Coverage Pointers - Volume XX, No. 24

Volume XX, No. 24 (No. 537)
Friday, May 17, 2019
A Biweekly Electronic Newsletter

 

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

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

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

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

 

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

This issues comes to you from the State Capital where I’m presenting as part of a New York State Bar program on insurance coverage.  I’m here via Columbus, where I visited a good client doing a presentation on New York coverage and disclaimer rules.  Good friend and good time, for sure.  A bit tired of travel, no doubt.  Looking forward to the Amtrak ride home after the Friday program.  A nice change from airlines, no doubt.

No much going on in the courts over the last couple of weeks, not sure why.  There was a fascinating case from our high court on optional safety devices and the so-called “Rental Market Exception” in products liability litigation.  Chris Potenza and John Ewell cover that decision in a very insightful article available here.

For those who will be attending the New York Insurance Association Annual Meeting at the lovely Sagamore, please look me up.  I’ll be part of a great panel with fine lawyers talking about things that keep insurers up at night!

Flying with the Legal Eagles: Being Forewarned is Being Forearmed

Moderator: Marc Craw, Senior Counsel, MLMIC Insurance Company

Panelists: Michael Brown, Partner, Nicoletti Gonson Spinner; Brian Heermance, Senior Partner & Co-Branch Leader, Morrison Mahoney LLP; Dan Kohane, Senior Member, Hurwitz & Fine, P.C.; and William Matlin, Partner, Hoffman Roth & Matlin, LLP

To be prepared for the unforeseen and unique challenges of the ever-changing legal landscape in New York takes a trained eagle eye. Our moderator and panel of legal aficionados have scoped the terrain and laid the groundwork needed to forearm your company against the unexpected. Gain insights from these birds of a feather as they come together to bring you foresight for the current state of affairs in New York’s litigation environment.

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.

 

Feminism Considered, A Century Ago:

Poughkeepsie Eagle-News

Poughkeepsie, New York

17 May 1919

 

DR. GRIGGS TALKS ON FEMINIST MOVEMENT

Upholds Greater Freedom and

Responsibility for Women in Lecture at Y.M.C.A

 

“Nothing will bring the Kingdom of Heaven nearer than the development of each man and woman in the world into a perfect example of manhood and womanhood” said Dr. Edward Griggs in his lecture upon “Feminism and Democracy,” given at the Y.W.C.A . on Friday evening, in speaking of suffrage for women as opposed to the older scheme of things, the women living a life which is a parallel to that of Ibsen’s heroine in “A Doll’s House.”

          All that is sound in the feminist movement,” said the speaker, is simply an honest application of the principles of Democracy is liberty, equality, and at least the hope of fraternity. Feminism is the same. It depends the right of the woman to live her own life and be responsible to her own soul and to God for the conduct of her life.

          “Man must be first of all a man before he is fit to take upon himself the duties of the husband and father. A woman who has children finds that she must first of all be wife and mother. Why the difference? Simply prejudice that has been with us since the days of the cave-man, days when the right of possession ruled all else. Through all the history of man, the history of nine out of ten crimes begins with some infringement of what we consider our property,-crimes due to that possessive instinct that we all feel for what is ours.

          “The result is that the man feels himself absolute master in the home because he holds the purse strings. And this makes for lack of freedom for the woman. The woman of the home earns the money as fully as does her husband, and the time will come when there will always be an agreement made between husband and wife about money matters, before the wedding takes place. The most absurd anomaly of our present time is the lack of such economic freedom.

 

Jen’s Gems:

Greetings.  Hope everyone is well.  Last week, I attended DRI’s 2019 Business Litigation Super Conference in Austin, Texas, where I spoke about cyber coverage focusing on a ransomware claim.  It was a great program, and it was my first time in Austin.  I would definitely put Austin on par with New Orleans and Key West for the most bars per square foot. 

In my column this week, I report on a trial court decision addressing the two-year-old Court of Appeals’ decision in Burlington Ins. Co. v. New York Transit Authority.  In that decision, the court analyzed the newer additional insured language which affords coverage for bodily injury and property damage “caused, in whole or in part, by” the named insured’s acts or omissions.  In the Burlington decision, the court held that this language directed not the application of a “but for” test, but instead looks to proximate causation.  The Court of Appeals, which is the highest court in New York, defined proximate cause based on the named insured's “negligence or other actionable deed.”  In the decision I report on this week, the court applies only the negligence piece of proximate cause finding a question of fact on coverage based upon the reasoning that the name insured’s liability in the underlying action had not yet been determined.  The problem with only looking to the named insured’s negligence is that the Court of Appeals was clear in its decision that it was not creating a pure negligence standard; with that said, we have yet to see any cases which directly address what is a non-negligent “other actionable deed.”  The case is an interesting read and an example of what we are seeing out of the trial courts when presented this issue.

Until next week…

 

Jen

Jennifer A. Ehman

 

How Much is a Lonely Widow Worth?  Depends on the Newspaper:

 

Winston-Salem Journal

Winston-Salem, North Carolina

17 May 1919

 

WILL YOU WRITE LONELY WIDOW, age 30, worth $40,000.  Object matrimony.  Address, Mrs. A. L. Hill, 14 E 6^th St., Jacksonville, Fla.

 

Editor’s Note:  Mrs. Hill apparently hit the lottery the same day. Note the Zanesville, Ohio add just below where she was worth $100,000!

 

John’s Jersey Journal:

Dear Subscribers:

While this column usually has a Jersey focus, today we foray into New York product liability. Part of my practice includes defense work and I enjoy a good product liability case.

New York Product Liability    

On May 9, 2019, the New York Court of Appeals decided a product liability case which is significant for rental companies and manufacturers whose products reach the rental market. In Fasolas v. Bobcat of New York, the Court of Appeals upheld the rule that manufacturers are entitled to a defense to strict products liability if the purchaser is aware of optional safety devices and chooses not to use them, regardless of whether the product was sold directly to the end-user or came into the injured end user's hands through the rental market. V. Christopher Potenza, H&F member and products expert, and I wrote up the case and discuss implications for manufacturers and rental companies alike.

Last year, the Appellate Division went rogue, so to speak, and said manufacturers cannot assert the defense where the end-user rented the product, creating a “Rental Market Exception” to the defense. In effect, keeping manufacturers in the case and on the verdict sheet. The Court of Appeals has now struck down the Rental Market Exception. Our break down of the decision is available here.

New Jersey Insurance Coverage

On May 4, I attended the Insurance Law Roundtable, an annual CLE geared towards New Jersey coverage attorneys. The panel – comprised of a number of respected coverage lawyers and a retired justice from the Appellate Division – covered a number of pertinent topics including the ethics of settlement negotiation, allocation in long-tail claims, strategies for mediating insurance coverage disputes. They closed the program out with a review of significant insurance decisions from the past year. The decisions themselves looked familiar. We reported on them here. It was a very informative presentation and one of the best CLEs I’ve ever attended. Kudos to those who organized such a terrific program.

In today’s issue, we have a coverage case from the Third Circuit Court of Appeals. It is rare to see a coverage case from the Third Circuit involving Jersey law. The case arose out of a Hurricane Sandy claim brought against a flood insurance policy. There was federal jurisdiction because national flood insurance is governed by FEMA and federal law. Since the insured failed to file an adequate proof of loss (“amount claimed $0.00”), the Third Circuit upheld the denial of coverage.

It’s been awhile since I’ve mentioned the New Jersey bad faith bill currently pending in the Assembly. The bill – entitled the New Jersey Insurance Fair Conduct Act – passed the Senate in June of 2018 (we covered it here). It remains pending. The New Jersey Bar Association is now working with the sponsor on revising (and hopefully limiting) the scope of the bill.

 

John

John R. Ewell

 

Same Widow, Different Value:

The Times Recorder

Zanesville, Ohio

17 May 1919

 

LONELY WIDOW, worth $100,000, wishes to hear from honorable gentleman under 60, object matrimony.  Write Mrs. Hill, 14 E. 6^th St., Jacksonville, Fla.

 

Peiper on Property and Potpourri:

We start of this week by thanking the panelists from around the State who volunteered their time and effort as part of the Bar Association’s Annual Coverage Update.  The faculty from the four locations reveals a lot of familiar faces, but also quite a few newcomers.  One of which was our own Brian Barnas who made his speaking debut at the Buffalo Panel.  If anyone out there is looking for a primer on spotting, preserving and prevailing on misrepresentation and fraud claims, Brian is the speaker you’re looking for.

My column comes to you tonight in the afterglow of a great night of parenting.  I rushed out of the office to take my fourth grader to his PTO ice cream social and art show.  From there, we raced over to the middle school to catch my daughter perform in the 6th grade orchestra.  The show culminated in a rendition of the 1812 Overture; complete with brown paper bags being “popped” in place of the traditional cannon blasts.  Yes, I do have a headache, and no I do not believe it is a coincidence. 

As for actual legal issues this week, we only one flood case to report.  Not much else happening.  Perhaps next week…sigh.

With that we bid adieu to this week.   Here’s hoping the coming days bring enough sunshine for the muddy paw prints to disappear from my kitchen floor, although we sincerely doubt it. 

For those of “up north,” Happy Victoria Day
 

Steve

Steven E. Peiper

[email protected]

 

Wanna Car?

 

Dunkirk Evening Observer

Dunkirk, New York

17 May 1919

 

Not Altogether a Wise Thing to Do

 

in buying an Auto, to merely compare specifications, as 50% of the manufacturers of passenger carts buy their units from the same concerns:  such as gears, clutches, starters and lighting systems.  Therefore you could be easily deceived.  A safe rule to follow is to figure the cost of your car—the expense of running and the resale price it brings.  This will give you the cost per mile, which should be of the utmost importance to you—easy riding and appearance considered.

