Coverage Pointers - Volume XX, No. 25

Volume XX, No. 25 (No. 538)
Friday, May 31, 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.

We send regards from the Adirondack State Park, where I am attending the New York Insurance Association (“NYIA”) Annual Meeting at the Sagamore.  I had the pleasure of speaking with a great panel of lawyers speaking about what keeps insurers up at night.  Great stuff.  Thanks, NYIA, for inviting me.  It’s been a challenging couple of months for travel and I look forward to my return to the home tomorrow.

Child Victims cases coming in?  Contact us to develop an insurance response.  Time is passing quickly.

Our usual array of interesting cases in this week’s issue.  Let us know if we can come to your shop for training.

Don’t forget to suattbscribe 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.

And, of course, we offer our usual collection of stories from 100 years ago, today:

 

Lawyer Stuck with Client’s Bill – 100 Years Ago:

 

The New York Times

New York, New York

31 May 1919

LAWYER TO PAY DETECTIVE.

Cost of Evidence in Polacco

Divorce Suite Fixed at $504.

 

          By a decision of the Supreme Court, Dominick G. Riley, a private detective, will recover $504 from Samuel P. Tull, a lawyer, for services in shadowing Giorgio Polacco, formerly conductor at the Metropolitan Opera House, and now with the Chicago Opera Company, when Mme. Clothlide Polacco was seeking evidence for a divorce in 1917, which she obtained last year.  The defendant contended that he was not responsible for the payment of the detective’s bill.

          Riley, who was formerly a Captain of detectives in the Police Department, said he was directed to “out a couple of his best men” on the case, and Riley and his assistants followed Polacco for seven days.  The testimony involved Miss Edith Mason, who was a soprano at the Metropolitan.

 

John’s Jersey Journal:

I hope you enjoyed Memorial Day weekend. Most of mine was spent doing yardwork, which was surprisingly enjoyable. This is the first spring in the new house so Erin and I have been working hard to spruce it up. The Bluetooth speaker had a playlist of summer  tunes. There were a number of trips to the hardware store and my credit card was kind enough to alert me every time we made a purchase. With a new fence, flowerbeds, solar lights, a bonfire pit, and patio furniture, the house and yard look much nicer. We are ready for summer.

In the world of coverage, New Jersey coverage to be precise, we have an interesting decision from the New Jersey Appellate Division on PIP reimbursement. New Jersey law does not permit a PIP insurer to recover from another PIP carrier. Reimbursement may be sought against either a non-PIP insurer, most commonly the insurers of owners of commercial motor vehicles which are not required to maintain PIP coverage, or an uninsured tortfeasor if the insurer seeking recovery has paid PIP benefits as a result of a New Jersey accident.

On May 23, the New Jersey Appellate Division ruled that PIP carriers can compel arbitration of non-PIP carriers such as uninsured and self-insured entities. The Court ruled that PIP insurers are not required to commence a lawsuit and establish the tortfeasor’s liability. Rather, the arbitrator can determine whether a party is a “tortfeasor.”

Prior to this, New Jersey law was unclear whether the PIP insurer could compel arbitration of the non-PIP insurer or was required to commence a lawsuit and obtain a verdict establishing fault of the purported tortfeasor. The trial court judge had ruled that PIP carriers were required to first establish the fault of the purported tortfeasor by trial, either by judge or jury, before the PIP carrier could compel arbitration. Had that decision been upheld, it would have made pursing loss transfer extremely expensive because a trial would be required. The Appellate Division took a hard look and decided arbitration of such matters would be better than clogging up the trial courts.

The decision is a clear victory for New Jersey PIP insurers. PIP insurers can compel arbitration of non-PIP insurers making it considerably easier, faster, and cheaper to pursue reimbursement.

 

John

John R. Ewell

[email protected]

 

Airline Accident – Not Exactly a Mass Disaster:

 

The Standard Union

Brooklyn, New York

31 May 1919

 

TWO HURT WHEN PLANE

CRASHES INTO FENCE

 

          An airplane attempting to avoid hitting a man who was crossing the aviation field at the old Brighton Beach racetrack yesterday afternoon, crashed into a fence, probably fatally injuring Robert J. Wilde, pilot, 26 years old, of 526 North Curly street, Baltimore, and seriously injured William E. Rice, passenger, 27, of 119 Home avenue, Rutherford, N. J.  Both men were taken to Coney Island Hospital where Wilde was found to have sustained a fracture of the skull and Rice a possible fracture of the skull.  The airplane was demolished.

          Wilde was taking Rice into the air for an exhibition flight and was to be paid $15 for the service.  Just as Wilde reached the edge of the field, a man darted across the path of the machine and the pilot sought to get up into the air to avoid hitting him.  The airplane failed to rise and crashed straight into the fence, carrying away twenty-seven feet of the boarding.  As the men were strapped in, the machine and the fence fell on them.

 

Peiper on Property and Potpourri:

Best wishes from the road.

 

Steve

Steven E. Peiper

[email protected]

 

Cigar Causes Mayhem:

 

Democrat and Chronicle

Rochester, New York

31 May 1919

 

CIGAR STUB BURNS AN AUTO

 

Dropped from Window on Hood of

Machine Near Four Corners

 

          A lighted cigar stud, dropped from an upper window upon the top of an automobile, set fire to the vehicle when it was in front of No. 18 Main street east last night.  It burned a hole through the top and did $10 damage.  The incident attracted a large crowd about the Four Corners.

          Children started a bonfire with matches and papers in the cellar of the house of T. F. Wisborn of No. 583 Garson avenue, yesterday afternoon. Battalion Chief Lynch and firemen went to the premises and soon stifled the flames.  No damage was incurred.

          Engine 6 was called to the rear of the Rochester Box and Lumber Company’s property near the Culver road subway last evening.  Boys set fire to the wet grass and the flames menaced the premises.

          Hose 7 went to Exchange and Doran streets yesterday after noon, where a grass fire had started. 

 

Hewitt’s Highlights: 

Dear Subscribers:

I hope you had a meaningful Memorial Day Weekend and were able to pay tribute to our fallen military in some way. I hope you also were able to have some fun in the unofficial kick off to the summer season. I took my family on a boat ride around Manhattan as my boys had not seen the Statue of Liberty up close. We also marched in a Memorial Day parade with their Cub Scouts’ pack.  

There are a few serious injury cases this edition.  There is one in which the Court said a jury verdict on damages for a serious injury can be set aside if they deviated materially from reasonable compensation. Two cases involve a defendant failing to meet its prima facie case on summary judgment because their own experts found significant range of motion limitations.  In another case, a plaintiff did not establish an issue of fact as its chiropractor found degeneration but did not explain his conclusory finding that it was exacerbated by the accident. Also, mild hearing loss of less than one percent and subjective tinnitus was found not to be causally related to the accident.                                                             

Until next issue,

 

Rob
Robert E.B. Hewitt III

[email protected]

 

 

Wilewicz’ Wide-World of Coverage:

Dear Readers,

I’ll be honest – I’m going through Game of Thrones withdrawal. It’s a show I’d followed since it started, having read the books before the show was even a “thing”. It’s really a great show, an epic story, and I’ve appreciated the unexpected twists and turns from the beginning. A story that just kills off main characters here and there just as you get to know them (not a spoiler, as the show is known for this and it spans many years of fictional time) is just realistic and yet unusual. Now, regardless of where fans fall on analysis of the controversial last season, I will miss the watercooler debriefing that followed each episode. So, truth be told, I’m now re-reading the full 4,200+ page (that’s over 1.7 million words) series from the beginning. Allegedly and purportedly, the 6th and 7th volumes will be coming out before the author dies, but I’m not holding my breath.

Now, this week in the Wide World of Coverage, we have a couple of Second Circuit cases for you perusal. First, in New York State Electric & Gas v. Century, the court looked at whether a carrier had waived its right to disclaim on the basis of late notice. The wrinkle was that during discovery the insured found a draft, incomplete, and unsent disclaimer that raised the late notice defense, but that was never sent to the insured. Unfortunately for the insured, however, the court did not see this as an intentional relinquishment of a known right, which is the standard for waiver. Moreover, the late notice defense precluded coverage for the insured where they knew of the claims decades earlier but neglected to tell their insurance carriers for years.

Finally, we have Mazzarella v. Amica Mutual. There, the Second Circuit interpreted whether a policy’s water exclusion precluded coverage for water claims. Somewhat unsurprisingly, given this framing (and the way the insured’s pled their Complaint), the policy did not provide coverage for the water claims. Indeed, the water exclusion was very broad and enumerated many ways in which water claims were barred. When the insureds presented their claim for water damage anyway, there simply was no coverage. Moreover, since their bad faith claim was nearly identical to the breach of insurance contract claim, it was also dismissed as duplicative. Check out Lee’s column on CT case law for the summary of that one.

Until next time, everyone!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Mass Escape from Prison – All Captured:

 

The Evening World

New York, New York

31 May 1919

 

15 BOYS FELL JAIL GUARD AT

ISLAND, FLEEING IN BOAT

 

Fugitives Rescued From Drowning

When Clinging to Swamped Craft.

          Fifteen boys escaped from their dormitory in the House of Refuge on Randall’s Island early to-day after their leader, Louis D. Dominico, seventeen years old, had ambushed Night Keeper Thomas Downs and beaten him into insensibility with a hammer.

          Six of the fugitives were rescued from the Bronx Kills while trying to reach shore in a rowboat.  Eight others were captured in a small building in course of construction adjoining the Children’s Hospital.  The other was nearly smothered in the slime of a marsh when found by searchers.  All were brought to the East 126th Street Station and later taken to Headquarters for the lineup.  The charge of felonious assault against them may be changed to murder, as Keeper Downs may not recover.

