action against Evanston seeking a declaratory judgment that Evanston was required to defend and indemnify the State for the Staveski claims.  While Evanston eventually agreed to provide coverage to the State for the Staveski claims, Evanston did not agree to the State’s request that the law firm retained to defend the State in the Staveski action assert a third-party claim on behalf of the State against Bruckel in the Court of Claims litigation.


Later, the Staveski claims against the State were settled, leaving the State v. Bruckel action pending.  It was undisputed that Bruckel’s President, Peter S. Bruckel, never forwarded the pleadings or any papers which Bruckel had been served to Evanston.  Despite Evanston not receiving the pleadings for one year, the State asserted that it had provided Evanston with notice of its intention to commence that action before it did so, informed Evanston within one month after it filed the summons and complaint that it had commenced the action, and then notified Evanston of Bruckel’s default and of its intention to seek a default judgment.  But, the evidence also showed that Evanston had made several attempts to obtain the summons and complaint from the State, and the State did not respond until March 1, 2013 - nearly one year after it had commenced the action against Bruckel.  As a result, Evanston issued a disclaimer of coverage based on late notice of claim and Bruckel’s failure to send the pleadings to Evanston.


As opposed to a situation where the insurer received no notice of injury, the Court found that Evanston was provided notice of the underlying accident involving Staveski and the timely notice of Staveski’s and Camargo’s action against the State in the Court of Claims.  In addition, Evanston had taken part in defending the State in that action and participated in the settlement.  The Court further found that Evanston was aware of the State’s desire to recoup its uninsured costs from Bruckel, and that Evanston never made a serious attempt to obtain the pleadings from Bruckel or to otherwise have Bruckel cooperate in the defense of the action.


Based on these facts, the State and Bruckel filed summary judgment motions seeking to dismiss the declaratory judgment action instituted by Evanston.  Specifically, Evanston maintained that it did not owe a duty to defend or indemnify Bruckel based on the breaches of the notice provisions of its insurance policies.  While the Court denied both motions for summary judgment without prejudice to renewal upon a more complete record, the Court noted precedent wherein the carrier must establish prejudice by late notice of the claim before it may properly disclaim coverage where an insured previously gives timely notice of the accident.


Brian F. Mark

[email protected]


04/11/19       Southern-Owners Ins. Co. v. Mac Contrs. of Fla., LLC

U.S. Court of Appeals for the Eleventh Circuit
US Court of Appeals Holds that where the Underlying Complaint is Silent as to the Timing of Damages and Could Reasonably be Construed to Allege “Property Damage” Occurring During Ongoing Operations, there is a Potential for Coverage

This declaratory-judgment action arises out of an underlying construction defects action related to the construction of a custom-built residence in Florida.  MAC Contractors of Florida, LLC, doing business as KJIMS Construction ("KJIMS") entered into a contract with Paul Doppelt and Deborah Doppelt to serve as the general contractor of a custom-built residence.


Problems arose between KJIMS and the Doppelts after construction began, and KJIMS eventually left the job site before completing the project and before the issuance of a certificate of occupancy.  After serving KJIMS with a notice of defects, the Doppelts sued KJIMS in state court alleging myriad construction defects and damages at the project.  Among other things, the Doppelts claimed "damage to wood floors and the metal roof" that KJIMS had failed to remediate despite its assurances that the damages would be repaired.


Southern-Owners issued two commercial general liability ("CGL") insurance policies to KJIMS covering the time frame relevant to this case, October 2014 to October 2016.  Southern-Owners initially agreed to defend KJIMS against the Doppelts' lawsuit, but it later withdrew the defense and then filed this action for declaratory relief, which sought a declaration that it did not owe a duty to defend or indemnify its insured.  The parties filed cross-motions for summary judgment.  Southern-Owners argued that an exclusionary provision—the "Your Work" exclusion— clearly applied to bar coverage for the Doppelts' suit.  The district court agreed and granted summary judgment to Southern-Owners.  KJIMS appealed the district court’s decision.


