Volume XX, No. 3 (No. 514)

Friday, July 27, 2018

A Biweekly Electronic Newsletter

www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2018
All rights reserved
 

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

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

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

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

 

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.  North or south, east or west, wherever we may find them.

Aloha, from Honolulu.  On my way to the FDCC Annual Meeting in Maui, I received a pleasurable invitation from  a very kind insurer to do some risk transfer and bad faith training in Honolulu.  Never wanting to turn down an opportunity to provide in-house education, we took this side trip for today’s presentation.  It’s a burden I can easily tolerate.  You’ll find a Hawaiian influence in my selection of stories from 100 years ago.

Last week I had the opportunity to participate in the Annual Judicial Symposium for the NFJE in Chicago.  If you don’t know much about the National Foundation for Judicial Excellence, please visit its website, www.nfje.net   It is a charitable foundation that provides educational programming for state appellate judges.  Some 150 judges from 39 states attended.  I was honored to be elected NFJE’s Vice President for the coming year.

Pardon the brevity of the note and the issue. The courts are in their summer siesta and my coverage team is traveling and working hard.

I would draw your attention to Barnas on Bad Faith column and a very interesting decision that refuses to throw out a bad faith cause of action.  No bad faith was found, but the claim will persist.

 

For Those with Travel Envy:

For my Facebook friends, skip ahead, you saw this next entry when I landed in LAX on Wednesday.  For those who constantly pick on me about travel, here’s my “diary” entry, writing on Hawaiian Airlines Flight 51, designed as a non-stop flight from JFK to Honolulu:

 

Dear Diary:

As I write this, we’re 130 miles from Los Angeles. Who was it that said that flying was exotic? Not moi. This is one of those stories one prefers not to have to experience. However, if you are reading this, we are safely on the ground because this plane is not equipped with WiFi.

Lovely moment on a non-stop from NYC to Honolulu.

About 1 1/2 hours out of LAX, captain announces that there is some (non-serious) issue with the plane so we’ll have to land in LAX (should be a normal landing). A couple of the “systems” aren’t working.

Then he announces that the plane is heavy on fuel, because the tanks were filled to go across the Pacific. So, he tells us, they have to dump fuel and we’re watching it spew out of the engines. Not particularly reassuring. Least they can do is serve free booze.

Can we take an Uber from LA to Honolulu? I’ll check the app.

Now 65 miles from LA and all seems normal from back here.

I suppose if this were a serious problem, the plane would have landed in Albuquerque (a city name I learned to spell playing Word Riot years ago).

The screen on the TV says “Welcome to Hawaii”. Liar, liar, pants on fire.

Descending. They haven’t told us to assume the crash position, I guess that’s a good thing. In fifth grade, during the Cuban Missile crisis, they had us hiding under desks. That was useful as well.

“Flight attendants, please be seated for arrival” is a reassuring announcement.

The TV screen tells me that Charles Lindbergh rests in Hana, Maui, buried under a tree. I’m sure he appreciates being remembered.

Now the screen talks about saki, but they haven’t offered us any. The nerve.

LA is looming below.

At least they dumped the fuel before they flew over LA. The folks below surely appreciate that.

Safely landed. Mahalo.

 

ERA, “From Here to Infinity” – the Story of Harry Heitmann:

Thanks to Wiki, for this tale of woe involving Harry Heitmann.  He played in one major league baseball game, 100 years ago today.  His earned run average is “infinite”.

Henry Anton "Harry" Heitmann (October 6, 1896 – December 15, 1958) was a pitcher in Major League Baseball. He pitched in one game for the Brooklyn Robins (predecessor name to the Dodgers) during the 1918 baseball season, getting the start against the St. Louis Cardinals on July 27, 1918, in the second game of a doubleheader.

Heitmann had been called up to the majors after a glittering debut season in the minors with Rochester, where he went 17–6 with a 1.32 earned run average (ERA). Unfortunately, his major league career would not be anywhere near as successful—although for nearly one hundred years there was a discrepancy in the account of just how unsuccessful Heitmann was in his one ML game. Written newspaper accounts claim he faced four batters and got none of them out, while the published box score indicated he faced five batters and got one out. In both accounts, the four batters who reached safely all did so on base hits, and all came around to score, tagging Heitmann with the loss. Official baseball statistics went with the box score version, crediting Heitmann with pitching one-third of an inning and finishing his career with an ERA of 108.00.

However, recent research by the Society for American Baseball Research confirms the newspaper accounts. As of 2011, Heitmann is now credited with facing four batters, giving up four hits and four runs, and being one of 19 players who retired from the major leagues with an ERA of infinity.

The aftermath of Heitmann's appearance has also become part of baseball lore. According to contemporary accounts, Heitmann was pulled from the game, then—even as the game continued—he immediately packed up his belongings, left the stadium, and enlisted in the Navy. Other accounts have Heitmann already enlisted in the Navy, and leaving the stadium to return to the Brooklyn Naval base. Whether or not this legend is strictly true is open to debate. In any event, Heitmann's naval career didn't last that long; by 1919 he was again pitching for Rochester. Heitmann enjoyed a relatively long and successful minor league career that lasted until 1928, switching from pitching to being primarily an outfielder/first baseman by the mid-1920s. He finished his minor league career with a 68–46 win–loss record, and a .292 batting average in nearly 2,000 at bats.

 

Peiper Portuguese :

We return from a brief hiatus. While I had planned on joining the newsletter in my usual spot, the inconsistency of Transatlantic WiFi was ultimately my undoing.   Apologies on our absence here, but no apologies on visiting Lisbon where I attended the mid-summer classic that is the IADC annual meeting.  We’re back on terra firma this week, and ready to jump back into the fray.  The fray, however, is not cooperating. As consistent as humidity in August, Appellate Decisions have slowed to trickle (not unlike my WiFi from two weeks ago).

Not lost in the Mid-Summer Malaise, however, is a gem from the Appellate Division, Third Department.  The Roemer decision, reviewed by Brian Barnas deserves some extra study. In it, the Third Department appears to be suggesting the Pavia/Gordon standard now applies to consequential damages. Brian provides excellent analysis, we’d encourage you to take a look. 

 

Steve
Steven E. Peiper

[email protected]

 

Why Insure the Railroads, a Century Ago?

 

The Buffalo Commercial
Buffalo, New York

27 Jul 1918

INSURANCE QUESTION

Dropping Insurance on Railroad
Property, False Economy

New York, July 27.—Several important New York City Insurance men ridiculed the report given out in Washington that the railroad administration would save $200,000,000 a year by the order dropping all fire and other property insurance by railroads.

One insurance executive said that for the past twenty years the bulk of railroad insurance has been carried by two syndicates who have put the insurance on their books at an acquisition cost of less than one-half the premium received from any other line of business in the United States, and that the companies have written the insurance of railroads at a loss.  He declared that most companies are glad to be relieved of it, so far as the returns are concerned, but are opposed to the policy of self-insurance by the government.