          Dominico had a hammer and chisel he had secreted under his clothes and during the night chiseled the lock off his cell.

          Dominico struck Keeper Downs ten times on the head with the hammer.  He then took Downs’s keys and, running back into the dormitory, unlocked the cells of fourteen of his boy chums.

 

Barnas on Bad Faith:

Hello again:

The Toronto Raptors are in the NBA Finals.  Those are words I never thought I would be able to type and have them be true.  Not only are we in the Finals, but we’re hosting game one in The North™ against the Golden State Warriors tonight.  I’m ready, Drake is ready, and all of Canada is ready too.  I didn’t have any luck getting tickets, so if anyone is sitting on an extra couple, and wants to send them to their friendly local bad faith columnist, please do so!  Nobody is really picking the Raptors to win, but nobody was picking them against the Bucks either.  Either way it has already been the greatest season in Toronto Raptors history.  I hope it ends with a championship parade down Yonge Street.

In addition to looking forward to the NBA Finals, I’m very much looking forward to attending the DRI Insurance Bad Faith and Extra-Contractual Liability Seminar at the Westin Washington D.C. City Center next week from June 5 to June 7.  It’s a great program that DRI puts on every two years with updates on bad faith law from around the country and useful, practical tips for handling and defending a bad faith case.  I hope to see some of you there.

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

 

Brian

Brian D. Barnas

[email protected]

 

Not Her Again?

Vancouver Daily World

Vancouver, British Columbia

31 May 1919

 

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

 

Editor’s Note:  In our most recent issue, she claimed to be worth between $40,000 and $100,000, depending on what newspaper you purchased.  But see below.

 

Off the Mark:

Dear Readers,

Last weekend’s camping trip was a success.  The weather was just about perfect, with only a little rain on Saturday night.  The kids and I had a great time and are looking forward to the next one.  Maybe we will be able to convince the wife to join us.

This edition of “Off the Mark” discusses a recent construction defect case from the Supreme Court of Alabama.   In Nationwide Mut. Fire Ins. Co. v. David Grp., Inc., the Alabama Supreme Court, examined the underlying allegations of faulty workmanship related to the construction of a house.  The Court determined that the record failed to demonstrate any claims of damage resulting from the alleged faulty workmanship, and thus, there was no evidence of damage resulting from an “occurrence”.  As such, the Court held that coverage under the CGL policy was not triggered.

 

Brian

Brian F. Mark
[email protected]

 

She Lost $5000 Somewhere Along the Line:

 

The Ogden Standard

Ogden, Utah

31 May 1919

 

PERSONAL

 

WILL you write lonely widow, worth $95,000?  Object, matrimony.  Address Lillian, Box 1355, Jacksonville, Fla.

 

Wandering Waters:

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

The NBA is closing in on the end of an exciting season.  The Finals begin Thursday night with the Warriors facing the Raptors.  While the Warriors are entering their fifth straight finals, the Raptors are making their first finals appearance in team history.  Almost a year after the Raptors’ controversially traded their face of the franchise for Kawhi, the dividends are paying well. Not only has the Raptors reached its first finals in team history, they have done so due to the stellar play of Kawhi.  Kawhi has been the best player in the Playoffs and shows no signs of slowing down.  While the Warriors are heavy favorites, Kawhi gives the Raptors a chance to win its first championship.  I do not have any stake in the series, but it would be something to see Kawhi lift the NBA championship for a team north of the boarder.  Here’s to, hopefully, an exciting NBA Finals.

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

 

Larry

Larry E. Waters

[email protected]

 

Daylight Savings Time Controversy, a Century Ago:

 

Poughkeepsie Eagle-News

Poughkeepsie, New York

31 May 1919

 

REPEAL OF DAYLIGHT

SAVING LAW UNLIKELY

 

Congressman Platt Says, However,

That April and October May Be Eliminated.

 

          In a recent letter to Peter H. Troy of this city, Congressman Edmund Platt discusses the proposed repeal of the Daylight Saving Law, expressing his opinion that the rider to the agricultural appropriation bill, which has for its object the defeat of the plan, will not be accepted by Congress.  Mr. Platt says, however, that there is some possibility that the period for daylight saving may be restricted by eliminating the months of April and October, in which the smallest gains are made.

          Sentiment throughout the county, according to those who have had an opportunity to observe it, is said to be preponderantly in favor of the present law, despite a tendency in some of the rural sections to oppose it. 

 

Boron’s Benchmarks:

Dear Subscribers:

Let me be “perfectly clear about this”. There’s ambiguity aplenty in our everyday use of our English language.  Need an example?  Okay.  Let’s say you’re standing next to me at the corner of Court Street and Montague Street out in front of Kings County Supreme Court in Brooklyn, and I say to you, “Call me a cab.”  Many of you in response would then lean out toward the street, hold out your hand, and hail a passing cab for me.  However, some of you might just respond, by saying, “You’re a cab.”

The differing responses to my words depend upon your interpretation of them.  And, your interpretation depends upon the context within which I have made the statement “Call me a cab.”  If the two of us have spent the past 15 minutes laughing and joking and carrying on in a frivolous way (yes, even coverage counsel occasionally do this) when I say to you, “Call me a cab”, your humorous response of, “You’re a cab”, fits the context of what is going on.  If, on the other hand, you know I am in serious need of a cab right away because I need to get from the courthouse to the airport as soon as possible, you’ll (hopefully) pass on making a joke, and instead get to work helping me out by hailing a cab.

Because insurance policies impact important legal and financial matters, drafters of insurance policies work very hard to avoid ambiguity in the policy terms.  Nonetheless, insureds who have had their claims denied because of, let’s say, the application of an exclusion in the policy, often thereafter assert that the exclusion contains an ambiguous term, knowing that when a policy provision is found to be susceptible to more than one interpretation, courts construe the ambiguity against the insurer and liberally in favor of the insured.

Whether a term within an exclusion set forth in a CGL policy is ambiguous or not is the primary issue grappled with by the Virginia Supreme Court in the James River Insurance Company v Doswell Truck Stop, LLC case I’ve written about this week.  The Virginia Supreme Court’s analysis reflects and applies the oft-cited premise that “[I]n determining whether a term is ambiguous, a court cannot look at the term in isolation; it must look at the term in the context of the entire contract.”

The Doswell case is a short, instructive read.  Enjoy.  And now, hoping all is well with you, let me conclude by setting forth the following in no uncertain terms - Boron’s Benchmarks will return in two weeks with further coverage of the high courts outside of New York.

     

Eric

Eric T. Boron

[email protected]

 

Tire Insurance?

Press and Sun-Bulletin

Binghamton, New York

31 May 1919

 

HEALTH INSURANCE

on

United States Revere Tires

 

          We guarantee full mileage on all our tires.  This is not conditional.  Regardless of how a tire is injured we will repair without cost to the purchaser.  Our price is the lowest of any tire of equal mileage sold in Broome Co.  This is the most liberal guarantee ever offered the motorist.  A full line of fabric and cord tires in stock. 

 

Sturdevant, Rath & Sturdevant

 

Phone 3759-W                                   26 Henry Street

 

Marti's Legislative and Regulatory Markers:

Dear Subscribers,

Before you know it, you will turn to your friends and family and recount the days when you used to drive your own car.  If you’re having trouble wrapping your brain around this possibility, you’re not alone.  In many cities, studies have shown that there is no clear plan for autonomous vehicles.  As this technology continues to progress, the legislature will need to find ways to address the impact of this new driving experience.  Among the benefits, it is anticipated that there will be a reduction of motor vehicle accidents due to human error.  How will this impact auto insurance policies? How will the legislature and courts address liability and coverage issues in the future?  For now, it remains to be seen.  But, in New York, there is a push to learn more regarding this technology.

On May 16, 2019, the New York State legislature proposed two bills dealing with autonomous vehicles, Senate Bill Nos. S6014 and S6052.  The first bill would establish a New York Task force on automated vehicle technology, and closer to my home, the second bill would authorize a comprehensive study of autonomous vehicle technology testing on the University at Buffalo North Campus.  For the details, feel free to read on.

 

Jerry

Jerry Marti

[email protected]

 

Employee Wanted – Wages Suspect:

Buffalo Evening News

Buffalo, New York

31 May 1919

 

WANTED—2 paperhangers, 18 cents a roll; bring tools ready to work Monday morning at 8 o’clock, 485 Ashland Ave.

 

Barci’s Basics (On No Fault):

Hello Subscribers!

I have officially turned the heat off and am not going back! At least, that’s what I keep telling myself. My parents even brought me a hand-me-down window air conditioning unit since they finally got central air. Unfortunately, it seems that that exchange brought another round of semi-chilly temperatures, although nothing like winter, and an infestation of stink bugs! Imagine my surprise when I opened their trunk to see the new unit covered in bugs…not pleasant. I am hoping all the bugs are dead now after attacking the unit with Lysol and leaving it outside.

On the no-fault front I have two cases for you. The first is an interesting case where the lower court incorrectly calculated attorney’s fees and the other is another fun vacatur case. I have seen a number of these vacatur cases now, where the carrier appeals to the Supreme Court and the provider/applicant defaults in court, but then appeals. The Appellate Divisions essentially hold that default judgments won’t fly when there is an arbitration award for the applicant and they move for vacatur.