The CGL policies at issue provided coverage for damages due to "property damage" caused by an "occurrence," which is defined as an "accident."  A "Your Work" exclusionary provision excluded coverage for "'[p]roperty damage' to 'your work' arising out of it or any part of it and included in the 'products-completed operations hazard.'"


The relevant policy definitions are as follows:


"Property damage" is defined as:

a. Physical injury to tangible property, including all resulting loss of use of that property.  All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured.  All such loss shall be deemed to occur at the time of the "occurrence" that caused it.


"Your work," is defined as:

(1) Work or operations performed by you or on your

behalf; and

(2) Materials, parts or equipment furnished in connection with such work or operations.


"Products-completed operations hazard," is defined to include:

a. Includes all "bodily injury" and "property damage"

occurring away from premises you own or rent and

arising out of "your product" or "your work" except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned.  However "your work" will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract has been completed.

(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.

(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.


The district court concluded that Southern-Owners had no duty to defend as the Your Work exclusion applied.  The court found that the Your Work exclusion "unambiguously denies coverage for property damage in the event that the insured abandons or does not complete its work, which is what was alleged to have occurred in this case."


In its appeal, KJIMS argued that the district court erred because the underlying complaint is silent as to the timing of damages and could reasonably be construed to allege "property damage" occurring during ongoing operations—that is, before KJIMS abandoned the project.  KJIMS argued that property damage occurring before the work was "completed" or "abandoned" is not included in the "products-completed operations hazard" and, as a result, falls outside the Your Work exclusion.  The basis of KJIMS’ argument is that the Your Work exclusion applies to only property damage "included in the 'products-completed operations hazard.'"


Southern-Owners agreed that the Your Work exclusion did not apply to property damage caused during ongoing operations, but argued that summary judgment was still appropriate for at least three reasons.  None of Southern-Owners’ reasons were found to be persuasive by the Court of Appeals.


First, Southern-Owners argued that KJIMS failed to preserve the argument that the underlying allegations are unclear as to the timing of the damages.  However, the Court found that KJIMS had preserved its argument as it had raised same in its summary judgment motion.  KJIMS had argued that "in neither Underlying Complaint do the Doppelts allege the timeframe for which the damages incurred," that "[d]amages to hardwood floors, roofing, granite, among others, most certainly occurred during the course of the Project," and that such damages were not included in the "products-completed operations hazard," thus creating a potential for coverage.  


Second, Southern-Owners argued that the underlying amended complaint cannot reasonably be construed to present a claim for damages that occurred during ongoing operations.  The Court disagreed and cited Florida law holding "property damage occurs when the damage happens, not when the damage is discovered or discoverable."  And where the underlying allegations, even though silent as to the timing of damages, can be reasonably construed to allege property damage that occurred during the policy period, "there is a potential for coverage." 


The Court stated that although the underlying allegations are silent as to the timing of the damages, the allegations could be reasonably construed to allege damages that occurred during ongoing operations.  Specifically, the Doppelts alleged "damage to wood floors and the metal roof" that KJIMS had failed to remediate despite its assurances that the damages would be fixed.  The Court found it reasonable to infer from this allegation that KJIMS had promised to remediate the damage to the wood floors and metal roof before it abandoned the project.  Construing the Your Work exclusion narrowly and resolving all doubts in favor of KJIMS, the Court concluded that the underlying allegations could be fairly be construed to allege damages during ongoing operations.


The Court noted that if the Doppelts did not allege "property damage," there would be no coverage under the CGL policies, regardless of any exclusionary provision or the timing of the damages.  However, the Court declined to address this issue because the district court did not consider it below.


Although Southern-Owners argued that two other exclusions applied to bar coverage, it did not move for summary judgment on the basis of these exclusions, nor did the district court address these exclusions in its summary-judgment order.  Accordingly, the Court declined to consider these arguments without prejudice to their being raised, as appropriate, on remand.


In light of the above, the Court vacated the district court’s granting of summary judgment in favor of Southern-Owners and remanded the case back to the district court.



