Coverage Pointers - Volume XX, No. 4

Volume XX, No. 4 (No. 515)
Friday, August 10, 2018

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.  Lord knows we get calls each and every day with situations and every one could lead to a great lead-in story.

It’s been a tiring but restful two weeks.  The itinerary included Oahu, where I presented to an insurer on contractual and additional insured risk transfer and Hawaiian Bad Faith Law, then on to Maui for the Federation of Defense & Corporate Counsel Annual Meeting.  That included some great CLE, wonderful friendships and a 24 mile bicycle ride down the Haleakala volcano (thankfully, on the outside).  This is not the volcano currently erupting, that being located on the Big Island.

Following the conference, I spent three glorious days in the Napa Valley, leaving but two bottles of wine available for the next tourist.

Speaking of flights …

 

Mosaic Award – Ignored by my H&F Colleagues:

Much of our practice requires us to get on an early morning plane and return at home later that day.  The folks at the JetBlue ticket counter know the H&F attorneys well.

I am proud to announce – since my colleagues ignored this significant award received, --  that I won the 2018 Hurwitz & Fine Mosaic Award, being the first attorney in the office to have enough flight miles and/or legs to qualify for JetBlue Mosaic status for 2019.  Snatching the silver trophy from last year’s winner, Brian Barnas, I edged out five others from our coverage team for this prestigious honor.  To earn Mosaic status, one needs either 30 legs and 12,000 flight points or 15,000 flight points in a calendar year.  I reached both plateaus on July 23.  Peiper, Barnas, Ewell, Wilewicz and Ehman ought to be ashamed of themselves for not mentioning it!  I think they are sore losers.  The problem with flight awards is that the win only gives me the opportunity to take more flights!

We are in the dog days of summer and the courts are in their sluggish mode.  Someone asked me the derivation of the term “dog days” so, me without a life of my own, did a little research.  One version I found suggested that the “dog days” are those hot days in July and August where our canine friends become sluggish (ergo, the courts).  A more sophisticated view offers this (compliments of http://wilstar.com/dogdays.htm):

The term dog days has an interesting origin. In ancient times, when the night sky was unobscured by artificial lights and smog,different groups of people in different parts of the world drew images in the sky by “connecting the dots” of stars. The images drawn were dependent upon the culture. The Chinese saw different images than the Native Americans, who saw different pictures than the Europeans. These star pictures are now called constellations, and the constellations that are now mapped out in the sky come from our European ancestors.

They saw images of bears, (Ursa Major and Ursa Minor), twins, (Gemini), a bull, (Taurus), and others, including dogs, (Canis Major and Canis Minor).

The brightest of the stars in Canis Major (the big dog) is Sirius, which also happens to be the brightest star in the night sky. In fact, it is so bright that the ancient Romans thought that the earth received heat from it. Look for it in the southern sky (viewed from northern latitudes) during January.

In the summer, however, Sirius, the “dog star,” rises and sets with the sun. During late July, Sirius is in conjunction with the sun, and the ancients believed that its heat added to the heat of the sun, creating a stretch of hot and sultry weather. They named this period of time, from 20 days before the conjunction to 20 days after, “dog days” after the dog star.

The conjunction of Sirius with the sun varies somewhat with latitude. And the “precession of the equinoxes” (a gradual drifting of the constellations over time) means that the constellations today are not in exactly the same place in the sky as they were in ancient Rome. Today, dog days occur during the period between July 3 and August 11. Although it is certainly the warmest period of the summer, the heat is not due to the added radiation from a far-away star, regardless of its brightness. No, the heat of summer is a direct result of the earth’s tilt.

In any event, despite having to stay awake at JFK from 10:30 PM until 5:40 AM the other night because of flight delays and cancellations, we are happy to be back in the fold and at full tilt.  We welcome new subscribers from the beautiful Aloha State and from other places around the country.

We offer our usual array of reported decisions,  (fewer than usual this issue because of summer court siestas), cover notes from our editorial staff and a smatter of news stories from 100 years ago today. The actual issue with case summaries and links to the actual decisions, is attached.

 

Two other great newsletters are available from our litigation team:  Labor Law Pointers, edited by Dave ([email protected]) Adams and Premises Law Pointers produced by Jody ([email protected]) Briandi.  Contact them for subscriptions.  Tell them I sent you and they will charge you what we do for this publication.

 

We will start out with a flashback to August 10, 1918 and see where this takes us.

 

A Woman to Serve the State Senate from Staten Island?

 

The Pittsburgh Press

Pittsburgh, Pennsylvania

10 Aug 1918

 

New York Women

Want Senate Seat

 

Although one American woman has been elected to Congress, women legislators are still so great a rarity that the novelty of the idea is unimpaired and general interest is excited by the predictions that New York State may have more than one woman member of its general Assembly as the result of the elections the coming November.

 

At the moment attention is focused by the effort of a large number of prominent Staten Island Republicans to make a woman their candidate for the state Senate to succeed George Cromwell.  

 

Mr. Cromwell, for many years borough president of Richmond, is described as having a strength that is essentially personal.  He is going to retire.  Mrs. Mary S. Brennan of St. George will succeed him if she can win the primaries and can get more votes in November than the Democratic candidate.  Mr. Cromwell could do that; Mrs. Brennan’s ability to do it is not so certain. 

 

It is said that no woman has ever before been nominated for office by either party in Richmond County.  A state senatorship nomination has not been offered to a woman by either organization elsewhere, in the metropolis or up-state.  Mrs. Brennan will be admired for the pluck that inspires her to demand a Senate seat in representation of the newly enfranchised fair sex.  But she is not unlikely to find that the chivalry of the stronger sex is not quite equal to the task of overcoming the Democratic majority normally returned by the district. 

 

Editor’s Note:  We found no report of her success in the upcoming primary.

 

John’s Jersey Journal:

 

It has been a busy summer! At the end of the month, Erin and I are getting married. Then off to Jamaica for the Honeymoon. When we get back we close on our house and move in. It has been a whirlwind of a year, but what an exciting time!

 

Erin and I are getting married on a boat cruise on Lake Erie. We are setting sail from Buffalo, having the ceremony on the boat and then the reception immediately after. Erin and I are both excited!

 

The following morning, we are on the early flight out. I let Sandals book the flight for us. And what a tremendous job they’ve done. I learned of a passenger class I didn’t know existed. Economy Minus. It’s different than regular economy. With regular economy, you actually have a seat. When I called for the seat assignment I was told that this “fare class” does not qualify for seat assignment. So I don’t know if they will tie us to the top of the plane, sit us between the pilot and co-pilot, or stuff us in the coat closet.

I’ll see if I can upgrade (I’d like my marriage to last longer than 24 hours).

 

Provided we make it to Jamaica, Erin and I will be spending a week on the beach enjoying the sun and waves, drinking rum punch, and enjoying some time off. I look forward to coming back refreshed and rejuvenated.

 

In today’s column, we have an interesting decision involving anti-concurrent and anti-sequential language in a third-party casualty claim. Such provision bars coverage where a claimed loss is caused by a combination of covered and excluded perils. New Jersey courts have routinely held that such provisions are valid and enforceable.

 

The claimant alleged that she was injured by mold in the building where she worked. She also alleged that her injuries were caused by breathing in HVAC filter fragments. The policy contained a mold exclusion, which contained anti-concurrent and anti-sequential language. Liability for mold was excluded, regardless of whether or not there was any other cause contributed at the same time, and regardless of the sequence of those causes. 

