Coverage Pointers - Volume XX, No. 5

Volume XX, No. 5 (No. 516)
Friday, August 24, 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:

Join me in wishing a hearty congratulations to John Ewell and his bride to be, Erin. who are to be married next Friday.  Ewell’s Universe is expanding for the better!  Wishing them a wonderful life together.

Do you have a situation?  We love situations.


Atta Lawyers Awarded:

First, a pair of Atta-Lawyers to Jody Briandi and Anastasia McCarthy for their superb handling of a school district-defense matter in Erie County Supreme Court.  A student in a school chemistry laboratory tossed a caustic substance at another student allegedly resulting in the victim’s loss of taste.  There were both defense issues and disputed medical questions.  Part way through the trial, the “tossing” student’s homeowners’ carrier settled out but the case against the school district went to verdict.

The jury returned a No Cause verdict in favor of the school after an hour or so of deliberation and announced that had it rendered a verdict, it would have awarded $5,000 for past pain and suffering and nothing for future.  Well done.


We Want to EMPOWER You!  Need an In-House Claims Conference Speaker?:

Let me get your attention with this simply mantra:  New York hates reservation of rights letters?  Didn’t know that?  Read on.

So many of the “situation” calls that come in to our office remind us that:

  • Insurers without a consistent presence handling New York coverage questions do not appreciate the nuances of New York coverage rules and, unwittingly, may have waived the right to deny coverage.

  • Newly hired or assigned claims professionals have not been trained in New York’s special handling rules.

Accordingly, insurers send out “reservation of rights” letters, legitimate and effective in most civilized jurisdictions but often worthless in preserving New York coverage rights or committing some other New York coverage sin.  We don’t want that to happen to you!  We want to empower your company to make the right decisions, so often time sensitive under New York statutory and common law.

Accordingly, we offer training.  We regularly visit and participate in regional or national (or even local) claims training for insurers throughout the country.  Here is a sample of programs provided in the past but we can create one for you   We revise our list as requests come in.

  • Most Common Mistakes Made in Handling New York Coverage Problems and How to Prevent Them

  • Life after Burlington – How Do We Resolve “Additional Insured“ Issues?

  • Life after Carlson – When is a Policy “Issued or Delivered in New York” to Trigger Draconian Requirements of CPLR 3420(d)(2)?

  • Tenders, Additional Insured Obligations, Indemnity Agreements and Priority of Coverage

  • Chaos Breeds Resolution: Mediation and the Role of Coverage Counsel in Resolving Chaos

  • Strategic Approaches to Resolving Insurance Coverage Disputes:  Do We Defend and Start a DJ? Do We Sit Back and Wait?

  • Good Faith, Consequential Damages and Extra-Contractual Liability - the New York Experience

  • NY Coverage Letters - Nuts & Bolts: How to Create and Write and Timely Send a Disclaimer Letter and NY’s Special Dangers with Reservation of Rights Letters

  • Uninsured and Underinsured Claims Handling

  • Preventing Bad Faith Claims - First Party Cases

  • Preventing Bad Faith Claims - Liability Cases

  • The Primary and Excess Relationship

  • The Cooperation Clause - How to Handle

  • The Serious Injury Threshold

  • No Fault – Nuts and Bolts

  • An Auto Liability Policy Primer

  • A CGL Policy Primer

  • A Homeowners Liability Policy Primer

  • EUO's Under First Party Policies

  • Insured-Selected Counsel: When is it Necessary and How to Avoid and Control?

  • ADR and How to Get to "Yes"

  • “Other Insurance”

Interested in training?  Drop me a note at [email protected],


Peer Selected Honors and We Thanks Our Peers for the Recognition:

It’s that time of year when national publications announce the peer recognition choices.  We appreciate the kindness and respect demonstrated by our brothers and sisters at the Bar.

Hurwitz & Fine is pleased to announce that 10 of the firm’s attorneys have been selected by their peers for inclusion in the 2019 edition of The Best Lawyers in America.  In addition, President & Managing Member, Ann E. Evanko, earned “Lawyer of the Year” honor for her area of practice, Litigation – Labor and Employment.


2019 Best Lawyers in America:

  • Patrick B. Curran – Personal Injury Litigation – Defendants

  • Ann E. Evanko – Corporate Law, Employment Law – Management, Litigation – Labor and Employment, Mediation

  • Robert P. Fine – Corporate Law, Health Care Law, Mergers and Acquisitions Law, Tax Law, Trusts and Estates

  • Lawrence C. Franco – Corporate Law, Tax Law, Trusts and Estates

  • Dan D. Kohane – Commercial Litigation, Insurance Law, Litigation – Insurance

  • Michael F. Perley – Litigation – Municipal, Personal Injury Litigation – Defendants

  • Edward C. Robinson – Elder Law

  • Lawrence M. Ross – Corporate Law, Health Care Law, Tax Law

  • Roger L. Ross – Real Estate Law

  • Andrea Schillaci – Product Liability Litigation - Defendants


2018 Upstate New York Super Lawyers:

In addition, we are delighted to share that 25 attorneys from Hurwitz & Fine, P.C. have been selected to the 2018 Upstate New York Super Lawyers list. This is an exclusive list, recognizing no more than five percent of attorneys in New York.

  • David R. Adams (featured in a story in this year’s magazine)

  • Diane F. Bosse

  • Jody E. Briandi – Top 25 Women

  • Todd C. Bushway

  • Earl K. Cantwell

  • Patrick B. Curran

  • Ann E. Evanko – Top 25 Women

  • Robert P. Fine

  • Lawrence C. Franco

  • Christopher J. Hurley

  • Dan D. Kohane – Top 50

  • Steven E. Peiper

  • Michael F. Perley – Top 50

  • V. Christopher Potenza – Top 50

  • Edward C. Robinson

  • Lawrence M. Ross

  • Roger L. Ross

  • Andrea Schillaci – Top 50, Top 25 Women

  • Amber E. Storr

  • Kevin J. Zanner

  • Edward B. Flink


2018 Upstate New York Rising Stars:

  • Jennifer A. Ehman

  • Marc A. Schulz

  • Agnieszka A. Wilewicz

  • James L. Maswick


Sister Electronic Publications:

  • Labor Law Pointers – everything you need to know about New York construction site accidents, including common law negligence, scaffolding cases, Labor Law Sections 200, 240 and 241(6).  This newsletter is published monthly.  Contact Dave Adams to subscribe:  [email protected].

  • Premises Pointers – all you need to understand about retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!).  A monthly publication.  Contact Jody Briandi to subscribe:  [email protected] .


Recognition of the Sabbath During War Time – 100 Years Ago:


Dunkirk Evening Observer
Dunkirk, New York

24 Aug 1918




It is Expected That About Forty Young Men From This District Will Be Enrolled Today

Orthodox Jews who have religious scruples against registering for war service today, their Sabbath, may register on Monday.  Word to this effect was received by the Local Exemption Board today.  The board’s office in the Citizens Trust Co’s. building at Fredonia, will be open on Monday from nine in the morning until five in the evening for this purpose.

Today is the regular registration day for young men of Dunkirk, Pomfret and Sheridan, who have become of age since June 5, this year.  Those from Dunkirk are to register in the City Hall and those from Fredonia, at the Fredonia Village Hall.  The Sheridan young men may register either in Dunkirk or Fredonia.  The registration places will be open until nine o’clock this evening.

It is estimated that there are about forty men in this division who have become of age since June 5.


John’s Jersey Journal:

Dear Subscribers:

I hope you have been enjoying our column on New Jersey insurance decisions and developments. Thank you for the notes and calls. We are frequently being asked “Does Hurwitz & Fine handle New Jersey coverage cases?” The answer is Yes! We do! So if you have a situation in New Jersey, or a situation where New Jersey law may apply, give us a call or send us an email. We’d love to help!

We can advise you on New Jersey insurance law, prepare disclaimers and reservation of rights letters that comply with New Jersey requirements, and litigate declaratory judgment actions on your behalf in New Jersey state and federal courts. Our “coverage” territory has expanded! So the next time you hear “New Jersey”, think of us.

And if you want to stay current on New Jersey insurance law, keep reading our Jersey Journal. We report on insurance decisions from New Jersey state and federal courts.  We constantly review the New Jersey Appellate Division and New Jersey Supreme Court dockets and summarize the insurance decisions for you. We also monitor New Jersey federal courts—the U.S. District Court for New Jersey and Third Circuit Court of Appeals.