That’s all folks,

 

Marina

Marina A. Barci

[email protected]

 

Abandonment

Star-Gazette

Elmira, New York

31 May 1919

 

Notice

 

          My wife, Eleanor Pike, having left my bed and board without just cause or provocation.  I hereby forbid all persons harboring or trusting her on my account, as I will pay no bills contracted by her.

 

          Dated, May 31st, 1919

SAMUEL PIKE.

 

Lee’s Connecticut Chronicles:

Dear Nutmeggers:

Welcome to the unofficial start of summer, as we leave May in the rearview mirror and jump headlong into June and our summer plans. But, just because school’s out (or almost), it’s not too late to do a little learning. Let’s take a look at one of the Constitution State’s most famous and influential jurists – Oliver Ellsworth. A native Nutmegger, Ellsworth had a distinguished career as lawyer, judge, Constitutional Convention delegate, Senator, and ambassador. His career reached a pinnacle with his appointment by George Washington as the Chief Justice of the U.S. Supreme Court. While on the Court, Ellsworth's chief legacy was ending the practice of seriatim opinion writing, where the Justices wrote individual opinions on each case. Instead, Ellsworth pioneered the practice that we know today, where the consensus of the Court is represented by a single written opinion. Just imagine the difficulty of divining precedent from five (or more) separate opinions. Thank you, Oliver Ellsworth.

Have a Happy Summer!

 

Lee

Lee S. Siegel

[email protected]

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

 

  • SUM Claimant was Permitted to Settle with Tortfeasor and Issue Release when SUM Carrier Did Not Advance Tortfeasor’s Limits within Thirty Days of Notice
  • A Good Primer on Policy Rescission

 

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

Robert E.B. Hewitt III

[email protected]

 

  • Jury Damages Verdict Can Be Set Side If Deviates Materially from What Would Be Reasonable Compensation
  • Chiropractor Did Not Explain the Basis for His Opinion That the Herniation was New in Light of His Findings of Degenerative Conditions 
  • Defendant’s Own Expert Found Significant Range of Motion Limitations Such that Motion was Denied
  • Defendant’s Own Expert Again Found Significant Range of Motion Limitations

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

  • Rare Direct Action in Subrogation Case; Claimant’s Case is Barred by Application of Judicial Estoppel
  • Failure to Disclose Mold Infestation Does Not Give Rise to Liability to Mum Sellers where Plaintiffs Failed to Establish Active Concealment of the Condition

Potpourri

  • Emails Between Counsel Offering, and Accepting, Settlement Terms Qualified as A Binding Stipulation

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Second Circuit holds for Carriers in Dispute Over Late Notice of Contamination and Remediation Claims, Rejecting Insured’s Waiver Argument

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Trial Court Dismisses Lawsuit Claiming Breach of Fiduciary Duty and Breach of Contract Where Insurer Issue Installment Payments Per Family Court Order

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Insured given Second Bite at the Bad Faith Apple
  • Insurer did not Act in Bad Faith by Changing its Reason for the Coverage Denial at Trial

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

  • PIP Insurers Can Compel Arbitration of Non-PIP insurers, Uninsureds and Self-insured Entities; Arbitrator can determine whether a party is a “tortfeasor”

 

LEE’S CONNECTICUT CHRONICLES

Lee S. Siegel

[email protected]

 

  • Connecticut Concrete Claim Crumbles

 

Marti's Legislative and Regulatory Markers

Jerry Marti

[email protected]

 

  • New York State Senate Bill Number: S6014
  • New York State Senate Bill Number: S6052

 

OFF THE MARK
Brian F. Mark

[email protected]

 

  • Supreme Court Holds that Where there is no Evidence of Damage Resulting from Faulty Workmanship, there is no “Occurrence” under a CGL Policy, and, thus, Coverage is not Triggered

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

  • Court Dismissed Plaintiff’s Amended Complaint with Prejudice and Granted Defendant’s Motion to Dismiss

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

  • Commercial General Liability Insurance Policy – Circuit Court Decision in Favor of Insured in Declaratory Judgment Action Reversed on Finding That Auto Exclusion Precludes Coverage for Underlying Bodily Injury Action

 

BARCI’S BASICS (ON NO FAULT)

Marina A. Barci

[email protected]

 

  • Attorney’s Fees for Securing Payment of Overdue Claims are Decided by the Court and are Not Bound by the 20% Rule
  • Failure to Appear Denial of Coverage Requires Clear Proof the Insured Received Notice

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

  • Statute of Limitations Hog-Ties Hog Barn Claim

Forgive the brevity.  Your editor needs to return home.  Thanks for the understanding.

 

 

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

[email protected]

 

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
[email protected]
 

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]

 

05/29/19       Matter of Unitrin Direct Insurance Company v. Muriqi
Appellate Division, Second Department

SUM Claimant was Permitted to Settle with Tortfeasor and Issue Release when SUM Carrier Did Not Advance Tortfeasor’s Limits within Thirty Days of Notice

Muriqi claimed injury in an automobile accident with a vehicle owned and operated by Vega, who was insured by Esurance. On the date of the accident, Muriqi had her own automobile insurance policy, which included a supplementary uninsured/underinsured motorists (hereinafter SUM) endorsement, issued by Unitrin. By letter dated January 8, 2017, Esurance, on behalf of Vega, tendered its policy limit of $25,000 to the appellant to settle her claim against Vega.

Muriqi then demanded arbitration of her claim for SUM benefits from Unitrin. Unitrin moved to permanently stay arbitration alleging that Muriqui failed to comply with the terms and conditions of the subject insurance policy, namely, those relating to settling with a third party.

Where "an automobile insurance policy expressly requires the insurer's prior consent to any settlement by the insured with a tortfeasor, failure of the insured to obtain such prior consent from the insurer constitutes a breach of the insurance contract”.

However, Condition 10 of the SUM policy requires that when an insured advises its SUM carrier of its desire to settle following receipt of an offer of the full policy limits of the tortfeasor, the insurer must either consent to the settlement or advance the settlement amount to the insured and assume the prosecution of the tort action within 30 days. Where the insurer does not timely respond in accordance with such condition, the insured may settle with the tortfeasor without the insurer's consent and without forfeiting his or her rights to SUM benefits.

Here, Unitrin failed to come forward with sufficient facts to establish justification for a stay of arbitration. Indeed, the submissions demonstrated that Muriqi executed a release with Esurance and Vega "after thirty calendar days actual written notice" to the petitioners, as provided for in Condition 10, which is required by Insurance Regulation 35-D to be part of the SUM endorsement.

That’s what the policy required so there was no evidence of a violation of the Condition.

 

05/22/19       Stillwell Ave. v. U.S. Underwriters Insurance Co.

Appellate Division, Second Department

A Good Primer on Policy Rescission

To establish the right to rescind an insurance policy, an insurer must show that its insured made a material misrepresentation of fact when securing the policy. A representation is a statement as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application.

Here, the insurer established their prima facie entitlement to judgment as a matter of law through evidence demonstrating that the plaintiff made a material misrepresentation on its application. That evidence included the affidavit of a senior vice president of corporate underwriting and a copy of the underwriting guidelines, which established that the plaintiff's misrepresentation induced the defendants to issue a policy it otherwise would not have issued. The plaintiff failed to raise a triable issue of fact in opposition.

 

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

Robert E.B. Hewitt III

[email protected]

 

05/29/19       Rozmarin v. Sookhu

Appellate Division, Second Department

Jury Damages Verdict Can Be Set Side If Deviates Materially from What Would Be Reasonable Compensation

The plaintiff commenced this action to recover damages for personal injuries she sustained to her spine and left shoulder because of an automobile accident. Following a jury trial on the issue of damages only, the jury found that the plaintiff, who was 38 years old at the time of the accident, sustained a serious injury because of the accident under the permanent consequential limitation of use category of Insurance Law § 5102(d), and awarded her $20,000 for past pain and suffering and $0 for future pain and suffering. Plaintiff took more than two months to move pursuant to CPLR 4404(a) and 5501 for an additur to the future pain and suffering award, or, alternatively, to set aside that jury verdict as contrary to the weight of the evidence and for a new trial on the issue of future pain and suffering.  The Appellate Division found the motion was untimely as it was made more than 15 days after the jury verdict was rendered, without good cause shown. However, the court also held that while the amount of damages to be awarded for personal injuries is primarily a question for the jury, it may be set aside if it deviates materially from what would be reasonable compensation   Although not binding upon the courts, recent awards for similar or comparable injuries may serve to "guide and enlighten" the court in determining whether an award is reasonable. On appeal from the Judgement, the Court found the damages awards for past and future pain and suffering deviated materially from what would be reasonable compensation.

 

05/23/19       Black v. Gordon

Appellate Division, First Department

Chiropractor Did Not Explain the Basis for His Opinion That the Herniation was New in Light of His Findings of Degenerative Conditions 

The Appellate Division found contrary to plaintiff's contention, defendants demonstrated prima facie that she did not sustain a serious injury involving hearing loss and tinnitus as a result of the motor vehicle accident. Their expert otorhinolaryngologist found mild hearing impairment of less than one percent, and subjective complaints of tinnitus, which could not be causally related to the accident. Such minor limitations and subjective complaints were held to not constitute a significant or serious injury within the meaning of Insurance Law § 5102(d).