It was pointed out that the insurance companies have organized and perfected an efficient system of inspection which has kept fire loss of railroad property down to a minimum, and that the new order destroys this organization.  Therefore, the government will have to build up one to replace it.  This, it was said, will require an expenditure of about $1,000,000 a year.  Such an organization, it was declared, could not be made as efficient as the present one within ten years. 

 

Hewitt’s Highlights: 

Dear Subscribers:

Summer continues and it is getting hot and humid on Long Island. Are these the dog days of summer? I think so as the Yankees continue to fall short of catching up to the Red Sox and the Mets sitting in last place.

On the serious injury front, the Courts seem to be slowing down for the summer. However, we have one case in which plaintiffs are reminded they must explain gaps in treatment satisfactorily or they will lose on a motion to dismiss. Defendants should be highlighting gaps in treatment. Also, plaintiffs’ doctors must address defendant’s experts which opine that film taken immediately after the accident shows only degenerative injuries.   We also have a case in which a rare motion to set aside the verdict was granted, where the jury was improperly asked whether plaintiff suffered an “injury,” not a “serious injury.”

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

Calamities in Honolulu:

 

Honolulu Star-Bulletin
Honolulu, Hawaii

27 Jul 1918

THREE CLAIMS CASHED
FOR CALAMITY CORNER
WITHIN PAST MONTH

 

Within the past month; Calamity Corner, as the corner of Beretania and Keeaumoku streets is known, has cost the insurance department of the Schuman Carriage Co. in the neighborhood of $500.  Three claims to that total have been settled by Stanton Wyatt on insured cars damaged at that corner in the past four weeks.

“You know that I don’t think that corner is bad but merely that its reputation is bad,” remarked Mr. Wyatt.  “When people come to that corner they remember the many accidents that have happened there and they get rattled and the first thing you know there’s one more accident added to the list.  Why, there’s a half dozen other corners I know which are much more dangerous but which haven’t the bad name that Calamity Corner has.”

Editor’s Note:  that corner is 2.5 miles from here, so I decided not to make a site visit.

 

Wilewicz’ Wide-World of Coverage:           

Still traveling in Poland.

 

Agnes
Agnes A. Wilewicz

[email protected]

 

Diet Advice, a Century Ago:

 

The Honolulu Advertiser
Honolulu, Hawaii

27 Jul 1918

 

TOO MANY CALORIES
AS BAD AS TOO FEW

 

“What is a calorie?”  Many people nowadays are asking this question.

A calorie is the amount of heat required to raise the temperature of a pound of water about four degrees Fahrenheit.  It is the accepted unit of fuel value or—as applied to food—energy value.  And the commonest fallacy is always the best food to eat.

Food performs other important functions in the body beside supplying undigested calories.  You can put out a fire with too much coal.  The most important thing sometimes is to get rid of ashes and clinkers or to put in a new grate.  Food should do all these things for the human furnace—keep it in repair, supply fuel, keep a clear draft.

Dr. Sherman, professor of food chemistry, Columbia University, referring to the increasing use of sugar—the highest of all goods in calories and energy value—says:

“There is a constantly increasing danger of unbalancing the diet and making it deficient in some of the substances which are needed for the building and repair of body tissue and for the regulation of physiological processes.”

The proper dietary balance of all necessary elements is the vital consideration in choosing food.  Don’t eat merely for calories or protein or carbohydrates.  East for a balanced diet. 

 

Barnas on Bad Faith:

Hello again:

I have a New York first party bad faith case in my column this week and it is full of interesting issues.  A fire destroyed Plaintiff’s residence in March 2010 and he submitted the claim to Allstate.  After settlement negotiations were unsuccessful, the appraisal process took place and the independent appraisers agreed upon the amount of the loss in June 2011.  However, on July 1, 2011, Allstate disclaimed coverage based upon Plaintiff’s lack of an insurable interest.  Plaintiff sued Allstate seeking a declaration that he had an insurable interest and that Allstate acted in bad faith.

As readers of this publication well know, the decisions by the Court of Appeals in Bi-Economy and Panasia concluded that an insured can assert a claim for consequential damages against an insurer for breach of an insurance contract.  However, what the standard for awarding consequential damages has been difficult to determine from the cases that have come out since.  The Third Department in Roemer seems to suggest that the standard for consequential damages resulting from a breach of the covenant of good faith and fair dealing in the first party context is the same as the standard for third party bad faith.  Indeed, the court cites to Pavia and Smith, two well-known third party bad faith cases, in stating that the insurer’s conduct must constitute a gross disregard of the insured’s interests to establish a prima facie case of bad faith.  The court then considered the evidence against that standard in deciding Allstate’s motion for summary judgment.

Unfortunately for Allstate in this case, the court still found an issue of fact on bad faith, even considering the claim under the Pavia standard, which is generally viewed as insurer friendly.  The problem in this case was Allstate presented no admissible evidence to explain why it disclaimed based on lack of an insurable interest after 16 months of investigating the claim and coming to an agreement on value through the appraisal process.  Allstate’s attorney’s affirmation was not based on personal knowledge, and, as such, the court concluded that it lacked any probative value as to whether defendant’s conduct in investigating and denying coverage constituted bad faith.  Of note, with only an attorney’s affidavit presented, the court concluded that Allstate did not even meet its burden of establishing prima facie case that it did not act in bad faith.  The court did not even consider the insured’s evidence in opposition to the motion.

This decision will bear watching to see if more courts in New York apply the Pavia standard to claims for consequential damages and first party bad faith.  At the very least, we finally appear to be getting a little bit of clarity on this issue.

Have a nice weekend.

Signing off,

 

Brian
Brian D. Barnas

[email protected]

 

Hawaiian Fundraising:

 

 

The Honolulu Advertiser
Honolulu, Hawaii

27 Jul 1918

 

PRETTY GIRLS IN COLLUSION
WITH STERN COPS HELD

 

Summary Street Corner Trials and Fines
Swelled Day’s Total of Thrift Saving Stamp Sales

 

MOLOKAI LEPERS SET
EXAMPLES TO SLACKERS

 

Big Mass Meeting At Night
Brought Day’s Total Up to

Record of Week So Far

 

With pretty girls and stern traffic cops working in collusion all day, with practically every store in the city making a plate-glass window display calling upon patriots to do their duty and with mob singing and oratory and patriotic movies in Bishop Park throughout the evening, yesterday had to be a record breaker in the Thrift Stamp campaign, and it was.

While the cash sales could not be totaled and will not be announced until this morning, it seems certain that they were the heaviest of the week, which means that they ran well towards fifty thousand dollars.  The Limit Club membership jumped fifty-eight, and cash sale as reported by wireless ran over ten thousand dollars in the Crescent City.