Larry E. Waters
[email protected]


04/29/19       Nationwide Mutual Fire Ins. Co. v. POK Academy, LLC

District Court, Southern District of New York

Defendants’ Motion to Dismiss Denied Because the Court had Subject Matter Jurisdiction as the Citizenship of the Subrogee-Insurer and Not that of the Insured Determined Whether the Parties were Diverse
Plaintiff is an insurance company incorporated in Illinois with its principal place of business in Ohio.  Plaintiff issued a policy of insurance to non-party PKNY, which provided coverage for PKNY’s building and property located at 17 Academy Street in Poughkeepsie (the “insured property”). Defendants, POK Academy LLC, Urban Green Builders, and Urban Green Equities II (collectively the “Defendants”) owned, managed or controlled the building at 19 Academy Street (the “neighboring Property”).


In June 18, 2018, the building at the neighboring property collapsed onto the building at the insured property, which destroyed the building at the insured property. In addition to the destroyed building, PKNY also incurred costs in connection with the emergency response to the collapse and subsequent debris removal.


Thereafter, PKNY submitted an insurance claim to Plaintiff and Plaintiff paid the claim in accordance with the policy.  Now, Plaintiff as subrogee of PKNY brings the current negligence claim against defendants seeking damages, including costs for the building and personal property, debris removal, emergency response, and loss of business income, plus interest and costs.


Now, defendants POK Academy and Urban Green Equities II motioned to dismiss the Complaint pursuant to Rule 12(b)(1). 


The current court began its analysis by acknowledging when a case is at the pleading stage, when deciding a motion to dismiss under Rule 12(b)1), the Court must accept as true all material facts alleged in the complaint and draw all interferences in the Plaintiff’s favor.  Further, the Court acknowledged that for purposes of diversity, a subrogee-insurer qualifies as a real party in interest.   Moreover, the Court noted that the citizenship of the subrogee-insurer controls in deciding whether the parties are diverse.


Applying the relevant case law, the Court concluded that there was complete diversity. Here, Plaintiff is a citizen of Illinois and Ohio, and Defendants are alleged to be citizens of New York. As such, the Court determined that complete diversity exists and the Court has subject matter jurisdiction. 


Further, the Court noted that it had no authority to transfer the instant action to state court.  Citing to Bingham v. Pancake, the Court noted that Federal courts may transfer an action to another federal court. 


In sum, the Court denied Plaintiff’s motion to dismiss. 


04/24/19       New York Central Mutual Ins. Co. v. TopBuild Home Services

District Court, Eastern District of New York

Defendants’ Motion for Partial Summary Judgment Granted as the “Lesser of Two Doctrine” Applies to an Insurer’s Damages-Only Subrogation

Plaintiff’s subrogors, Paul and Karen Mazzola (the “Mazzolas” were the original owners of the property located at 27 Ferraro Drive (the “Property”).  Plaintiff issued a Homeowners policy, which provided coverage for the Property. 


On November 29, 2015, a fire occurred at the Property resulting in damage to the exterior and interior of the Property.  Prior to the fire, Defendant installed blown-in insulation in certain parts of the Property.  Plaintiff alleges that Defendant’s insulation work caused the fire. 


Following the fire, the Mazzolas submitted a claim to Plaintiff for insurance coverage under the Policy through their Public Adjuster. The Mazzolas’ Public Adjuster and the Plaintiff’s adjuster agreed-upon total payment that exhausted the Policy’s limits, as well as the Policy additional guaranteed replacement cost coverage limit and the “other structures” and “code update” limits.


Thereafter, Plaintiff tendered a demand to Defendant for full reimbursement of the repair costs it paid to the Mazzolas’ as result of the fire. Plaintiff was unsuccessful.  Next, Plaintiff filed suit against Defendant in state court, which the Defendant removed to this Court.  Defendant now moves for summary judgment. 


In its motion, Defendant did not contest liability.  Defendant asserted that it should only owe Plaintiff the lesser of: (1) the difference between the Property’s market value before and immediately after it damaged or (2) the reasonable cost of repairs necessary to restore it to its original condition.  Defendants asserted further that it should not be liable for replacement value repair costs that exceed the diminution of value, especially given that Plaintiff paid for the Mazzolas’ upgrades to the Property “pursuant to a private bargained-for agreement that nothing to do with Defendant or it assumed negligence in the case.”