Defendants also demonstrated prima facie that plaintiff's claimed cervical spine injuries were not serious injuries causally related to the accident but were preexisting degenerative conditions. In opposition, plaintiff submitted, inter alia, an unaffirmed MRI report of her radiologist, who found bulging and herniated discs, with a bony ridge and hypertrophic changes, and the affidavit of a chiropractor, who examined her several years after the accident. The chiropractor acknowledged that the MRI film showed preexisting degenerative conditions, and therefore he was required to address the issue of causation and explain the basis for his conclusions that the conditions were caused by the accident. Instead, the chiropractor provided only a conclusory opinion, which provided no basis for his opinion that the preexisting disc bulges were aggravated by the accident, or for assessing the extent of any exacerbation. Nor did he provide a reason for his opinion that the herniation was new, or address the significance of the bony growth at the same level of the herniation, as noted in plaintiff's own MRI report 

 

05/22/19       Flood v. Fillas

Appellate Division, Second Department

Defendant’s Own Expert Found Significant Range of Motion Limitations Such that Motion was Denied

The defendant failed to meet his prima facie burden of showing that the injured plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendant failed to submit competent medical evidence establishing, prima facie, that the injured plaintiff did not sustain a serious injury to the lumbar region of her spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), as the defendant's expert found significant deficits in the range of motion of the lumbar region of the injured plaintiff's spine. Further, the opinion of the defendant's expert as to the cause of the alleged injury to the lumbar region of the injured plaintiff's spine was speculative.

 

05/22/19       Nash v. MRC Recovery, Inc.

Appellate Division, Second Department

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

The MRC defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The MRC defendants failed to submit competent medical evidence establishing, prima facie, that the plaintiff did not sustain a serious injury to his left ankle under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), as one of their experts, an orthopedic surgeon who examined the plaintiff on April 16, 2014, found significant limitations in the range of motion of the plaintiff's left ankle. The expert measured the range of motion of the plaintiff's left ankle using a goniometer and found that the ankle had a 25 percent restriction in dorsiflexion, and a 33 percent restriction in plantar flexion.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

05/23/19       Greater New York Mut. Ins. Co. v. Utica First Ins. Co.

Appellate Division, First Department

Rare Direct Action in Subrogation Case; Claimant’s Case is Barred by Application of Judicial Estoppel

This case involves a fire at an apartment building.  Greater New York insured the owner and manager of the building, and Allstate insured various tenants residing therein.  Upon payment, GNY and Allstate then commenced action against Utica First’s insured New Triple M Construction Corp seeking recovery in subrogation.  Triple M had been retained to perform work at the premises by the building’s owner, and the evidence established that the fire was resultant from Triple M’s negligent use of a torch while performing roofing work.

Utica First disclaimed coverage for the loss because of Triple M’s misrepresentation that they were not using torches at the time of the fire.  As such, Utica First did not represent, nor defend, Triple M’s interests in the subrogation actions.  When Triple M defaulted, both GNY and Allstate entered judgment against Triple M.

In the instant matter, both carriers move, as judgment creditors under Insurance Law 3420(a)(2), to enforce recovery against Triple M’s carrier, Utica.  Utica moved for summary judgment arguing that Triple M’s misrepresentations about the cause and origin of the fire support the decision to disclaim.  The court agreed, and upheld Utica’s denial.

In addition, the Appellate Division also explained that because GNY and Allstate obtained judgments against Triple M by arguing the negligence use of a torch was the cause of the fire, both are subsequently precluded from changing their theory of recovery on the resulting direct action.  This is due to the application of the judicial estoppel theory which prohibits a party from taking inconsistent positions in subsequent litigation.

 

05/22/19       Rosner v. Bankers Standard Ins. Co. 

Appellate Division, Second Department

Failure to Disclose Mold Infestation Does Not Give Rise to Liability to Mum Sellers where Plaintiffs Failed to Establish Active Concealment of the Condition

Defendants Bernstein sold their private residence to plaintiffs in January of 2013.  As part of that transaction, the contract of sale provided that “no covenant, warranty, or representation in contract survived the closing.”  In addition, however, a Rider to that contract noted that the defendants were unaware of any mold or vermin infestation in the house.  A home inspection prior to closing revealed evidence of water staining and water intrusion. However, the inspector stopped short of issuing a report on potential mold issues.  Rather, he advised that the plaintiffs should retain a mold abatement specialist to evaluate the home.

Plaintiff’s elected to forego a mold inspection.  Unfortunately, shortly after taking possession of the home, plaintiff Brooke Rosner started experience symptoms related to mold exposure.  A subsequent inspection revealed the existence of substantial mold which allegedly rendered the premises uninhabitable.  Plaintiffs commenced this case against their insurance company, the home inspector, and the Bernstein, as sellers of the home.   The inspector and carrier eventually settled with plaintiffs.  The Bernsteins, on the other hand, proceeded with an application for summary judgment.  Because the contract provisions did not survive closing, the Bernsteins argued that any statements made in the Rider relative to mold were not relevant. Moreover, the rule for purchasing a home in New York is caveat emptor, and thus provides that a seller is under no obligation to disclose potential issues with a home. As such, absent evidence that the Bernsteins actively concealed the mold condition, they were under no duty to disclose mold condition to the plaintiffs/buyers.

In addition, the Bernsteins also successfully moved for dismissal of the third cause of action as asserted by plaintiffs.  That claim, sounding in general negligence, failed where plaintiff failed to establish any legal duty that was separate and apart from the contract of sale.

The Bernsteins also successfully defeated plaintiffs’ fourth cause of action asserting negligent misrepresentation.  To successfully present a claim for negligent misrepresentation, the claimant must demonstrate a special, privity-like relationship, the conveyance by one party to another of incorrect information, and reasonable reliance upon the incorrect information.  Here, plaintiffs failed to establish a special relationship.  Further, as with the failed negligence claim, plaintiffs were unable to show how any of the alleged misrepresentations made by the Bernsteins were extraneous or collateral to the breach of contract claim. 

 

Potpourri

 

05/29/19       Herz v. Transamerica Life Ins. Co.

Appellate Division, Second Department

Emails Between Counsel Offering, and Accepting, Settlement Terms Qualified as A Binding Stipulation

Plaintiff was the named beneficiary on a life insurance policy purchased by her husband.  Upon his death in 2013, plaintiff asserted a claim under the policy.  Transamerica, we presume, denied the claim which resulted in lengthy settlement negotiations between the two parties.  This culminated in a March 13, 2018 email between counsel wherein plaintiff’s counsel accepted an offer of $12,500 in exchange for a full Release of Transamerica.  On April 30th of that year, plaintiff’s counsel advised defense counsel for Transamerica that the Release “looked good.”  The next day, however, plaintiff’s counsel requested that the language providing “Transamerica denies the allegations set forth…” be added to the document.

Transamerica refused to accede to the requested change.  After plaintiff obtained new counsel, settlement discussions broke down in their entirety.  As a result, Transamerica filed an application seeking to enforce the terms of the original agreement.  The trial court ruled that a settlement had, in fact, been effectuated, and therefore enforced the terms of the original agreement.  On appeal, the Appellate Division affirmed.

In so holding, the Second Department noted that a stipulation of settlement must conform to the requirements of CPLR § 2104.  To that end, a settlement reached out of “open court” must be reduced to writing.  Moreover, the terms of the agreement must be part of the recording, and there must be mutual assent of those terms.  The existence of evidence of an offer, and acceptance, was enough to establish the basis of an enforceable agreement. 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

04/25/19       New York State Electric & Gas v. Century Indemnity Company

United States Court of Appeals, Second Circuit

Second Circuit holds for Carriers in Dispute Over Late Notice of Contamination and Remediation Claims, Rejecting Insured’s Waiver Argument

New York State Electric & Gas (NYSEG) investigated and remediated contamination at nearly two dozen former manufactured gas plant sites over the course of many years. Starting in the early 1980s, the New York State Department of Environmental Conservation was involved in the remediation, as was the United States Environmental Protection Agency. There was significant contamination at many of the plants and NYSEG incurred considerable costs over time. At one point, they notified their insurance carriers and requested indemnification in relation to the various contamination occurrences. Those carriers, including Century and OneBeacon, disclaimed coverage on several bases, primarily late notice, and litigation ensued.

At issue before the Second Circuit was whether the carriers had waived the right to assert the late notice defense. In particular, the insured claimed that a draft disclaimer letter, that had been crafted but never sent, showed that the carriers had waived that defense when they did not raise it timely. However, this argument failed to hold water, the court held, because to demonstrate waiver a party must “put forward evidence of a clear manifestation of intent to waive” a known right. The letter was not only never sent, but the draft was incomplete, clearly a copy/paste from another disclaimer letter, and never reviewed by the carrier before a coverage determination was made. In the case of such facts, it could not be said that the carrier was lulled into sitting on its rights. Moreover, the carrier did not have complete copies of the old policies until the start of litigation, so it could not have known the full facts sufficient to warrant waiver.

Rather, what was clear was that the insured provided categorical late notice of the claims. They knew at least from the start of the 1980s about the various occurrences and remediation efforts, particularly in light of the fact that governmental agencies were involved and left a long paper trail. At the latest, they knew for certain in the early 1990s and thus should have provided notice sooner. As such, their notice was untimely as a matter of law.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

05/07/19       Sankey v. State Farm Life Ins. Co.

Supreme Court, Broome County

Hon. Eugene D. Faughnan

Trial Court Dismisses Lawsuit Claiming Breach of Fiduciary Duty and Breach of Contract Where Insurer Issue Installment Payments Per Family Court Order

Plaintiff was the recipient of an infant settlement in connection with a personal injury action.  At that time, she was 12 years old.  As part of the settlement an annuity was purchased from State Farm Life Insurance Company by State Farm Fire & Casualty Company (collectively “State Farm”) to provide future periodic payments.