 

Leper Do Full Duty

Going over the top and proving their community one hundred percent patriotic, the lepers of Molokai already have purchased their full quota of war stamps for the year, or twenty dollars of W. S. S. for every man, woman and child in the settlement.

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Readers. 

I’m back from Israel, and it was amazing! Did you miss me? I prayed at the Western Wall, rode a camel, ate a ton, floated in the Dead Sea, ate a ton, toured Jerusalem, ate a ton, rode an ATV along the Lebanon border, ate a ton, toured underground tunnels, and ate a ton.  It’s not a vacation unless your clothes don’t fit when you come back, right?  On the good hand, there’s more of me to love now. About eight pounds more.

On a more serious note, in administrative news, New York’s Department of Financial Services (DFS) issued a Circular Letter promulgating guidelines to prohibit carriers from discriminating against LGBT Americans.

We try not to be political here at Coverage Pointers, but, carriers should note that while the current Administration has indicated that it will limit or eliminate certain health coverage for LGBT Americans currently afforded by the ACA, insurance is also State-regulated.  In this case, New York, acting preemptively to combat anticipated cuts for gender dysphoria treatment and other procedures, issued guidelines banning discriminatory coverage.

Note:  As statutes are dense, I typically edit and summarize.  Here, I quote from the circular letter verbatim.  Should you, Dear Reader, have any questions, I would be happy to discuss the letter with you.  But, to the extent anyone wants my opinion, I believe an attack on any one American’s rights is an attack on each of us; we are all, each one of us, the same on the inside, and entitled to equal treatment under the law.  

 

Howard
Howard B. Altman

[email protected]

 

Huge Verdict in Death Case?

 

Trenton Evening Times
Trenton, New Jersey

27 Jul 1918

 

AFFIRM VERDICT OF
$1,500 FOR DEATH

 

Supreme Court States That It

Believes in Jury’s Judgment on Case

 

The Supreme Court today affirmed a judgment of $1,500 recovered by Joseph Bustruck of West Hoboken from the Union Express and Freight Company in the Hudson County courts, for the death of his five-year-old son.  In the first suit a judgment of $2,500 was awarded, but that was set aside in a former appeal on the ground that it was excessive.  In affirming the new verdict the Supreme Court gives expression to the method of arriving at verdicts in such suits as this.  The court’s comment on this line follows:

“As verdicts in this class of cases are bound to be more or less speculative in their character, and as we have no other and better standard to go by than the jury had to arrive at the value of the prospective life of the child to his next of kin, we are unable to say that the jury speculated wrongly, or that the award is so grossly excessive as to shock the sense of right and clearly evinces that it was the result of mistake, misconduct, passion or prejudice on the part of the jury.”

 

Off the Mark:

 

Dear Readers,

I can’t believe it’s almost August already.  I hope all of our readers are enjoying the summer.  It seem like the courts are doing so as my search for interesting construction defect cases came up empty.  As always, I will continue to keep an eye out for noteworthy decisions and will keep you updated.

Until next time …

 

Brian
Brian F. Mark

[email protected]

 

Powerful Advice for the Working Wife:

 

News-Journal
Mansfield, Ohio

27 Jul 1918

 

SAVES LABOR IN THE HOME

Base Plugs Help Women Get Their

Work Done Quickly.

 

Mrs. Jones orders an outlet installed in her living room for the convenient operation of her vacuum cleaner.

Hardly is the first morning’s electric sweeping over, before she discovers that the outlet provides a handy connection for an electric toaster, chafing dish, or percolator when “tea” or after-dinner coffee are to be served in the living room. Then it occurs to her that a fan can also be operated from the same magic opening.   And a few days later she perhaps even plugs in a portable lamp to add the final touch of comfort to that corner of the living room, at the same time saving burning a whole cluster of lamps overhead.

An outlet once installed—in living room, dining room, kitchen, bathroom, hall or bedroom—is a continual invitation of make use of those labor-saving appliances already in the household, and to add more.

In building your new home or rewiring your old one, use plenty of outlets.

 

Wandering Waters:

Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.

What an exciting NBA off-season.  After endless rumors and reports, Khawhi Leonard has finally ended his time with the Spurs.  Despite his reported preference for the Lakers or Clippers, the Spurs traded Leonard to the Raptors.  Recent reports appear to indicate Leonard is not too happy about his new employer.  While the Raptors hope they can sell Leonard on the franchise long term, many speculated Leonard would leave for sunny California when he is a free agent next summer.  One can only hope next summer will have as much drama and suspense as the current NBA offseason.

With that being said, this week we have one case from the United States District Court, Southern District of New York.  I hope you enjoy.

Until next time…. 

 

Larry
Larry E. Waters

[email protected]

 

Object Hawaiian Matrimony:

The Honolulu Advertiser
Honolulu, Hawaii

27 Jul 1918

PERSONAL

SERGEANT would like to meet honest home loving, working girl or widow, not over 35.  Object matrimony.  Address “Lonesome,” P. O. Box 61. 

 

Boron’s Benchmarks:

Dear Subscribers:

So, last night, my wife asked me what the best part of my work day had been.  She asked me this question about a nanosecond after I had stuffed a chewy hunk of pizza into my mouth.  I know I probably shouldn’t admit this, but I answered her while chewing, saying I was enjoying putting together a column about choice of law.  It was evident she didn’t understand what I had said – not so rare, actually – because she next asked, “Where’s Choisavla?”

As far as I know, there is no place called Choisavla (put the EM-pha-sis on the first SY-lla-ble; CHOI-sa-vla).  But, there is a place called the Delaware Supreme Court, and that is where a ruling was issued last week, resolving a choice of law dispute concerning corporate-wide liability insurance policies, which saved Travelers from having to pay out a $13.7 million verdict in an asbestos exposure suit.  I’ve written about the case, Travelers v. CNH, and hope you’ll find your way over to that part of this newsletter.

But, before you go there, indulge me for a moment to ponder why the Travelers policies at issue were silent on the choice of law issue.  Wouldn’t you think a choice of law clause would have been among the boilerplate policy provisions, so as to provide for some degree of predictability and certainty about how coverage disputes which may arise would get resolved?  Perhaps not, especially if you appreciate that the best choice of law for an insurer will depend, in truth, upon what particular legal issues are of greatest import to the insurer in each unique coverage dispute.

A saying of Jean-Paul Sartre, the French existentialist philosopher, dramatist, screenwriter, novelist and critic who famously declined the award of the 1964 Nobel Prize in Literature, is often quoted, “We are our choices”.  Simple enough on one level, I’d say.  But, is choosing not to make a choice actually making a choice?  Wow, I’ll leave you to chew on that – without talking at the same time as you’re chewing, please - while I move on to trying to understand why someone would turn down a Nobel Prize.

Here’s hoping this material may be helpful in or for your work.