 

A dispute arose over whether the liability insurer for the building’s owner owed a duty to defend the building owner. The carrier took the position the mold exclusion excluded coverage, and that applying the anti-concurrent and anti-sequential language of the exclusion, the HVAC filter fragment allegations did not matter. The carrier denied coverage entirely and did not assign a reservation of rights defense.

 

The trial court ordered the carrier to defend because there were allegations that the injuries were caused by the HVAC filter fragments, The carrier vigorously disputed any defense obligation and appealed. The New Jersey Appellate Division held that trial court erroneously ordered the insurer to defend due to the anti-concurrent and anti-sequential language in the policy exclusion. The Appellate Division reversed the order ordering the carrier to defend. The Court also found that the carrier did not breach its duty to act in good faith.

 

The case is a good read and is discussed in greater detail in the attached issue.

 

Hope everyone is enjoying their summer!

 

John

John R. Ewell

[email protected]

 

To the Hoosegow He Goes:

 

Democrat and Chronicle

Rochester, New York

10 Aug 1918

 

Ungrateful Guest Sent to

Penitentiary for Theft.

 

Dudley Wodring, 18 years old, of Phillipsburg, N.J., pleaded guilty to a charge of petit larceny in City court yesterday and was committed to the penitentiary for sixty days.  Wodring become friendly with two Rochester soldiers at Camp Dix, one of whom was a son of Mrs. Julia Gertin of No. 36 Ruggles Street.  He accompanied young Gertin to his home here, when the latter obtained a furlough.  While here Wodring stole $41 from Mrs. Gertin.  She complained to the police and Wodring was arrested at Easton, Pa., on his way home.  He admitted the theft, saying he stole in order to pay his car fare back to New Jersey. 

 

John Casey, better known as “Crutch,” was committed to the penitentiary for six months because of an extended case of intoxication.

 

Charles Moses, was given a thirty-day term in the penitentiary for carrying a revolver.

 

Peiper’s Program:

 

With the calendar flipping to August, we slog through another two weeks of limited material.  We do review yet another alleged broker malpractice claim in this week’s Potpourri section.  The New York rules for broker liability have traditionally created a high hurdle for jilted insureds.  Over the past five years, however, New York Appellate Courts have been more willing to listen to arguments of “special relationships.”   In Hefty, the pendulum swings back in favor of the agent/broker as it rightly should have on the facts of that case.

 

Today also marks the last full day of hockey camp for my son. He’s been in Canada all week, and he sounds like he’s having quite the time.  For those wondering, he’s 4 for 4 on Tim Hortons this week for breakfast. He’s also had Swiss Chalet, apparently, at least three times.  No word on Canadian beer, but we’re fairly confident he’s a bit young for that.  At least we hope so! 

 

If you have no idea what Swiss Chalet is, or (***gasp***) Tim’s is, you must make a trip to Southern Ontario.  Both are “culinary” options on virtually every corner in the Golden Horseshoe.  You’ll love them, and Dan will put you up at the beach.  Just tell him I sent you. 

 

We conclude this week by noting that August 10th is National S’mores Day.  It is also National Lazy Day.  National Lazy, on a Friday, in August.  Yep. Sounds about right!  See you in two weeks.

 

Steve

Steven E. Peiper

[email protected]

 

Editor’s Note:  Steve added that penultimate paragraph just to see if I read his cover note.

 

No More Car Production During WW I?:

 

The Indianapolis Star

Indianapolis, Indiana

10 Aug 1918

 

PASSENGER AUTOMOBILE

INDUSTRY MUST STOP

 

War Industries Board Tells

Manufacturers to Get Upon

100 Per Cent War Basis.

 

WASHINGTON, Aug. 9.—Manufacturers of passenger automobiles were advised by the war industries board today to convert their plants to 100 per cent war work, as rapidly as possible and to place them on that basis not later than Jan. 1, 1919, in a letter addressed to the National Automobile Chamber of Commerce.  In no other way, the letter stated, could they be assured of the continuance of their industry or the preservation of their organizations.

 

The letter was in response to a proposal made yesterday by Hugh Chaimers, on the part of the manufacturers voluntarily to curtail the passenger car industry 50 per cent.  The war industries board declared that the present situation regarding steel and other materials needed for war work gave little assurance of material required for the manufacture of passenger automobiles, even after providing for war requirements.

 

Pending receipt by the Board of Sworn Inventories of Materials on Hand requested last July 16, no materials will be permitted for passenger car manufacturers.

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

We have been having heavy rain and thunderstorms mixed in with our very hot, humid August. Well, it is the dog days as they say.   My wife and I will be taking our boys to their first football game this weekend to see the Jets play. I am a Giants fan, but the Jets’ tickets were cheaper and more available. We are all excited to go to the game except, perhaps, my wife. I hope you are all having a nice summer.

 

As far as serious injury cases – there aren’t any! The Appellate Divisions have not issued any decisions in the last two weeks so there is nothing to report.  I will see you in two weeks.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

It was So Much Easier to Get Into Canada, Once Upon a Time:

 

Buffalo Evening News

Buffalo, New York

10 Aug 1918

 

NO RESTRICTIONS ON

MOTORING IN CANADA

 

Passports Not Required From

American Citizen, Says Communication.

 

Motorists who wish to tour in Canada and who do not know the formalities required will be interested in the following communication from the minister of immigration at Ottawa:

 

“The Canadian registration act applies only to persons permanently residing in Canada and does not in any way affect visitors to that country from the United States.  Passports are not required either, and the only papers necessary to secure admission to Canada is for the visitors to have papers showing they are citizens of the United States.  On their arrival at the international boundary they are provided with identification cards by the Canadian immigration agents, which permit them to travel at will throughout Canada.  Senator Robertson, chairman of the Canadian registration board, authorizes the statement that neither in the instructions issued nor the regulations for Canadian registration is there anything that would indicate desire or intention to impose restrictions upon Americans or aliens entering, traveling in or leaving Canada.” 

 

Wilewicz’ Wide-World of Coverage:

 

Dear Readers,

 

I am just back from a 10-day hiatus in Warsaw and Prague with my family. That is, as has become tradition, I traveled to see my grandmother in Poland with my mother and daughter (and we popped over to the Czech Republic for a couple of days). Four generations of women, globe-trotting, has become an annual event. While we range in age from 12 to 79, we are fairly similarly-minded and each year it’s a joy to reconnect and see something new.

 

Unfortunately, Europe is currently experiencing a heat wave like never before. I recently read that Portugal has clocked record heats in excess of 120 degrees – Fahrenheit. I have never felt anything like that before, and don’t hope to any time soon. In Poland the weather was fairly temperate, but with most places lacking AC, the bright 86 degrees quickly became stifling. Meanwhile, in Prague, we stayed at a building that was over 200 years old and the vaulted ceilings did not help the 90 degree evenings. Nevertheless, the scenery was beautiful. I’m partial to Poland (see my full name and birthplace), but I did find Prague charming and very Paris-like. The food was world-class and all of the bridges over the river were walkable and picturesque. I’ll likely return some day, but this time will certainly get my Airbnb apartment with air conditioning.

 

In any event, in other news, the Second Circuit appears to be on summer vacation at the moment. Indeed, while I understand that they have continued to hear arguments in recent weeks, they have not issued a coverage-related decision since my last writing. Thus, my column is reluctantly bare this week. Hopefully next time we’ll have half a dozen to peruse and digest from the beach.

 

Until then!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Captain who Sunk Lusitania Gets His Due:

 

The New York Times

New York, New York

10 Aug 1918

 

Captain Who Sank Lusitania

Blown Up by a British Mine

 

Copyright, 1918, by The New York Times Co.