Thereafter, in May 2015, the Broome County Family Court issued an Order essentially garnishing the last two installment payments due from the settlement.  The father of plaintiff’s children had brought a child support proceeding in Family Court, and the Family Court directed State Farm to pay the last two installments directly to the Broome County Support Collection Unit in order to satisfy plaintiff’s child support arrears, and to secure future weekly child support payments.  There was no dispute that plaintiff was represented by counsel in the Family Court action or that the Order stated to be on the consent of the parties.

Nonetheless, plaintiff brought this action alleging breach of fiduciary duty and breach of contract against State Farm.  Specifically, plaintiff alleged that State Farm knew, or should have known, that the Family Court Order did not comply with Family Court law and should not have been obeyed.  The challenge was that under the law any undertaking to pay for child support must be of a definite duration, not to exceed three years, and the subject order was open-ended.

Upon receipt of the complaint, State Farm moved to dismiss the action.  In considering the breach of fiduciary duty claim, the court held that plaintiff failed to allege a fiduciary relationship between her and State Farm.  There were no allegations of any sort of special trust or confidence between the parties, or any reliance plaintiff had on State farm to make the installment payments.  While the complaint contained conclusory allegations that defendants owed a fiduciary duty to her, no facts were alleged with any particularity.  The court was clear that State Farm had a responsibility to safeguard the settlement money and ensure it was paid out timely, but that did not extend to disobeying Court Orders, or even evaluating the legal sufficiency of the Court Order.  Further, as plaintiff did not contend child support arrears or weekly payment were inaccurate, the court could not identify any cognizable damages.  Accordingly, the claim based upon breach of fiduciary duty was dismissed, and a similar finding was made relative to the breach of contract claim.

The court lastly concluded that the claims were also barred by the doctrine of laches.  “This doctrine is applicable where there has been a considerable delay resulting in a change of position … or other disadvantage.”  The court pointed out that the Family Court order was issued almost four years ago, and defendants turned over the payments more than two and a half years ago.  Yet, plaintiff did not commence this action until July 2018.  She also did not take any steps to appeal or modify the Order in Family Court or make any payments to satisfy the child support obligation herself.  She could have done so and requested that the Order directing payment from the Support Collection Unit cease.  Had she done so, then the money would still be available from that unit.  Instead, it was used to satisfy plaintiff’s support obligation.  State Farm’s motion to dismiss was granted in its entirety.

Note:  Atta lawyer Dan Kohane.   

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

05/20/19       Aiello v. Geico General Insurance Company

United States District Court, District of Nevada

Insured given Second Bite at the Bad Faith Apple

Ashley Aiello was injured in a car accident in March 2018, which was caused by an unidentified driver who fled the scene and was never identified.  Aiello submitted a claim to Geico for uninsured motorist coverage.  She alleged that Geico failed to pay benefits and commenced a lawsuit alleging breach of contract and bad faith.

Geico moved to dismiss the cause of action for bad faith.  Under Nevada law, an insurer breaches the duty of good faith when it refuses without proper cause to compensate its insured for a loss covered by the policy.  An insurer's incorrect determination that coverage does not exist under a particular policy is not an actional tort unless there was no reasonable basis for that determination.

Here, Aiello only alleged that Geico failed to pay here benefits.  There was no allegation that Geico denied coverage with an actual or implied awareness that there was no reasonable basis supporting its decision.  The mere formulaic recitation of the elements of the cause of action as insufficient.

However, Aiello sought leave to amend the complaint.  In her motion papers, Aiello argued that she had additional facts to support her claim.  The court gave Aiello leave to file an amended complaint even though Aiello did not proffer her additional facts in response to the motion.

 

05/17/19       Thomas v. Farmers Insurance Company

United States Court of Appeals, Tenth Circuit

Insurer did not Act in Bad Faith by Changing its Reason for the Coverage Denial at Trial

The Thomases owned a home in Sand Springs, Oklahoma, for over thirty years. On December 14, 2012, the Thomases’ homeowner’s insurance policy provided by Farmers became effective. This insurance policy contained an earthquake endorsement that protected the home against certain damage caused by earthquakes.  On November 12, 2014, a 4.9 magnitude earthquake (the “2014 Earthquake”) struck Conway Springs, Kansas, which is approximately 112 miles from Sand Springs.  Two days later, Jodi Thomas noticed that the slab floor in a utility closet was broken and had collapsed four inches.  She suspected that the 2014 Earthquake caused the damage and reported the damage to her Farmers agent.

Farmers investigated the claim, and ultimately denied the claim for damages to the home because the damage was not caused by earthquake activity.  Farmers denied the claim a second time after the Thomases sent additional documentation and engineering reports concerning the damage to their home because the damage to the home was determined to not be caused by an earthquake.

While Farmers twice told the Thomases that it denied coverage under the insurance policy because the damage was not caused by earthquake activity, at trial Farmers gave a different reason for its denial.  At trial, Farmers argued for the first time that an earlier earthquake in 2011 (the “2011 Earthquake”) caused the damage to the Thomases’ home.  The 2011 Earthquake was a 5.3 magnitude earthquake that struck near Prague, Oklahoma, which is 55 miles from the Thomases’ home in Sand Springs, Oklahoma.

On appeal, the Thomases argued that by changing its rationale for denying the claim Farmers acted contrary to Oklahoma bad faith case law.  Under Oklahoma law, a claim for bad faith in the insurance context turns on whether the insurer had a good faith belief, at the time its performance was requested, that it had a justifiable reason for withholding payment under the policy.  To determine the validity of the claim, the insurer must investigate reasonably appropriate under the circumstances.  Accordingly, the focus of a bad-faith claim is the knowledge and belief of the insurer during the time period the claim is being reviewed.

Thus, under Oklahoma law an insurance bad faith claim is premised on the actual reason the insurance company gave when it denied the claim, not a post-denial rationalization.  Therefore, evidence that supports a post-denial rationalization, rather than the evidence that the insurance company actually relied on when initially denying a claim, is inadmissible.

The 2011 Earthquake was never the reason Farmers gave when it denied the Thomases’ claim.  In fact, Farmers expressly stated in both denial letters that the damage to the property was not caused by earthquake activity at all.  However, the Thomases never objected at trial when Farmers presented its new rationale for denying the claim.  Thus, this argument wasn’t preserved.  Even if it had been, the court noted that the Thomases’ own expert conceded that, under a United States Geological Survey earthquake scale, the surface impact of the 2014 Earthquake near the Thomases’ home was II or III (“weak”) and the potential damage expected from a level II or III earthquake under the scale is “none.”

Accordingly, the jury’s verdict in favor of Farmers on the bad faith count was affirmed.

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

05/23/19       Liberty Mutual et. al v. Penske Truck Leasing Co.

New Jersey Superior Court, Appellate Division

PIP Insurers Can Compel Arbitration of Non-PIP insurers, Uninsured and Self-insured Entities; Arbitrator can determine whether a party is a “tortfeasor”

A tractor-trailer truck driven by Albert Kika and a pickup truck driven by Eugene Jerinsky were involved in a collision. Kika was backing a car carrier into a car dealership and blocking two lanes of traffic.  Jerinsky was unable to stop and struck the trailer of Kika’s truck. The police report stated that Kika failed to yield the right-of-way to traffic while attempting to back his tractor-trailer into the dealership. A witness gave a statement and reported that he saw the tractor-trailer blocking the roadway and was able to stop. The witness then saw Jerinsky’s truck hit the trailer.

Jerinsky had automobile liability insurance provided by Liberty. Kika was employed by CEVA Freight. CEVA owned and self-insured the truck driven by Kika. CEVA does not maintain and is not required to maintain PIP coverage because the truck was a commercial vehicle. Jerinsky received medical treatment and applied to Liberty for PIP benefits. Liberty opened a PIP claims file and began paying Jerinsky's medical providers. Liberty then requested reimbursement from CEVA for the PIP benefits it had paid on behalf of Jerinsky. Liberty also informed CEVA that if it would not agree to provide reimbursement, Liberty demanded arbitration of its right to reimbursement of the PIP benefits. CEVA denied Liberty's request and refused to arbitrate the issue, contending that Kika was not at fault for the accident.

Liberty sued CEVA and Kika. Liberty demanded reimbursement of the PIP benefits it had paid on behalf of Jerinsky. Liberty also demanded arbitration of its claim for reimbursement of the PIP benefits.

CEVA and Kika answered and CEVA admitted that it was self-insured. Liberty again requested CEVA consent to arbitration, but CEVA continued to refuse to arbitrate Liberty's PIP benefits claim. Liberty, therefore, filed a motion to compel CEVA to arbitrate the PIP benefit reimbursement claim citing N.J.S.A. 39:6A-9.1 9 (the “PIP Reimbursement Statute”). CEVA opposed that motion, contending that its driver, Kika, was not a tortfeasor and the question of Kika's fault for the accident should be decided in a court proceeding and not at arbitration.

 

The trial court ruled that Kika's fault for the accident had be determined in a court proceeding, either by a judge or jury, before Liberty would be entitled to arbitration. As such, the trial judge denied Liberty’s motion. Liberty appealed.

The PIP Reimbursement Statute provides that an insurer that has paid PIP benefits as a result of an accident in New Jersey has a right to recover those benefits from any "tortfeasor" that is not required to maintain PIP protection or did not maintain PIP protection.