Regards,

 

Eric
Eric T. Boron          

[email protected]

 

Baseball Players face War Deadline:

 

New-York Tribune
New York, New York

27 July 1918

 

Baker Rules Against
Baseball, but Gives
Players Till Sept. 1

 

Declaring that winning the war is now the big business of the United States government, Secretary of War Baker yesterday denied the petition of organized baseball to be allowed to continue its season until October 15 without interference from the “work or fight” order.

Secretary Baker, however, decided that he would allow the ball players affected by the draft to continue playing until September 1.  This decision was made, not as exempting baseball, but because of a belief among ball players gathered from a statement by the Secretary that the department was favorable to baseball and would not interfere with the industry before the end of the season.

While the big league officials have not made definite plans as to their future, some high in authority say that the present season of the majors will end on September 2, and a world series will follow immediately thereafter.  For full details and the text of Secretary Baker’s decision see the sporting pages.

 

Headlines from Today’s Issue, Attached:

 

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

 

  • Where Tenant has Responsibility for Common Areas and the Lease Obligates Tenant to Purchase AI Coverage for Landlord for those Areas, Carrier is Obligated to Defend and Indemnify Landlord under Additional Insured Endorsement

 

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III

[email protected]  

 

  • New Trial Order Where Jury Was Asked If Plaintiff Suffered an Injury but Not Whether She Suffered a Serious Injury as Is the Standard

  • Plaintiff’s Doctor Failed to Address the Finding of Defendant’s Expert that Film Taken after Plaintiff’s Injury Only Showed Degenerative Changes

  • Defendant Failed to Address 90/180-Day Claim

  • Plaintiff Adequately Explained Gap in Treatment

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

 

  • Question of Fact Over Whether Water is Ground Water or From a Plumbing System

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz

[email protected]

 

  • In Poland.

 

JEN’S GEMS
Jennifer A. Ehman

[email protected]

 

  • Nothing to report…

 

JERRY’S NO FAULT NAVIGATION
Jerry Marti

[email protected]

 

  • Defendant Entitled to No-Fault Authorization as Part of Discovery

 

BARNAS ON BAD FAITH
Brian D. Barnas

[email protected]

 

  • Issue of Fact on Bad Faith where the Insurer Failed to Present any Admissible Evidence to Explain why it Disclaimed Coverage Based on a Lack of an Insurable Interest 16 Months after Fire

 

JOHN’S JERSEY JOURNAL
John R. Ewell
[email protected]

 

  • All Quiet on the Jersey Front.

 

ALTMAN’S ADMINISTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman

[email protected]

 

  • Gender Identity

 

OFF THE MARK
Brian F. Mark
[email protected]

 

  • Nothing to report…

 

WANDERING WATERS
Larry E. Waters

[email protected]

 

  • Plaintiffs Motion for Summary Judgment Claims Granted Only to the Remaining Sites Which it Could Establish the Property Damage Occurred During the Policy Period and Plaintiff Did Not Expect or Intended the Property Damage that it Was Obligated to Remediate at the Time of the  Policy Period.

 

BORON’S BENCHMARKS
Eric T. Boron

[email protected]

  • Choice of Law

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

 

  • Direct or Consequential Damages

 

Mahalo.

Dan

 

Dan D. Kohane
Hurwitz & Fine, P.C.

1300 Liberty Building
Buffalo, NY 14202

 

Office:            716.849.8942
Mobile:           716.445.2258
Fax:                716.855.0874
E-Mail:            [email protected] 
Website:         www.hurwitzfine.com 
Twitter:           @kohane
LinkedIn:       www.linkedin.com/in/kohane

 

 

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
Edward B. Flink
Brian D. Barnas
Howard B. Altman
Brian F. Mark
Eric T. Boron
John R. Ewell
Larry E. Waters
Diane F. Bosse
Joel R. Appelbaum

 

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

 

Michael F. Perley
Edward B. Flink
Eric T. Boron
Brian D. Barnas
Howard B. Altman
James L. Maswick

 

NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
[email protected]
 

Jerry Marti

 

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

Jerry’s No-Fault Navigation
John’s Jersey Journal

Altman’s Administrative (and Legislative) Agenda
Off the Mark

Wandering Waters

Boron’s Benchmarks

Earl’s Pearls

 

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

 

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

Robert E.B. Hewitt III

[email protected]  

 

07/25/17       Brown v. Ng
Appellate Division, Fourth Department

New Trial Order Where Jury Was Asked If Plaintiff Suffered an Injury but Not Whether She Suffered a Serious Injury as Is the Standard

The plaintiff alleged that the defendant's vehicle struck her vehicle in the rear.   At trial, defendant acknowledged that her failure to yield the right-of-way caused the accident, but she claimed that plaintiff did not sustain a resultant "serious injury" within the meaning of Insurance Law § 5102 (d). The following question appeared on the verdict sheet: "Was the negligence of defendant a substantial factor in causing injury to the plaintiff?" The jury answered that question in the negative and thereby returned a verdict in defendant's favor. Plaintiff now appealed the verdict and the denial of her summary judgment on the issue of serious injury. The Appellate Division upheld the denial of her summary judgment motion. They held it was undisputed that plaintiff met her initial burden of establishing that she sustained a serious injury under the significant limitation of use and 90/180-day categories. The report submitted by defendant's medical expert, however, raised an issue of fact regarding whether plaintiff sustained a serious injury as a result of the accident.

As for the motion to set aside the verdict as against the weight of the evidence, the Appellate Division held the jury was not asked to determine the appropriate issue, having only been asked if plaintiff sustained an “injury” and not a “serious injury,” as is the standard. The Appellate Division’s review indicates that Plaintiff's medical records from her visit to the emergency room immediately after the accident show that she was diagnosed with cervical sprain, strain, minor head injury, acute low back pain, and shoulder strain. Plaintiff's treating chiropractor testified that, in his opinion, plaintiff had "on going disabilities" and "continued to suffer pain and significant limitations of motion" as a result of the accident. He also testified that plaintiff's range of motion was limited and that she experienced moderate to severe muscle spasms on multiple occasions. Defendant's medical expert even testified that plaintiff suffered muscle pain as a result of the accident, although he opined that such pain was only "a mild or minor injury and not a significant consequential disabling injury." In light of the foregoing, the Appellate Division concluded that the evidence that the accident was "a substantial factor in causing an injury to plaintiff" so preponderates in plaintiff's favor that the jury's contrary finding could not have been reached on any fair interpretation of such evidence. A new trial was necessary to determine whether plaintiff suffered a “serious injury.” 

 

07/25/17       Cavitolo v. Broser
Appellate Division, Second Department

Plaintiff’s Doctor Failed to Address the Finding of Defendant’s Expert that Film Taken after Plaintiff’s Injury Only Showed Degenerative Changes

The Appellate Division found that defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff's left shoulder and the cervical region of her spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) and that, in any event, the alleged injuries were not caused by the accident. The defendant also demonstrated, prima facie, that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d). How is not revealed in the decision.