Today’s case from the New Jersey Appellate Division is just plain interesting. It involves the theft of human hair weaves. Beauty Plus Trading, a wholesaler of human hair weaves, ordered a shipment from a warehouse in China. The shipment arrived in New Jersey, and was delivered to Beauty Plus Trading warehouse on a Friday at 4 p.m. Since their warehouse would close at 5 p.m., they decided not to unload it. After all, the company noted that employees were “particularly reluctant” to work overtime on Fridays. When the workers arrived the following Monday, they discovered that someone had stolen the truckload of wigs, valued at a quarter million dollars.

A dispute arose whether there was coverage for the theft under Beauty Plus Trading’s marine cargo policy. The policy provided coverage from warehouse to warehouse. Meaning that coverage attached from when the goods were shipped from the warehouse in China to when the goods were received at the insured’s warehouse. The policy included an extension of coverage for loading and unloading of the wigs for, in essence, the first 24 hours after the goods were received. Thus, there was coverage for the wigs until 5 p.m. on Saturday. However, video footage showed the thieves driving off with the truckload of wigs at 9 p.m. on Saturday. Therefore, the court ruled that there was no coverage based upon the clear terms of the policy.

The court rejected the policyholder’s argument that coverage should be extended to the next business day, the following Monday. The policy’s language was unambiguous and no further action was required by the insured.

What’s more intriguing is that somewhere in New Jersey, some guy is trying to sell stolen human hair weaves on a street corner or eBay.

Still no movement on the New Jersey Bad Faith bill.

The wedding is finally here. I am getting married next Friday and will then be on my honeymoon in Jamaica. Enjoy what’s left of summer!


John R. Ewell

[email protected]


Where’s the Proof?


The Los Angeles Times
Los Angeles, California

24 Aug 1918



Forest Ranger Carries Hundred Pounds of “Proof” Long Way


Division Ranger W. D. Marx and Ranger E. B. Hamilton had carried 100 pounds of evidence of an unextinguished camp fire for twenty miles on burro back over tortuous mountain trails from the Big Tejunga to Pasadena.  Justice Benjamin C. Strang of that city yesterday decided that C. H. Meyers of Glendale was not guilty of having left his camp fire burning.

The big spruce knots were perfectly admissible as evidence, except that they were not glowing coals when produced in court, as they had been when Hamilton discovered them.  He said that he had to extinguish them before he could carry them out of the hills.

Both the defendant and Mrs. Meyers and Mr. and Mrs. Stanley Turner, also of Glendale, testified that the fire has been well covered with sand when they left it.  Hamilton found it a day later popping merrily after the wind had blown away the sand.


Peiper’s Parsings:

We start this week with congratulations to all of my aforementioned colleagues who were recently honored on the TopSuperBest lists for this past year.  We have an extraordinary collection of legal talent around here, and I’m continually grateful to count as law partners some of the very best lawyers in the country.  Cheers to all.

I must admit I’ve struggled to find something to write about this week.  My friends on the newsletter have covered kids going back to school (of which I’m in favor of), the forthcoming of Fall (of which I’m in favor of) and the dredges of Summer humidity (of which I’m not in favor of).  Not sure if Ella Smith will make an appearance this week, but I’ve seen her recently and she’s “fab” as always.

With it being the last issue of the traditional summer, I also don’t have it in me to comment on legal matters.  The “National Day” list for 8/24 is not particularly inspiring either.  I’m running short on material.

With nothing much left to say, I’ll leave you this week with an important public service announcement.  I’m finally getting what you Pacific Timers have known for years.  Earlier is better.

Two weeks ago, the English Premier League started its 2018-19 season.  I know, surely, that soccer has slowly, but steadily, gained traction over the past two decades in the U.S.  I was a bit late the game, acting as only a casual observer over most of that time.  However, this whole EPL Saturday morning thing really works for me.  I like the idea of sporting events starting at 7:30 and ending by noon.  I’m hooked.  Not so much on the soccer (although I do like it), but more so on the plausible excuse for putting off house projects until weekend afternoons, and then putting them off until the following weekend.

So for this week’s public service announcement, Potpourri suggests buying yourself a “kit”, pouring a cup of coffee, and putting off pulling weeds for another weekend.  Cheers.


Steven E. Peiper
[email protected]


That’s the Pits – a Century Ago:


The Courier-News
Bridgewater, New Jersey
24 Aug 1918




One of the latest weapons which Uncle Sam is using in his fight against the Hun is the peach stones.  The pits of plums and apricots are also being called to the colors.

The Government has sent out a general request to the department stores in the large cities to place convenient receptacles for the collection of the pits of peaches, plums and apricots, which have been found peculiarly adapted to the manufacture of charcoal, used as an absorbent in gas masks.  Poison gases filtered through masks in which this charcoal is used are robbed of their deadliness. 


Hewitt’s Highlights: 

Dear Subscribers:

Summer is rapidly coming to an end. However, next week my family and I will be going camping for our vacation. Well, semi-camping, if you can call staying in a cabin with air conditioning, running water, and electricity camping. In two weeks, when the next edition arrives, my children will already be back in school two days and my wife will already be back teaching. That was a quick summer! Aren’t they all?

There is only one serious injury threshold case this edition. It simply involves the Appellate Division, Second Department, reversing a grant of summary judgment because the defendants did not address all claims in the bill of particulars as to serious injury. Other than that, the dog days of summer have arrived.                        

Until next time,


Robert Hewitt

[email protected]


Editor’s Note:  Motel 6 is camping for me.


Unusual Grounds for Divorce:


Reading Times
Reading, Pennsylvania
24 Aug 1918




An unusual case and probably the first to be heard under the law that refuses matrimony in the case of an epileptic, is the suit of Gertrude Regan, who is charging her husband, Calvin Regan, with non-support.  Mrs. Regan is an epileptic.  She is 18 years old and he is 20.

The husband alleges that as he could not wed his bride in this state, he went to Maryland, where the knot was tied and as the marriage was in contradiction of the laws of this state, his wife cannot collect for non-support.


Wilewicz’ Wide-World of Coverage:

Dear Readers,

We are still enjoying this summer with no end here, trying to get outside as much as possible and soaking up vitamin D to save up for winter. I’m hearing that this warm spell might mean a warm, but wet (i.e. snowy?!) season upcoming, so one must prepare. My daughter is already looking forward to school starting back up again – she actually has a countdown on the desk in her room – and indeed I am looking forward to regaining some routine. Summer has been exhausting.

Now, in coverage news, the Second Circuit again steered clear of cerebral coverage cases during these dog days of summer. However, in the Wide World of Coverage we scoured the Circuits, as we often do, and found that the Sixth Circuit recently analyzed a cyber-liability case that might be of interest. As we have noted before, we are always on the lookout for cyber coverage cases, as this is a bourgeoning area, ripe with coverage issues.

In American Tooling Center v. Travelers, at issue was whether a business insurance policy provided coverage when an insured suffered losses due to a social engineering scam. That is, one of the insured’s emails with its vendor was intercepted by a scammer, who then proceeded to tell the insured that its banking information had changed. The insured then changed the payee information and sent the payments to the fraudster’s bank instead. In a well-written and reasoned decision, the court found coverage for that claim. It was a direct loss to the insured, resulting from computer fraud, and no exclusions applied. The decision is brief, but well worth the five minutes it might take to read. Link to the decision, and summary of the meat of it, are annexed in this weeks’ edition as attached.

Until next time!


Agnes A. Wilewicz
[email protected]


World Series Approaching – in 1918:


The Buffalo Enquirer
Buffalo, New York
24 Aug 1918





Practically Certain Boston Red Sox and
Chicago Cubs Will be Contending

Teams From Two Major Leagues—End of Game
Till After War.


(I. N. S. Sports Editor.)


New York, Aug. 24.—Baseball is to be shelved for the duration of the war with fitting ceremonies.

Secretary Baker’s approval of the world’s series has today paved the way for the playing of the big fall classic, and the 1918 season will be closed true to traditions of the game.

Plans for staging the bon-ton event of the national pastime may now be completed by the national commission without fear of interruption, and indications today point more strongly than ever to the Red Sox as opponents of the Cubs.

The Chicago Nationals have clinched the National league pennant.  The Red Sox, three full games ahead of the second place, Cleveland Americans, are a full step nearer their goal today.

Figuring Boston as the American league winner it is a practical certainty that the series will open in Boston September 4.  The usual customs will not be followed this year regarding the schedule of games, according to baseball men here.  The commission hopes to arrange the schedule so that one trip and two at the most, between Boston and Chicago will suffice.  It is likely that three games will be scheduled for Boston and three for the Windy city.