In opposition, Plaintiff argued that the proper measure of damages in the subrogation action, was the amount that Plaintiff was forced to expend because of Defendant’s wrongful conduct. Plaintiff asserted further that the “lesser of two rule” “does not apply to [this] subrogation action, especially in the insurance context as there is no way that Plaintiff could have mitigated the amounts paid to its insured.” 


In its analysis, the Court noted that “in a subrogation action the insurer can recover from the tortfeasor what the insured could have recovered in his or her own right.” The Court also noted that “an award of damages to a person injured by the negligence of another is designed to restore the injured party, to the extent possible, to the position that would have been occupied had the wrong not occurred.”  Further, the Court highlighted that “the proper measure of damages for permanent injury to real property is the lesser of the decline in the market value and the cost of restoration.”


Applying the relevant rule of law, the Court determined that “since Plaintiff has stepped into the Mazzolas’ shoes, its rights are the same as the Mazzolas’ and Plaintiff’s ability to recovery is likewise limited by the lesser of two doctrine.  As such, the Court determined that that Plaintiff may only recover the diminution in value.  The Court reasoned to uphold Plaintiff’s argument would punish both uninsured homeowners and tortfeasors, as the latter would be liable for differing amounts for the same exact negligent action and resulting injury based solely on whether the injured party purchased home insurance.  Further, the Court reasoned to rule in Plaintiff’s favor would upend the well-established doctrine of subrogation because the insurer would no longer be inheriting the rights of its insured, no more and no less. 


In sum, the Court granted motion for partial summary judgment as the court found the lesser of two doctrine applies to this damages-only subrogation. 



Eric T. Boron

[email protected]


04/08/19       Christy’s Auto Rentals Inc. v Massachusetts Homeland Ins. Co.

Supreme Court of Rhode Island

Automobile Liability Insurance – In DJ Action Brought against Insurer, Summary Judgment Granted to Insurer Based upon Determination Plaintiff Christy’s Auto Rentals Lacked Standing to Sue

In October of 2012 while Christian Lanoie (“Lanoie”) was driving a one-day box truck rental vehicle of Christy's Auto Rentals, Inc. (Christy's), he was involved in a motor vehicle collision. Lanoie, at the time of rental, initialed a section of the Christy’s Rental Agreement indicating he declined purchasing the proffered liability protection option offered by Christy’s.  Lanoie had his own personal auto insurance policy with Massachusetts Homeland Insurance Company (“Homeland”) at the time. The collision caused the other vehicle $1,300.00 of damage.  Christy’s paid the other vehicle’s damage claim and then sued Lanoie in a tort action for damage the collision caused to the rented Christy’s box truck. 


Christy’s also filed a declaratory judgment (“DJ”) action in the Superior Court, naming as defendants both Lanoie and Homeland. Lanoie was a “nominal defendant” in the DJ action, per a Rhode Island statutory requirement that all interested persons be joined in the action.  Got it, so far?


Christy's sought a ruling through the DJ that the damages Lanoie caused to its rental vehicle (and to the other vehicle) were covered under Lanoie's auto insurance policy with Homeland.  Homeland answered that Lanoie's policy did “not cover the damages for which the plaintiff complains.” Homeland also denied many of the allegations set forth in the petition for declaratory judgment—notably including Christy's allegation that the Court “has jurisdiction to declare the rights, status, and legal relations of the parties pursuant to R.I.G.L. 9-30-1” and its allegation that “[t]here is an actual dispute between Plaintiff Christy's Auto Rentals, Inc. and Defendants Massachusetts Homeland Insurance Company and Christian R. Lanoie under the above policy.”


Homeland filed a motion for summary judgment in the DJ action, arguing “no material issue of fact is in dispute between the parties with regard to [Homeland's] liability to the plaintiff because * * * the plaintiff lacks standing to maintain this direct action against this defendant[.]”Christy's filed a cross-motion for summary judgment, contending: (1) “Homeland * * * waived its right to avail itself of the standing defense by failing to assert it in its Answer;” and (2) “Homeland's argument regarding Christy's standing to assert this declaratory judgment action is fallacious and contrary to the plain language and legislative intent of the Uniform Declaratory Judgments Act.”