The statute goes on to state that if the tortfeasor is insured, the reimbursement is to be made by the insurer. This subsection also states that the determination of whether the insurer that paid PIP benefits is entitled to recover and the amount of the recovery shall be made by agreement of the parties, or if they cannot agree, in arbitration. In sum, PIP Reimbursement Statute "creates a direct right of reimbursement, not a subrogation right." The statute "allows PIP carriers to recover not from other PIP carriers but from non-PIP carriers and uninsureds." If there is a non-PIP carrier involved, the two insurers are either to agree on the reimbursement claim or, if they cannot agree, the dispute is to be resolved in arbitration.

Liberty argued that because CEVA's status as a self-insured entity brings it within the ambit of the PIP Reimbursement Statute, CEVA is required to arbitrate the issue of whether Kika was negligent and, therefore, a "tortfeasor," to determine whether Liberty is "legally entitled" to reimbursement of PIP benefits paid on behalf of Jerinsky. CEVA, in contrast, contended that Kika's negligence is a legal issue to be determined in a court proceeding and that the PIP Reimbursement Statute does not apply to it until Kika's status as a "tortfeasor" is established. The Appellate Division agreed with Liberty and rejected CEVA’s position.

CEVA is self-insured and, as the owner of a commercial vehicle, it was not required to carry PIP coverage. As a self-insured entity without PIP coverage, CEVA is subject to the PIP Reimbursement Statute.

The Appellate Division found that the language of the PIP Reimbursement Statute is clear on its face when it states that "the determination as to whether an insurer . . . is legally entitled to recover the amount of payments and the amount of the recovery" shall be by agreement, or, "upon failing to agree, by arbitration." The plain meaning of the words "legally entitled to recover" includes disputes about whether the non-PIP insurer's insured was a tortfeasor.

The Appellate Division ruled that an arbitrator may determine whether a party is a tortfeasor and that a PIP insurer is not required to first commence a lawsuit and obtain an adjudication that the party was negligent. The Court supported its decision citing public policy. The goal of the No-Fault system is to contain costs, including by limiting litigation in favor of arbitration. Further, The Court noted that if PIP insurers were required to commence a court proceeding to determine whether a party is a tortfeasor, it would result in protracted trials and burden the New Jersey court system.

The Appellate Division reversed the lower court and remanded the matter back to the trial court for an order compelling CEVA to arbitration all issues related to the PIP insurer’s request for reimbursement of PIP benefits.

 

LEE’S CONNECTICUT CHRONICLES

Lee S. Siegel

[email protected]

 

05/16/19       Mazzarella v. Amica Mutual Insurance Company

United States Court of Appeals, Second Circuit

Connecticut Concrete Claim Crumbles

The Second Circuit summarily rejected a homeowners’ attempt to secure first-party property insurance coverage for crumbling concrete. Circumventing typical collapse-type arguments, the homeowners instead alleged that the home suffered direct physical loss “caused by water and oxygen infiltration, including damage to concrete basement walls, interior walls, floor tiles, subfloors and wood floors, interior doors and windows, and the chimney…” This novel pleading attempt fared no better than actions by previous homeowners seeking coverage for damage to their homes arising from defective concrete. Although the court does not address the chemical process, the concrete is alleged to lose its integrity over time as it oxidizes from exposure to air and water. The Second Circuit side-stepped the vexing issue of whether the Connecticut concrete claims allege a direct physical loss, instead finding that the insureds’ pleading gambit led directly to an exclusion. “We need not decide whether the Mazzarellas sufficiently alleged a “direct physical loss” because, on the face of the Complaint, the claimed loss would fall within the Policy's exclusions as a matter of law…. The Complaint alleged damage “caused by water and oxygen infiltration” and “rainwater entering the Residence.” …. This asserted loss unambiguously falls within the exclusion for loss caused by “[w]ater,” which includes “surface water,” “overflow of any body of water,” “storm surge,” water that “[b]acks up through sewers or drains,” and 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 court also noted the applicability of exclusions for wear and tear, latent defects, and settling and bulging.

Additionally, the court affirmed dismissal of the plaintiffs’ bad faith and CUTPA/CUIPA causes of action. Under settled Connecticut law, allegations of a mere coverage dispute will not state a claim for bad faith and an insured cannot state a claim for bad faith if the insurer properly denied coverage. Since Amica's denial of coverage was not wrongful, the bad faith claim was not independently actionable. The plaintiffs’ attempt to make out a CUTPA/CUIPA violation by tying together other concrete claim denials was also unsuccessful. “The Mazzarellas have not adequately pleaded that Amica engaged in CUTPA/CUIPA-targeted misconduct -- i.e., conduct distinct from the coverage denial -- with “such frequency as to indicate a general business practice.””

[Editor’s Note: Connecticut practitioners continue to await the Supreme Court’s ruling in the concrete foundation cases heard in December 2018. See Karas v. Liberty Ins. Corp., Vera v. Liberty Mut. Fire Ins. Co., and Jemiola v. Hartford Cas. Ins. Co. The Court’s ruling is expected to give guidance as to whether these claims fall within coverage for sudden and abrupt collapse or are otherwise precluded from coverage, as above.]

 

Marti's Legislative and Regulatory Markers

Jerry Marti

[email protected]

 

05/16/19       Senate Bill S6014

New York State Senate   

Bill Number: S6014

State Senator Timothy M. Kennedy from the 63rd Senate District has sponsored a bill to establish a New York task force on automated vehicle technology with an eye towards providing recommendations that will support safe-testing, deployment, and operation of autonomous vehicles on public highways.

The bill points out the many benefits of such technology, including mobility options for the disadvantaged, disabled and elderly, improvement of congestion, emissions mitigation, and improved livable land use.  In addition, there would be a two-year testing program for automobile manufacturers and technology leaders to test and demonstrate automated vehicle technology in New York.  The goal is to formulate comprehensive laws and regulations to ensure that the state is prepared for the safe deployment of automobiles equipped with this technology.

The bill is currently on the floor calendar. 

 

05/16/19       Senate Bill S6052

New York State Senate   

Bill Number: S6052

State Senator Timothy M. Kennedy from the 63rd Senate District has also sponsored a bill, which would authorize a comprehensive study on the designation of private roads on the University at Buffalo North Campus for the purposes of autonomous vehicle technology testing.  The legislative intent behind the bill centers on increasing pedestrian and passenger safety, reducing traffic and congestion, and improving the movement of goods and services across the state. Of note, autonomous vehicle technology possesses the ability to eliminate or reduce some motor vehicle accidents due to human error.

The bill is currently on the floor calendar.

 

OFF THE MARK
Brian F. Mark

[email protected]

 

05/24/19       Nationwide Mut. Fire Ins. Co. v. David Grp., Inc.

Supreme Court of Alabama
Supreme Court Holds that Where there is no Evidence of Damage Resulting from Faulty Workmanship, there is no “Occurrence” under a CGL Policy, and, thus, Coverage is not Triggered

This declaratory-judgment action arises out of an underlying construction defects action related to the construction of a house.  In October of 2006, Saurin and Valerie Shah purchased a newly built house from The David Group, Inc. ("TDG").  After they moved in, the Shahs began experiencing problems with their new house.  Despite TDG's efforts at correcting the problems, the Shahs sued TDG in February 2008.

In their complaint, the Shahs alleged that the house had "severe structural issues" and that they had discovered "numerous and substantial construction defects in the residence including, but not limited to, serious defects resulting in health and safety issues, building code violations, poor workmanship, misuse of construction materials, and disregard of proper installation methods."  They also asserted claims of rescission, breach of contract, breach of express and implied warranties, negligence and wantonness, negligent supervision and training, misrepresentation and fraud, suppression, and "gross negligence" and "incompetence."  As a result of the purported defects, the Shahs alleged that they "suffered and/or are continuing to suffer damages including, but without limitation[,] repair, and/or replacement costs, loss of the use and enjoyment of areas of their home, loss of market value in their home, mental anguish and emotional distress damages."

At the time the Shahs purchased the house, TDG was insured under a CGL policy issued by Nationwide Mutual Fire Insurance Company ("Nationwide").  Under the terms of the CGL policy, Nationwide agreed to "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies."  According to the policy, its coverage applied to "bodily injury" and "property damage" only if "[t]he 'bodily injury' or 'property damage' is caused by an 'occurrence.'"

Although Nationwide initially defended TDG against the Shahs' action, Nationwide withdrew its defense after conducting its own investigation into the Shahs' allegations.  Nationwide explained in a letter to TDG that, based on its investigation, it concluded that it had no duty either to defend or to indemnify TDG because, the damage the Shahs complained of did not constitute an "occurrence" so as to trigger coverage under the CGL policy.

In September 2008, TDG commenced an action against Nationwide seeking a judgment declaring that Nationwide was obligated to defend TDG in the underlying action and to indemnify TDG for any judgment entered against it. TDG also requested that all fees and expenses it incurred in defending against the Shahs' action be paid by Nationwide. On October 20, 2009, the arbitrator issued an award in favor of the Shahs in the amount of $12,725.

In July 2011, Nationwide filed a motion for a summary judgment.  In its motion, Nationwide argued, among other things, that TDG's alleged faulty workmanship in constructing the Shahs' house did not constitute an "occurrence" so as to trigger coverage under the CGL policy.  The motion was denied in January 2015.  The Order denying the motion also awarded partial summary judgment to TDG on the issue of coverage.  The trial court’s decision held that the complaint alleged, and the arbitration award indicated, that there was damage to the Shahs' house that resulted from or was caused by TDG's faulty work.  The trial court thus concluded that TDG was entitled to coverage and indemnification under the CGL policy not only for the damages awarded against it in the Shahs' action but also for its attorney fees and expenses incurred in defending the Shahs' action.  On February 15, 2018, the trial court entered a new final judgment awarding damages.  Thereafter, Nationwide appealed.