With the stamp of approval of the war department behind it, the world’s series promises to be a success.  Had it been attempted without official sanction public interest would have been turned to derision. 


Barnas on Bad Faith:

Hello again:

I’m recently back from an exciting long weekend in Chicago where I saw Pearl Jam at Wrigley [amazing show], a Royals-White Sox game at Guaranteed Rate Field [surprisingly good for a game between two teams with less combined wins than the Red Sox], caught some of the Chicago Air and Water Show [jets are very loud], took in the Spurs game at an authentic Tottenham supporters’ bar [I now know most of the Spurs chants], and spent some quality time with good friends.  This week hasn’t been nearly as exciting, but we’re almost to the weekend.  Fall is even in the air with highs in the low 70s and cool nights the last couple days.  I love summer in Buffalo, but fall is the best season around here in my humble opinion.  I’m certainly ready for hoodies, apples, playoff baseball, football, and Oktoberfest.

I have a New York extra-contractual case from the Second Department in my column this week.  The Second Department concludes that the insured sufficiently stated a claim for consequential damages by specifically identifying the damage sustained as a result of the insurer’s alleged failure to pay the claim.  The insured’s claim for violation of General Business Law § 349 did not survive however, as it was based on a private contractual dispute between the parties, which is not within the ambit of the statute.

Have a nice weekend.


Signing off,


Brian D. Barnas
[email protected]


How Much for a Toe?


The St. Bernard Voice
Arabi, Louisiana
24 Aug 1918


Jury Sets Fancy Price on Young Lady’s Big Toe


New York.—Brooklyn is offering $17,500 for big toes.  This is believed to be the record price for such articles.  As there is no present indication the offer will be increased, it looks like a good time for those persons who are in need of money to exchange toes for cash. Nearly everyone could get along with fewer toes, especially in these parts where the car straps are hung so low one doesn't need toes to stand on. Another thing about cashing in a few toes is that it will make no difference in your appearance. No one need know that your sudden prosperity is due to your having obtained an absolute divorce from them.

While the Brooklyn price referred to a big toe, no doubt you could arrange to get a tidy sum for one of your smaller ones in case you don't feel like parting with either of your grown-up toes. Before chopping any of them off, however, it might be well to submit them to the supreme court jury of 12 good men and true—or as much so as Brooklyn men can be—who decided that the Coney Island and Brooklyn Railroad company ought to pay $17,500 to Miss Fannie C. Ciamerille for removing the big toe of her left foot without first having obtained her permission.

Miss Ciamerille was greatly attached to the big toe until July 31, 1917, when, she alleges, she was permanently separated from it by being thrown from an open car.

Immediately following the verdict those in the courtroom began speculating on how many toes they could spare and keep from tipping over. More than one man was heard to observe he would be willing to have one of his toes cut off close to his knee for half the amount.

Nothing in the evidence disclosed that Miss Ciamerille's big toe was other than the ordinary, matter-of-fact, well-behaved big toe. No superior intelligence was claimed for it. There was no suggestion of it having been trained for any special purpose. In short, it was just a plain, honest, more-or-less blunt big toe, a toe that minded its own business and did not interfere with other toes. The fact that such a toe could earn that much money was what started the spectators figuring out how much income tax they would have to pay on certain amounts.


Off the Mark:

Dear Readers,

The end of the summer is rapidly approaching.  I can’t believe Labor Day is right around the corner.  Thankfully, the humidity has eased up a bit.  Our summer plans took a sharp turn as we have decided to move.  With only one month before school starts, we have a lot of work to do.

This edition of “Off the Mark” discusses a recent construction defect case from the US District Court for the Western District of Washington.  In Diamond Constr., LLC. v. Atl. Cas. Ins. Co., the insured failed to properly protect a roof from overnight rain while performing a roof replacement job.  The US District Court examined a number of exclusions contained in the CGL policy issued to the insured contractor and determined that the policy exclusion for ongoing operations was applicable and barred coverage.  The decision also examined the insured’s allegations of bad faith and violation of a consumer protection act.

Until next time …


Brian F. Mark
[email protected]


Wages Out of Control – a Century Ago?


The Ottawa Herald
Ottawa, Kansas
24 Aug 1918




Skilled Shipbuilders Have Presented

“Friendly Demands”


Washington, Aug. 24—Skilled workers in the shipbuilding industry of the country have presented “friendly demands” to the labor adjustment board of the shipping board for increases in wages to $1 an hour and double pay for all overtime, Saturday half holidays throughout the year and 10 per cent bonus for all night shop work.  The present wage is approximately seventy five cents an hour.


Wandering Waters

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

The NBA offseason continues to steam ahead.  Recently, the NBA released the full schedule for the 2018-2019 seasons.  As to no surprise, the Lakers have the most nationally televised games.  In fact, almost half of the Lakers’ games will appear on national television.

While I am excited to watch LeBron in LA, I am a little worried about my favorite player, Dwayne Wade.  To date, he has yet to sign with any team.  I am positive that that he will play this upcoming season for the Miami Heat.  However, I am also positive this will be his last season.  Dwayne Wade is arguably one of the best three shooting guards of all time and it will truly be a sad day when his historic NBA career ends.  If this truly is his last season, I will be watching a ton of Miami Heat games on NBA League Pass.  

With that being said, this week we have one case from the United States District Court, Eastern District of New York.  Kudos to our very own Brian Barnas, who prepared the successful motion papers.  I hope you enjoy.

Until next time…. 


Larry E. Waters
[email protected]


Food Costs Skyrocketing:


The Buffalo Times
Buffalo, New York
24 Aug 1918


Drafted Men Allowed 75 Cents For Their Meals


Another raise in prices was felt today when Buffalo draft boards received notice to allow all drafted men and men on military work 75 cents a meal instead of the old rate of 60 cents.  The increase was necessary, said the bulletin, because of the rise in prices of foodstuffs.


Boron’s Benchmarks:

Dear Subscribers:

This month, my wife Beth and I celebrated our 35th wedding anniversary.  You younger readers – and that is just about ALL of you, I would guess – listen closely.  Take it from someone who knows.  Time really does “fly”.  Especially when you’re having fun, as we have for the past 35 years. Seems like a few minutes ago we were celebrating 25 years.  Busy as we all are, I urge you to intentionally carve out time on a regular basis to step back, appreciate, and celebrate what, aside from your work, and who, at work and beyond, is great in your life. 

If you are a workaholic and/or perfectionist like me, reading this note may just be a fortuitous event in your life.  What do I mean by fortuitous?  Dictionary definitions will tell you fortuitous means “happening by accident or chance, rather than by design”, or, “happening by a lucky chance, fortunate”.  Meeting Beth was a fortuitous and particularly fortunate event for me, since we had no common friends, never attended the same schools or churches, and did not live in the same town.  And no, we didn’t meet in a bar.  We met at an audition, if you must know.  And as a result of that fortuitous meeting at the audition, I was awarded the role of a…ok, I’ll just stop right there.

Of course, the issue of whether an event is fortuitous or not might differ, depending on whose perspective is considered, right?  I feel fairly confident Beth would likewise say meeting me was a fortuitous thing for her.  In any event, perhaps this humble but heartfelt cover note may serve as the reminder or impetus you need to rethink or refocus your priorities and perspectives in your personal life, or work life, or, best of all, in both, because time goes by.  Faster than you can even imagine.

And now, by the fortuity of all fortuities, this issue of Boron’s Benchmarks considers an opinion issued last week by the Supreme Court of Kentucky, American Mining Insurance Company v Peters Farms LLC, which discusses - drum roll here, please - the legal doctrine of fortuity.  Imagine that!  In this very instructive case, the legal doctrine of fortuity is considered and applied by the court in contemplation of whether an insured’s indisputably wrongful act in mining another’s land without permission causing property damage was an “accident” constituting an “occurrence” under a CGL policy by which coverage would be triggered.

I do hope this material may be fortuitous for you and/or your work.



Eric T. Boron
[email protected]


Punishing those who Try Suicide – 100 Years Ago:


Carlisle Evening Herald
Carlisle, Pennsylvania
24 Aug 1918




Frustrated Suicides in New Jersey Are Sent Up by Police Magistrate


Trenton, N.J.—Despondent saloonkeepers will be committed to the workhouse by Magistrate Geraghty if they fail in attempts to kill themselves.  An example was furnished recently when Michael Curley, at one time the proprietor of a prominent drinking place in the city, was sent to the institute to serve three months because he tried to drown himself in a creek.  He was pulled out in the nick of time by a policeman.