          Little need be said of the appearance and riding of a PAIGE care as pioneers of the present day lines, and following the high grade type of spring suspension so popular on the best foreign cars.

          The resale of a PAIGE care can best be explained by the unusual small number of their product that can be bought on the second hand market.  We have a waiting list for used PAIGES—99% of those who bought Paige cars from us nearly four years ago are still driving Paige cars today.

 

GUAY’S Garage & Machine Shop, 121 Central Avenue, Dunkirk, N.Y.

 

AUTOMOTIVE DEALERS—PAIGE, OAKLAND AND STEWART

 

Hewitt’s Highlights: 

Dear Subscribers:

We have had a lot of rain and a lot of sun since our last edition, never knowing what weather we are going to get on a day-to-day basis. On the plus side, I had an excuse not to mow the lawn due to a rainy weekend. My oldest son also turned ten years old, so that was exciting for him to reach double digits.

There are a number of serious injury cases this edition. There are cases where plaintiff’s expert failed to explain findings of degeneration. There are cases where defense experts actually supported plaintiff’s argument by finding significant range of motion limitations. We also have a case where a plaintiff did not explain what objective tests it used in support of his conclusion.                                                        

Until next issue,

 

Rob
Robert E.B. Hewitt III

 

Anarchists Beware:

 

New York Herald

New York, New York

17 May 1919

 

ANTI-ANARCHY BILL READY.

 

Overman Says Measure Will Be  Presented at Extra Session.

 

          WASHINGTON, May 16.—Senator Overman (N.C.), chairman of the Senate committee which has been investigating the spread of the lawless propaganda in the United States, announced to-day that a bill designed to reach persons advocating overthrow of the Government by force would be introduced in the extra session of Congress.

          Senator Overman was one of the men to whom infernal machines were mailed in the May Day, bomb plot, but the package was held up by post office authorities. 

 

Wilewicz’ Wide-World of Coverage:

Dear Readers,

Spring is finally, actually, and literally here! I have been reluctant to write about the weather as I didn’t want to jinx it (and spring has been a long time coming around these parts). But, our front-yard cherry tree blossomed for all of three days, until a strong wind and rain storm blew all of the buds off, and our backyard fruit trees are finally starting to bloom. We’re looking forward to warm evenings on the porch and lazy weekend afternoons that seem to have been too long in coming.

Anyway, in this week’s Wide World, we got a little further afield than our usual east-coast beat. From the Appellate Court of Illinois we bring you Continental Casualty v. Hennessy Industries. It is of particular interest to any of us who handle environmental coverage cases. In this one, the court interpreted a few policies’ definitions of an “occurrence”. However, unlike more standard definitions, which define the term as an accident, including continuous or repeated exposure to substantially the same general harmful conditions, and stop there, these policies expressly grouped occurrences by location. That is, they made reference in the definitions to all exposures to substantially the same conditions “at or emanating from each premises location shall be deemed one occurrence”. Thus, where a company had many locations across the country, those claims could not be lumped together, but each location could. This could have potentially wide-spread implications, so we will be sure to watch this case proceed forward and will update you as the matter proceeds up the courts.

That’s a wrap for now. Until next time!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

A Dizzying Record;

 

The Post Star

Glens Falls, New York

17 May 1919

 

New World’s Record

In Looping Loop

 

WASHINGTON, May 16.—Making 457 consecutive loops during a flight lasting one hour and fifty-four minutes, Lieutenants Ralph J. Johnson and Mark R. Woodward set a new world’s record today at Carlestrom Field, Arcadia, Fla.  The making of the new record was announced by air service officers here, who said a Lapere two-seated fighting plane was used. 

 

Barnas on Bad Faith:

Hello again:

As someone who primarily supports sports teams from Buffalo and Toronto, there have generally been more bad times than good ones.  What I have found is that the continuous losing makes those moments of success all the more exciting, even if they usually are fleeting. 

I’m happy to be riding two of those highs right now simultaneously with the Raptors having advanced to the Eastern Conference Finals and Tottenham Hotspur having made it to the Champions League Final.  Both did so in dramatic fashion in a span of less than a week.  Spurs scored three goals in the second half on the road at Ajax, including the winner in the 95^th minute, to advance and have a shot at the first European title in club history.  The Raptors won a hard-fought series in seven games against the Sixers with Kawhi Leonard hitting the first game seven buzzer beater winner in the history of the NBA.  Spurs face a huge challenge against Liverpool, and the Raptors have their work cut out for them first against Milwaukee and then likely against Golden State in the NBA Finals if they’re able to advance.  Rather than worrying about the destinations I’m just going to try to enjoy the ride because these trips are so few and far between.

I have two cases in my column.  The first is a decision from the Iowa Supreme Court where the court concludes that Iowa law does not recognize a bad faith cause of action against a third-party administrator of a workers’ compensation carrier.  As detailed in the decision, many states don’t recognize any bad faith cause of action against third-party administrators.  The only state the court found that recognized a bad faith cause of action against a third-party administrator of a workers’ compensation carrier was Colorado.  The Iowa court declined to follow Colorado’s lead.

The second case in my column is from Florida and arises out of a tragic accident on a Royal Caribbean Cruise.  The underlying plaintiffs went on a zip line course while stopped in St. Lucia.  Unfortunately, Mrs. McCullough wasn’t harnessed in properly, and she fell 50 feet and was rendered a quadriplegic.  The excursion operators were included as defendants in the resulting lawsuit, and they were insured by AIG.  AIG denied coverage, and eventually a judgment was entered against the defendants. 

However, there was never a determination of coverage under the AIG policy.  Thus, the court determined that the plaintiffs’ bad faith action against AIG was premature since there was no determination that there was coverage under the AIG policy.  The case was stayed pending a determination of coverage.

That’s all for now.  Have a great weekend.

 

Brian

Brian D. Barnas

[email protected]

 

How Much is a Governor Worth?  Apparently, Not as Much as a Widow:

 

Buffalo Evening News

Buffalo, New York

17 May 1919

 

GOVERNORS’ SALARIES.

 

The next governor of Pennsylvania will receive the largest salary paid to an American state executive, $18,000 a year. This is an advance of $8,000. At the present time Illinois pays her governor the largest salary, $12,000. The $10,000 states are New York, California, Massachusetts, New Jersey and Ohio.

          There is nothing in the size of Pennsylvania’s budget to warrant so wide a margin over some of her sister states. Indeed, her budget of $40,000,00 is exceeded by that of California, and of course is much less than New York’s, which is nearly twice that.

          A governor’s salary, however, bears no relation to the budget- or to anything else. Why should Nevada pay her governor $7,000, and Nebraska pay hers only $2500? Pennsylvania will be thought to be a bit extravagant with her governor, or else most other states will seem niggardly to theirs.

 

Off the Mark:

Dear Readers,

I think I spoke too soon about the weather on Long Island, or maybe I jinxed it.  It seems like it rains every day.  Oh well, at least I don’t have to turn the sprinklers on.  Hopefully, all of the rain will be out of the way and the weather will be nice for Memorial Day weekend.  I will be camping with my boys in the Catskills and rain makes it much less fun. 

There are no noteworthy construction defect decisions to report on this edition.  I’m sure the hiatus will not last long.

I hope everyone has an enjoyable Memorial Day weekend.

Until next time …

 

Brian

Brian F. Mark
[email protected]

 

Employer-Paid Insurance:

 

Buffalo Morning Express and

Illustrated Buffalo Express

Buffalo, New York

17 May 1919

 

HENGERER INSURANCE

 

Company thus to protect all

employees free of charge.

 

          At the song service yesterday morning, Edward L. Hengerer, president of the Wm. Hengerer Company, announced that group life insurance had been taken out with the Etna Life Insurance Company for all the employees of the store.  The insurance will be made payable to any beneficiary that the employee names and every person on the store payroll, regardless of age, after three months’ service will have a policy issued in his or her name, the premiums being paid by the company.

          Employees will not be required to stand physical examination, and the policy provides for disability benefits and requires that payment of the full sum insured in the event of becoming disabled before the age of 60.

          The amount of insurance depends upon the length of service.  One who has been employed for three months is insured for $300, at six months for $500, and thereafter $100 is added for each subsequent year’s service until the amount of $3,000 is reached, which amount is carried on employees who have been in the store’s service for 25 years or more.  Employees on the pension list are also included.  Thus continuity and length of service are rewarded.  Over 750 persons are covered at this time and the insurance in force exceeds $700,000.

 

Wandering Waters:

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

The NBA continues to dominate the sports headlines.  On Tuesday, the NBA held its annual draft lottery to determine who will have the opportunity to select the freshman phenom Zion Williamson.  This was the first year the NBA implemented its new draft lottery odds system.  Previously, the team with the worst record had a 25% chance to win the first overall selection.  However, to prevent further “tanking”, the three teams finishing with the three worst records are all given the same 14% chance to win the first overall selection. 

In its first year of the new system, the results appeared to have worked.  None of the teams finishing with the three worst records finished with the top pick in the draft.  Rather the Pelicans, who were projected in the bottom half of the draft lottery, won the first overall selection.  Now it is a foregone conclusion that the Pelicans will select Zion Williamson with the first overall pick and cement the franchise with a projected superstar. 