In its appeal, Nationwide argued that the trial court erred in finding that TDG was entitled to coverage.  According to Nationwide, because the "defects" alleged by the Shahs and identified by the arbitrator referred to nothing more than faulty work performed by TDG, those defects were not "occurrences" that would trigger coverage under the CGL policy and, thus, Nationwide was not required to indemnify TDG for the damages awarded against it in the Shahs' action.

The Nationwide policy defined an “occurrence” as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."  Although the Nationwide policy does not define the term "accident," the Supreme Court has previously stated that, in this context, an "accident" is "'[a]n unintended and unforeseen injurious occurrence; something that does not occur in the usual course of events or that could [not] be reasonably anticipated.'"

The Shahs alleged that TDG breached the parties' contract and express and implied warranties by failing to properly construct their house in a "good workmanlike" manner. The Court noted that Alabama law recognizes an implied warranty of workmanship, i.e., a duty that a contractor will "'use reasonable skill in fulfilling [his] contractual obligations.'"  Even when a contractor has completed the work contracted for, the contractor can be held liable for breaching the parties' contract and the implied warranty of workmanship if it failed to use reasonable skill in performing its work.  However, The Supreme Court has repeatedly held that "faulty workmanship itself is not an occurrence" under a CGL policy like the one here.  The Supreme Court has recognized, however, that faulty work may lead to an occurrence and thus trigger coverage under a CGL policy, "if it subjects personal property or other parts of the [damaged] structure to 'continuous or repeated exposure' to some other 'general harmful condition' ... and, as a result of that exposure, personal property or other parts of the structure are damaged."

The trial court held that, although the arbitrator's award was not "expressly clear" as to the basis for awarding damages, the Shahs' complaint "sufficiently allege[d] claims other than faulty workmanship and pray[ed] for damages on [those] claims" and that the arbitrator "had the opportunity to find [that] the Shahs suffered damages due to occurrences caused by faulty workmanship."

The Court noted that although the Shahs' complaint clearly alleged faulty workmanship, the Shahs did not allege additional or resulting damage to their house or to their personal property as a result of that faulty workmanship.  The Court held that the record before it failed to support the conclusion that the arbitrator found the Shahs to have "suffered damages" because of an occurrence caused by faulty workmanship.  Under these circumstances, the Court determined that there was no evidence demonstrating that there was property damage or personal injury resulting from an "occurrence" that triggered coverage under the CGL policy.

In light of the above determination, the Court concluded that the trial court erred in finding that TDG was entitled to coverage and indemnification under its CGL policy with Nationwide.  Thus, the Supreme Court reversed the trial court's judgment and remanded the case back to the trial court.

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

05/21/19       Elder Toledo Rodrigues v. American Security Ins. Co.

United States District Court, Western District of New York

Court Dismissed Plaintiff’s Amended Complaint with Prejudice and Granted Defendant’s Motion to Dismiss
Plaintiff purchased a home in Buffalo (the “premises”) and obtained a mortgage in June 2006. Pursuant to the mortgage agreement, Plaintiff was required to obtain property insurance.  The mortgage agreement also provided that if Plaintiff failed to obtain property insurance, the lender could choose to do so at his expense.  In addition, the agreement provided that any coverage that the lender purchased would cover the lender’s interest without any guarantee that it would cover Plaintiff.

Following the mortgage agreement, American Security Insurance Company (“ASIC”) issued a policy of insurance (the “Policy”).  The Policy provided that “if a mortgagee is named in this policy, any loss payable under the policy shall be paid to the mortgagee and you “property owner” as interests appear.”  The Policy also contained a two-year suit limitation as to when an action may be brought by any party under the terms of the Policy.

At some point, the insured failed to make mortgage payments beginning August 2007 and at that time Plaintiff stopped paying property insurance.  Subsequently, the Plaintiff filed for personal bankruptcy in 2008 and the court determined that Plaintiff’s personal obligations to the Fargo Avenue for the Premises totaled $52,256.00.

Thereafter, a fire took place at the premises on June 2, 2014. The insured commenced this current action first in state court on February 22, 2017 seeking the payment of insurance proceeds in connection with a fire that at the house. On November 22, 2017, the Magistrate Judge’s R&R recognized that: (1) the Complaint was time-barred under the Policy’s suit limitations clause, and (2) the Complaint failed to state a claim upon which relief can be granted. The United States District Judge issued a Decision and Order on July 9, 2018 agreeing with the Magistrate’s R&R.  However, in light of the Second Circuit’s case law providing that “[a] pro se complaint should not dismissed without the [c]our granting leave to amend at least once when a liberal of the complaint gives any indication that a valid claim might be stated” the Court allowed Plaintiff to file an amended complaint correcting the deficiencies noted by the Magistrate Judge’s R&R. The permission to amend was without prejudice to Defendants filing renewed motions to dismiss. Now this decision stems from whether the Plaintiff amended pleadings corrected the deficiencies noted by the Magistrate Judge’s R&R.

In its analysis the Court first found that Plaintiff has failed to state a claim for breach of contract.  In support the Court noted that the ASIC has shown that it properly remitted the insurance Policy proceeds in accordance with the Policy’s mortgage clause. 

Second, the Court found that the Plaintiff failed to state a plausible fraud claim. In its analysis the court recognized that a “[a] cause of action for fraud fails where, as here, the claimed fraud relates to an alleged breach of contract.  The also recognized that since Plaintiff’s fraud claim is premised on ASIC’s failure to adhere to the terms of the policy, it does not allege that ASIC’s breached promises extraneous or collateral to the policy itself.

Third, the Court found that Plaintiff failed to state a claim upon which relief can be granted as N.Y. Ins. L. § 2601 does not provide a private right of action for violation of the statute.

Fourth, the Court rejected Plaintiff’s request for permission to file another amended complaint.  In support, the Court acknowledged that “[i]t is well settled to leave to amend may be properly denied for, among other things, “repeated failures to cure deficiencies, and the futility of amendment.” Applying the relevant case law, the Court found that there was simply no possibility that Plaintiff could state a viable, timely claim for relief based upon the record available.

In sum, the Court granted the defendant’s motion to dismiss and the dismissed the amended Complaint with prejudice. 

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

05/16/19       James River Insurance Company v. Doswell Truck Stop, LLC

Supreme Court of Virginia

Commercial General Liability Insurance Policy – Circuit Court Decision in Favor of Insured in Declaratory Judgment Action Reversed on Finding That Auto Exclusion Precludes Coverage for Underlying Bodily Injury Action

Readers of Coverage Pointers well know that when a policy provision is found to be susceptible to more than one interpretation, courts construe the ambiguity against the insurer and liberally in favor of the insured. This principle is often asserted by policyholders seeking coverage.  But it is not without limitation. This interpretive device favors coverage, but courts should not impose an unreasonable interpretation or an absurd result.  When considering whether a term of an insurance policy is ambiguous, courts should not look at a term of an insurance policy in isolation, but rather, in the context of the entire contract.

The Virginia Supreme Court analyzed the term “maintenance” in the Commercial General Liability Policy at issue in the entire contractual context of the policy in determining the term “maintenance” was not ambiguous.  This finding reversed the circuit court’s ruling. The Supreme Court’s reversal means liability coverage is precluded for the claimant’s bodily injury action against the insured.

The background facts are as follows.  The insured Doswell Truck Stop, LLC (“DTS”) operates a truck stop in Doswell, Virginia. The truck stop premises include a gas station/convenience store, a hotel, a repair garage/truck wash, and approximately 24 acres of vacant land.  At all times relevant to the present case, DTS was insured under a Commercial General Liability Policy (the “Policy”), issued by James River Insurance Company (“James River”).

The Policy contained an Absolute Auto, Aircraft and Watercraft Exclusion endorsement (the “Auto Exclusion”) which precludes coverage for bodily injury and property damage arising out of the maintenance of any “auto.”  The Policy defines the term “auto” as:

a. A land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment; or

b. Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged.

However, “auto” does not include “mobile equipment”.

The Policy’s Auto Exclusion specifically states:

“Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft. Use includes operation and “loading or unloading”. Use also includes the handling and placing of persons by an insured into, onto or from an aircraft, “auto” or watercraft.

This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft.

In June 2016, James T. Smith (“Smith”) filed a personal injury lawsuit against DTS for injuries he allegedly suffered because of a tire explosion.  According to Smith’s complaint, he sought to have DTS repair or replace a tire on his tractor-trailer. During the repair, a DTS employee invited Smith into the garage area. The tire was secured within an OSHA-compliant steel cage designed for inflating damaged truck tires. However, while Smith was present, the DTS employee over-inflated the tire, causing it to explode and injure Smith.

DTS filed an insurance claim with James River, but James River denied coverage on the basis that DTS’s claim was precluded by the Auto Exclusion.

DTS filed a declaratory judgment action against James River, seeking a determination of whether the Policy covered Smith’s injury. DTS and James River both filed motions with the circuit court for summary judgment. In its motion, DTS argued that the term “maintenance” in the Auto Exclusion was ambiguous because it is subject to two meanings: (1) regular repair operations and (2) a possessory interest other than ownership or use. DTS asserted that both definitions of maintenance are equally possible in the context of the Auto Exclusion and, therefore, the circuit court should adopt the construction that is most likely to effectuate coverage. Alternatively, DTS contended that an independent basis existed for coverage under the Policy. Specifically, DTS claimed that Smith’s complaint contained a premises liability claim that would not be precluded by the Auto Exclusion.