Special Cable to The New York Times.

 

LONDON, Aug. 9.— It has now become known that Captain Lieut. Schweiger, who commanded the submarine that sank the Lusitania, has been missing from the German Navy since September, 1917.

 

At that date he was in command of the U-88 and she was going out in company with another U-boat  when those on the other boat heard a chain scraping alongside.  The commander of the other boat realized that they were in an unknown British mine field.

 

Almost immediately afterward he heard a tremendous explosion and decided that it would be safer to come to the surface.  Nothing was to be seen of the U-88.  He tried to get in touch with her by wireless and otherwise, but from that moment she has never been heard of. 

 

Editor’s Note: It was concluded that Schwieger was killed in action on 5 September 1917. His U-boat U-88 hit a British mine while being chased by HMS Stonecrop.

 

Barnas on Bad Faith:

 

Hello again:

 

We’ve reached the point in the baseball season in the American League where if you’re not a fan of the Red Sox, Yankees, Astros, Indians, Athletics, or Mariners, you really don’t have much to look forward to.  Unfortunately, the undersigned is a fan of the Blue Jays who are merely playing out the string in a second consecutive disappointing season.  The Blue Jays sit a mere 29 games behind the Red Sox in the AL East and 16 games back in the Wild Card.  Safe to say there will be no postseason baseball north of the border this year.

 

However, brighter times are ahead we hope.  Uber-prospect Vladimir Guerrero Jr., the top prospect in all of Major League Baseball, has finally made his way to Downtown Buffalo and joined the AAA Bisons.  How is Vlad doing so far in AAA?  As of this writing he’s hitting .455, with a .581 On Base Percentage, and a .682 Slugging percentage in his first eight games.  He’s walked eight times and only struck out twice.  Not bad.  Did I mention he’s only 19?  I’ve already taken the short walk down the street from the office to see Vladdy three times since he was called up, and I’m hoping to see him a couple more in what undoubtedly will be a short stint in AAA.

 

This weekend also marks the beginning of the English Premier League.  After years of not really being able to get into club soccer – I’ve always been a big fan of international competition but that’s really been it – I have decided that this is the year I make a go of it.  So I did some research and decided I’ll be supporting Tottenham Hotspur.  First fixture for Spurs is Saturday at 7:30am EST against Newcastle.  I’ll be up early with some coffee and breakfast to support Harry Kane and the lads.

 

As far as the cases go, I have the Ho case from New York County Supreme Court.  This is a bit of an odd one, as the insurer attempted to consolidate the bad faith/breach of contract case with the insured’s case against the underlying tortfeasors.  It makes sense that the carrier would want to pursue its right of subrogation, but the Court determined it would be too confusing for the jury to have the insurer who denied coverage and the insured both listed as plaintiffs.  While consolidation was denied, the Court did informally consolidate the cases for purposes of discovery.

 

Kuzava is a Colorado case where the Court held that the bad faith failure to settle claim wasn’t ripe for adjudication because the underlying judgment was still being appealed by the insurer.  Without a final and non-appealable excess judgment, the bad faith claim was premature.

 

Have a nice weekend.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

A Close but Expensive Shave – 100 Years Ago:

 

The Kingston Daily Freeman

Kingston, New York

10 Aug 1918

 

Price of Shaves Double.

 

New Haven, Conn., Aug. 10.—Shaves which used to be had for 10 cents are now 20 cents and haircuts which used to be scissored for two bits now bring 40 cents, and other barber prices have gone up in proportion in shops throughout the principal cities of the state, all due to the war shortage of barbers. 

 

Off the Mark:

 

Dear Readers,

 

The recent heat wave on Long Island has been brutal.  This weekend, the family and I are headed to a beach house.  Seems like the perfect time to enjoy the beach. 

The end of summer lull appears to be upon us as there were no noteworthy construction defect cases to report on in this edition.

 

Until next time …

 

Brian

Brian F. Mark
[email protected]

 

Worth Getting Married?

 

Middletown Times-Press

Middletown, New York

10 Aug 1918

 

MARRIED MEN TO

BE DEFERRED

 

Marriage Relation Will Automatically

Set the Registrants Back in the Draft.

 

WOULD LEAVE CALL FOR

BOYS OF 18 TO WILSON

 

Secretary Baker Says “Work or Fight”

Rule Won’t Apply to Professional Men.

 

Washington, Aug. 10—The new draft legislation will contain authority of the President to extend deferred classification to Class 1 for men from eighteen to nineteen years of age; the marriage relation will automatically constitute deferred classification, and professional men, such as lawyers, newspaper men and other persons not engaged in producing material war supplies will not come under the “work or fight” regulations, Secretary of War Baker indicated yesterday in discussing his appearance before the a Senate Military Affairs Committee.

 

Secretary Baker said that it was the purpose of the War Department to allow the President to grant deferred rating in Class 1 to youths not yet attaining the age of nineteen, not because boys of that age do not make good soldiers, but because he believes there is a fixed sentiment in the country against bringing into the military service boys who have not reached maturity.

 

With reference to married men, Secretary Baker said he hoped that regulations would be so fixed that men with dependents would not be compelled to ask for deferred classification. 

 

Wandering Waters :

 

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

 

The NBA has finally released its schedule for opening week, Christmas day, and Martin Luther King Jr. day.  In a surprise move, the Lakers are not scheduled to play on opening night.  I was completely shocked as the NBA finally had its dream for the best player to wear the jersey OF an iconic franchise.  Nonetheless, LeBron makes his regular season debut in Portland against the Trailblazers.  The sad news is that I will have to adjust my sleep schedule to watch the west coast games this upcoming season. 

 

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]

 

Baseball Debut – 100 Years Ago This Week – Another One-Game Wonder:

 

Lou Bauer, at age 19, had his pitching debut (and his last trip to the mound in the major leagues) a century ago this week.  The Philadelphia Inquirer reported his appearance in its August 14, 1918 recap of the game, where the Philadelphia Athletics lost to the Washington Senators in the first game of a double-header.   I LOVE the way the newspaper wrote this story:

 

“With that two-run lead staring us in the face, Keene was lifted to let a more lustily clouter go to bat in the eighth, and then Manager Connie introduced another stranger in the ninth.  This was a local person named Bauer, but he didn’t tarry long enough for us to get properly acquainted with him.  After pitching to two of the enemy and walking both to first base, Connie sent him into the clubhouse to look at a large photograph of the home plate, so he’d know what it looked like the next time he went out there to poise himself on the pitching peak.  Bill Adams then finished the inning.”

 

Boron’s Benchmarks:

 

Dear Subscribers:

 

Don McLean’s “American Pie” is an epic 8 ½ minute song about, among other things, “the day the music died.”  It was written about the awful 1959 plane crash that ended the lives of multiple talented musicians.  But it also, it seems to me, provided McLean’s view on the state of our country, and its public policies, at the time he wrote it.  The Tannone v. Amica Mutual case I’ve written about in this edition of our newsletter concerns, in large part, public policy considerations.

 

Two evenings ago, because of severe thunderstorms, I unexpectedly spent the entire night in lovely Terminal 5 at the JFK Airport in New York.  Let me tell you, the music never dies there.  Or even gets turned down.  Pretty hard to catnap with the “background” music blaring.  But don’t cry for me Argentina, at least I was safe inside all night.  According to news reports, three separate persons were struck by lightning in different locations in Queens that night. 

 

Just wondering who decided it was good “public policy” to keep the happy music going ALL NIGHT LONG.  Which is the refrain of one of the songs that played over the sound system about 4:30 a.m.  No joke.