The hearing justice conducted hearings on the issue of standing on November 17 and December 17, 2015. At the conclusion of the latter hearing, the hearing justice ruled from the bench that, because standing was “raised in a motion for summary judgment where the plaintiff had the opportunity and in fact argues substantively on the issue and had the right to address it[;] * * * the issue was not waived by the failure to put it in the answer.” Having determined that there was no waiver, the hearing justice then proceeded to rule on the merits of the standing argument and held that “this claim is barred because * * * Christy's lacks standing.” The hearing justice acknowledged that “the Supreme Court has never firmly decided this,” but he noted that “I do see language that says that in Rhode Island and most other jurisdictions an injured party lacks standing to maintain a direct action for damages against a tortfeasor's insurer until and unless the injured party secured a judgment against the tortfeasor.”


On the appeal of Christy’s to the Supreme Court of Rhode Island, the Supreme Court’s unanimous decision first held there had been no waiver of the defense of standing merely because standing was not set forth as an affirmative defense by Homeland.  Thereafter, the hearing justice’s substantive ruling on standing was considered and affirmed by Supreme Court.   I hope you’re not disappointed to learn that there’s only Rhode Island statutory law and case law cited in the Supreme Court’s opinion, notwithstanding the hearing justice’s passing reference made in his ruling from the bench to “language that says in Rhode Island and most other jurisdictions an injured party lacks standing to maintain a direct action for damages against a tortfeasor's insurer until and unless the injured party secured a judgment against the tortfeasor.


As you may imagine, the Rhode Island case law cited by Supreme Court’s opinion relies upon legal principles many of us have heard once or twice or a hundred times in our careers. In affirming the hearing justice’s grant of summary judgment to Homeland, Supreme Court noted established legal precedent in Rhode Island is that “determination of whether a party has standing begins with the pivotal question of whether the party alleges that the challenged action has caused him or her injury in fact.”  The Court further opined that there must be a “legally cognizable and protectable interest [that] must be concrete and particularized * * * and * * * actual or imminent, not conjectural or hypothetical”.  Noting that Christy’s was not a party to the Homeland auto insurance contract with Lanoie, it lacks standing to gain an interpretation from the Court as to the implications of that contract on issues of indemnification.


The Rhode Island Supreme Court concluded its opinion by indicating that if Christy’s were to eventually succeed in its tort action against Lanoie, and secure a judgment against Lanoie, and is then unable to collect on such judgment, then Christy’s would have “a legally cognizable interest that is no longer hypothetical”.  Does the Rhode Island Supreme Court’s nonbinding dicta prompt our New York friends to think, yep, things are pretty similar here in New York?  If not, take a quick peek at New York’s Insurance Law Section 3420 (a) (2), which should…at least hypothetically…trigger such thoughts…or wonderings…


Before I ellipsis (ellipses?) (ellipsize?) you to death…let me just say…be well, and have an awesome next two weeks.



Marina A. Barci

[email protected]


04/15/19       Advanced Recovery Equip. & Supplies, LLC v. MVAIC

Civil Court of the City of New York, New York County

Filing a Notice of Claim is a Mandatory Condition Precedent to Coverage

This case serves as a friendly reminder to all that insureds need to follow the conditions required under their policy, whether it is a private policy or one set up by the state to protect those injured by uninsured motorists. When you are injured in NYS by an uninsured motorist, you can apply to MVAIC for the same no-fault benefits that you would receive under any other policy.


Rather than having to follow policy requirements for MVAIC, those who want benefits have to comply with Insurance Law § 5208. One of the requirements for injured parties under § 5208 is to submit a notice of claim and report the accident within 24 hours. In this case, the plaintiff ignored the two attempts MVAIC made to request that plaintiff complete a notice of intent and provide other relevant information. Due to the plaintiff’s failure to comply with the notice of claim requirement, MVAIC was proper in denying coverage as the plaintiff was not a covered person because they failed to comply with a condition precedent to coverage.