In opposition, the Appellate Division held plaintiff failed to raise a triable issue of fact. The affirmation of the plaintiff's expert failed to address the findings of the defendant's examining radiologist that the magnetic resonance imaging of the plaintiff's left shoulder, taken shortly after the accident, revealed only pre-existing degenerative conditions

 

07/25/18       Bardales v. Monell
Appellate Division, Second Department

Defendant Failed to Address 90/180-Day Claim

This action arises from a motor vehicle accident that occurred on June 12, 2013, near or at the intersection of Sweet Hollow Road and Old Country Road in Huntington, NY.  The Appellate Division held 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 accident. The papers submitted by the defendants failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendants failed to meet their prima facie burden, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.

 

07/25/18       Hu v. Frenzel
Appellate Division, Second Department
Plaintiff Adequately Explained Gap in Treatment

The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) by submitting competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and thoracolumbar regions of the plaintiff's spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition to the defendant's prima facie showing, the plaintiff raised triable issues of fact as to whether she sustained serious injuries to the cervical and thoracolumbar regions of her spine. Further, plaintiff adequately explained the gap in her treatment by submitting an affirmed medical report of her treating physician

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

07/12/18       Wickline v. New York Cent. Mut. Fire Ins. Co.
Appellate Division, Third Department
Question of Fact Over Whether Water is Ground Water or From a Plumbing System

The current lawsuit arises from a cracked basement wall that was discovered in 2014.  Plaintiff submitted a claim to NYCM, and NYCM immediately opened an investigation which included an inspection of the home by an engineer.  When the engineer opined that the crack was the result of freezing and thawing ground water, NYCM disclaimed on the basis of the exclusion which precluded coverage for damage caused by freezing/thawing of water to a foundation.  Water was defined, in relevant part, as water below the surface of the ground which exerts pressure on a foundation “regardless of whether [the water] is caused by an act of nature or is otherwise caused."

During the course of repairs, plaintiff’s engineer discovered evidence, in his opinion, which suggested the water leaked from a hose bib that was not frost protected.  Thus, water leaked against the foundation from a water line that ran to an exterior spigot.  Plaintiff, in turn, asked NYCM to reconsider its coverage opinion that the loss was caused by frozen groundwater.

NYCM eventually moved for summary judgment, again asserting that the loss was caused by pressure of groundwater against a foundation.  In denying the motion, the trial court found a  question of fact as to whether the water was, in fact, ground water under the terms of the policy. On appeal, the Third Department agreed and therein noted the source of the water is relevant. Here, the policy does provide coverage for “bulging…of a foundation…when caused by water which is accidentally discharged from a plumbing system.”    Thus, if the water qualifies as a discharge from a plumbing system, coverage would be triggered.

In addition, the Court also refused to grant NYCM’s motion to dismiss claim for consequential damages. Plaintiff alleges that if not for the NYCM denial it would not have had to undertake “extensive and expensive corrective work.”  The Court noted that consequential damages are recoverable upon a showing that they are “within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.”  As there remains a question of fact as to whether plaintiff even has coverage, it follows there also remains a question of fact on plaintiff’s consequential damages claim. 

 

Peiper’s Point – Surely, if there is no breach of contract, there can be no consequential damages.  We have no quibble with this position.

However, we do submit that the Appellate Division may have overlooked another key distinction. By their nature Consequential Damages are damages which arise as a result of a breach.  Here, plaintiff had to repair plumbing and drainage damages as a result of a burst failed hose bib.  The damages came not from NYCM’s denial, but as a result of the actual loss.  The damage from the hose bib was not exacerbated by NYCM’s decision to deny.  Rather, it was the extent of the damage that was discovered as part of plaintiff’s attempts to remedy the problem.  The discovery of the hose bib is not a new loss, and thus the damage is not consequential.  

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

Nothing to report…

 

JERRY’S NO FAULT NAVIGATION

Jerry Marti

[email protected]

 

07/11/18       Manuel Cajamarca v. Eugene Osatuk, et al. 
Appellate Division, Second Department
Defendant Entitled to No-Fault Authorization as Part of Discovery

After Defendant had served a demand for no-fault/collateral source authorizations, Plaintiff moved for a protective order arguing that such records are not discoverable under CPLR 4545(a) where Plaintiff does not seek to recover unreimbursed special damages. The Supreme Court granted the plaintiff’s motion, and the defendant appealed the decision.

On appeal, the Court held that, under CPLR § 3101(a), the plaintiff’s no-fault records are material and necessary to the defense of a plaintiff’s claim to having sustained a serious injury within the meaning of Insurance Law § 5102. Moreover, the Court noted that CPLR 4545(a) governs the admissibility of evidence to establish that damages have been or will be covered in whole or in part by a collateral source.  In contrast, in the context of discovery, “[a]ny matter which may lead to the discovery of admissible proof is discoverable, as is any matter which bears upon a defense, even if the facts themselves are not admissible.”  Accordingly, the Appellate Division, Second Department reversed the lower court and denied the plaintiff’s motion for a protective order preventing disclosure – with costs.

 

BARNAS ON BAD FAITH
Brian D. Barnas
[email protected]

 

07/19/18       Roemer v. Allstate Indemnity Insurance Company
Appellate Division, Third Department
Issue of Fact on Bad Faith where the Insurer Failed to Present any Admissible Evidence to Explain why it Disclaimed Coverage Based on a Lack of an Insurable Interest 16 Months after Fire

In March 2010, a fire destroyed plaintiff's residence located at 1 Braley Point in the Hamlet of Bolton Landing, Warren County.  Plaintiff's residence was one of two structures on the property, the other consisting of a lodge that plaintiff used as a rental accommodation during the summer tourist season.  The homeowners insurance policy for the property was procured through defendant and plaintiff was listed as the named insured.  Following the fire, plaintiff promptly notified defendant of the loss and an investigation ensued.  The parties' subsequent attempts to reach a settlement with respect to the amount of loss proved unsuccessful, and plaintiff thereafter initiated the appraisal process.  Although the independent appraisers hired by the parties ultimately agreed upon the amount of loss in June 2011, no payment was subsequently forthcoming from defendant.  Rather, on July 1, 2011, defendant issued plaintiff a written disclaimer of coverage, determining that plaintiff lacked an insurable interest in the property, as the titled owner of the property was Roe Management and Development, Inc. and not plaintiff.

Plaintiff thereafter commenced this action seeking a declaratory judgment that he had an insurable interest in the property, that he is entitled to the agreed-upon settlement offer, that the disclaimer of coverage was improper and wrongful and that defendant acted in bad faith.  Defendant moved for partial summary judgment seeking dismissal of plaintiff's claims for consequential damages, as well as plaintiff's claim alleging that defendant failed to act in good faith in adjusting plaintiff's insurance claim. Supreme Court partially granted defendant's motion by dismissing plaintiff's claim for counsel fees, but otherwise denied the motion, finding that defendant's alleged conduct created a question of fact as to whether it breached the covenant of good faith and fair dealing. Defendant now appeals.