 

Anyhow, enough about still-sleep-deprived me, here’s hoping this material may be helpful in or for your work. 

 

Regards,

 

Eric

Eric T. Boron

[email protected]

 

Editor’s Note:  Eric and I entertained each other during that all-nighter.  He was in a suit and tie, coming back from a deposition.  I was in shorts and a polo shirt, returning from Napa.

 

Playing (Badly) the Woman Card, 100 Years Ago:

 

Court Says Women are Impudent to Policemen

Macon (Missouri) Chronicle-Herald

August 10, 1918

 

Long Island City:  Mrs. Bertha Gottesman of Beachurst Long Island was arraigned here charged with speeding.

 

“You should be lenient with me because of my sex, she said to the magistrate with an arch smile.

 

“I used to be,” replied the magistrate tartly, “but I’ve found that women are more impudent to policemen than men, and they take advantage of every consideration.  Twenty-five dollars.”

 

Editor’s Note:  My research indicates that Bertha was three months short of her 18th birthday at the time and had been married four months earlier.  She lived to see her 88th birthday while her husband, Phillip, died in 1945 at the age of 53. She had two children, one of whom died in infancy.  The other, Elihu, lived until age 80.  I see no record of any other speeding tickets.

 

Jerry’s Navigating No Fault

 

Dear Subscribers,

 

Hello and welcome to Navigating No Fault, your eyes and ears to the no-fault regulations.  With summer in full swing in Buffalo, NY, the grills have become the stars in many backyards.  Our home is no exception.  One time, my wife and I tried making pizza on the grill.  We were both starving at the time, which turned out to be a big mistake.  Neither of us took the time follow the recipe.  How hard can it be, right? Dough, sauce, cheese, toppings, and you’re done.  Nay, nay. Our pizza came out like a big blob, partially cooked, and well, not chef quality.  Lesson learned – follow the steps in the recipe. . .  but, I still ate the pizza.

 

Speaking of taking the proper steps, I report on a Supreme Court decision issued a few days ago wherein the Court denied summary judgment to the insurer.  While the insurer had valid grounds for the summary judgment, i.e., the failure of defendant to appear for the examinations under oath (“EUOs”), the steps taken in asking for the EUOs fell short.  Read my column for more.

 

Jerry

Jerry Marti

[email protected]

 

 

Headlines from Today’s Issue (attached)

 

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

 

  • General Release Precludes SUM Claim

  • Material Misrepresentation Voids Policy, Even if Not Willful

 

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

Robert E.B. Hewitt III

[email protected]  

 

  • Summer doldrums. The courts are quiet.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

  • Bifurcation Motion Denied Where Same Experts are Needed for Liability and Damages Portion of Trial

  • Underinsured Homeowners Did Not Have Special Relationship with Broker who Sold the Policy

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Second Circuit is on summer vacation.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Court Declines to Permit Discovery on Damages in Direct Action by Injured Plaintiff      

  • Workers’ Compensation and Employers Liability Carrier Successfully Commences Declaratory Judgment Action in Order to Establish Lack of “Grave Injury” and the Absence of an Enforceable Common Law Claim in the Underlying Action

 

JERRY’S NO FAULT NAVIGATION

Jerry Marti

[email protected]

 

  • Insure Does Not Meet Prima Facie Showing for Breach Based on Failure to attend Examinations under Oath

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Bad Faith Claim was not Ripe for Judicial Review because Excess Judgment was not Final and Non-Appealable

  • Insurer’s Motion to Consolidate Breach of Contract and Bad Faith Case with the Insured’s Negligence Claim was Denied

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

  • Insurer Erroneously Ordered to Defend Where Trial Judge Failed To Consider Anti-Concurrent/Sequential Language in Exclusion

 

OFF THE MARK
Brian F. Mark

[email protected]

 

  • The courts have offered me nothing!

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

  • Defendant’s Motion for Summary Judgment for Granted because the “Make Whole” Rule did Not Apply because the “Made Whole” Rule did not Apply to Recover a Portion of Defendant’s Settlement with Tortfeasor’s was Inconsistent with Established Subrogation Law

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

  • Underinsured Motorist Coverage/Graves Amendment/Public Policy Considerations

 

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

 

  • Materiality of Misrepresentations can be Determined by a Jury

 

 

That’s all we wrote.  See you in a couple of weeks.

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

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

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

Off the Mark

Wandering Waters

Boron’s Benchmarks

Earl’s Pearls

 

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

 

08/08/18       Travelers Home & Marine Insurance Company v. Fiumara

Appellate Division, Second Department

General Release Precludes SUM Claim

This is an appeal from an order seeking to stay an underinsured motorist arbitration.

 

Fiumara was a passenger in a vehicle insured by Travelers when that vehicle was involved in an accident with an Allstate-insured car. Fiumara sued the drivers and owners of both vehicles and settled with owner and driver of the Allstate car, issuing a general release.

 

Fiumara then served a demand for a supplementary underinsured motorist (“SUM”) benefits claim on Travelers.  Travelers commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration on the ground that the SUM claim was barred by the general release.

 

 

Fiumara opposed the petition, arguing that she was not barred from pursuing the claim against the petitioner because her SUM claim did not exist at the time that the general release was given.

 

The general release, in clear and unambiguous terms however, released all claims and future claims the Fiumara has against Travelers by reason of the subject accident. The plain language of the release thus precluded the appellant's SUM claim against the petitioner.

Editor’s Note:  Also, no consent obtained for settlement in violation of Condition 10.

 

08/01/18       Piller v. Otsego Mutual Fire Insurance Company

Appellate Division, Third Department

Material Misrepresentation Voids Policy, Even if Not Willful

In 2002, the Pillers purchased a townhouse and then filled out an application for homeowners’ insurance with Otsego. They represented that the townhouse was their primary residence, that it was a single-family dwelling and that they did own or rent any other residences.  The policy was renewed several times.

 

In 2011, the plaintiffs made a claim under the insurance policy for water damage sustained when a pipe broke. In investigating the claim, Otsego Mutual discovered that the plaintiffs had never lived at the townhouse. Instead, they lived in Brooklyn, and the townhouse had been continually occupied since 2002 by their daughter and her family. Therefore, Otsego Mutual informed the plaintiffs that it was disclaiming coverage and voiding the policy because the plaintiffs had failed to disclose, inter alia, that (1) the townhouse was not their primary residence, (2) the townhouse was not owner-occupied, and (3) they owned and occupied a separate residence.

 

The Pillars sued for their loss and Otsego counterclaimed for rescission.

 

To establish the right to rescind an insurance policy, an insurer must show that its insured made a material misrepresentation of fact when he or she secured the policy. 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.

 

Otsego Mutual established that with proof and the insureds offered nothing of merit in opposition.

 

The plaintiffs' contention that Otsego Mutual was required to establish that their misrepresentation was willful lacks merit. With limited exception not applicable here, a material misrepresentation, even if innocent or unintentional, is sufficient to warrant rescission of an insurance policy.

 

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

Robert E.B. Hewitt III

[email protected]  

 

Summer doldrums. The courts are quiet.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

07/26/18       Fu v. County of Washington

Appellate Division, Third Department

Bifurcation Motion Denied Where Same Experts are Needed for Liability and Damages Portion of Trial

Plaintiff was injured when her car slid off of the road due to an icy patch and struck a concrete culvert.  After a question of fact on liability was found at the time of summary judgment motions, defendant moved to bifurcate the trial. 