When arraigned in court, clad only in a blanket, Curley delivered a brief speech in which he said:  “I am sober, all right.  I attended a funeral a few days ago, and then decided there was nothing more to live for, so I jumped into the creek.  No one cares for me, and I’m just in the way.” 


Jerry’s No-Fault Navigation

Dear Subscribers,

Hello and welcome to No-Fault Navigation, your eyes and ears to the no-fault regulations.  I’ll get straight to the point.  As a Mets fan, there is not much to celebrate these days.  In fact, reminiscing about the past Mets players alleviates some of the discomfort of watching the current Metropolitans.  For this, I bring you back to August 4, 1982, a special date in baseball history.  Outfielder Joel Youngblood started the day as a Met and knocked in a pair of runs in the 3rd inning against the Cubs.  After the inning was over, he returned to the dugout and learned that he had been traded to the Montreal Expos.  Later that day, he got a hit for the Expos, and became the only player in history to hit a single for two different teams in two different cities on the same day.  (Feel free to use this playing trivia on a long car ride)

Speaking of 1982, Michael Jackson’s Thriller was released, the first issue of USA Today was published, and the Court of Appeals decided an issue surrounding intentional injuries in the no-fault arena, which is still good law today.  To reminisce some more, please read on to my columm.


Jerry Marti
[email protected]



Headlines from Today’s Issue (attached):


Dan D. Kohane
[email protected]


  • Where Complaint for Underinsured (SUM) Benefits Fails to Allege that the Insured had Exhausted the Tortfeasor’s Liability Limits, Action Properly Dismissed

  • Where there are Two Possible Reasons for Accident and Death, Business Pursuits Exclusion Inapplicable

  • Excellent Discussion on “Special Employer” Defense; Case Dismissed when Uncontradicted Evidence Established that Special Employer Controlled Manner and Means of Work

  • Exclusion for Bodily Injury Sustain by a Person Employed by or Contract with Insured Upheld with Evidence that Injured was in Course of Employment

  • Where Trade Contract Did Not Require AI Status, AI Status Not Provided


Robert E.B. Hewitt III

[email protected]


  • Defendants Failed to Address All Claims in the Bill of Particulars


Steven E. Peiper
[email protected]


  • Failure to Refute Expert’s Determination of Fire Loss Results in Summary Judgment


Agnes A. Wilewicz
[email protected]


  • Sixth Circuit Finds Coverage for Social Engineering Claim under Business Insurance Policy, Where Insured Suffered Direct Loss Resulting from the Fraud, and No Exclusions Applied (Michigan Law)


Jennifer A. Ehman
[email protected]


  • Court Finds that Claims Arising out of Damage to Consigned Property were Subject to Sub Limit for Property of Others, and not Business Personal Property Limit

  • Trial Court Grants Preliminary Injunction Relative to All Pending and Future Lawsuits for No-fault Insurance Benefits Pending Outcome of Declaratory Judgment Action


Jerry Marti
[email protected]


  • Insurer May Exclude Coverage for Intentional Acts


Brian D. Barnas
[email protected]


  • Plaintiffs Stated a Cause of Action for Consequential Damages where they Specifically Identified the Damage they Suffered as a Result of Defendant’s Alleged Failure to Pay their Supplemental Claim


John R. Ewell
[email protected]


  • No Coverage under Marine Cargo Policy for Theft of Human Hair Weaves


Brian F. Mark
[email protected]


  • US District Court Finds Ongoing Operations Exclusion to be Applicable and Bar Coverage for a Breach of Contract Claim Arising out of Construction Defects


Larry E. Waters
[email protected]


  • Plaintiff’s Motion for Default Judgment Granted because Defendant was Properly Served, Ignoring the Default Would Prejudice Plaintiff, and Plaintiff is Entitled to Declaratory Relief Because of the Insured’s Material Misrepresentation on His Application for Insurance


Eric T. Boron
[email protected]


  • CGL – Property Damage – Accident – Doctrine of Fortuity – Occurrence


Earl K. Cantwell
[email protected]


  • First Things First – Assess the Jurisdiction of your Case



That’s all she wrote.  Enjoy the waning days of summer.  A happy birthday to my late mother, who passed away about two years ago. She would have turned 97 today.



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

Dan D. Kohane
[email protected]


Agnes A. Wilewicz
[email protected]


Jennifer A. Ehman
[email protected]


Dan D. Kohane, Chair
[email protected]


Steven E. Peiper, Co-Chair
[email protected]


Michael F. Perley
Jennifer A. Ehman

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


Steven E. Peiper, Team Leader
[email protected]


Michael F. Perley
Edward B. Flink

Eric T. Boron
Brian D. Barnas
James L. Maswick


Jennifer A. Ehman, Team Leader
[email protected]

Jerry Marti


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


Dan D. Kohane
[email protected]


08/22/18       Colella v. GEICO General Insurance Company

Appellate Division, Second Department

Where Complaint for Underinsured (SUM) Benefits Fails to Allege that the Insured had Exhausted the Tortfeasor’s Liability Limits, Action Properly Dismissed

In August 2010, the plaintiff/insured Colella was injured when the vehicle she was operating was struck by a vehicle owned and operated by Moran. In May 2014, the plaintiff commenced this action against GEICO, the insurer of her vehicle at the time of the accident. In the first cause of action, the plaintiff sought a judgment declaring that she was entitled to supplementary uninsured/underinsured motorist (“SUM”) benefits in the sum of $200,000 pursuant to her policy of insurance with GEICO.

GEICO moved pursuant to CPLR 3211(a)(7) to dismiss the complaint.

As a condition precedent to the obligation of the insurer to pay under the supplementary uninsured/underinsured motorists insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements. Here, the complaint failed to allege that the limit of the tortfeasor's insurance policy had been exhausted by payment.

Contrary to the plaintiff's contention, GEICO is not collaterally estopped from contesting her right to recover SUM benefits even though it did not intervene in the underlying personal injury action that she brought against Moran.


08/16/18       Waddy v. Genessee (sic) Patrons Cooperative Ins. Co.

Appellate Division, Third Department

Where there are Two Possible Reasons for Accident and Death, Business Pursuits Exclusion Inapplicable

Genesee Patrons (“Genesee” although misspelled in caption) issued a homeowners' policy to two individuals (“insureds”), who operated a certified respite home for the elderly and special needs adults out of their home. In July 2013, the insureds' son, who was 11 years old at the time, was with his cousin and his friend in the garage attached to the insureds' home and they were playing with a gas grill lighter and accelerants. A fire subsequently ignited and spread to the home.

Three adult residents in the respite home (“decedents”) were not evacuated from the respite home and died. As a consequence, separate wrongful death and negligence actions were commenced against the insureds alleging negligence and wrongful death causes of action due to the fire. Claims included negligent supervision and entrustment. Genesee disclaimed coverage and, after the insureds failed to appear in those actions, separate default judgments were entered against them.

The decedents’ estates subsequently commenced separate “direct” actions under Insurance Law § 3420 (a) (2) against Genesee claiming that it was responsible for coverage up to the maximum amount allowable per occurrence under the policy issued to the insureds. The insurer claimed that coverage was properly disclaimed under the business pursuits exclusion and that the nonbusiness exception thereto was inapplicable. The lower court reasoned that there were two causes of decedents' deaths, one of which fell within the exception to the business pursuits exclusion and one of which did not and, therefore, such exclusion did not apply to bar coverage.

Under the applicable insurance policy, Genesee provided coverage for "bodily injury or property damages caused by an occurrence." The policy, however, had a business pursuits exclusion stating that the policy did not apply to liability "resulting from activities in connection with an insured's business, except as provided under Incidental Liability and Medical Payments Coverages." An exception to this business pursuits exclusion provided that defendant would pay for bodily injury resulting from "activities in conjunction with business pursuits which are ordinarily considered non-business in nature."

As a general rule, if the injury was caused by an act that would not have occurred but for the business pursuits of the insured, said act is beyond the scope of the policy; however, if the injurious act would have occurred regardless of the insured's business activity, the exception applies and coverage is provided even though the act may have had a causal relationship to the insured's business pursuits. Genesee, as the party relying on an exclusion, bears the burden of establishing that losses fell wholly within the insurance policy's exclusionary clauses.

Genesee argues that decedents' deaths were caused by the gross negligence of the insureds in operating a respite home — i.e., the failure to have an adequate fire evacuation plan, among other things. The decedents counter that the deaths were caused by the fire started by the children playing with a gas grill lighter and accelerants in the garage. In view of this, plaintiffs contend that the fire would have occurred regardless of the insureds' operation of a respite home and, therefore, the exception to the exclusion applied.