In addition, to the headlines off the court, the NBA playoffs continues to provide much excitement.  Last Sunday provided two exceptional game 7s.  The Raptors and the Sixers provided the most excitement, with the Raptors winning on a buzzer beater in game 7.  With only a few seconds remaining, Kawhi Leonard hit the only game 7 buzzer beater in NBA history.  It truly is a great time to be a NBA fan.

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

 

Larry

Larry E. Waters

 

Workers Compensation Legislation, a Century Ago:

 

Democrat and Chronicle

Rochester, New York

17 May 1919

 

DIRECT SETTLEMENT HEDGED

 

Bill Safeguarding Compensation

Law Signed by Governor

 

          Albany, May 16.—The Foley bill to amend the Workmen’s Compensation law by prohibiting direct settlements except after approval by the Industrial Commission was signed by Governor Smith to-day.

          The Governor also signed the Hewitt bill appropriating $25,000 for the employment of prisoners in the construction of state and county highways.            

 

Boron’s Benchmarks:

Dear Subscribers:

New subscriber to Coverage Pointers?  Welcome to Boron’s Benchmarks, providing coverage (pun intended) of decisions issued by the high courts of the 49 states of the union not named New York.

This issue’s column considers last week’s split decision issued by the Louisiana Supreme Court upholding enforcement of a forum selection clause in a commercial property and casualty insurance policy.  Specifically, the Court determined that Louisiana statutory law providing that no insurance contract delivered or issued for delivery in Louisiana shall contain a condition “[d]epriving the courts of this state of the jurisdiction of action against the insurer” does not prohibit enforcement of a forum selection clause which the parties had contractually agreed to saying disagreements shall be litigated “in a court of competent jurisdiction within the State of New York”.  The Court made a factual finding that the policy was delivered or issued for delivery in Louisiana. The forum selection clause in the policy requires disputes to be litigated in the State of New York.  Citing the forum selection clause of the insurance contract, the insurer, XL Insurance America, Inc., disputed that its insured, Creekstone Juban I, L.L.C., could sue the insurer in Louisiana to recover additional payment after a flood loss.

The Supreme Court of Louisiana held that where parties have contracted for a forum or venue in which they will resolve disputes, such agreement does not result in depriving the Louisiana courts of “jurisdiction.” Moreover, not enforcing a forum section clause would, according to the decision, undermine the ability of parties to freely engage in contractual agreements “and thereby impair the ability of companies to do business in this state."

A vigorous dissent in the case begins with these three words, “It is ridiculous…”, leaving no doubt the Court was sharply divided on this issue. 

I hope all is well with you.  Boron’s Benchmarks will be back in two weeks with further coverage of the high courts outside of New York.

    

Eric

Eric T. Boron

[email protected]

 

Oh by the way:

          Lonely Mrs. Hill was worth $100,000, Camden, Tucson and Montgomery newspapers as well.  She was worth only $40,000 in Buffalo.  Hmm.

 

Marti's Legislative and Regulatory Markers:

Dear Subscribers,

This week, we focus our attention on New York State automobile insurance policies and the challenges faced by insurance carriers with fraud. While the legislative intent behind the no-fault system has been primarily based on the prompt payment of claims, this has also had the effect of permitting payment under fraudulent schemes.

For instance, in November of 2018, the New York State Attorney General announced a 61-Count Indictment including charges of insurance fraud, grand larceny, the unauthorized practice of medicine, and money laundering as part of a $1 Million insurance fraud scheme by Brooklyn Medical Clinic Jamaica Wellness, P.C.  Among the allegations, the clinic encouraged patients to fabricate or exaggerate their injuries and submit claims to insurance carriers for treatment provided and prescribed by unlicensed individuals. Paid runners were used to solicit accident victims to the clinic.  To entice unsuspecting victims, one of the defendants misrepresented that he was an attorney.  In addition, the clinic did not actually treat patients. As it stands now, insurance carriers can only cancel insurance policies prospectively, which allows opportunity for no-fault fraud between the time when the policy is “purchased” under fraudulent circumstances to the time it is cancelled.

Given the brazen nature of these fraudulent schemes, the New York Legislature has proposed a bill to retroactively cancel a policy involving fraud.  For more on the recent legislation, please read on.

 

Jerry

Jerry Marti

 

World Record Air Speed – 60 MPH:

Great Bend Tribune

Great Bend, Kansas

17 May 1919

 

          Washington, May 17.-The three American naval seaplanes en route on the first attempt to reach Europe from America by air passed Station No. 6, the destroyer Ward, three hundred miles from Trepassey Bay, at 10:05 p.m., Washington time, according to a message received by the Navy Department.

          The planes were expected to maintain an average speed of sixty nautical miles an hour, although they are capable of making ninety miles if circumstances demand. Temperature was expected to determine the flying altitude, but it was believed that five thousand feet would be the limit.

 

Barci’s Basics (On No Fault):

Hello Subscribers!

The sun is finally shining here in Buffalo! As I write this there is someone blasting “It Takes Two” by Rob Base and DJ E-Z Rockin in the square outside our office (and yes I did have to look up the artists for that song). It seems as though it might finally be time to turn my heat off…maybe. We’ve had it on since early October which, in my opinion, is far too long, but until the temperature at night stays about 60 degrees I just can’t justify turning it off. Hopefully by our next issue it will be time!

On the no-fault front I have three cases for you, two of which discuss the NY Workers’ Compensation Fee Schedule. This is a very popular issue that is almost always asserted as a defense in my no-fault actions. The Fee Schedule is long and boring, and usually requires a third-party billing company to properly code the bills the insurers get from the providers, but it is a very important thing to follow. It can ultimately save the insurer hundreds if not thousands of dollars on these cases where the providers charge more or less whatever they want for some services. It is usually considered an unwaivable defense and is very hard to overcome presumption of the proper fee amounts for each code. If you have any questions about utilizing the fee schedule, please reach out and ask! I am happy to help. 

That’s all folks,

         

Marina

Marina A. Barci

 

Racism Rampant, 100 Years Ago

Richmond Times Dispatch

Richmond, Virginia

16 May 1919

 

Handcuff White Girl to Negress

Guards Carry Couple

Through Streets on

Open Wagon

         

          A white woman, well dressed and apparently about twenty-six years of age, handcuffed to a negro girl, was carried to the State Penitentiary yesterday afternoon on an open wagon. The party of prisoners, which made its way up Cary Street shortly after 4 o’clock, consisted of two female prisoners, and four colored and one white man. The men were manacled and on foot, walking under guard behind the rickety wagon in which the two women were riding. The convicts were brought here from Newport News for confinement.

          Inquiry at the penitentiary yesterday afternoon failed to disclose on what charge the young white woman was being imprisoned. Men in the office said the commitment papers were in files and they could not refer to them. J. B. Wood, superintendent of the institution, was not in Richmond last night, and it could not be ascertained by whose direction the young white woman was transported to prison in the open wagon.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Life in Southern New England is a little hot and cold this time of year. During the day, temperatures hit the 70s and above, windows are open, sweaters are folded away, jackets stay safely on their hangers, and all is good – until the sun sets. Then, we batten the hatches, close the windows, turn on the heat, and huddle for warmth around our mugs of hot chocolate, as the overnight lows drop into the 30s. It’s sort of like following Connecticut’s attempts to make sense of the Collateral Source Rule. In Connecticut, the common law collateral source rule provides that a defendant cannot escape paying the plaintiff just because a portion of the damages were paid by an independent third party. But the Legislature got involved, enacting Connecticut General Statutes §52-225a, providing for a collateral source reduction except "that there shall be no reduction for . . . a collateral source for which a right of subrogation exists." Perfectly clear, right? Let the litigation ensue. Today, we’ll look at an issue of first impression. Do the statutory protections of the Collateral Source Rule apply in the UM/UIM context? Read on for the answer.

 

Lee

Lee S. Siegel

[email protected]

 

Headlines for this week’s issue:

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

• As Title Insurance Company Demonstrated that there was No Possibility of Indemnity Under the Policy, Because of Policy Exclusions it had No Obligation to Defend

 

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

Robert E.B. Hewitt III

• Defendant’s Own Expert Found 90 Degree Range of Motion Limitations

• Appellate Division Upheld Verdict Where Jury Apparently Believed Defense Expert that Plaintiff’s Neck Injuries Were Due to Pre-Existing Arthritis

• Defendant’s Expert’s Finding of a 30 Degree Range of Motion Limitation in the Spine Conflicted With His Determination There Was No Serious Injury

• Defendant’s Own Expert Found Significant Range of Motion Limitations

• Issue of Fact Due to Conflicting Expert Findings

• Plaintiff’s Physician’s Reports Did Not State What Objective Tests He Performed and Did Not Deal with Radiologist’s Finding of Degeneration

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

• Exclusion Defined by FEMA Flood Zones is Held Unambiguous thus Resulting in an Effective Denial

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

• In Asbestos cases, Illinois Court Holds that Policies’ Definition of an Occurrence Which Contained “Premises” Clause Meant that Each Exposure Location Was a Separate Occurrence

 

JEN’S GEMS

Jennifer A. Ehman

• Based Upon Burlington Decision, Trial Court Finds Obligation to Indemnify Premature

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

• Iowa Law does not Recognize a Common Law Cause of Action for Bad Faith Failure to Pay Workers’ Compensation Benefits against a Third-Party Claims Administrator of a Workers’ Compensation Insurer

• Bad Faith Action was Premature where Coverage under the Policy had not yet been Determined

 

JOHN’S JERSEY JOURNAL
John R. Ewell

• Third Circuit Bounces Flood Claim Where Insured Failed to Submit Sufficient Proof of Loss

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

 

LEE’S CONNECTICUT CHRONICLES

Lee S. Siegel

[email protected]

• Statutory Collateral Source Rule Applies in UM/UIM

 

Marti's Legislative and Regulatory Markers

Jerry Marti

• New York State Senate Bill Number: S643

 

OFF THE MARK
Brian F. Mark

[email protected]

• No decisions to report on this edition.