A covenant of good faith and fair dealing is implicit in every insurance contract and requires the insurer to investigate in good faith and pay covered claims.  In turn, consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.  To establish a prima facie case of bad faith, it must be established that the insurer's conduct constituted a gross disregard of the insured's interests — that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer.  In establishing a claim for bad faith, although not an exhaustive list, the courts will consider the facts and circumstances surrounding the case, including whether liability is clear, whether the potential damages far exceed the insurance coverage and any other evidence which tends to establish or negate the insurer's bad faith in refusing to settle.

Defendant contended that was no evidence in the record demonstrating that it acted in bad faith or engaged in conduct constituting a gross disregard of its insured's interests.  The day after plaintiff's residence was destroyed by fire, plaintiff submitted a standard fire claim form notifying defendant of the loss and defendant thereafter commenced an investigation.  While the investigation was pending, defendant advanced plaintiff $5,000 for the removal of debris from the property pursuant to its insurance policy.  The Warren County Fire Investigation Office subsequently determined that the cause of the fire was accidental such that there appears to be no dispute that the accident is covered by the insurance policy.  Additionally, for the following 12 months, defendant paid plaintiff for additional living expenses in accordance with the terms and coverage limits provided for in its insurance policy.  When initial settlement negotiations thereafter proved unsuccessful, plaintiff commenced the appraisal process pursuant to the terms of the insurance policy, and each party thereafter hired their own independent appraiser to determine the amount of loss.  In June 2011, the appraisers mutually agreed upon the amount of loss; however, on July 1, 2011 — 16 months after plaintiff's residence was destroyed by fire — defendant disclaimed coverage on the basis that plaintiff did not have insurable interest in the property.

Of note, Defendant failed to present any admissible evidence in support of its motion to explain why, after 16 months of investigation it only disclaimed coverage after the parties' independent appraisers had reached a mutual agreement as to the amount of loss incurred.  Defendant submitted only an attorney affirmation, which was not based on personal knowledge of the defendant’s investigation.  At no point prior to paying plaintiff various benefits to which he was otherwise entitled under the insurance policy, or during settlement negotiations or the appraisal process, did defendant ever indicate to plaintiff that coverage might ultimately be denied because he was apparently not the titled owner of the property — a fact of which plaintiff avers he made his insurance agent aware prior to purchasing the subject policy.

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

ALTMAN’S ADMINISTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

On June 25, 2018, DFS issued a Circular Letter outlining guidelines to prevent “discrimination based on sexual orientation, gender identity and/or gender dysphoria.”

The letter may be viewed at:

https://www.dfs.ny.gov/insurance/circltr/2018/cl2018_09.pdf

Note:  As statutes are dense, I typically edit and summarize.  Here, to avoid adding my “two cents” to a potentially controversial issue, I quote from the circular letter directly and verbatim.  I neither cut nor added from DFS’s language, though bold certain sections to highlight DFS’s mandates. Should you, Dear Reader, have any questions, I would be happy to discuss the letter with you.  But, to the extent anyone wants my opinion, I believe an attack on any one American’s rights is an attack on each of us; we are all, each one of us, the same on the inside, and entitled to equal treatment under the law. That said, the Circular Letter reads as follows:

 

I.        Purpose

It has been reported that the Trump Administration is planning to repeal a federal regulation that clarifies that the Affordable Care Act’s (“ACA’s”) non-discrimination protections based on sex include protections based on gender identity. This circular letter reminds issuers that, regardless of protections at the federal level, New York State has its own state requirements related to non-discrimination protections based on sexual orientation, gender identity and/or gender dysphoria.

 

II.       Federal Non-Discrimination Provisions

42 U.S.C. § 18116 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs or activities. It extends nondiscrimination protections to individuals participating in any health program or activity any part of which received funding from the Department of Health and Human Services (“HHS”); any health program or activity that HHS itself administers; and health insurance marketplaces and all plans offered by issuers that participate in those marketplaces. HHS adopted 45 CFR Part 92 effective 7/18/16. 45 CFR § 92.4 defined discrimination based on sex as including discrimination based on pregnancy, false pregnancy, termination of pregnancy, or recovery therefrom, childbirth or related medical conditions, sex stereotyping, and gender identity. The final rule became effective July 18, 2016 and incorporated the above-referenced protections.1 The rule applies to comprehensive coverage in the individual and small group markets, Child Health Plus, Medicaid, and the Essential Plan, or any other program that receives funding from HHS.

 

III.      New York State Non-Discrimination Provisions

Regardless of the federal non-discrimination protections or lack thereof for individuals based on sexual orientation or gender identity, New York provides its own state protections. Insurance Law § 2607 prohibits all issuers from refusing to issue any policy of insurance, or cancel or decline to renew such policy because of the sex or marital status of the applicant or policyholder. Additionally, § 52.72 of 11 NYCRR 52 (Insurance Regulation 62) prohibits issuers from discriminating on those bases, as well as other things. The regulation provides that discrimination based on sex includes discrimination on the basis of pregnancy, false pregnancy, termination of pregnancy or recovery therefrom, childbirth or related medical conditions, sex stereotyping, and gender identity. The regulation applies to individual and small group accident and health insurance policies that provide hospital, surgical, or medical expense coverage, as well as student accident and health insurance policies. Furthermore, The Department of Financial Services (Department) will be promulgating an amendment to that regulation to clarify that the non-discrimination protections apply to sexual orientation and to large group accident and health insurance policies that provide hospital, surgical, or medical expense coverage as intended under existing New York law.

 

Additionally, we remind issuers of three previous circular letters issued by the Department that relate to discrimination based on sexual orientation, gender identity and gender dysphoria. Insurance Circular Letter No. 7 (2014) advises issuers that the law prohibits them from denying coverage for medically necessary treatment of gender dysphoria. It reminds issuers that an issuer of a policy that includes coverage for mental health conditions may not exclude coverage for the diagnosis and treatment of gender dysphoria. Although an issuer may subject gender dysphoria treatment to a medical necessity review, any such review must be performed consistently with the provisions of Article 49 of the Insurance Law and/or Public Health Law. Insurance Circular Letter No. 12 (2107) clarifies that issuers should not automatically deny claims for transgender individuals because the gender with which the individual identifies does not match the gender of someone to whom those services are typically provided. It reminds issuers that receive claims from insureds of one gender or sex for a service that is typically or exclusively provided to individuals of another gender or sex to take reasonable steps, including requesting additional information, to determine whether the insureds are eligible for the services prior to denying the claims. Insurance Circular Letter No. 7 (2017) addresses health insurance coverage for infertility treatment and advises issuers that the law prohibits them from discriminating based on sexual orientation, marital status or gender identity.