In turn, plaintiff’s assignees (medical providers, etc.) were unable to collect the assigned no-fault benefits because plaintiff was never entitled to the benefits in the first place. The court also noted that plaintiff’s cross-motion that MVAIC failed to timely deny or approve its claims within 30 days was unfounded because plaintiff failed to comply with a mandatory condition precedent to coverage and any failure to timely deny by MVAIC is of no consequence and does not preclude dismissal of plaintiff’s action for lack of coverage.


04/09/19       Parisien v. Omni Indem. Co.

Civil Court of the City of New York, Kings County

Insurer Wins Conflicts of Law Issue But Fails to Meet Summary Judgment Burden

The facts: the insured, Emily, had a Pennsylvania auto policy with the defendant. Her application stated that she resided and kept her car at her residence in PA. Emily also has a common law husband named Ed. Ed was allegedly injured when he was driving Emily’s car in the Bronx, NY and rear ended. (Reading, PA and the Bronx are roughly 3 hours apart, but we don’t know why Ed was in NY). Ed made a claim for no-fault benefits under Emily’s policies. At the request of defendant, Ed testified at an EUO. As a result of the EUO, defendant determined that Emily had made a “material misrepresentation” on her application. The defendant then retroactively rescinded Emily’s policy and returned all premiums. Thus Ed could not recover no-fault benefits under the policy because it no longer existed.


Emily and Ed brought an action in the appropriate NY court (where the accident took place), but defendant argued that PA law should apply. PA law allows for retroactive rescission of a policy, whereas in this case NY law would allow only for prospective cancellation because in NY, “an insurer may not void an entire motor vehicle policy retroactively for a material misrepresentation if it includes statutory coverage for liability,” which no-fault benefits are. See DFS 12/18/16 opinion.


The court determined through the “significant contacts” test under a conflicts of law analysis that PA law applied because “the principal location of the insured’s risk is the place where the vehicle is to be principally garaged,” Emily applied for her policy in PA, indicated on her policy that she resided in PA and owned a registered and garaged vehicle in PA, and the defendant is an insurance company doing business in PA. The only connection NY had to the issue was that the accident occurred there. Therefore, the court was required to follow PA’s law that permits retroactive rescission of an auto policy for material misrepresentation.


However, in a twist, the court found that the defendants own motion for summary judgment on the issue contained triable issues of fact as to whether Emily actually resided in PA at the time of the accident and whether she made a material misrepresentation concerning her domicile and garaging of her vehicle when procuring the policy. Defendant attempted to submit Emily and Ed’s EUO transcripts as conclusive proof that they made certain material misrepresentations regarding domicile. Meanwhile, after reviewing the transcripts the court found that there were questions as to where Emily and Ed were domiciled based on their “unconventional manner of living and making ends meet.” The EUO transcripts, according to the court, do not demonstrate that Emily and Ed are not domiciled in PA, nor do they provide definitive proof that they are domiciled in NY. Defendant did not submit any other proof that Emily was not a resident of PA at the time she obtained the policy or at the time of the accident. Thus, the defendant’s motion for summary judgment was denied based on the questions of fact present in their own proof.


04/09/19       AEE Med. Diagnostic, P.C. v. Hereford Ins. Co.

Civil Court of the City of New York, New York County

Attorney’s Fees Reduced by Court Because Attorney Could Only Provide Estimates of Time Spent on Case 

I have a hard time resonating with the issue of this case as I am required to bill my time meticulously every day. However, it appears the plaintiff’s attorney in this case is not.


This action was commenced after plaintiff was awarded after trial a judgment for no-fault benefits. Attorney’s fees were included in the award, but the amount was not, so this action was brought to determine the amount. The plaintiff’s attorney testified about her general practices, but was unable to give specific time calculations that she spent on this particular case, only estimations, so the court granted her $695.00 in attorney’s fees for 3 court appearances and 6.5 hours of trial and motion paper preparation (which in my experience is probably significantly less time than she spent on the case, or at least it appears that it would be significantly less time than I would have spent on the case).