 

The trial court denied the motion, and the Appellate Division concurred.  While the Appellate Division noted that bifurcation is encouraged when doing so assists in the clarification of issues, it also noted that great deference is granted to the discretion of the trial judge overseeing the matter.  In opposing the defendant’s motion, plaintiff argued that first responders acting as expert witnesses would be required to testify at both the liability and damages portion of a bifurcated trial.  Under such circumstances, the Court providently exercised its discretion by denying the motion and ordering only one trial.

 

07/26/18       Hefty v. Paul Semour Ins. Agency

Appellate Division, Third Department

Underinsured Homeowners Did Not Have Special Relationship with Broker who Sold the Policy

Plaintiff purchased a property in need of significant renovation for $33,000.  At the time of purchase, the defendant placed homeowner’s coverage on the dwelling with a replacement cost limit of $92,000.  After $200,000 in renovations to the property over the course of three years, the premises were destroyed by fire.  Unfortunately, despite altering the value of the home, it appears the plaintiffs did not upgrade their RC policy limit.

As a result, plaintiffs sued their broker alleging negligence.  In deciding the case, the Court reviewed the general principal that a broker is only liable where they fail to obtain requested coverage in a reasonable amount of time.  Thus, to make a claim for insufficient coverage, the policyholder must establish that she/he/it made a specific request for increased limits. In support of defendant’s motion, deposition transcripts from plaintiffs established that no request for an increase in coverage was ever communicated to defendant.  In this regard, the Court noted that “at best” the plaintiffs established an interest in additional insurance.  However, absent a specific request no obligation was created for the broker. 

Plaintiffs also argued that it enjoyed a “special relationship” with defendant broker, and, as such, it was owed a “duty of advisement.”  Plaintiffs, however, failed to establish that they paid a fee to the broker for advisement services, that there was detrimental reliance upon advice given by the broker or there was a long-standing relationship which could have created a special relationship.   In so holding, the Court noted that plaintiffs were sophisticated consumers (owning over 10 properties).  The Court also confirmed that more than a long history (here the parties had worked together for 10 years) is needed to create a special relationship.  

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

Second Circuit is on summer vacation.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

08/02/18       Yong Song Oh v. American Bankers Ins. Co. of Florida

Supreme Court, New York County

Hon. Arlene P. Bluth

Court Declines to Permit Discovery on Damages in Direct Action by Injured Plaintiff

This decision arises out of an Insurance Law §3420(a) action to collect on a judgment.  The underlying injured plaintiff fell on a sidewalk in Queens and broke her wrist.  She brought suit against defendant’s named insured, Mr. Jin, alleging that he owned the property and was negligent in the maintenance of the sidewalk. 

 

Defendant provided a defense to Mr. Jin under his homeowners’ policy.  In the answer, Mr. Jin admitted to ownership of the property.  Mr. Jin never appeared for a deposition and was precluded from testifying at trial.  After the note of issue was filed, Mr. Jin’s counsel sought to amend the answer to deny ownership.  The motion was granted and the court sua sponte made it a conditional order of preclusion, giving Mr. Jin another opportunity to appear for his deposition.  The Second Department reversed finding no basis to allow amendment.  In other words, Mr. Jin was stuck with admitting ownership.

 

Mr. Jin’s attorney then sought to be relieved from the case, which motion was granted.  The matter then proceeded to an inquest where the injured plaintiff was awarded a substantial judgment.  When the judgment went unsatisfied, this action resulted.

 

The question before the court at this point was not the ultimate issue of the case, but rather the scope of questions which can be asked at the deposition of the injured plaintiff.  The parties agreed that defendant could not ask about how the accident happened, but they disagreed about questions concerning her damages.  The injured plaintiff’s counsel took the position that the ship had sailed and the proper way to contest damages was to move to vacate the inquest and have another inquest.  Defendant, however, submitted that it could not take such action as it was not a party to the underlying litigation.  Instead, in defendant’s view, because courts have the inherent authority to review damages awarded, even at an inquest, this court should allow questions as to the injured plaintiff’s damages.

 

In considering the argument, the court disagreed that it had authority to review an inquest and judgment from Supreme Court; only the Appellate Division has that power.  Moreover, in the court’s view, defense counsel could have contested damages, but withdrew and permitted the inquest to go unchallenged.  Since defendant’s assigned counsel declined to challenge the proof at the inquest, it would, in the court’s view, be improper to provide defendant another chance to challenge the damages in this forum.  Accordingly, because defendant could not attack the judgment after the inquest in this case, the court would not permit questions about the injured plaintiff’s damages.

 

07/23/18       Commerce & Indus. Ins. Co. v. One Whitehall, L.P.

Supreme Court, New York County

Hon. Tanya R. Kennedy  

Workers’ Compensation and Employers Liability Carrier Successfully Commences Declaratory Judgment Action in Order to Establish Lack of “Grave Injury” and the Absence of an Enforceable Common Law Claim in the Underlying Action

This decision arises out of an action commenced by a workers’ compensation and employers’ liability insurer.  Plaintiff filed this motion seeking a declaration that it had no duty to defend or indemnify its named insured, Titan Contracting (“Titan”), in conjunction with an underlying personal injury action.  The policy at issue provided that it will cover the insured against claims or suit by third parties resulting from injury to an employee of the insured, but only “where recovery is permitted by law.”  The policy also states that it does not cover “liability assumed under a contract.”

 

In May 2011, Titan’s employee commenced a lawsuit against a property owner seeking monetary damages as a result of an accident on the construction site.  In relevant part, the owner then commenced an action against Titan alleging breach of contract, contractual indemnity, common law indemnity and contribution.  The injured plaintiff served five verified bills of particular in the underlying action wherein he alleged injury to his left shoulder and arm which required arthroscopic surgery, cervical injury, lumbar spine injury requiring lumbar laminectomy and partial discectomy. 

 

Plaintiff agreed to contribute to the defense of Titan in the third-party action but expressly reserved its rights to withdraw the defense if there was no coverage under its policy.  Plaintiff took the position that its policy did not cover the common-law claims against Titan since the injured plaintiff did not sustain a “grave injury.”  In other words, because Titan could not be held liable for common-law indemnity or contribution in the underlying action, no defense or indemnity was owed.  Moreover, any claims for contractual indemnity and breach of contract where explicitly excluded.

 

In considering this motion, the court reviewed the terms of Section 11 of the New York Workers’ Compensation law, which sets forth the definition of “grave injury.”  In reviewing the injured plaintiff’s allegations, the court found that injury to his left shoulder, cervical spine and lumbar spine did not qualify as “grave” pursuant to Section 11.  Thus, a claim of common law indemnification against Titan in the underlying action was not permitted.

 

The court also agreed that plaintiff’s policy clearly excluded “liability assumed under a contract.”  Thus, plaintiff had no obligation to defend or indemnify Titan regarding the breach of contract or contractual indemnity cause of action. 

 

JERRY’S NO FAULT NAVIGATION

Jerry Marti

[email protected]

 

08/09/18       State Farm v. Sweetwater Chiropractic, P.C.

Supreme Court, New York County

Insure Does Not Meet Prima Facie Showing for Breach Based on Failure to attend Examinations under Oath

In this declaratory judgment action, plaintiff insurer, State Farm and its related entities, sought summary judgment against defendant medical provider, Sweetwater Chiropractic, based on defendant’s failure to appear for the scheduled examinations under oath (“EUOs”). 