 

IV.      Conclusion

Regardless of federal action or inaction with respect to discrimination based on sexual orientation, gender identity and gender dysphoria, we remind issuers that, under New York State law, they are prohibited from discriminating against individuals based on sexual orientation, gender identity and gender dysphoria. The Department will monitor compliance with the non-discrimination requirements, including during market conduct exams. The Department will take action against an issuer for any failure to adhere to all statutory and regulatory prohibitions against discrimination.

Please direct any questions regarding this circular letter to Thomas Fusco, Supervising Insurance Attorney, Health Bureau, New York State Department of Financial Services, Walter J. Mahoney Office Building, 65 Court Street, Room 7, Buffalo, New York 14202 or by e-mail at [email protected].

 

          Practice Note:  The foregoing applies to New York only.  Other states (CA, MA, OR, etc.) will likely follow suit should the Trump Administration carry through on its plan to eliminate these coverages.  As insurance is both Federally and State-regulated, carriers practicing nationally must comply with each State’s laws, meaning, that no health insurer doing business in New York (or any other State prohibiting discrimination in coverage) may deny or limit the coverages outlined above even if such coverage is cut from the ACA.   

 

OFF THE MARK
Brian F. Mark

[email protected]

 

Nothing to report…

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

07/15/2018 Olin Corporation v. Lamorak Insurance Company, et al 
United States District Court, Southern District of New York
Plaintiffs Motion for Summary Judgment Claims Granted Only to the Remaining Sites Which it Could Establish the Property Damage Occurred During the Policy Period and Plaintiff Did Not Expect or Intended the Property Damage that it Was Obligated to Remediate at the Time of the  Policy Period.

Plaintiff Olin Corporation (“Olin”) was issued three excess policies which provided coverage from January 1, 1970 to December 31, 1970. The three policies issued by predecessors to Defendant Lamorak Insurance Company (“Lamorak”) provided up to $20 million of coverage for each occurrence.  Olin sought coverage from Lamorak under the policies for the fifteen remaining sites (“Remaining Sites”). Olin has entered into settlement agreements with the other excess insurers for the Remaining Sites.

The current decision stems from Olin’s motion for summary judgment against Lamorak for insurance coverage at the fifteen Remaining Sites and motion for partial summary judgment on Lamorak’s third-party claims for contribution and indemnity against the other excess carriers.  In addition, the current decision stems from Lamorak’s motion for judgment on Olin and partial summary judgment on its own third-party claims.

The following will focus on the court’s decision as it pertains to Olin’s motion for summary judgment against Lamorak as to breach of contract and for declaratory judgment for the Remaining Sites.

In consideration of Olin’s motion for summary judgment, the court first considered Olin’s motion to strike portions of Lamorak’s experts report and testimony. Lamorak’s expert opined on costs Olin incurred to address contamination at the Remaining Sites. The court began its analysis with the accepted principal that “an expert testifying about damages need not be trained as an economist.”  Lamorak’s expert had no primary training in cost accounting nor had ever been qualified by a court to testify on accounting issues.  Nevertheless, the court rejected Olin’s motion to strike Lamorak’s expert witness report and testimony.  The court found Lamorak’s expert has had experience throughout her career as an engineer in evaluating and estimating the costs associated with investigating and remediating sites.  Such experience included the cost categorization and methodology she put forth in her report.  Further, the court reasoned that Lamorak’s expert opinion that the reliability of the source of Olin’s expert was inaccurate, and was not relied upon by any expertise.  Rather, her opinion was based upon her review of actual invoices that comprise the alleged costs or the specific scope of services performed.  As such, the court did not exclude Lamorak’s expert report and testimony for purposes of the pending motion for summary judgments.  However, the court held that prior to trial a Daubert hearing will be held regarding the admissibility of Lamorak’s expert cost opinions.

Second, the court considered Lamorak’s motion to strike Olin’s 56.1 Statement.  Lamorak offered several arguments in support of its motion including: (1) that the portions of Olin’s 56.1 Statement which relied on expert opinions should be stricken as experts cannot disclose otherwise inadmissible evidence to establish facts; (2) that Olin improperly relied on expert opinion in its 56.1 Statement as none of Olin’s expert’s had personal knowledge as to the facts put forth; and (3) that the court should strike references to both parties’ experts as expert opinion is inadmissible evidence on a motion for summary judgment. The court rejected Lamorak’s arguments.  The court reasoned that Lamorak failed to establish that the underlying evidence that the experts relied on where in fact inadmissible.  In addition, the court reasoned  that “an expert’s lack of contemporaneous personal knowledge does not render [such  expert’s knowledge] inadmissible.”  Further, the court reasoned that it has held in the past, Olin is entitled to use an expert to synthesize and digest reams of otherwise admissible evidence.  Moreover, the court reasoned that the summary judgment standard requires a court to consider all relevant admissible evidence and that there was no question expert opinion is admissible as long as the criteria for Federal Rules of Evidence 702 were met.

Third, the court considered the relevant legal principals to which Olin must satisfy in order to recover under the policies. The court acknowledged that in order to recover under the policies, Olin must show for each site that the (1) property damage occurred or continued to spread during the policy period; (2) that by the time of the policy period of 1970 Olin did not expect or intend the property damage that it was obligated to remediate; (3) Olin is legally liable for certain sums on account of the property damage; and (4) the amount of those sums.

Olin argued that it did not need to prove actual damages if it reasonably settled with a party to whom it was liable for during the policy period.  In a previous decision, the court held that when Olin reasonable settles a claims that alleged covered property damage, Lamorak’s policy was triggered.  Although the court acknowledged that it had discretion to reconsider the previous ruling, the court declined to do so.  In support, the court noted that Lamorak did not challenge the previous ruling before the Second Circuit even though it appealed other rulings.  Further, the court noted its previous decision was correct as it was logical that a settlement reasonably entered into suffices to establish not only a fact of liability but also the fact of a particular type of damage triggering that liability.  Accordingly, the court found Olin was not required to prove that the covered damage actually occurred for claims reasonably settled, which alleged covered property damage in 1970.

Next, Olin argued that Lamorak could not rely on secondary sources such as newspaper articles, textbooks, and/or industry publications to show the environmental awareness of the general public or its membership in the Manufacturing Chemists’ Association to establish Olin expected or intended the damage.  Specifically, Olin argued that Lamorak was collaterally estopped from re-litigating “the factual finding that general industry knowledge and Olin’s membership in trade association does not show that it expected or intended the property damage.”  The court rejected Olin’s argument.  The court reasoned that in the prior litigation, jury found only that by the time of the effective dates of the policies, Olin did not expect or intended the property damage it was already responsible to remediate.  As such, the court held that Lamorak was not collaterally estopped from relying on materials showing general industry knowledge or Olin’s membership in trade organization.  However, the court held Lamorak was collaterally estopped from arguing the same evidence, which established that Olin expected or intended damage if the waste disposal practices at the Remaining Sites were identical to the waste disposal practices for sites previously litigated.