The appellate court agreed with the decedents.  It is undisputed that the act of the insureds' son and the other children in playing with the gas grill lighter and accelerants was the impetus for the fire. Although the insureds' negligence in operating their business — i.e., the failure to have an adequate fire evacuation plan — may have been a contributing cause of decedents' deaths, it cannot be said as matter of law that the fire also was not a contributing cause. In other words, the fire would have occurred regardless of the insureds' business operations, thereby rendering the exception to the business pursuits exclusion applicable.

A claim by one plaintiff involving personal injuries arising out of a fall on the premises may fall within the business pursuit exclusion.  The record evidence does not conclusively establish the circumstances surrounding the fall in the insureds' home. In this regard, the complaint merely alleged that the plaintiff, while using her walker to get to the first floor bathroom, was caused to fall. As such, the record evidence does not allow for a determination as to whether the personal injuries allegedly sustained from the fall were a loss that fell wholly within the business pursuits exclusion.


08/15/18       James v. Crystal Springs Water

Appellate Division, Second Department

Excellent Discussion on “Special Employer” Defense; Case Dismissed when Uncontradicted Evidence Established that Special Employer Controlled Manner and Means of Work

James was employed by Manpower Group and was involved in an accident while working at a premises owned by Crystal Springs.  He began receiving workers compensation benefits under a Manpower W/C policy.  He then sued Crystal Springs for his personal injuries.

Crystal Springs moved for summary judgment dismissing the complaint on the ground, among others, that it was the plaintiff's special employer pursuant to Workers' Compensation Law §§ 11 and 29.

Pursuant to Workers' Compensation Law §§ 11 and 29(6), an employee who is entitled to receive workers' compensation benefits may not sue his or her employer based on injuries sustained by the employee. For purposes of the Workers' Compensation Law, a person may be deemed to have more than one employer—a general employer and a special employer. The receipt of Workers' Compensation benefits from a general employer precludes an employee from commencing a negligence action against a special employer.

A special employee is one who is transferred for a limited time of whatever duration to the service of another. A person's categorization as a special employee is usually a question of fact. However, the determination of special employment status may be made as a matter of law where the particular, undisputed critical facts compel that conclusion and present no triable issue of fact.  Many factors are weighed in deciding whether a special employment relationship exists, and generally no single one is decisive. Principal factors include who has the right to control the employee's work, who is responsible for the payment of wages and the furnishing of equipment, who has the right to discharge the employee, and whether the work being performed was in furtherance of the special employer's or the general employer's business. The most significant factor is who controls and directs the manner, details, and ultimate result of the employee's work.

Crystal Springs established its prima facie entitlement to judgment as a matter of law dismissing the complaint. Crystal Springs established, prima facie, that the plaintiff received workers' compensation benefits through the submission of the plaintiff's deposition testimony, in which the plaintiff testified that he had applied for and received workers' compensation benefits. Crystal Springs also submitted the plaintiff's bill of particulars, which stated that the plaintiff was receiving workers' compensation benefits. In addition, Crystal Springs demonstrated, through the plaintiff's deposition testimony and the deposition testimony of its production manager and plant supervisor, that Crystal Springs controlled and directed the manner, details, and ultimate result of the plaintiff's work. Thus, Crystal Springs established, prima facie, that it was the plaintiff's special employer.


08/15/18       Northfield Insurance Company v. Golob
Appellate Division, Second Department

Exclusion for Bodily Injury Sustain by a Person Employed by or Contract with Insured Upheld with Evidence that Injured was in Course of Employment

The Golobs contracted with ADT for the performance of certain services at their home. Daniel Christensen, an ADT employee, allegedly was injured during the work and sued the Golobs, among others.

The Golobs sought protection from Northfield, their own CGL carrier and tendered the claim to Northfield.  It disclaimed coverage based upon a policy exclusion, which excluded coverage for bodily injury sustained by any person "employed by . . . any organization that . . . [c]ontracted with [the named insured] or with any insured for services" where the injuries "[arose] out of and in the course of employment by that organization."

Northfield agreed to defend its insured and commenced this action to confirm the disclaimer.   The insured contended that the exclusion did not apply because ADT had been instructed to hold off performing the work, and for that reason, Christensen was "nothing more than a trespasser" on the property at the time of the accident.

To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegations of the complaint [in the underlying action] cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision.

Here, Northfield established its prima facie entitlement to judgment as a matter of law by submitting evidence that the defendants contracted with ADT for the performance of services, that Christensen was employed by ADT, and that Christensen was acting in the course of that employment at the time he was injured at the premises. These facts demonstrated that the claimed exclusion applied to the allegations of the complaint. The insureds’ claim that ADT performed the work earlier than instructed did not render the exclusion inapplicable, as the timing of the work did not negate the fact that the work was performed pursuant to a contract with the insureds, or that Christensen was acting within the scope of his employment with ADT at the time he was injured.

Editor’s Note:  Kudos to Jessica Foscolo and Judi Shelton for excellent appellate advocacy.


08/15/18       Temple Beth Shalom Foundation v. T.G. Nickel & Associates

Appellate Division, Second Department

Where Trade Contract Did Not Require AI Status, AI Status Not Provided

Temple Beth Shalom Foundation, Inc. (“Temple”), and Philadelphia Indemnity Insurance Company (“PIIC”) commenced this action against T.G. Nickel & Associates, Inc. (“Nickel”), and Liberty International Underwriters, Inc. (“LIU”) for a judgment declaring that Liberty is obligated to defend and indemnify Temple in an underlying personal injury action entitled Duran v Temple Beth Shalom, Inc., and to reimburse PIIC for all attorney's fees and expenses incurred in the defense of Temple in the underlying action.

Duran sued Temple, Nickel and others to recover damages for personal injuries that Duran alleged he sustained while he was working at a construction site owned by Temple. Temple had contracted with Nickel to provide construction management services at the site. Nickel then subcontracted with Duran's employer, Boyle Services, Inc. (“Boyle”). During the trial in the underlying action, the court granted Nickel's motion dismissing the complaint insofar as asserted against it on the ground that the work Duran was performing at the time he was injured fell outside the scope of Nickel's contracts with Temple and Boyle.

Although Nickel's contract with Temple required Nickel to procure liability insurance, the contract expressly provided that Nickel was not required to include Temple as an additional insured on the liability insurance policy. PIIC had issued a commercial general liability policy of insurance to Temple, and LIU had issued a commercial general liability policy of insurance to Nickel (“LIU policy”). The LIU policy contained an endorsement providing that it was "amended to include as an insured any person or organization with whom [Nickel has] agreed to add as an additional insured by written contract but only with respect to liability arising out of [Nickel's] operations or premises owned by or rented by [Nickel]."

In a letter to Temple in January 2011, LIU conditionally agreed to accept the defense and indemnification of Temple and expressly reserved the right to disclaim coverage with respect to the underlying action. In May 2014, LIU informed Temple that it did not qualify as an insured or additional insured under the insurance policy and disclaimed coverage and indemnification.

LIU demonstrated its prima facie entitlement to judgment as a matter of law by establishing that it was not required to defend or indemnify Temple in the underlying action or to reimburse Temple or PIIC for defense costs. In opposition, Temple and Philadelphia failed to raise a triable issue of fact as to whether Temple was an additional insured under the insurance policy or whether Liberty was estopped from disclaiming coverage.


Robert E.B. Hewitt III

[email protected]


08/22/18       O’Shaunessey v. Sanchez

Appellate Division, Second Department

Defendants Failed to Address All Claims in the Bill of Particulars

The Appellate Division reversed the grant of summary judgment, finding defendants failed to meet their prima facie burden of showing that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject. The papers submitted by the defendants failed to adequately address the plaintiffs' claims, set forth in the bills of particulars, that plaintiff sustained a serious injury to her left shoulder under either the permanent consequential limitation of use or significant limitation of use categories 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 plaintiffs in opposition were sufficient to raise a triable issue of fact.


Steven E. Peiper
[email protected]


08/15/18       Cambridge Mutual Fire Ins. Co. v. P.O.B. Electric, Inc.

Appellate Division, Second Department

Failure to Refute Expert’s Determination of Fire Loss Results in Summary Judgment

Non-party Zaino’s house was damaged by fire on January 9, 2013.  The home was insured by Cambridge who, in turn, acknowledged coverage and adjusted the loss.  Cambridge then brought an action in subrogation against the defendant who, we are advised, performed electrical work at the home in November of 2012.