 

At the outset, the Court noted that the failure of a person to appear for a properly noticed EUO constitutes a breach of a condition precedent vitiating coverage. But, here, the Court found that the EUO requests were not reasonably or properly made by the insurer.  While the insurer noted that the EUOs were made to verify ownership compliance with state licensing requirements and the medical necessity of the services, there was no specificity in the affidavit in support of the motion. In particular, the affidavit failed to set forth any facts that State Farm had considered in making its determination to request an EUO for the specific claims at issue here, or to detail which services were being questioned as medically necessary.  Accordingly, the Supreme Court denied State Farm’s motion for summary judgment on this basis.

 

Tip:    When filing a summary judgment motion, the facts are viewed most favorably to the non-movant. With this in mind, affidavits in support of dispositive motions should be based on the services at issue, not a sampling of medical records from the provider.

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

07/31/18       Kuzava v. United Fire & Casualty Company

United States District Court, District of Colorado

Bad Faith Claim was not Ripe for Judicial Review because Excess Judgment was not Final and Non-Appealable

This case stems from a car accident between Timothy and Kathy Jo Kuzava (“Plaintiffs”) and Eric Kubby.  At the time of the accident, Mr. Kubby was operating a truck owned by Lyon Trucking, Inc.; both Mr. Kubby and Lyon Trucking were insured by United.  Following the accident, Plaintiffs brought personal injury claims against Mr. Kubby and Lyon (“Insureds”), and United agreed to defend Mr. Kubby and Lyon Trucking in the Underlying Action.

 

Plaintiffs and the Insureds entered into a change of venue agreement in which it was agreed that: (1) they would change venue and arbitrate the claimed damages before a neutral fact-finder; (2) Insureds would assign to Plaintiffs the rights and interests in any and all present and future claims under the Policy against United; and (3) Plaintiffs would not execute or enforce any judgment resulting from the arbitration against Insureds.

 

United brought a motion seeking to intervene in the Underlying Action to bar the arbitration proceedings.  While the motion was pending, the arbitration went forward.  United defended the Insureds, but it did not participate as a party.  More than $3,000,000 was awarded to Plaintiffs.  The court subsequently entered judgment and denied the motion to intervene.

 

United then filed an appeal of the denial of its motion to intervene.  The motion also sought to vacate the judgment.  The Insureds then assigned their rights under the policy to Plaintiffs, who commenced an action against United for breach of contract and bad faith.  United made a motion to dismiss arguing that the bad faith claim was not ripe.  At the time of the motion, the appeal on the motion to intervene had not yet been decided.

 

The Court agreed with United and dismissed the bad faith claim without prejudice.  Under Colorado law, a judgment must be final and non-appealable for a third-party bad faith claim to accrue.  Here, the excess judgment was not final and non-appealable because United’s motion was still pending.  Thus, the court concluded that the bad faith claim was not ripe for judicial review.

 

07/19/18       Ho v. PCK Realty Inc.

New York Supreme Court, New York County

Insurer’s Motion to Consolidate Breach of Contract and Bad Faith Case with the Insured’s Negligence Claim was Denied

Ms. Ho is the executrix of the estate of Hing Duen Ho (Mr. Ho).  Mr. Ho owned the building located at 105 East Broadway.  During the period in question, Mr. Ho had a fire policy with Greenwich.  On May 14, 2009, there was a major fire in a neighboring building, located at 109 East Broadway.  The building collapsed the next day, destabilizing 107 East Broadway, with which Mr. Ho's building shared a common wall. Pursuant to an emergency order, the building at 107 East Broadway was demolished. This demolition, in turn, destabilized Mr. Ho's building, and another emergency order directed that this building be braced.  Plaintiff alleges that this resulted in over $1,000,000 in expenses.

 

Mr. Ho filed a claim for the damages he incurred, and Greenwich denied coverage, stating that the damages were not the direct result of the fire at 109 East Broadway.

 

In 2010, plaintiff instituted the Greenwich action, alleging that the denial of coverage lacked merit and was made in bad faith.  In addition, two years later, plaintiff commenced the PCK Realty action.  The PCK Realty action asserts that it was the negligence of PCK Realty and Hong Kong Supermarket, both at 109 East Broadway that caused the fire and the resulting damage to the Building.  The action also asserts that A&M East Broadway was negligent in the demolition work in that it did not take measures to brace plaintiff's building, and that this negligence exacerbated the damage.

 

Greenwich moved to consolidate and intervene in PCK Realty as a plaintiff.  Greenwich argued that intervention is proper because both lawsuits arise from the same set of underlying facts and involve common questions of law.  Greenwich contended that the facts of the fire and collapse of 109 East Broadway, the damage to and demolition of 107 East Broadway, and the resulting cost to the Building are at issue in both cases.

 

The motion to intervene was denied.  Greenwich denied the claim for insurance coverage, and that would complicate its position as a co-plaintiff with the insured whose claim it denied.  The core issue in Greenwich is whether Greenwich wrongfully denied an insurance claim, while the core issue in PCK Realty is who is liable for the damages plaintiff has sustained. 

 

However, the Court did permit informal consolidation for purposes of discovery.

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

07/20/18       Wear v. Selective Insurance Co.

Superior Court of New Jersey, Appellate Division

Insurer Erroneously Ordered to Defend Where Trial Judge Failed To Consider Anti-Concurrent/Sequential Language in Exclusion

Woodbury Medical (“Woodbury”) owns an office building in Woodbury, New Jersey. Theresa Wear (“Wear”) worked in the building as a registered nurse. She claimed to suffer injuries due to exposure to alleged toxic conditions in the building. In her complaint against Woodbury, Wear averred that she was injured due to “exposure to mold and the HVAC filter fragments from when the HVAC system”.

 

Selective issued a commercial umbrella and business owners' insurance policy to Woodbury, which provided liability coverage for “bodily injury”. The policy included a mold exclusion. The mold exclusion contained both anti-concurrent and anti-sequential language. By its terms, the mold exclusion applied “regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.”

 

Selective was provided with the suit papers. After conducting an investigation, Selective issued a flat denial of coverage letter referencing the mold exclusion in the policy. Selective did not issue a reservation of rights letter as it took the position that the anti-concurrent and anti-sequential language in the exclusion precluded coverage even if there were other causes which may have contributed to the injury—such as the HVAC filter fragments.

 

Woodbury sued Selective seeking a declaration that Selective was obligated to defend and indemnify Woodbury in Wear’s litigation. Woodbury moved for partial summary judgment and Selective cross-moved for a declaration that there was no coverage.

 

The trial court granted Woodbury’s motion and denied Selective’s finding a duty to defend. The trial judge reasoned that there were allegations that Wear’s injuries were caused by mold, and allegations that the injuries were caused by the HVAC filter fragments. Notably, the trial judge did not address the anti-concurrent or anti-sequential language in the mold exclusion.

 

On appeal, the Appellate Division considered, among other things, (1) whether Selective owed a duty to defend; and (2) whether Selective breached its duty to act in good faith.

 

Woodbury argued that Selective had a duty to defend because Wear alleged alternative causes of injury, separate and apart from mold. The allegation that her injuries were caused by the HVAC filter fragments. Selective argued that, the mold exclusion, which included anti-concurrent and anti-sequential language, barred coverage.

 

In New Jersey, where two or more identifiable causes — one a covered event and one excluded — may contribute to a single property loss, there is coverage absent an anti-concurrent or anti-sequential clause in the policy. The policy at issue contained an anti-concurrent and anti-sequential clause and excludes coverage from any loss or damage “regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.” The Appellate Division found that the exclusion was not ambiguous. The Court explained that “a fair reading of the exclusion is that, despite other potential causes, mold must be excluded as a causative factor in order for there to be a covered loss.”