The circuit court ruled in favor of DTS. In a letter opinion, the circuit court determined that the Auto Exclusion was ambiguous with respect to the meaning of “maintenance” of an auto. It also adopted DTS’s argument on premises liability as an alternative basis for granting summary judgment. The circuit court further awarded DTS $7,000 in attorneys’ fees as compensation for the fees DTS had already incurred in defending Smith’s claim.

The Virginia Supreme Court began by analyzing whether the term “maintenance” in the policy exclusion at issue was ambiguous.  Supreme Court noted that “[I]n determining whether a term is ambiguous, a court cannot look at the term in isolation; it must look at the term in the context of the entire contract”, citing  Babcock & Wilcox Co. v. Areva NP, Inc., 292 Va. 165, 180, 788 S.E.2d 237 (2016) (recognizing that the proper interpretation of a contract requires a court to avoid placing emphasis on individual terms “wrenched from the larger contractual context”).

Supreme Court explained that a contractual term is not ambiguous merely because it is subject to multiple interpretations when viewed in isolation. Rather, a contractual term is ambiguous when it is subject to multiple interpretations in view of the entire contractual context.  Supreme Court cited the following Virginia legal precedent:

Under Virginia law, conflicting interpretations reveal an ambiguity only where they are reasonable. A “reasonable” or “fairly claimed” interpretation is one of two competing interpretations that are “equally possible” given the text and context of the disputed provision.

Erie Ins. Exch. v. EPC MD 15, LLC, 297 Va. 21, 29, 822 S.E.2d 351 (2019) (citations omitted).

Supreme Court then analyzed DTS’ arguments in opposition, noting that DTS asserted that notwithstanding the fact that “maintenance” is the term at issue in the present case, the meaning of its root word, maintain, should be considered by the court.   Supreme Court acknowledged that DTS’ argument correctly noted the term “maintain” is used throughout the Policy in a manner indicating that it should be interpreted as meaning “to keep.”   However, Supreme Court rejected the DTS argument that the interpretation of “maintain” informs the interpretation of “maintenance”, because although the word “maintenance” is derived from the word “maintain,” the terms are used differently throughout the Policy and, therefore, can have distinct meanings.

Supreme Court noted that the Policy’s definition of “mobile equipment” uses both terms in a manner that clearly indicates they have different meanings. For example, “mobile equipment,” as used in the Policy, may refer to “[v]ehicles maintained for use solely on or next to premises you own or rent” or “[v]ehicles ... maintained primarily to provide mobility” to certain permanently mounted equipment. (Supreme Court’s emphasis added.)  While Supreme Court conceded this language supports DTS’s argument, as the term “maintained” is used in a manner indicating that the term means “kept,” e.g., vehicles maintained for a specific purpose or use, it also recognized that the Policy also states that “mobile equipment” does not refer to “self-propelled vehicles with ... types of permanently attached equipment ... designed primarily for ... [r]oad maintenance.” (Emphasis added.)

Supreme Court’s analysis went on to determine that the interpretation of “maintenance” asserted by DTS would mean that this language refers to equipment primarily designed for a possessory interest in roads other than ownership or use. Such an interpretation, found Supreme Court, would make little sense and, therefore, cannot be an “equally possible” interpretation of the term “maintenance.” Rather, the more reasonable interpretation would be that this language referred to equipment primarily designed for the regular repair of roads.

A review of the Policy demonstrates that, of the two competing interpretations of “maintenance,” only one can reasonably be applied to every instance of the term in the Policy. Specifically, “regular repair operations” is the only interpretation of “maintenance” that can be reasonably applied to every instance of the term in the Policy, whereas the alternative interpretation offered by DTS can only reasonably be applied to approximately half of the instances in which the term is used. Accordingly, the term was found by Supreme Court to not be ambiguous.

Supreme Court also agreed with James River’s argument that the circuit court erred in ruling that Smith’s claim asserted a premises liability claim which provided an independent basis for potential liability that is not precluded by the Auto Exclusion.  Supreme Court found that James River correctly pointed out that the Auto Exclusion precludes coverage for bodily injury “arising out of the ownership, maintenance, use or entrustment” of a vehicle. (Supreme Court’s emphasis added.) Regardless of the nature of the claim brought by Smith, the fact remains that his injury arose out of maintenance of a vehicle and, therefore, coverage is precluded by the Auto Exclusion.

In the context of an insurance policy, the phrase “arising out of the ownership, maintenance or use” of a vehicle is broad in its scope. The Court has recognized that the “ownership, maintenance, or use of the vehicle need not be the direct, proximate cause of the injury in the strict legal sense” to fall within the scope of the “arising out of” language. State Farm Mut. Auto. Ins. Co. v. Powell, 227 Va. 492, 500, 318 S.E.2d 393 (1984). Rather, such language only requires that a reasonable causal connection exist between the ownership, maintenance or use of the automobile and the injury. Id.

Supreme Court dismissed DTS’ argument that language in Smith’s complaint indicated that his injuries were the result of a DTS employee negligently permitting him to enter a dangerous location, finding that Smith’s complaint specifically alleged that his injury occurred when a DTS employee “over inflated the tire so as to cause the tire to explode.” Thus, regardless of whether allowing Smith into a dangerous location was a proximate cause of his injuries, the fact remained that a significant causal connection existed between the maintenance on the tire and Smith’s injuries. As such, Smith’s injury arose out of the maintenance of a vehicle, the Auto Exclusion applied, and the circuit court erred in ruling that an independent basis existed for coverage under the Policy.

Dear readers, I hope your work has been informed by this column.  Have a great next two weeks.         

 

BARCI’S BASICS (ON NO FAULT)

Marina A. Barci

[email protected]

 

05/28/19       Matter of County-Wide Ins. Co. v. TC Acupuncture P.C.

Appellate Division, First Department

Attorney’s Fees for Securing Payment of Overdue Claims are Decided by the Court and are Not Bound by the 20% Rule

The applicant was awarded $3,746 at arbitration. After going through arbitration, the attorney was awarded $749.38, which was calculated as 20% of the arbitration award under 11 NYCRR 65-4.6. 11 NYCRR 65-4.6 says that there are certain limitations that apply to the payment by insurers to applicant’s attorneys in no-fault arbitrations, including the provision that attorneys’ fees shall be limited to 20% of the award, plus interest up to a maximum of $1,360. Thereafter, the no-fault benefits became overdue (insurers usually have 21-30 days depending on the forum to pay or appeal an award) and the attorney needed to do more work to secure payment of the award. Subsequently, the attorney wanted to be paid for that extra work. The First Department reminded us all with this case that claimants are entitled to recover reasonable attorney’s fees for securing payment of an overdue claim, but that the court adjudicating the matter of overdue payment will set a reasonable attorney’s fee for their trouble under 11 NYCRR 65-4.10(j)(4), not 65-4.6. (Rather than go through all this, it is best practice to pay or file appeals of award in a timely fashion).

 

05/29/19       Global Liberty Ins. Co. v. Shahid Mian, M.D., P.C.

Appellate Division, Second Department

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

The applicant here was awarded $6,759.16, plus interest and attorney’s fees in arbitration. The carrier appealed this award to the master arbitrator, who affirmed it, so the carrier moved for a trial de novo. After moving the case to courts, the carrier put in an answer and the provider failed to appear, so the carrier moved for default judgment, asking that the arbitrator’s award be overturned. The default judgment was granted in July 2017 and the provider moved for vacatur in September 2017, which is a relatively short time period for all of the vacatur cases that I have seen. The vacatur was granted to the provider and the carrier appealed to where the case is now. The Second Department held that the provider had demonstrated a reasonable excuse for its default and showed that it had a potentially meritorious defense when it provided the court with proof of the arbitration award and master arbitrators affirmation of the award. Thus, vacatur was appropriate.

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

12/24/18       Oswald v. South Central Mutual Insurance Co.  

Minnesota, Court of Appeals

Statute of Limitations Hog-Ties Hog Barn Claim

In June 2016, the insureds’ hog barn burned down with a suspicion that it was incendiary and caused by arson. The insurance policy, which is something apparently unique to Minnesota called a “township mutual insurance policy”, provided that property claims must be brought within one year after the loss. This was apparently different from normal Minnesota statutes of limitation. The insureds initially filed a claim which was never perfected by valid service of process. They then re-filed the claim which was deemed barred by the one-year suit limitation period, and this decision was upheld on appeal.

The Court of Appeals held that the one-year limitations period in the policy was not unreasonable, and in fact had the insureds perfected service of their originally filed complaint they would have been within the one-year limitations period. The Appellate Court also ruled that the policy provision was not ambiguous, and there had been no tolling or estoppel to assert the statute of limitations based upon any equitable principles or conduct by the insurance company. Therefore, the decision of the district court was affirmed.

This case again emphasizes the importance of statutes of limitations, which are significant defenses as a matter of law and are truly “show stoppers” in that they may completely bar a claim, or significant parts or time periods of a claim.

Care should be taken to analyze whether different claims may have different statutes of limitations in a particular jurisdiction, such as whether the underlying claim was one for personal injury, property damage, or breach of contract. Care should also be taken to determine, as best possible, what is the start or commencement date of the running of the statute of limitations. Is it the date of loss? Is it the date of some filing or notice of a claim? Is it the date of receipt of a denial or rejection of a claim? This is particularly important in cases such as this where the applicable statute of limitations may be very short, such as less than two years, so any suit may have to be filed on an expedited basis. 

Hurwitz & Fine, P.C.

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Phone: 716-849-8900

Fax: 716-855-0874

         

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535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

 

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