 

WANDERING WATERS

Larry E. Waters

• Court Upholds the Report and Recommendations as the Report Withstands all the Plaintiffs’ Objections under the Applicable Standards of Review

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

• Commercial Property and Casualty Insurance Policy – Split Court Rules Louisiana Law Does Not Prohibit Enforcement of a Forum Selection Clause in Policy Requiring Disputes Be Litigated in New York

 

BARCI’S BASICS (ON NO FAULT)

Marina A. Barci

• CPT Assistant Given Full Effect Under NY Workers’ Compensation Fee Schedule

• Failure to Appear Denial of Coverage Requires Clear Proof the Insured Received Notice

• Lower Court Overstepped by Sua Sponte Searching the Arbitration Record and Granting Provider Summary Judgment

 

EARL’S PEARLS

Earl K. Cantwell

·Commercial Limitation of Liability Clause Upheld

 

 

See you in a couple of weeks if not sooner!

 

 

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

 

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

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Lee S. Siegel

Brian D. Barnas

Brian F. Mark

John R. Ewell

Larry E. Waters

Jerry Marti

Eric T. Boron

Marina A. Barci

Diane F. Bosse

Joel R. Appelbaum

 

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

 

Michael F. Perley

Eric T. Boron

Brian D. Barnas

Larry E. Waters

 

NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader

Jerry Marti

Marina A. Barci

 

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

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

John’s Jersey Journal

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

 

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

 

05/08/19       Queens Organization, LLC v. First American Title Ins. Co.

Appellate Division, Second Department

As Title Insurance Company Demonstrated that there was No Possibility of Indemnity Under the Policy Because of Policy Exclusions, it had No Obligation to Defend

The plaintiff commenced this action to recover damages for breach of a title insurance policy issued in connection with real property located in Queens. The plaintiff sought to recover legal fees incurred by it in defending an action entitled Estate of Washington v. Queens Organization, LLC, an action which was ultimately dismissed on the merits.

If any of the claims against an insured in a complaint arguably arise from covered events, the insurer is required to defend the entire action. Nonetheless, "an insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision”.

Here, the plaintiff failed to establish its prima facie entitlement to judgment as a matter of law by demonstrating that First American breached the title insurance policy in refusing to defend the plaintiff in the underlying action. First American met its burden of demonstrating that the allegations of the underlying complaint cast the pleadings wholly within an exclusion of the policy.

The complaint in the underlying action alleged that the plaintiff and/or its principal recorded a deed that had been fraudulently altered, conveying a 50% interest in the property to the plaintiff. Exclusion 3(a) of the policy provides that coverage is excluded for "(d)efects, liens, encumbrances, adverse claims, or other matters . . . created, suffered, assumed, or agreed to by the Insured Claimant." First American demonstrated that the allegations of the underlying complaint fell entirely within an exclusion of the policy, that the exclusion was subject to no other reasonable interpretation, and that there was no possible factual or legal basis upon which First American may eventually be held obligated to indemnify the plaintiff under any policy provision.

 

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

Robert E.B. Hewitt III

 

05/15/19       Bertucci v. Murdolo

Appellate Division, Second Department

Defendant’s Own Expert Found 90 Degree Range of Motion Limitations

The defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. In support, they submitted, inter alia, the affirmed report of an orthopedic surgeon who examined the plaintiff. The surgeon measured the range of motion of the cervical region of the plaintiff's spine, and found substantial limitations of 50% or more, although the surgeon summarily opined that the plaintiff's limitations were self-imposed. The report further stated that the resolved injuries of the cervical region of the plaintiff's spine were causally related to the accident. The Appellate Division held that defendants failed to meet their prima facie burden of demonstrating that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident since their expert orthopedic surgeon found significant limitations in the range of motion of the cervical region of the plaintiff's spine and did not adequately explain and substantiate his opinion that the limitations were self-imposed.

 

05/15/19       Kleiber v. Fichtel

Appellate Division, Second Department

Appellate Division Upheld Verdict Where Jury Apparently Believed Defense Expert that Plaintiff’s Neck Injuries Were Due to Pre-Existing Arthritis

The Appellate Division reinstated the jury verdict after appeal. The plaintiff commenced this action against the defendants to recover damages for injuries he allegedly sustained in a motor vehicle accident on June 1, 2013. The case proceeded to a trial on the issues of whether the plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) and damages, the defendants having conceded fault for the accident. At that trial, the plaintiff presented the testimony of his treating orthopedic surgeon, who testified that he performed cervical discectomy and spinal fusion surgery on the plaintiff's spine 17 days after the accident. The plaintiff's expert testified that the surgery was originally recommended in the emergency room, on the day of the accident. He further noted that he performed surgery on the plaintiff's cervical spine without attempting physical therapy first, because he did not believe that physical therapy would help. The plaintiff's expert concluded that the accident was the cause of the plaintiff's injuries. However, the defendant's orthopedic expert, who examined the plaintiff approximately three years after the accident and found restrictions of up to 67% in the range of motion of the plaintiff's cervical spine, noted that the plaintiff had preexisting arthritis in his neck, and opined that the accident merely temporarily exacerbated a preexisting injury. Further, the plaintiff was extensively cross-examined as to inconsistencies between his trial testimony and his testimony at an earlier social security hearing and as to inconsistencies between his testimonies and his actions as depicted on a surveillance video, including his lifting, carrying, and changing of an automobile tire.

During his summation, defense counsel argued that the plaintiff has "been lying and exaggerating for a few years now." This remark was not objected to by the plaintiff's counsel. Defense counsel also referred to the plaintiff's case as a "tissue box of lies," and later as a "landfill of lies." Again, neither remark was objected to. The phrase "tissue box of lies" was a reference to the plaintiff's testimony, both at trial and at the social security hearing, to the effect that he had difficulty lifting objects, such as a tissue box. Defense counsel twice referred to the plaintiff's case as a "charade," which remarks were not objected to. He also urged the jury that the plaintiff's expert knowingly performed unnecessary surgery on the plaintiff because "that's where the money is." No objection was interposed.

At the conclusion of the defense summation, the plaintiff's counsel did not lodge any objections, did not request a curative instruction, and did not move for a mistrial. The jury found that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d), that the plaintiff sustained $50,000 in damages for lost earnings, and that the plaintiff's damages should be reduced by $25,000 because of his failure to wear an available seat belt. The plaintiff thereafter moved pursuant to CPLR 4401 for a directed verdict and, alternatively, pursuant to CPLR 4404(a) to set aside the jury verdict on the issue of damages in the interest of justice and for a new trial on the issue of damages on the ground that defense counsel's summation comments deprived him of a fair trial. The Supreme Court granted that branch of the plaintiff's motion which was pursuant to CPLR 4404(a) to set aside the jury verdict on the issue of damages in the interest of justice and for a new trial on damages, holding that defense counsel's comments "had the cumulative effect of confusing the issues of the case for the jury, and denied plaintiff substantial justice and a fair trial."

The Appellate Division held that this was error. Under CPLR 4404(a), a trial court has the discretion to order a new trial in the interest of justice.  In considering whether to exercise its discretionary power to order a new trial based on errors at trial, the court must decide whether substantial justice has been done, whether it is likely that the verdict has been affected and must look to its own common sense, experience and sense of fairness rather than to precedents in arriving at a decision.  The Appellate Division stated that the trial of this action took place over a period of two weeks; the defense summation consumed less than two hours. The plaintiff's motion for a new trial was predicated upon more than 30 instances of asserted improper comments made by defense counsel during summation, consisting of comments claimed to be predicated upon facts outside the record, comments said to be aimed at inflaming the passion of the jury, and comments asserted to be attacks on the plaintiff's character. While the defense summation was followed by both the plaintiff's summation and the court's charge, no transcript of those portions of the trial had been provided. The Supreme Court's order did not set forth what, if any, arguments or statements were made by the plaintiff's counsel that were responsive to the challenged assertions made by defense counsel in his closing. Nor does the order indicate what, if any, instructions the court gave to the jurors with respect to their consideration of any of the remarks in summation by defense counsel. The Supreme Court identified three instances where defense counsel continued an inappropriate argument after the court had sustained an objection by the plaintiff's counsel. In one instance, defense counsel was contending that the jury should find that the plaintiff sought the jury to perceive that he was hospitalized on September 8, 2016, rather than on September 8, 2006, so that the jury would infer that the plaintiff's lifting and changing of the tire on September 7, 2016, led to the plaintiff's hospitalization the next day. While the court did sustain a general objection interposed in the midst of this aspect of defense counsel's argument, and defense counsel did continue to address this point, the plaintiff does not assert that this contention by defense counsel was inappropriate, and the Appellate Division viewed it as fair comment. The second instance involved an argument by defense counsel that the plaintiff had not called a family member, friend, or employer to "back up" his testimony as to date he returned to work. After an objection by the plaintiff's counsel was sustained, defense counsel shifted his argument to note the failure to call witnesses to verify that the plaintiff was still complaining of his conditions or to testify that the plaintiff's complaints had stopped prior to the accident. On appeal, the plaintiff does not contest the appropriateness of this argument, and the Appellate Division viewed it as fair comment. In the third instance, defense counsel was commenting on the testimony of one of the plaintiff's witnesses, and the court sustained an objection. Defense counsel was then pressed to complete his summation by both the plaintiff's counsel and the court. When defense counsel then made a comment about the plaintiff's desire for sympathy, the court sustained an objection and instructed the jury to disregard the comment. Again, on appeal, the plaintiff did not point to this aspect of the defense closing as the basis for setting aside the jury verdict. The Appellate Division found the verdict finding a serious injury was supported by the evidence, and the jury had ample reason to reject the plaintiff's claims and accept the arguments of the defendants.