 

The Appellate Division concluded that it was premature to order Selective to assume responsibility for the defense since it was unclear, based upon the anti-concurrent and anti-sequential language in the exclusion, whether any claims would be covered. Therefore, the Appellate Division held that the duty to defend should be converted to a duty to reimburse pending resolution of the coverage action. Meaning that Selective would only have to pay the defense costs if it is later determined in the coverage action that some of the alleged claims were covered.

 

Finally, the court noted that Selective did not breach its duty to act in good faith. The Appellate Division held that Selective was within its right to dispute coverage based upon the language of the policy’s exclusion.

 

OFF THE MARK
Brian F. Mark

[email protected]

 

The courts have offered me nothing!

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

08/02/18       In Re September 11 Litigation

United States District Court, Southern District of New York

Defendant’s Motion for Summary Judgment for Granted because the “Make Whole” Rule did Not Apply because the “Made Whole” Rule did not Apply to Recover a Portion of Defendant’s Settlement with Tortfeasor’s was Inconsistent with Established Subrogation Law

The case originates from a dispute between the insurers and insureds for a portion of a settlement ending subrogation litigation.  Plaintiffs, the insureds, lessees of the World Trade Center Properties, settled with the insurers and had a settlement with the tortfeasors (the “Aviation Defendants”).  The insurers, using its subrogation rights settled with the Aviation Defendants, resolving their aggregate claims for $1.2 billion.  The court approved and the Second Circuit affirmed the settlement despite Plaintiffs’ objections.  Plaintiffs argue that they are entitled to a portion of the settlement of the insurers’ settlement with the tortfeasors pursuant to the subrogation provision in the insurance contract.  The current decision considers Defendant QBE Insurance (Europe) Ltd. f/k/a (“QBE”) motion for summary judgment dismissing Plaintiffs’ Complaint. 

 

Previously, QBE insured Plaintiffs under a WilProp 2000 policy form (the “WilProp Form”) which provided that “[i]f any amount is recovered as a result of [subrogation] proceedings, the net amount recovered after deducting the costs of recovery shall be distributed first to the insured in reimbursement for the deductible amount retained and for any uninsured loss or damage resulting from the exhaustion of limits under this policy or primary or excess policy.”  As to this provision, the court previously held that “Plaintiffs gain priority with respect to WillProp Defendants’ Settlement Proceeds (after deducting the costs of recovery and aside from the deductible amount retained) only if Plaintiffs have legally recoverable tort damages exceeding Plaintiffs’ insurance recovery.” 

 

In its analysis, the court first noted that New York law governs the insurance contract at issue.  Under New York, “subrogation forecloses insureds from recovering twice for the same injury while also preventing tortfeasors from escaping liability.”  The court recognized also that “when giving meaning to contractual subrogation provisions, courts appropriately rely on equitable subrogation principles on the assumption that, absent an evident intention to the contrary, the parties meant to incorporate those principles.  However, the court also noted that equitable subrogation is limited by the “made whole” rule, which provides that the insurer may seek subrogation against only those funds and assets that remain after the insured has been compensated.”  Nevertheless, the “made whole” rule is triggered only when “the source of recovery ultimately available are inadequate to fully compensate the insured for its losses.”

 

Plaintiffs’ argument mainly rested on the application of the “made whole” rule.  Applying the well settled New York law regarding subrogation, the court held that the “made whole” did not apply and therefore Plaintiffs cannot claim priority to QBE’s subrogation recovery.  In this decision, the court focused on two points.  First, the court found Plaintiffs elected to settle their claims against Aviation Defendants without exhausting the sources of recovery available to them.  Second, the court found Plaintiffs elected to settle their claims against Aviation Defendants without resolving the underlying issues in the Tort Action. 

 

In addition, the court rejected Plaintiffs argument that the WilProp Form modified the equitable subrogation rule.  Specifically, Plaintiffs argued that the WilProp Form expressly makes the existence of any “uninsured loss or damage” contingent exclusively on “exhaustion of the limits of the QBE insurance policy itself. . . .”  Although, the court acknowledged that parties are free to contract around equitable subrogation principles, the court found the parties did not do so here.  The court determined that the relevant portions of the WilProp Form was absent of the word “exclusive” and drawing such an inference as contended by Plaintiffs was inconsistent with New York law that equitable subrogation principles apply absent an evident intention to the contrary.  As such, the court held that Plaintiffs’ settlement with the Aviation Defendants bars further recovery in the current action. 

 

Further, the court rejected Plaintiffs’ argument that granting QBE’s motion for summary judgment is inconsistent with the judicial policy favoring settlement and judicial economy.  In rejecting Plaintiffs’ argument, the court noted that the court is required to apply the law and not a policy goal in defiance of established New York law.  The court noted also that the principal goal of equitable subrogation doctrine is to hold the tortfeasor, not the insurer responsible for injuries incurred by the insured.  As such, to permit Plaintiffs to recover a portion of QBE’s settlement with the tortfeasors under the “made whole” rule would be inconsistent with the goals that underlie subrogation because Plaintiffs have settled their claims against the alleged tortfeasors and are not competing with QBE for a limited source of recovery. 

 

In sum, the court granted QBE’s motion for summary judgment and instructed the clerk to terminate enter judgment dismissing the Complaint, tax costs as appropriate, and close the file.

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

08/07/18       Tannone v Amica Mutual Insurance Company        

Supreme Court of Connecticut

Underinsured Motorist Coverage/Graves Amendment/Public Policy Considerations

Sandra and Patrick Tannone were pedestrian insureds injured while crossing the street.  They were struck by a rented vehicle, driven by a permitted user, not the renter of the vehicle.  Multiple insurance claims, as you might imagine, ensued, as well as this insurance coverage litigation.  The Tannones claimed their damages exceeded what they could recover through the renter’s/permitted user’s fully tendered automobile liability insurance policies.  Denial by Amica Mutual of the Tannones’ respective individual underinsured motorist coverage claims prompted this litigation.

 

By way of procedural background, Amica’s motion for summary judgment in this litigation, made to the Connecticut Superior Court, was granted.  The grant of summary judgment upheld the application by Amica of exclusionary language set forth in the Tannones’ automobile insurance policies with Amica, whereby Amica denied the individual underinsured motorist coverage claims of the Tannones.  The Connecticut Superior Court’s ruling favoring Amica relied in large part upon precedent established by a factually similar 1999 Connecticut Supreme Court ruling, discussed below. 

 

The pertinent exclusion from underinsured motorist coverage in the Amica policies provided the Tannones had no underinsured motorist coverage for their personal injuries suffered due to the negligent operation of a “self-insured” vehicle.  The Connecticut Supreme Court analyzed whether the policies at issue, containing underinsured motorist coverage required by Connecticut state law, could nevertheless validly exclude such benefits to the insureds because the owner of the underinsured vehicle driven by the tortfeasors in the matter at hand was a rental car company, Enterprise, designated as a ‘self-insurer’ pursuant to Connecticut statutory law.  

 

The Connecticut Supreme Court previously addressed such an issue in Orkney v. Hanover Ins. Co., 248 Conn. 195, 202–206 (1999).  There, the Connecticut Supreme Court upheld the validity of § 38a-334-6 (c) (2) (B) of the Regulations of Connecticut State Agencies, which authorizes an exclusion from the underinsured motorist coverage requirement for uninsured or underinsured vehicles owned by a self-insurer under any motor vehicle law.  That 1999 holding was premised on the following public policy notion.  Because self-insurers were required under Connecticut statutory law to prove their ability to pay judgments when liable, underinsurance coverage was rendered “unnecessary” in such situations, as a matter of public policy. So, nineteen years ago Orkney held there was nothing inconsistent between the public policy underlying mandatory underinsured motorist coverage, and, a regulation that permits a coverage exclusion for damage caused by vehicles owned by self-insurers who had the proven wherewithal to pay judgments when liable.