At the time of motion practice, Cambridge established that fire occurred as a result of a failure of the service entrance cable.  Cambridge also established, through an expert, that defendant failed to properly test the cable during the work months prior to the fire.  Because the defect was not uncovered, and thus never replaced, Zaino’s home was damaged by a fire that should have been avoided.

Defendant presented opposition based upon their observations of the fire.   Defendant failed, however, to adduce any evidence of how/where the fire started.  It also conceded, by its silence, Cambridge’s argument that defendant should have tested the supply line.  On this Record, summary judgment was awarded on behalf of Cambridge.   


Agnes A. Wilewicz
[email protected]


07/13/18       American Tooling Center, Inc. v. Travelers Casualty and Surety

United States Court of Appeals, Sixth Circuit

Sixth Circuit Finds Coverage for Social Engineering Claim under Business Insurance Policy, Where Insured Suffered Direct Loss Resulting from the Fraud, and No Exclusions Applied (Michigan Law)

American Tooling Center, Inc. (ATC) is a Michigan auto parts tool and die manufacturer that subcontracts some of its work to a vendor in China. In 2014 and 2015, it was insured under a business insurance policy with Travelers. During that time, ATC received a series of emails from what appeared to be its vendor, claiming that it had changed bank accounts and that its banking information needed to be updated. ATC changed the routing and account numbers, and proceeded to pay various invoices to that new bank account. When the real vendor later inquired about the back payments and the fraud was discovered, ATC sought coverage for the $834,000 in losses from Travelers.

Travelers’ policy provided coverage for computer crime thus: “1. Computer Fraud. The Company will pay the Insured for the Insured’s direct loss of, or direct loss from damage to, Money, Securities and Other Property directly caused by Computer Fraud.” The carrier disclaimed coverage under this provision, asserting that there was no coverage since 1) ATC did not suffer a “direct loss”, 2) this was not a case of “Computer Fraud”, and 3) the loss was not “directly caused by Computer Fraud”. Moreover, they argued there were applicable exclusions in any event. The Circuit Court, however, rejected all of these arguments and found coverage.

First, the court addressed whether the insured had suffered a “direct loss”. While the policy did not define the word “direct”, the court rejected the carrier’s argument for a narrow definition. Rather, it logically followed that since the insured suffered an immediate and/or proximate loss, it had suffered a “direct” one. Since they lost funds as a result, they had sustained a direct loss.

Second, there was a dispute as to whether the impersonator’s conduct constituted “computer fraud”. This term was defined in the policy as: “The use of any computer to fraudulently cause a transfer of Money, Securities or Other Property from inside the Premises or Financial Institution Premises: 1. to a person (other than a Messenger) outside the Premises or Financial Institution Premises; or 2. to a place outside the Premises or Financial Institution Premises.” Travelers did not dispute that there was a transfer of money from the insured’s bank, but asserted that the provision required that a computer fraudulently caused the transfer as well. The court, however, noted that if the carrier had wanted to limit the definition further like that, it could have. Having not done so, it was to be read as broadly as it was written.

Third, at issue was whether the insured had met its burden of demonstrating that its “direct loss” was “directly caused” by the computer fraud. Here, it was clear that it had. The chain of events demonstrated that the insured suffered a direct financial loss when the money left the insured’s accounts and went to another, and also that the computer fraudster directly caused such loss to occur.

Finally, the policy contained three potentially applicable exclusions. One for losses suffered in any exchange or purchase (not applicable because nothing was exchanged, just money lost), another was for damages resulting from the input of Electronic Data (also not applicable where the definition of Electronic Data expressly excluded instructions or directions input into a computer), and one for losses resulting from fraudulent documents (also not applicable where banking entries were not “documents”). However, none of those exclusions applied and Travelers’ prior win on summary judgment was reversed with the direction that judgment be entered in favor of the insured.



Jennifer A. Ehman
[email protected]


08/14/18       Talisman Servs., Inc. v. Hermitage Ins. Co.

Supreme Court, New York County

Hon. William Franc Perry

Court Finds that Claims Arising out of Damage to Consigned Property were Subject to Sub Limit for Property of Others, and not Business Personal Property Limit

Plaintiff operates a thrift shop in a commercial building located in Staten Island, where it sells antique items on consignment.  On January 9, 2015, the premises where plaintiff’s consignment shop was located sustained water damage as a result of a pipe leak/break, which resulted in water damage to certain items kept on consignment in the retail store.  Plaintiff submitted a claim to Hermitage under its CGL policy relative to the loss of these items.

After receipt of the claim, Hermitage paid Plaintiff the $2,500 limit under its policy for Property of Others.  Thereafter, Plaintiff commenced this action against Hermitage alleging that it was entitled to the $52,000 limit of insurance listed in the Policy’s Declarations for Business Personal Property coverage, claiming that its inventory of consigned items constituted Business Personal Property or that term was ambiguous.

On this motion for summary judgment, Hermitage contended that the terms and conditions of its policy were clear.  Its policy does not provide coverage for the personal property of others, except under a coverage extension, which has a limit of $2,500, which Hermitage already plaid.  In response, Plaintiff argued, again, that the term “Business Personal Property” is ambiguous and that Plaintiff expected that the consigned property would be covered as such.

In considering these arguments, the court held Plaintiff’s argument ignored the plain meaning of the Policy's terms, conditions and exclusions, and would render the Personal Property of Others coverage extension provision, meaningless.  In the court’s view, this argument was an attempt to circumvent the plain language of the policy.

The Policy defines the term "Covered Property" as three separate types of property, specifically, Building, Your Business Personal Property and Personal Property of Others.  The Policy states that coverage for Covered Property is provided "if a Limit of Insurance is shown in the Declarations for that type of property." The only type of property listed in the Declarations with a limit of insurance shown, is Business Personal Property with a limit of $52,000; there is no other type of Covered Property noted on the Declarations page. Finally, the Policy contains a coverage extension for Property of Others which allows the insured to extend the insurance that applies to Your Business Personal Property to apply to "personal property of others in your care, custody, or control. The most we will pay for loss or damage under this Extension is $2,500 at each described premises.”

As such, in accordance with the plain language of the Policy, the only Covered Property with a coverage limit of $52,000, is Business Personal Property; and based on the definition of Your Business Personal Property and Property of Others, as set forth in the Policy, it is clear that the consigned items were not owned by plaintiff at the time of the loss but were, by its own admission, "given to her [Plaintiff] to be prepared for sale within the shop", and thus, do not fall within the definition of Covered Property as set forth in the Policy.  Similarly, the court found that Plaintiff’s contention that it had a reasonable expectation that the Policy provided coverage for the consigned property of others was equally unpersuasive and at odds with the plain language of the Policy.


08/14/18       Ameriprise Insurance Company v. Hampton

Supreme Court, New York County

Hon. Robert Reed

Trial Court Grants Preliminary Injunction Relative to All Pending and Future Lawsuits for No-fault Insurance Benefits Pending Outcome of Declaratory Judgment Action

On July 22, 2013, there was an “alleged” motor vehicle accident involving a car owned by John Bunn.  The Bunn vehicle was being operated by Cheryl Armour (“Armour”) when it came into contact with another vehicle.  At the time of the incident, Bunn's vehicle, insured by Ameriprise, allegedly contained a number of passengers in addition to Armour including Latonya Hampton (“Hampton”), Shakeya Witherspoon (“Witherspoon”, Nakia McCrae (“McCrae”) and Audrey Johnson (“Johnson”). Upon receipt of notification of the incident, Ameriprise began receiving bills for medical treatment from several of the treating providers.

Several Examinations Under Oath were conducted.

Examination Under Oath (EUO) of Defendant John T. Bunn

Bunn testified that, before the incident, he had driven from around the corner, at his mother's house, to the location of the incident. After leaving his mother's house, he saw Armour, who got into his vehicle at Bergen Street.  After Armour got in, Bunn ran upstairs to visit someone, leaving the key in the ignition.

He then received a phone call from Armour and when he came downstairs, a whole bunch of people were in the car.  He learned that Armour had a scratch under her eye caused by a female driver in the other car, who attacked her.


EUO of Defendant Cheryl Armour

Armour testified that, at the time of the alleged incident, she was seated in the driver's seat of Bunn's vehicle.  Prior to the incident, Bunn had taken her and several other people, except for Johnson, to Dunkin Donuts.  After they went to Dunkin Donuts, Bunn parked his vehicle in front of a fire hydrant so that he could go inside to drop something off for a friend's mother. Bunn told her to sit in the driver's seat in case she had to move the car to avoid getting a ticket. She testified that the other vehicle reversed into Bunn's parked vehicle twice, with the second hit pushing Bunn's vehicle up onto a curb and into the fire hydrant. As a result of the incident, she was bleeding underneath her left eye. She testified that she, McCrae, Witherspoon, and Johnson all went to the same medical facility that she found out about through Hampton's sister. She further testified that people approached her at the scene of the incident to offer her legal services, but she did not take any of their business cards.