 

05/14/19       Lewis v. Revell

Appellate Division, First Department

Defendant’s Expert’s Finding of a 30 Degree Range of Motion Limitation in the Spine Conflicted With His Determination that There Was No Serious Injury

In support of his motion for summary judgment dismissing the complaint, defendant submitted, inter alia, the expert report of an orthopedist who found plaintiff had full range of motion in her left hip and apparently found a significant 30-degree limitation in range of motion in the lumbar spine. The

orthopedist opined that plaintiff's injuries, as found in MRI reports, were caused by the accident but fully resolved. The orthopedist's findings were enough to meet defendant's prima facie burden concerning the claims of left hip injury, but, since his findings of limitations in the lumbar spine conflicted with his findings of an absence of serious injury, the burden did not shift on the lumbar spine claims. Defendant also submitted the report of a radiologist who opined that plaintiff's hip conditions were not causally related to the accident, which conflicted with the orthopedist's opinion as to causation, and therefore did not shift the burden of proof to plaintiff on that issue.

Plaintiff raised triable issues of fact through the report of her expert orthopedist, who, among other things, documented limitations in range of motion of her left hip and lumbar spine and explained his conclusion that the left hip injury was causally related to the accident. Defendant's argument that plaintiff failed to explain a gap in her treatment is unavailing, since it ignores her deposition testimony that she in fact was continuing treatment with various medical providers. Moreover, since defendant improperly raised the argument for the first time in reply, plaintiff did not have any opportunity to respond by submitting supporting proof of such treatment. However, plaintiff's "90/180-day" claim should have been dismissed, since defendant submitted her deposition testimony that she only missed three days of work and returned to work after working from home for another five days. Plaintiff submitted no evidence to raise an issue of fact on this claim.

As to liability, plaintiff established her prima facie entitlement to partial summary judgment by showing that she was crossing the street within the crosswalk, with the light in her favor, when defendant's vehicle struck her while making a left turn, Plaintiff was not required to demonstrate her freedom from comparative fault to be entitled to partial summary judgment as to defendant's liability.

 

05/08/19       Burt v. MTA Bus Co.

Appellate Division, Second Department

Defendant’s Own Expert Found Significant Range of Motion Limitations

The defendant's medical evidence demonstrated the existence of a triable issue of fact as to whether the plaintiff sustained a serious injury to the cervical and lumbar regions of her spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d), as one of its experts found significant limitations in the range of motion of the cervical and lumbar regions of the plaintiff's spine.

 

05/08/19       Kelly v. Andrew

Appellate Division, Second Department

Issue of Fact Due to Conflicting Expert Findings

The plaintiff commenced this action to recover damages for personal injuries that she allegedly sustained in a motor vehicle accident on June 15, 2012. Thereafter, the defendants moved, for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants relied on, inter alia, the affirmed report of an orthopedic surgeon who examined the plaintiff on June 17, 2015. The orthopedic surgeon measured the range of motion of the lumbar region of the plaintiff's spine and, in comparing those results to what would be considered normal range of motion, he found no limitation in the plaintiff's range of motion. In opposition, the plaintiff submitted, inter alia, the affirmed report of a neurologist who examined the plaintiff on July 7, 2016. The neurologist measured the range of motion of the lumbar region of the plaintiff's spine and, in comparing those results to what would be considered normal range of motion, found a 22% deficit in the flexion of the lumbar region of the plaintiff's spine, but otherwise found the results to be normal. The Appellate Division found an issue of fact based on the competing expert’s finding.

 

05/01/19       Zavala v. Zizzo

Appellate Division, Second Department

Plaintiff’s Physician’s Reports Did Not State What Objective Tests He Performed and Did Not Deal with Radiologist’s Finding of Degeneration

The plaintiff commenced this action to recover damages for personal injuries he allegedly sustained in a motor vehicle accident. The defendant moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendant met her prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine and the plaintiff's right shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) and that, in any event, the alleged injuries were not caused by the accident.

In opposition, the plaintiff failed to raise a triable issue of fact. The plaintiff submitted an affirmation from his treating physician, who concluded that the cervical and lumbar regions of the plaintiff's spine and the plaintiff's right shoulder sustained range-of-motion limitations as a result of the accident. However, the affirmation fails to identify the objective tests that were utilized to measure range of motion, and thus, does not support the limitation conclusion. In addition, the affirmations of the plaintiff's treating physicians failed to address the findings of the defendant's radiologist that the alleged injuries to these body parts were degenerative in nature. Thus, the conclusions by the plaintiff's treating physicians as to causation were speculative and insufficient to raise a triable issue of fact.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

05/08/19       Hudson Shore Assoc., LP v. Praetorian Ins. Co.

Appellate Division, Second Department

Exclusion Defined by FEMA Flood Zones is Held Unambiguous thus Resulting in an Effective Denial

Plaintiff’s claim arose from flood related damage which occurred during Hurricane Sandy.  Apparently, the policy at issue provided limited flood coverage.  The coverage, however, then excluded any losses which occurred within areas designated as SFH zones by FEMA.  Because the claim originated within a SFH zone, Praetorian predictably declined to acknowledge the risk.

The policy in question listed only Hudson Shore Associates, LP as a named insured.  Although the property boasted of 162 separate apartments, the policy did not list each individual unit.  As such, the Court ruled that the exclusion unambiguously applied to bar coverage.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

04/23/19       Continental Casualty v. Hennessy Industries, Inc., et al.

Appellate Court of Illinois, First Judicial District

In Asbestos cases, Illinois Court Holds that Policies’ Definition of an Occurrence Which Contained “Premises” Clause Meant that Each Exposure Location Was a Separate Occurrence

Between the 1950s and 1980s, Ammco Tools manufactured automobile brake equipment including brake shoe grinders, brake lathes, and brake assembly washers. While this equipment did not contain asbestos, when the parts were used with brake shoes that did contain asbestos, the Ammco equipment was alleged to have caused a release of asbestos, and resultant injury to workers. Over time, many claims were filed relative to this exposure, alleging to have occurred at various locations around the country. As often happens, litigation ensued. That litigation spawned coverage litigation, and the issue arose of the number of occurrences (and hence policy limits, periods, etc.) that might be in play.

At issue were two definitions of an “occurrence”, contained in two potentially applicable policies over the course of many years of alleged injury. One defined an occurrence as: “An event or continuous or repeated exposure to conditions, which unexpectedly causes Personal Injury and/or Property Damage and/or Advertising Liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from each premises location shall be deemed one occurrence.” The other definition read similarly: “An accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.”

In interpreting these definitions, the court found that they differed from more narrowly tailored or standard form definitions. The fact that the policies expressly included language referring to the premises as being one occurrence meant that in cases where multiple properties were in play, each one was a separate occurrence. However, since all of the claims that arose from the substantially same general conditions they could not be lumped together if they occurred at different locations.

 

JEN’S GEMS

Jennifer A. Ehman

 

04/15/19       New York Mar. Gen. Ins. Co. v. Arch Specialty Ins. Co.

Supreme Court, New York

Hon. Gerald Lebovits

Based Upon Burlington Decision, Trial Court Finds Obligation to Indemnify Premature

This decision involves a claim for additional insured status under the “caused by, in whole or in part,” acts or omissions language.  The underlying injured plaintiff, Jose Ramiriez, sustained injury while working in the course of his employment for Do Right Construction Corp. (“Do Right”) at a construction site.  The injured plaintiff then filed suit against the owner and general contractor for the project.  They then tendered to Do Right’s insurer, Arch Specialty (“Arch”).

Arch denied the tender on the basis that the underlying complaint did not allege that Ramirez was an employee of Do Right.  Thereafter, Ramirez served a supplemental bill of particulars in the underlying that alleged he was employed as a laborer for Do Right at the time of the accident.  Upon receipt of that filing, the owner and general contractor retendered their defense.  Arch again denied the tender.

Plaintiffs (the owner, general contractor and their insurer) then commenced this declaratory judgment action.  A day before the answer was due Arch sent a letter indicating that it would provide plaintiffs a defense, but reserved the right to disclaim coverage and deny liability with respect to any indemnity.  Arch also requested that the declaratory judgment action be withdrawn without prejudice.  Over the next few months a series of correspondence were exchanged whereby plaintiffs ultimately took the position that they would not discontinue the declaratory judgment action unless the reservation was withdrawn.  Plaintiffs pointed to deposition testimony indicating that the accident occurred while Ramiriez was following a Do Right supervisor’s instructions to carry plywood from the roof to the first floor.  Ultimately, plaintiffs moved forward with this motion for default and summary judgment.

The court considered the motion for default first.  Based upon a review of the communications, the court concluded that Arch never secured a promise of discontinuance of the declaratory judgment action from plaintiffs noting that their unfounded belief to the contrary did not excuse the failure to appear. The court also highlighted that this motion was not made for seven months and that Arch offered no reasonable excuse for its failure to act in a timely manner.