 

However, and very notably, six years after Orkney was decided by the Connecticut Supreme Court, Congress passed, in 2005, what is commonly referred to as the Graves Amendment, 49 U.S.C. § 30106(a). The Graves Amendment makes rental car companies immune from vicarious liability for injuries caused by their underinsured lessees even if a state has designated them as self-insurers capable of providing a remedy. As you all no doubt know, federal law trumps state law.  (This writer refrains, as a matter of H&F policy, from opining about whether “Trump Law” overrides federal and/or state law.) 

 

The Tannones argued in their appeal to the Connecticut Supreme Court that in light of the passage of the Graves Amendment, the self-insured exclusion in their underinsured motorist coverage with Amica should not apply to Enterprise because the regulation authorizing that exclusion was now invalid as applied to Enterprise, because Enterprise could not be held liable following the Graves Amendment.  The Connecticut Supreme Court’s holding agreed with the Tannones, reversing and remanding this case to Superior Court.  The state regulation giving rise to the self-insurance exclusion in the Tannones’ policies was held invalid as applied to Enterprise.

 

The Connecticut Supreme Court explained that while Enterprise was indeed a self-insurer under Connecticut statutory law, because Congress had passed the Graves Amendment resulting in no ability to hold Enterprise vicariously liable for the negligence of its customers, the “relevant legislative landscape” had changed since the court’s 1999 decision in Orkney, which had upheld the self-insurer exclusion.  Thus, Orkney was no longer controlling.

 

The court reasoned that central to the decision in Orkney was the injured party’s ability to “seek compensation from the [self-insurer]” for the negligence of its lessees. At the time of Orkney, the self-insurer exclusion did not foreclose the insured from a remedy, but rather, directed the insured to seek another source of compensation for the insured’s injuries: the self-insurer.  Now, given the impact of the Graves Amendment, injured parties are precluded by federal statute from seeking compensation from rental car companies as self-insurers, “undercutting the primary rationale on which Orkney was decided”, said the court.  The court concluded that Section 38a-334-6 contradicted the “public policy” behind Connecticut’s underinsured motorist mandate, and was invalid as applied.  Accordingly, the exclusion set forth in the Tannones’ policies with Amica could not preclude the Tannones from receiving the underinsured motorist benefits of their policies.

 

Since way back in ’03 – that’s 1803 – beginning with Marbury v Madison, our tripartite form of government has grown to acknowledge and accept the power and authority of judicial review of federal and state laws.  It has long been established that application of federal law can nullify existing state law.  Just the way it is. And now we know how things stand on this issue, in Connecticut at least.  

 

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

 

06/26/18       Borchardt v. State Farm Fire and Casualty Company

United States District Court, District of Minnesota

Materiality of Misrepresentations can be Determined by a Jury

In September 2014, a fire destroyed the home of the Plaintiffs, Todd and Michele Borchardt and their two adult children, Danielle and Dillon. State Farm denied coverage for two reasons. First, State Farm alleged that Plaintiffs set the fire. Secondly, State Farm alleged that Plaintiffs lied about the cause of the fire, and also about the items and amount of personal property destroyed in the fire. At trial, a jury returned a mixed verdict. They found that it had not been proven that the Plaintiffs had set the fire, but the jury also found that the State Farm had proven that Todd, Michele and Danielle had each willfully, and with intent to defraud State Farm, concealed or misrepresented any material fact or circumstance relating to the fire and his or her insurance claim. In short, the intentional misrepresentations found by the jury related to the number and value of items and personal property destroyed in the fire. After the trial, the Plaintiffs moved for a Judgment as a matter of law and notwithstanding the jury verdict, that no reasonable juror could have found that the alleged misrepresentations concerning personal property were material. The Court first noted that the appropriate standard of review would be most favorable to the jury’s verdict, and draw all reasonable inference in support of the verdict.

 

The Plaintiffs first argued that, on a prior summary judgment motion, the Court had held that the insured’s misrepresentations could not be deemed “material” unless those misrepresentations impacted the investigation. They then argued that State Farm introduced no evidence that misrepresentations about the personal property had any impact on the investigation. The Court rejected this argument on procedural and substantive grounds. Procedurally, the “law of the case” doctrine applies only to issues decided by a final judgment, and the Order denying the summary judgment motion was not a final judgment. Substantively, the Court ruled that its prior ruling did not establish that the only way that a misrepresentation could be deemed material was if it impacted the insurer’s investigation. The misrepresentations about the personal property might not have impacted State Farm’s investigation into the cause of the fire, but they would nevertheless have been material, unless the amount of money involved was trivial.

 

The Plaintiffs next argued that State Farm did not present expert testimony as to whether a “reasonable insurer” would have considered the misrepresentations about the number and value of items lost in the fire to be material. Plaintiffs argued that this position was inconsistent with a position previously taken by State Farm on a prior motion. However, the Court ruled that there was no clear inconsistency between the prior motion regarding bad faith and what State Farm was now arguing regarding materiality. There was nothing inconsistent with arguing that a lay person is not capable of assessing the reasonableness of an arson investigation, but also arguing that a juror is capable of assessing the materiality of fraudulent statements about the number and value of items of personal property. The dispute before the Court related to issues of fact about whether and to what extent Plaintiffs lied about the items of personal property lost in the fire, and this was not inconsistent with prior arguments or Court rulings.

 

Lastly, Plaintiffs argued that State Farm did not introduce evidence sufficient to support the jury finding that the misrepresentations were material. Among other things, Plaintiffs argued that expert testimony was necessary to help the jury decide whether the amount of money was or was not so small that a reasonable insurer was not likely to deem it important. However, the Court reviewed the record and testimony with respect to substantial discrepancies regarding personal property such as flat-screen televisions, riding lawnmowers, computers, and DVDs, and concluded that the evidence at trial was sufficient to allow a reasonable jury to conclude that Plaintiffs overstated their claim by thousands of dollars. The jury did not need an expert to tell them that fraudulent statements of that magnitude would be substantial and material to a reasonable insurer.

 

Post-trial, the Court concluded that the jury reasonably found that three of the Claimants had lied to State Farm about the personal property lost in the fire. Only Dillon was entitled to recover, and since he did not own the home, he was limited to recovering the value of personal property that he alone lost in the fire. The Plaintiffs motion for Judgment notwithstanding the verdict was essentially denied.

 

This case is a good example of material misrepresentations voiding a policy or claim. It was also significant that the Court ruled that the issue of “materiality” was a question of fact for the jury and not a question of law for the Court to decide in the abstract.

 

The Court also ruled that the “materiality” of the misrepresentations with respect to thousands of dollars of personal property in question was a clear question of fact on which the jury could rule without expert witness testimony regarding insurance company practices, underwriting, or claims handling.

 

While the jury apparently did not believe that the Plaintiffs were responsible for setting the fire at the property, it appears the jury clearly believed that the Plaintiffs (at least three of them) materially inflated their claims, precluding any recovery.

 

This case also supports the strategy of having multiple arguments in contested claims. The jury did not believe Plaintiffs set the fire, but they decided the claims presented were highly fraudulent.

 

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874

         

Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

 

Lake Placid Office

2577 Main Street

Lake Placid, NY 12946

Phone: 518-523-2441

Fax: 518-523-2442

 

www.hurwitzfine.com

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