EUO of Defendant Shakeya Witherspoon

Witherspoon testified that at the time of the incident, she was a passenger in Bunn's vehicle sitting in the middle of the backseat. At the time of the incident the vehicle was not moving.  She first got into the vehicle when she, Armour, Bunn, McCrae, McCrae's child and Johnson went to the Dunkin Donuts, 20 to 30 minutes prior to the incident.  Prior to going to Dunkin Donuts, she Armour, McCrae and Johnson were on Bergen Street when Bunn pulled up to them to take them to Dunkin Donuts. She later testified that Johnson was not in the vehicle when they went to Dunkin Donuts.  When they returned to Bergen Street, they parked in front of a fire hydrant and Bunn got out of the car because he had to take something to his godmother.  Bunn’s car hit a hydrant after the other vehicle backed into it twice.

EUO of Defendant Nakia McCrae

McCrae testified that it was drizzling on the day of the incident and she went outside to Bergen Street and met up with Witherspoon, Armour, Johnson and Hampton to watch their kids play and talk with each other while they had coffee.  Bunn arrived by himself and at that point everyone decided to go to Dunkin Donuts because she had a Dunkin Donuts gift card and Bunn drove them to Dunkin Donuts.  After Dunkin Donuts, they returned to Bergen Street and Bunn parked the vehicle, took the keys with him, and left everyone else in the car while he went to visit his godmother.  The other vehicle backed into Bunn's vehicle twice pushing Bunn's vehicle onto the sidewalk, but she did not believe Bunn's vehicle hit the fire hydrant.

EUO of Defendant Audrey Johnson

Johnson testified that at the time of the incident Armour was in the driver's seat, she was in the front passenger seat, Hampton was behind her and McCrae was next to Witherspoon behind Armour.  It was drizzling on the day of the incident and she was coming out of a building when she saw Armour, Witherspoon, and McCrae parked so she went over to talk to Armour and got in Bunn's vehicle, As she was talking, the other vehicle backed into Bunn's vehicle, and Bunn's vehicle hit the fire hydrant .

EUO of Defendant Latonya Hampton

Hampton testified that there was Dunkin Donuts in the vehicle. Before the incident, her youngest child came over and asked them to move Bunn's vehicle in order to get water from the fire hydrant. They moved Bunn's vehicle about five feet, so the vehicle was then about five feet away from the fire hydrant. The first impact occurred when they moved Bunn's vehicle up, which then moved Bunn's vehicle into the fire hydrant.

After notification, Ameriprise investigated the legitimacy of the incident. Ameriprise found the following during the investigation:

  1. When procuring the insurance policy, Bunn utilized a residential address of 118 Thielman Road, Hudson, NY 12534, but Bunn actually resided at 1060 Hendrix Street, Brooklyn, NY;

  2. The driver of Bunn's vehicle at the time of the incident was not a listed driver on the insurance policy, and Bunn was not in the vehicle at the time of the incident;

  3. The police report stated that the vehicle was moving before the incident occurred, but Bunn contacted Ameriprise several times to ensure that Ameriprise’s notes stated that he was not at fault, because his vehicle was parked;

  4. There was a discrepancy between Bunn's EUO and Armour's EUO in terms of who was in the vehicle at the time of the incident;

  5. Except for Hampton, all of the alleged passengers in Bunn's vehicle started receiving nearly identical treatment at the same multi-disciplinary medical facility, which included acupuncture, chiropractic treatment, and physical therapy;

  6. Ameriprise received billing for Armour, McCrae, Johnson, and Witherspoon from defendant Harden Street Medical PC as well as various sub-providers affiliated with the facility the day after the incident.


    Ameriprise commenced this action by filing a summons and complaint seeking a declaration that the incident was not a product of a covered event as it was the result of an intentional and/or staged occurrence.  It then filed this motion seeking a preliminary injunction or a stay of all pending and future lawsuits for uninsured/underinsured no-fault insurance benefits to the defendants pending determination of this declaratory judgment action.  Health providers, as assignees, opposed the motion.

    In considering the argument, the court noted that Ameriprise presented sufficient evidence to support its determination that the incident was not an accident. The verified complaint, affidavit of plaintiff's Special Investigative Unit Senior Special Investigator, and the EOUs of the individual defendants contain sufficient non-conclusory factual allegations for Ameriprise to conclude that the incident was intentional and not eligible for no-fault coverage. Furthermore, the answering defendants failed to present any factual evidence to contradict such a finding. Accordingly, the preliminary injunction was granted.

    Of interest, the court noted that the unsigned EUO transcripts of the individual defendants were admissible.  It also explicitly rejected the health care providers’ claim that the allegations of fraud were inapplicable to them because they were innocent third-parties.  The answering defendants were not innocent third-parties as they obtained assignments of individual defendants' no-fault benefits, thus they are subject to the same defenses as their assignors.


    Jerry Marti
    [email protected]


    02/23/82       Matter of Smith (Firemen’s Ins. Co.)   

    New York State Court of Appeals

    Insurer May Exclude Coverage for Intentional Acts

    Petitioner Smith sustained personal injuries when he exited the passenger side of a vehicle driven by his spouse at a speed of 30 miles per hour. His claim for no-fault benefits was denied by the insurer based on the determination that he had caused his own injuries. At arbitration, Smith was found to have intentionally left the vehicle, but with no intent to harm himself when he did so. The master arbitrator disagreed, and vacated the arbitration award finding that there was no rational basis on which the arbitrator could find Smith’s injury to have been caused unintentionally. The Special Term reinstated the arbitrator’s award. But, the Appellate Division reversed, holding that the master arbitrator’s determination was within his broad power of review and had a rational basis. The Court of Appeals affirmed the order.

    Tip: In denying first-party benefits based on an intentional act, the subjective intent of the claimant is not as determinative as the actual act. This applies the same today as in 1982.


    Brian D. Barnas

    [email protected]


08/22/18       Tiffany Tower Condo. LLC v. Insurance Co. of the Greater N.Y.

Appellate Division, Second Department

Plaintiffs Stated a Cause of Action for Consequential Damages where they Specifically Identified the Damage they Suffered as a Result of Defendant’s Alleged Failure to Pay their Supplemental Claim

In November 2012, Tiffany Tower, which owns a condominium building located in Brooklyn, filed a claim the defendant for damages sustained by the building during Superstorm Sandy. The defendant paid the original claim in December 2012. Almost two years later, in September 2014, Tiffany Tower submitted a supplemental claim to the defendant for additional losses which it asserted were caused by the storm. The defendant denied coverage for the supplemental claim.

In October 2014, Tiffany Tower and its Board of Managers commenced this action seeking to recover damages for breach of contract, to recover consequential damages for breach of the implied covenant of good faith and fair dealing, for a declaration that coverage for the supplemental claim was improperly denied, and to recover damages for violation of General Business Law § 349.

The court held that the plaintiffs sufficiently stated a cause of action to recover consequential damages for breach of the implied covenant of good faith and fair dealing based upon the defendant's refusal to pay the plaintiff's supplemental claim. The plaintiffs stated a viable cause of action to recover consequential damages based on the defendant's refusal to pay the supplemental claim by alleging, among other things, that they did not have the financial resources to repair the damage to the building and that the defendant's delay in paying the supplemental claim caused the building to continue to deteriorate. Contrary to the defendant's contention, the plaintiffs specifically identified the consequential damages allegedly suffered, including damage to fireproofing and additional water damage.

However, the second cause of action was dismissed to the extent it is predicated upon the allegation that the defendant failed to fully investigate the plaintiffs' original claim for damages. The insurance policy required that, in the event of loss or damage to property, the insured was required, inter alia, to give prompt notice of the loss or damage, to permit the insurer to inspect the property, and provide a signed, sworn proof of loss, with the insurer being obligated to give notice of its intentions within 30 days of receipt of the proof of loss. These provisions placed the onus on the insured to report the damage it claims occurred to the building. There is nothing in the insurance policy that imposed any obligation on the insurer to investigate for additional damage that was not reported by the insured. Here, the original claim was made in November 2012 and was paid by the defendant in December 2012.

The cause of action for a declaratory judgment was also dismissed because plaintiffs had an adequate remedy at law, specifically breach of contract.