Nonetheless, the court concluded that plaintiffs’ motion for default must be denied because they failed to provide proof of facts constituting a claim for declaratory judgment.  Specifically, plaintiffs sought a declaration that Arch had a duty to indemnity them based, again upon, testimony that the injured plaintiff was working under Do Right’s direction and supervision when he tripped and fell.  Plaintiffs relied upon a 2015 decision called Kel-Mar Designs, Inc. v Harleysville Ins. Co. of N.Y., 127 AD3d 662 (1^st Dept. 2015).  In considering this argument, the court was clear that Kel-Mar is no longer good law on this point.  Citing to the Burlington Insurance Co. v. New York City Transit Authority decision, the court explained that “additional-insured coverage of the type at issue here is not triggered merely because acts of the named insured were a but-for cause of the loss.”  “[T]he policy extends coverage only when the loss is proximately caused by the named insured-that is by the negligence of the named insured.”   The court further held that plaintiffs’ claim for declaratory judgment turns on whether Do Right is liable in the underlying action, and as that has not yet been determined, it was premature to resolve indemnity.

 

NOTE:  While I agree with the outcome, the reasoning is contrary to the actual language of Burlington.  In that decision, the Court of Appeals was clear that it was not creating a pure negligence standard.  Instead, in order to trigger this coverage, the additional insured has to establish that the named insured’s acts or omissions were a proximate cause of the loss defined as a negligent or otherwise actionable.  It is the possibility that Do Right’s conduct was  “otherwise actionable” which the trial judge does not address. 

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

05/10/19       De Dios v. Indemnity Insurance Company of North America

Supreme Court of Iowa

Iowa Law does not Recognize a Common Law Cause of Action for Bad Faith Failure to Pay Workers’ Compensation Benefits against a Third-Party Claims Administrator of a Workers’ Compensation Insurer

Plaintiff was employed by Brand Energy.  Brand Energy had a workers’ compensation insurance policy with Indemnity Insurance.  Indemnity delegated investigating, handling, managing, administering, and paying benefits under Iowa workers’ compensation policies to Broadspire.  On April 8, 2016, De Dios suffered a workplace accident and was injured.

De Dios alleged that Broadspire and/or Indemnity improperly denied him workers’ compensation benefits.  Plaintiff claimed that neither Indemnity nor Broadspire interviewed him, contacted any witnesses, or talked to his treating doctors about his accident and injuries.

De Dios filed a claim for benefits with the Iowa Workers’ Compensation Commissioner.  Later, he filed a bad faith action in federal district court against Indemnity and Broadspire.  The district court asked the Iowa Supreme Court to answer the following certified question of Iowa law: “In what circumstances, if any, can an injured employee hold a third-party claims administrator liable for the tort of bad faith for failure to pay workers’ compensation benefits?”

Iowa law recognizes first party bad faith against insurer’s, including workers’ compensation carriers.  This includes insurance carriers and self-insured employers.  In its prior case law, the Iowa Supreme Court emphasized the insurer/insured relationship in recognizing a bad faith cause of action against workers’ compensation carriers and self-insured employers but not uninsured employers.  Iowa statutory obligations on workers’ compensation insurers was also critical to the court’s decision to recognize the tort of bad faith.

In contrast, the court stated it was difficult to see how the existing rationale for bad faith liability in the workers’ compensation field applied to a third-party administrator like Broadspire.  A third-party administrator is contracted to the insurer and does not have an insurer/insured relationship with anyone.  In addition, the Iowa workers’ compensation statutes do not impose any affirmative obligations on third party administrators as they do on insurers.

De Dios argued that the bad faith cause of action should be recognized because third party administrators act sufficiently like insurers.  Thus, they should be able to be sued for bad faith is if they were insurers.  The only state the court found that allowed a bad faith claim against a workers’ compensation third-party administrator was Colorado.  The court rejected this argument, as Iowa statute delineates the entities that act as insurer’s under Iowa’s workers’ compensation system.

Accordingly, the majority of the court answered the question as follows: under Iowa law, a common law cause of action for bad-faith failure to pay workers’ compensation benefits is not available against a third-party claims administrator of a worker’s compensation insurance carrier.

 

05/10/19       McCullough v. Royal Caribbean Cruises, Ltd.

United States District Court, Southern District of Florida

Bad Faith Action was Premature where Coverage under the Policy had not yet been Determined

Plaintiffs were traveling on a Royal Caribbean cruise ship that stopped at St. Lucia.  During the stop, Plaintiffs participated in an “Adrena-Line” zip line course.  During a rappelling portion of the course, Mrs. McCulloguh was not properly secured to the harness and, as a result, she fell nearly fifty feet from the platform to the ground below.  She sustained severe injuries and was rendered a quadriplegic.

The McCulloughs sued numerous parties including Royal Caribbean, various insurance companies, and the excursion operators: Rain Forest Adventures (Holdings), Ltd.; Rain Forest Sky Rides, Ltd.; Rain Forest Tram, Ltd.; and Harald Joachim von der Goltz (collectively “the Rain Forest Defendants”).  Following the denial of their summary judgment motions, the Rain Forest Defendants went to mediation with the McCulloughs and then to binding arbitration. The arbitrator entered an award in favor of the McCulloughs.  The Court subsequently entered Final Judgment in their favor and against the Rain Forest Defendants jointly and severally.

At the time of the incident, Goltz was covered by an insurance policy issued by AIG with a liability coverage limit of $5,150,000.00.  AIG consistently disputed coverage based upon exclusions for bodily injury.  AIG did offer to fund a settlement for $350,000.00, but at no point did Plaintiffs seek to confirm that AIG had coverage for the incident.

Plaintiffs alleged that AIG acted in bad faith by failing to settle the McCulloughs’ claims against the Rain Forest Defendants within the policy’s limits.  AIG filed a motion to dismiss arguing that the McCulloughs’ third party bad faith insurance claim should be dismissed and sent to arbitration in accordance with the Disputes Clause of the policy because coverage under the policy has not been determined. The McCulloughs countered that they are not subject to the policy’s arbitration clause because (1) their action is for common law bad faith, a Florida cause of action separate and apart from the underlying insurance action, and (2) they were not signatories to the Policy.

The court concluded that the bad faith claim was premature.  Florida courts limit third party bad faith actions against an insurer to cases where coverage has been determined.  A coverage determination is necessary because a bad faith failure to settle claim is founded upon the obligation of the insurer to pay when all conditions under the policy would require an insurer exercising good faith and fair dealing towards its insured to pay.  Thus, an injured third party must first obtain a resolution on a coverage issue in favor of the insured before pursuing a bad faith claim. 

Here, AIG contested coverage and there has been no underlying determination of coverage under the policy.  There was only a final judgment against the Rain Forest Defendants on liability.  Since a threshold coverage issue existed, the McCulloughs’ bad faith claim was premature.  The court decided to stay the case until coverage under the policy was established.

As for the arbitration provision, the court concluded that the McCulloughs could not be compelled to arbitrate because they were non-signatories to the arbitration provision in the policy.

 

JOHN’S JERSEY JOURNAL
John R. Ewell

 

05/13/19       Uddoh v. Selective Ins. Co. of America

United States Court of Appeals, Third Circuit

Third Circuit Bounces Flood Claim Where Insured Failed to Submit Sufficient Proof of Loss

Uddoh owns property in Jersey City, New Jersey that was insured by a Standard Flood Insurance Policy (SFIP) issued by Selective, a “Write Your Own” company participating in the National Flood Insurance Program. SFIP policies are governed by FEMA and require timely submission of a sworn proof of loss.

According to Uddoh, flooding caused by Superstorm Sandy damaged his property. He submitted to Selective a proof of loss form that contained conflicting information. At “Actual Cash Value Loss,” $1957.99 is listed. That same amount is listed as a deductible. At “Net Amount Claimed,” $0.00 is provided. Uddoh also included handwritten notations on the form, stating that it was “signed under protest” and “demand[ing]” payment based on an insurance adjuster’s submission of both a report seeking $21,000 and an “advance payment request[]” for $30,000.” Attached to the proof of loss form was a contractor’s repair estimate of $26,000, which included items in Uddoh’s basement and third-floor ceiling.

Selective denied Uddoh’s claim, noting that the “minimal damage to the building” totaled $334.06, which was less than the policy’s $5,000 deductible. In addition, Selective explained that damages to the lower level of the home were excluded under policy’s basement limitation. Uddoh sued Selective in federal court alleging that Selective breached the insurance contract and engaged in a fraudulent scheme to deny him benefits. Selective moved for summary judgment. The District Court ruled that Uddoh failed to submit an adequate proof of loss as required by the SFIP and granted Selective’s motion. Uddoh appealed.

The SFIP provides that within 60 days after the loss (or within any extension authorized by FEMA), the claimant must file a sworn proof of loss that includes “an inventory of damaged property showing the quantity, description, actual cash value, and amount of loss.” The “net amount claimed” on the proof of loss was $0.00, but Uddoh indicated that he signed the form “under protest,” and suggested that he demanded either $21,000 or $30,000. An attached contractor’s estimate stated that the total cost of repairs was $26,000, but seemingly included items in Uddoh’s basement and third floor that are not covered by the flood insurance policy. The Third Circuit found that Uddoh’s proof of loss did not comply with the SFIP requirements because he failed to clearly indicate the amount that he was seeking to recover.