Earl K. Cantwell
[email protected]


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

Vermont Supreme Court

Is Loss of Funds “Physical Loss or Damage”?

Rainforest was insured by Sentinel under a business policy. A Sentinel employee was hit with a “ghost” cyber request to transfer funds to an outside bank account falsely stating that it came from a manager’s e-mail account. Rainforest did quickly learn that the manager had not sent the e-mail and was able to limit its loss. Rainforest claimed the loss was covered under the policy covering losses due to forgery, and also under a provision for the loss of money or securities by theft. Sentinel denied coverage, litigation ensued, and each side moved for summary judgment.


The Trial Court granted the insurance company’s motion, but this decision was reversed on appeal. The Trial Court did note in rendering its ruling, “How any insured, however sophisticated, is supposed to determine that it is getting what it paid for with a policy like this is a mystery to the Court.” The case centered on the interpretation of certain policy language in dispute.


In reversing the Trial Court, the Appellate Court noted that, with respect to an exclusion, the insurer bears the burden of proof.  However, the Court also argued that under Vermont law policy if terms are ambiguous or unclear, they must be construed broadly in favor of coverage, which may not be a universal rule of interpretation. The central issue focused on whether this loss fell within an exclusion that Sentinel would not pay for “physical loss or physical damage” caused by or resulting from false pretense. The insured argued that the “false pretense exclusion” did not apply because it only excludes physical loss or physical damage and the loss here was of money in a bank account and was not a physical loss. The Court was aided by a recent federal court case in Montana which interpreted this exact provision in a virtually identical fact pattern and ruled in favor of the insured. The relevant provisions in the insurance policies in that Montana case were identical to those before the Vermont court.


The issue was whether loss of money in an account was or was not “physical loss of money”, and the Court essentially held that the policy language was confusing as to what risks were covered and what risks were excluded. The Vermont Court agreed with the Montana court in holding that the insured did not suffer a physical loss, and therefore the false pretense exclusion did not bar coverage. In so doing, the Vermont Court concluded that, in this respect, in terms of defining physical loss or damage the false pretense exclusion was ambiguous and therefore should be held against the insurance company.


The Vermont Court attempted to buttress its conclusion by going through the policy and noting the many differing and even conflicting uses of the terms “physical loss”, “loss”, and “physical damage” as in part causing the confusion and ambiguity. The Court also cited case law that, in effect, supported both the insured’s and the insurance company’s interpretation of whether funds in a bank account are considered “physical loss or damage”.


Ultimately, the Vermont Court concluded that, since the false pretense exclusion is subject to at least two reasonable interpretations and is thus ambiguous, it was bound to interpret it in favor of the insured and the loss suffered was not “physical loss” and therefore not barred by the exclusion. The case was remanded to the Trial Court for further proceedings to determine whether other provisions in the insurance policy operated to provide coverage or exclude the loss.  The Trial Court was still going to have to struggle to determine whether other clauses and language in the policy such as “forgery”, “theft”, “covered property”, “money”, et al. operate to grant or deny coverage. 


This case represents an example of how insurance companies should strive to harmonize terms and definitions within their policies since this Court certainly found it confusing if not ambiguous how policy language readily and (sometimes without explanation) shifted back and forth in discussing physical damage, physical loss, loss, property damage, and other terms. This would also undoubtedly assist underwriters and claims personnel in uniformly processing and handling losses based on the policy language.


Given the origin of this loss in a computer “ghost” email, this case also represents an issue of whether traditional policy terms and definitions uniformly and readily apply to computer and cyber security claims. It may well be that computer and cyber security claims, because of their unique nature and indeed constantly evolving nature, require more specific definitions in terms of coverage and exclusions. This was a relatively simple “ghosting” claim, but it implicated many different policy definitions and language, not all of which was clear or consistent. This is one reason why specialized computer and cyber security endorsements and coverage may be desirable from the standpoint of both the insured and the insurance company since standard policy terms and definitions may not well fit computer losses.



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