Alternatively, Olin argued that Lamorak could not establish its subjective knowledge that it knew or intended that its actions would cause the specific damage, which required remediation.  Once again, the court rejected Olin’s argument.  The court concluded that a reasonable juror could infer from publications and Olin’s participation in organizations could establish that it had subjective knowledge.  The court reasoned that a reasonable juror did not need to find that the relevant sources discussed in detail the waste handling practices of Olin.  Rather, a reasonable juror needs only to find that the relevant sources of waste handling and pollution in general were applicable to Olin’s practices.

Applying the relevant legal principals and permitting Olin’s 56.1 statement, the court granted Olin’s motion for summary judgment on its claim for breach of contract and for a declaratory judgment for six of the Remaining sites and for one of Remaining Sites except with respect to damages.   

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

07/16/18       Travelers Indemnity Company v CNH Industrial America, LLC
Delaware Supreme Court
Choice of Law

Pop Quiz:  If Wisconsin was the site of the asbestos exposure liability occurrences that had been insured against, but the liability policies at issue, part of a corporate-wide insurance program implemented by the insured across the country, were negotiated, purchased, delivered, and managed by the insured in the state of Texas, which state’s law should be applied to decide a coverage dispute relating to those asbestos exposure liability insurance policies?

The answer is Texas, according to the Supreme Court of Delaware.  Here’s why.

This case is an insurance coverage dispute in which CNH sought coverage from Travelers for historic asbestos-related liabilities at J.I. Case, Inc., some of whose assets were transferred to CNH during a 1994 corporate reorganization. The focus of the appeal is one issue — whether three Travelers insurance policies issued in 1972, 1978, and 1985 were validly assigned to CNH by J.I. Case’s former parent, Tenneco, Inc., as part of a 1994 corporate reorganization.

The validity of the assignments was dependent on the state law governing the dispute. If Wisconsin law applied, where J.I. Case, Inc. was headquartered and the asbestos exposures had taken place, CNH could overcome the policies’ anti-assignment provisions. If Texas law applied, where Travelers asserted the policies had been negotiated, contracted, and performed, CNH conceded that the policies would not have been properly assigned to it by Tenneco during the reorganization, negating coverage.

The three Travelers policies at issue were silent on choice of law.  The Superior Court of the State of Delaware applied the “most significant relationship” test in the Restatement (Second) of Conflict of Laws. In doing so it decided that J.I. Case, Inc., the Wisconsin-based Company, and not Tenneco, Inc., its Texas-based former parent company, was the relevant party to focus on to resolve the choice of law question. Of the Second Restatement factors, the Superior Court of the State of Delaware had given the greatest weight to J.I. Case, Inc.’s principal place of business being in Wisconsin, and had applied Wisconsin law to the coverage dispute.

However, subsequent to the Superior Court of the State of Delaware’s choice of law ruling in this dispute, the Supreme Court of Delaware decided Certain Underwriters at Lloyds, London v. Chemtura Corp., in 2017.  In Chemtura, insurance policies covering environmental claims were part of a comprehensive insurance program addressing risks across corporate operations in multiple jurisdictions. Those policies were similarly silent on choice of law. The Supreme Court of Delaware emphasized, in deciding Chemtura, that when applying the Second Restatement factors to a corporate-wide insurance program, the court’s inquiry should focus on the contacts most relevant insurance to the insurance contracts, rather than on the location of the underlying claims. Otherwise, the insurance policies could be subject to different interpretations depending on the state law where each claim arose. It was further held in Chemtura that the contracting parties’ intentions at the time of contracting were best met by applying a consistent body of law across all the policies. In Chemtura, because New York was the insured’s principal place of business and the center of its insurance activities, New York was held by the Supreme Court of Delaware to have had the most significant relationship to the dispute, and thus its law governed the coverage issues.

The Supreme Court of Delaware followed its Chemtura decision of 2017 in deciding the Travelers v CNH appeal of the choice of law issue.  Delaware’s highest court found that Tenneco, the Texas-based former parent company of J.I. Case, had sought insurance coverage from Travelers through a corporate-wide insurance program covering operations across multiple jurisdictions. Moreover, Tenneco had negotiated and secured the insurance coverage, and managed its insurance program across the country, out of its Texas offices. Thus, under the Second Restatement factors, Texas was held by the Supreme Court of Delaware to have the most significant relationship to the contracting parties and the dispute, and therefore Texas law, and not Wisconsin law, applies.

Because the parties agreed that Tenneco’s assignment of the policies to CNH without Travelers’ consent was invalid under Texas law, the Supreme Court of Delaware’s reversal of the Superior Court of the State of Delaware’s choice of law ruling resulted in the court’s direction that judgment be entered in favor of Travelers.

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

 

11/01/2016   Jay Jala, LLC v. DDG Construction, Inc.,
United States District Court, E.D. Pennsylvania
Direct or Consequential Damages

DDG Construction agreed to construct a motel for Jay Jala, but did not complete the work, and left the project in December 2014.  Jay Jala terminated the contract, completed the motel on its own, and then sought damages from DDG.  However, the construction contract contained a waiver of consequential damages, and the Court had to scrutinize in detail issues and distinctions between direct versus consequential damages.

The contract barred recovery for damages incurred by the owner for rental expenses, loss of use, income, profit, financing, business, reputation, and lost productivity.  The basic framework the Court adopted was to ask whether the claimed damages represented a loss in value from deficient contractual performance, or were collateral costs and losses.

One item was a “project completion fee” for supervision of the project after DDG’s default.  The Court interpreted this as seeking reimbursement for owner overhead costs for the time period during which the owner essentially served as its own contractor, and allowed this item of approximately $12,000.00 per month as an item of “direct” damages.

With respect to additional bank interest paid because of delay, the Court also allowed this item as “direct damages” because of the importance of time to the contract.  Interest on the loan to construct a building was an integral part of contract performance - construction of the building - which was delayed.  In essence, the owner was entitled to recover as direct damages the “cost” of the additional time needed to complete the project, in the form of additional bank interest.

Likewise, the Court indicated that monthly utility expenses might be recoverable because the contract held the contractor liable to pay for the utility bills until the building was complete, and this expense was assumed by the owner during the delayed time to complete.

However, many other types of damages such as lost income, insurance, advertising, fixtures and equipment were deemed “consequential” and not recoverable because of the waiver clause.  The Court also disallowed the extra cost to store furniture, fixtures and equipment due to the delayed construction.

If the contract contains a waiver of consequential damages, it must be scrutinized as to what damages or types of damages are covered (or not). As the Court indicated here, the more a loss or damages can be said to have been caused by or from defective or delayed construction, the more they may be classified as direct damages and not within a waiver.