Uddoh did not dispute that his proof of loss was inadequate. Instead, he argued that the proof of loss requirement was waived by a FEMA bulletin issued after Superstorm Sandy. The bulletin stated that FEMA would “permit the insurer to adjust and pay a loss based on the evaluation of damage in the adjuster’s report instead of the signed Proof of Loss or insured-signed adjuster’s report.” The bulletin, however, specifically stated that it “[did] not constitute a blanket waiver of the Proof of Loss requirements of the SFIP.” The bulletin explained that “[i]f the insured disagrees with the amount of the payment [based on the adjuster’s report], the insured must send to the insurer a signed and sworn proof of loss meeting the requirements” of the SFIP Forms. The Court found that, contrary to Uddoh’s contention, the bulletin did not eliminate the proof of loss requirement. It simply allowed an insurance company’s initial payment to be based on the adjuster’s report, rather than a proof of loss. Since the proof of loss was inadequate, the Third Circuit affirmed the grant of summary judgment to the insurer.

Disclaimer: This is not a precedential option and is not binding precedent.

 

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 CONNECTICUT CHRONICLES

Lee S. Siegel

[email protected]

 

04/05/19       Logan v. Liberty Mutual Fire Ins. Co.

Superior Court, Hartford County
Statutory Collateral Source Rule Applies in UM/UIM

Logan was injured in a 2014 automobile accident with an underinsured driver. Unable to reach agreement with his carrier, Logan sued Liberty Mutual to collect UIM benefits. A jury awarded Logan $202,000 and Liberty Mutual, post-trial, sought to reduce the award by the value of collateral source reimbursement for medical services Logan received. The parties disputed whether a right of subrogation existed, but Liberty went a step further arguing that the statutory collateral source rule was limited to negligence actions and did not apply in the UM/UIM context. Without elaborating on how it reached its decision, the court ruled there is a right of subrogation regarding some portion of the plaintiff's paid medical expense, unfortunately, giving us little guidance on this significant factual issue.

On the legal front, the court concluded that General Statutes §52-225a applies to claims asserted under uninsured and underinsured motor vehicle insurance policies. That provision states, "that there shall be no reduction for . . . a collateral source for which a right of subrogation exists.” Since the court found a right of subrogation, it denied Liberty Mutual’s set-off request. Liberty Mutual had argued that General Statutes §38a-335(c) should apply. That provision states, “In no event shall any person be entitled to receive duplicate payments for the same element of loss.” However, the court reasoned that Liberty had cherry-picked that language and divorced it from its context regarding statutory automobile minimal limits in different jurisdiction. “[T]he language in §38a-335(c) appears restricted to situations where there are two different automobile insurance policies from different jurisdictions that are applicable to the same loss, not a situation like the one here where an insurance carrier seeks a post-verdict reduction of a jury verdict based on collateral source payments made on the plaintiff's behalf where there exists a right of subrogation.” Liberty Mutual was, therefore, required to pay the full judgment, including economic loss for medical bills, notwithstanding that Logan received the benefit of those medical services without paying for them.

 

Marti's Legislative and Regulatory Markers

Jerry Marti

 

05/16/19       Senate Bill S643

New York State Senate   

Bill Number: S643

State Senator Neil D. Breslin from the 44^th Senate District has sponsored a bill that permits an insurer to rescind or retroactively cancel an automobile policy in circumstances involving an accident staged to defraud an insurer. A similar bill has been sponsored in the State Assembly by New York State Assemblyman Marcos A. Crespo (A6210).

The proposal would allow retroactive cancellation of the automobile policy, in the first thirty days, where the payment is made with insufficient funds or the identity used to procure the policy turns out to be fraudulent.  In these cases, the automobile insurer would be allowed to cancel a policy.  Innocent victims of uninsured drivers, i.e., mandatory uninsured motorist coverage, would be covered under their own policy or the Motor Vehicle Accident Indemnification Corporation.

The purpose behind the bill is to combat staged automobile accidents.  Automobile no-fault states, such as New York State, have higher average premiums than tort states in part because fraud tends to be more prevalent within no-fault systems. It was considered that the rules under which no-fault is implemented make it relatively easy to submit fraudulent claims. Specifically, New York’s generous no-fault benefits, with minimal oversight, provide huge incentives for unbundling of services and supplies. 

On May 13, 2019, an insurance committee voted unanimously to proceed with the State Senate bill.  On May 15, 2019, the bill was advanced to a third reading, which at this point becomes ready for a final vote and/or subject to further debate, discussions or explanation.

The proposal also brings into line the retroactive cancellation of policies under similar conditions found in other large no-fault states.  The law will take effect 270 days after it becomes law. 

 

OFF THE MARK
Brian F. Mark

[email protected]

 

No decisions to report on this edition.

 

WANDERING WATERS

Larry E. Waters

                                                                                                                   

05/13/19       Robert Toussie, et al. v. Allstate Insurance Co.

District Court, Southern District of New York

Court Upholds the Report and Recommendations as the Report Withstands all the Plaintiffs’ Objections under the Applicable Standards of Review

Following Hurricane Sandy, Plaintiffs submitted several claims to Defendant pursuant to their homeowners policy. Plaintiffs’ claim included reimbursement for lost property, property damage, and lost personal property scheduled in the homeowners policy.  Plaintiffs provided to Defendants that everything at their home was damaged from hurricane Sandy or stolen by looters expect a piano and some chandeliers.  Shortly before the mediation of Plaintiffs’ personal-property claims, Plaintiffs informed Defendants they also suffered additional losses of unscheduled personal property in the amount of $3,983,221 as a result of theft following hurricane Sandy. Defendant reimbursed Plaintiffs for their scheduled-personal property losses but sought to investigate Plaintiffs unscheduled-personal property. 

After refusing to sit for an Examination under Oath, Plaintiffs commenced a lawsuit against Defendant.  During the discovery process, Defendant learned that contrary to Plaintiffs’ representations of lost or stolen property, Plaintiffs had items boxed and moved from Plaintiffs home at their direction to a secure storage facility shortly after the hurricane. 

On September 26, 2016, the Judge Pollak ordered Plaintiffs to disclose the names of the individuals involved in the packing of the boxes. After Plaintiffs failed to comply with the order, Defendants motion to compel the requested information. Similarly, Plaintiffs failed to comply with other discovery demands. 

Prior to their last discovery motion, Defendant moved to amend its answer on April 17, 2018 to add counterclaims alleging that the Plaintiffs had engaged in “many material misrepresentations, including the misrepresenting their entitlement to reimbursement for items of personal property that were later found in their storage unit.”  In response, on June 15, 2018 the Plaintiffs moved to amend their complaint to assert claims against Defendant for conversion and tortious interference with prospective business relations. 

After several other motions filed by defendant, Judge Pollak enter her report and recommendation on February 6, 2019, recommending that: (1) grant Defendant’s motion to amend its answer; (2) deny the Plaintiff’s motion to amend their complaint; (3) grant Defendant’s motion regarding the $50 million loss reported to the IRS; and (4) grant Defendant’s motion for sanctions.  The current decision stems from Plaintiffs’ objections to the report and recommendation regarding Defendant’s motion to amend the answer. 

The court began its analysis by noting that there are two standards of review based upon whether the order to be reviewed is dispositive.  When reviewing a dispositive order, the standard of review is de novo of those portions of the report or specified proposed findings or recommendations to which an objection is made.  In contrast, when revising an order regarding non-dispositive issues, the standard is clearly erroneous or contrary to law standard. 

In applying the relevant rule of law, the court determined that Plaintiff’s objections to the report ruling on Defendant’s motion to compel discovery and Defendant’s motion for sanctions are non-dispositive and therefore review is under the clearly erroneous or contrary to law standard.  The Court also ruled that the motions for leave to amend were dispositive and therefore under the de novo standard of review. 

Next the Court considered Judge Pollak’s report and recommendation regarding the granting of Defendant’s motion to amend its answer. The court rejected Plaintiffs’ argument that Defendant’s counterclaim regarding misrepresentations were after the commencement of the lawsuit. The Court noted that Defendant’s counterclaim specifically provides that there were misrepresentations and concealments that predated the filing of the lawsuit. 

In addition, the Court rejected Plaintiffs’ argument that “even those alleged misrepresentations that predate the lawsuit [were] irrelevant because Defendant repudiated the insurance contract as early as April 26, 2013.  In rejecting this argument, the Court noted that there was no basis to credit Plaintiffs’ assertion that the Defendant repudiated the policy in April 2013 because the alleged fax provided by Plaintiff provided that Plaintiffs’ claim may be reopened at a later date once the requested information had been provided to the adjuster. 

The Court rejected also Plaintiffs’ argument that “even if they made material misrepresentations with respect to the loss of personal property, that would not vitiate their entire policy and would not require disgorgement of payments that Defendant has already made, particularly not payments for damage to the Plaintiffs’ real property.”  In support of its rejection, the Court noted that unlike the cases Plaintiff relied on the Policy at issue explicitly provides that Defendant “has the right to cancel…[the] policy…if [the policyholders] intentionally conceal any material fact or circumstance before or after a loss.” As such, the Court concluded Plaintiffs’ arguments were meritless as the Policy clearly worded to include claims for loss made under the policy after it becomes effective as well as misrepresentations made in connection with the policy itself or its initial issuance. 

Moreover, the court rejected Plaintiffs’ argument regarding that “even if one of the insureds made material misrepresentations, the policy should not be vitiated as to the other insured.  In support, the Court recognized that on Defendant’s proposed motion, it had to assume the truth of Defendant’s counterclaims.  As such, the Court noted that the Defendant’s counterclaims allege that misrepresentations were made by and on behalf of both the insureds and therefore there was no innocent insured in the matter. 

In sum, the court adopted Judge Pollak’s recommendations in full. 

This is a recent decision, please contact me for a copy of the decision. 

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

05/08/19       Creekstone Juban I, L.L.C. v. XL Insurance America, Inc.

Supreme Court of Louisiana

Commercial Property and Casualty Insurance Policy – Split Court Rules Louisiana Law Does Not Prohibit Enforcement of a Forum Selection Clause in Policy Requiring Disputes Be Litigated in New York

This case concerns a disagreement over a claim for flood damage submitted by Plaintiff-Respondent Creekstone/Juban I, LLC (“Creekstone”), under a commercial property and casualty insurance policy (“Policy”) issued by Defendant-Appellant XL Insurance America, Inc. (“XL Insurance”). 

Creekstone is the owner of the insured property commonly known as Juban Crossing, high-end, multi-use facilities for retail sales, restaurants, and a theater. In August 2016, because of a massive flood, Juban Crossing sustained extensive flood damage to the buildings and their contents, including loss of revenue. Before the lawsuit was filed, XL Insurance forwarded to Creekstone $5,000,000.   XL Insurance did not immediately pay Creekstone certain additional requested sums, and Creekstone filed suit for such additional requested sums in the Twenty-First Judicial District Court, Parish of Livingston, in the State of Louisiana.

The Policy includes a forum selection clause, whereby the parties agreed that “any disagreement” related to the Policy “shall” be brought exclusively in the State of New York. The clause states, in pertinent part:

19. SERVICE OF SUIT AND CHOICE OF LAW

In the event that any disagreement arises between the “insured” and the “Company” requiring judicial resolution the “insured” and the “Company” each agree that any suit shall be brought and heard in a court of competent jurisdiction within the State of New York. The “Insured” and the “Company” further agree to comply voluntarily with all the requirements necessary to give such court jurisdiction....

The “Insured” and the Company” further agree that New York law shall control the interpretation, application and meaning of this contract, whether in suit or otherwise.

Upon being sued in Louisiana, XL Insurance filed a Declinatory Exception of Improper Venue, Peremptory Exception of No Cause of Action, and Motion to Dismiss. XL Insurance argued that in the forum selection clause, the parties agreed to litigate all issues involving the contract exclusively in the State of New York. Creekstone opposed the motion, contending that the forum selection clause was invalid under La. R.S. 22:868, which provides that no insurance contract “delivered or issued for delivery” in Louisiana and covering subjects in Louisiana shall contain any provision “[d]epriving the courts of this state of the jurisdiction of action against the insurer.” Creekstone argued that pursuant to La. R.S. 22:868, any contractual provision to the contrary would be void. After a hearing, at which the trial court made a factual finding that the Policy was delivered or issued for delivery in Louisiana, the trial court overruled XL's exceptions and motion, finding that upholding the Policy’s forum selection clause would violate Louisiana's public policy.  After XL’s appeal to the intermediate Louisiana court was unsuccessful, XL’s application to have the Louisiana Supreme Court hear this matter was granted.

The majority of the Louisiana Supreme Court found a forum-selection clause is a provision in a contract that mandates a particular state, county, parish, or court will be the proper “venue” in which the parties to an action must litigate any future disputes arises from their contractual negotiations and relationship. The majority determined the Louisiana statute at issue says nothing about venue, and finds that venue and jurisdiction are “separate and distinct.”   The majority declined to stretch the statutory definition of jurisdiction, clearly defined in Louisiana’s Civil Code, to include “venue” or “forum.”  Accordingly, Supreme Court reversed the judgment of the trial court insofar as it denied the exception of improper venue.   XL’s exception of improper venue was granted. The case was remanded to the trial court for further proceedings.  The majority opinion was buttressed by two written concurrences. 

A single written dissent criticizes the majority for failing to take the language of the forum selection clause of the Policy at issue at face value, pointing out that the Policy’s forum selection clause itself uses the word “jurisdiction” more than once, but the majority (erroneously) “determined that what the parties really meant was venue (even though the word venue does not appear in the forum selection clause), and, because jurisdiction and venue are different concepts, and the statute does not refer to venue, it does not apply to this contract.  Really.” (italics in original). 

The entire case is available for your perusal and edification elsewhere it this edition of Coverage Pointers by just clicking on it.  Have a great next two weeks.         

 

BARCI’S BASICS (ON NO FAULT)

Marina A. Barci

 

05/09/19       Matter of Global Liberty Ins. Co. v. McMahon

Appellate Division, First Department

CPT Assistant Given Full Effect Under NY Workers’ Compensation Fee Schedule

Global partially paid for the defendant’s claim of reimbursement under the no-fault policy for the assignor’s arthroscopic surgery. Global paid $2,980.44 of the $5,813.81 claim, citing the American Medical Association’s CPT Assistant newsletter as its justification for the proper fee amount. The defendant then commenced an arbitration to seek the difference. The lower arbitrator refused to consider the CPT Assistant that Global relied on and the master arbitrator affirmed. Thereafter, Global appealed to the lower court to vacate the award, which was denied. Finally, Global appealed to the First Department who, rightfully, reversed, citing that “the Official New York Workers' Compensation Fee Schedule directs users to refer to the CPT book for an explanation of coding rules and regulations not listed in this schedule. The CPT book, in turn, expressly makes reference to CPT Assistant. By both statute and regulation, the fee schedules established by the chair of the Workers' Compensation Board are expressly made applicable to claims under the No-Fault Law (see Insurance Law § 5108; 11 NYCRR 68.0, 68.1[a][1]).” Thus, Global was entitled to rely on the CPT Assistant and the parties were ordered to commence a new arbitration where the CPT Assistant is to be given due consideration.

 

05/09/19       Global Liberty Ins. Co. v. Tyrell

Appellate Division, First Department

Failure to Appear Denial of Coverage Requires Clear Proof the Insured Received Notice

Global sought a declaration that the defendant failed to appear for the duly noticed IME’s. In support of this declaration, Global submitted an attorney affirmation with affidavits of its claims adjuster, an employee of the company who handles their no-fault notice mailings, and the IME doctor. However, Global failed to include sufficient evidence that it provided the defendant-insured with the proper notice of the location of the scheduled IME’s, since the letters it attached showed an address for a doctor’s office that differed from the office address provided by the IME doctor in her affidavit. Global then attempted to submit “clearer” copies of the letters in reply. The Court found that these “clearer copies” were insufficient to establish prima facie that the defendant-insured ever received a clear copy.

 

05/15/19       Allstate Insurance Company v. Buffalo Neurosurgery Group

Appellate Division, Second Department

Lower Court Overstepped by Sua Sponte Searching the Arbitration Record and Granting Provider Summary Judgment

Arbitration was commenced by the defendant after Allstate denied its claim for no-fault benefits after preforming surgery and related care on the assignor. The arbitrator determined that the defendant was entitled to payment in the amount of $11,352.46, plus interest and attorney’s fees (which is a pretty hefty award for a no-fault case). Allstate appealed to a master arbitrator, who affirmed, so then they commenced an action for de novo review. Thereafter, Allstate moved for summary judgment on the complaint.

The lower court denied Allstate’s motion and, instead of just denying the motion, searched the record and awarded summary judgment to the defendant, concluding that the master arbitrator properly affirmed the award. The Second Department agreed with the lower court that part of Allstate’s motion should have been denied since the motion sought a determination that the assignor’s surgery was not medically necessary. The Second Department found that the peer review reports submitted in support of the medical necessity argument failed to demonstrate that the surgery was not medically necessary. However, they disagreed with the lower court decision related to the fee schedule. They held that Allstate established that the amount of benefits sought by the defendant was not in accordance with the workers’ compensation fee schedule and that the defendant failed to raise a triable issue of fact to rebut that. Thus, there was not sufficient evidence to establish that the $11,352.46 award from the arbitrator’s was correct and the lower court should not have searched the record and awarded summary judgment to the defendant.

 

EARL’S PEARLS

Earl K. Cantwell
 

09/27/18        OC Tint Shop, Inc. v. CPFilms, Inc.

District Court of Delaware

Commercial Limitation of Liability Clause Upheld
 

A limitation of liability provision in a contract between a buyer of film used to tint windows and the seller of such film was held not to be “unconscionable” under Delaware law. For the provision to be considered “unconscionable”, it would have to be both procedurally and substantively unconscionable, and Article 2 of the UCC generally provides that a limitation of damages where a loss is commercial is not “prima facie”  or inherently unconscionable.

The buyer argued that the seller changed the ingredients used to manufacture the film causing it to decline in quality, and also alleged that the seller changed the contract to include the provision without engaging in negotiation with the buyer. However, when both parties are commercial actors, the “bar” for finding unconscionability is high. The seller provided the new contract to the buyer, and stated that it would govern all purchases going forward. There was no substantive unconscionability because the provision did not preclude all rights and remedies, but did limit remedies under the contract to refund or replacement.

This case represents a situation where commercial sellers are increasingly using limitation of liability clauses to limit or restrict liability, and as between commercial vendors and purchasers courts are willing to enforce such provisions. This is particularly true in commercial and industrial settings where there is no private individual involved or consumer product connection.

Whether such a clause is “unconscionable” is looked at from both a procedural standpoint and a substantive standpoint. Procedurally, the questions are whether the limitation is clear, became part of the parties’ agreement, and was clearly stated and agreed to. Substantively, such a limitation generally cannot bar all rights and remedies, but limitation of remedies, such as in this case, is generally allowed.  

Such limitation of liability clauses are also increasingly seen in professional services contracts involving architects, engineers, design professionals, and similar professional and expert service providers.

 

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