Additionally, the cause of action under General Business Law § 349 was dismissed. That statute prohibits deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in the state. As a threshold matter, plaintiffs claiming the benefit of the statute must charge conduct of the defendant that is consumer-oriented. Private contract disputes, unique to the parties do not fall within the ambit of the statute. Here, the plaintiffs' allegations merely concern conduct relating to the parties' insurance contract, and not to acts or practices that have a broad impact on consumers at large.


John R. Ewell
[email protected]


08/14/18       Beauty Plus Trading Co. v. Nat. Union Fire Ins. of Pittsburgh, PA

Superior Court of New Jersey, Appellate Division

No Coverage under Marine Cargo Policy for Theft of Human Hair Weaves

Beauty Plus Trading Company (“plaintiff”) is a wholesale distributor of hair extensions with a warehouse in New Jersey. Plaintiff’s warehouse is open Monday through Friday until 6:00 p.m. A shipping container with 487 cartons of “human hair weaves” left the port of Qingdao, China, for plaintiff’s warehouse. The container arrived at Port Elizabeth, New Jersey, on December 9, 2014. A trucking company picked up the container from Elizabeth on Friday, December 12, 2014, and delivered it to plaintiff's warehouse at 5:00 p.m. that day with the original seal intact. Plaintiff's assistant warehouse manager signed a freight bill to confirm receipt of the container.

With only one hour left before closing, warehouse managers determined they did not have enough time to unload the container because it would take over an hour to unload, and their employees were “particularly reluctant to work overtime on Fridays.” Therefore, the workers cut the seal on the container, opened the doors, and backed the container into the warehouse unloading bay, where they left it until they returned to work on Monday. However, when the workers arrived at work at about 7:00 a.m. on Monday, the container was missing. Warehouse surveillance video revealed that on Saturday, December 13, 2014, at approximately 9:00 p.m., someone drove a white truck “up to the container, hooked a tractor to the chassis, and drove away” with it. Plaintiff reported the theft to the police, who later recovered the chassis and container with 397 cartons of weaves missing.

Plaintiff filed a claim with National Union Fire Ins. Co. of Pittsburg (“National Union”) under their marine cargo policy, which “cover[ed] all shipments of lawful goods and merchandise . . . consisting principally of new wigs and similar merchandise incidental” to plaintiff's business “[a]gainst all risk of physical loss or damage from any external cause…” The policy insured plaintiff against perils “of the seas and inland waters, fires, assailing thieves, jettisons, barratry of the Master and Mariners, and all other like perils, losses and misfortunes . . . except as may be otherwise provided . . . or endorsed” in the policy.

Under the policy’s “Warehouse to Warehouse” clause, insurance coverage “attache[d] from the time the goods [left] the warehouse …” and continued until the goods were "delivered to final warehouse at the destination named in the policy …” After delivery, the policy’s “Loading and Unloading” clause extended coverage for plaintiff’s goods as follows:

[A]fter they arrive[d] at the final destination, and continuing thereafter until they [were] unloaded (including into containers, trailers and rail cars) and throughout the unloading process, not to exceed [seventy-two] hours after arrival of the delivering conveyance at final destination but not later than [twenty-four] hours after the receiver ha[d] knowledge of the arrival of the delivering conveyance.

Additionally, the policy's “Storage Coverage” endorsement specifically provided coverage for “goods and merchandise . . . while temporarily stored in [plaintiff's] warehouses[.]”

National Union denied coverage for the theft under the “Warehouse to Warehouse,” “Loading and Unloading,” and “Storage Coverage” clauses. According to National Union, because the Warehouse to Warehouse clause provided coverage for plaintiff's goods while such goods were in transit and ended when the goods were no longer in transit[,]” there was no coverage "because the subject shipment . . . had reached [its] final destination” at the time of the theft. National Union further explained that coverage under the policy's Loading and Unloading clause had also terminated at the time the loss occurred because the theft occurred more than 24 hours after plaintiff had knowledge of the arrival of the container at its premises. Additionally, according to National Union, the “Storage Coverage” endorsement did not apply because the subject goods were not being temporarily stored in the warehouse at the time they were stolen, but were outside plaintiff’s warehouse instead.

Plaintiff sued National Union alleging breach of contract and seeking a declaration that the stolen wigs were covered by the policy. After discovery concluded, the parties filed cross motions for summary judgment. The trial court judge granted National Union’s summary judgment motion and denied plaintiff's cross-motion.

Plaintiff appealed.

The Appellate Division reviewed the policy provisions at issue and held that that the policy was unambiguous. Under the policy’s “Warehouse to Warehouse” clause, coverage attached when the goods left China and terminated when the goods arrived at their final destination, plaintiff’s warehouse, at approximately 5:00 p.m. on December 12, 2014. Under the policy’s “Loading and Unloading” clause, the policy extended coverage for seventy-two hours after delivery, “but not later than” twenty-four hours after plaintiff had notice of delivery. Thus, under the plain language of the policy, the goods were insured until 5:00 p.m. on Saturday, December 13, 2014. Because the theft occurred at approximately 9:00 p.m. that day, the Appellate Division held that the policy did not cover plaintiff’s loss.

Plaintiff argued that in spite of the plain language of the policy, the court should have applied the next business day rule to extend the policy's coverage until Monday, December 15, 2014.

Generally, courts apply the next business day rule when the time for a party’s performance under a contract or insurance policy expires on a weekend or holiday. However, if the contract does not require the party to act or an event to occur within the designated period, the fact that the final day falls on a weekend does not affect the parties’ performance under the contract.

Here, the policy did not require plaintiff to perform an act, such as unloading the goods, within the twenty-four hours of extended coverage. Nor did the contract require any other event to occur within the designated period.

Therefore, the Court held that:

Plaintiff was free to leave the goods in the container as it chose to do. Plaintiff’s decision did not, however, prevent the policy from lapsing and transferring the risk of loss back to plaintiff at 5:00 p.m. on Saturday, December 13, 2014. To rule otherwise would grant plaintiff a better policy of insurance than the one it purchased.

Judgment affirmed.

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


Brian F. Mark
[email protected]

08/13/18       Diamond Constr., LLC. v. Atl. Cas. Ins. Co.

U.S. District Court for the Western District of Washington
US District Court Finds Ongoing Operations Exclusion to be Applicable and Bar Coverage for a Breach of Contract Claim Arising out of Construction Defects

This declaratory-judgment action arises out of a water damage claim that occurred during a roof replacement project.  In 2016, the plaintiff, Diamond Construction, LLC ("Diamond"), contracted to replace the roof on the Bellevue Park Condominiums.  The new roofing assembly included two layers—a Polyglass base sheet and a top torch-down membrane.  Diamond began by applying the base sheet before moving on to the membrane.  By the end of the second workday, Diamond had not finished applying the membrane and was expecting an overnight rainstorm.  Before leaving the job site, Diamond's crew rechecked the base sheet to ensure it had been properly adhered to the roof.  The crew ensured adhesion by taping down small gaps in the base sheet's seams (referred to as "fishmouths"), and going over the seams with a small roller.  In a few areas, workers applied heat to ensure the seams were tightly sealed.

Early the next morning, Diamond's owner, Eugene Kuzmenko, learned that water was leaking through the roof and causing damage to several units inside the building.  When Mr. Kuzmenko arrived at the project he discovered multiple small tears and penetrations in the base sheet, which he surmised were caused by his crew moving equipment and supplies around on the roof before leaving the day before.

Mr. Kuzmenko made a claim with Diamond's insurance carrier, Atlantic Casualty Insurance Company ("Atlantic"), for the water damage to the units.  Following its investigation, Atlantic denied Diamond's claim.  In its denial letter, Atlantic stated, among other things, that the water damage was excluded under the policy's roofing endorsement because Diamond had not used a suitable rain cover when it left the work site, and the project involved the use of a membrane requiring heat for application.

Following Atlantic’s denial of Diamond's claim, Bellevue Park Homeowners Association ("Bellevue Park") filed a lawsuit in state court against Diamond seeking to recover damages caused by the rain.  Diamond's attorney sent Atlantic a letter demanding that the insurer defend it against Bellevue Park's lawsuit.  Atlantic never responded to Diamond's tender of defense.

Thereafter, Diamond filed this declaratory-judgment action alleging that Atlantic breached the terms of its insurance policy, acted in bad faith, and violated the Washington State Consumer Protection Act ("WCPA").  Diamond and Bellevue Park settled their case, with Bellevue Park receiving a covenant judgment and assignment of Diamond's claims against Atlantic.

Atlantic filed a motion for summary judgment asserting that plaintiffs' claims should be dismissed because "three exclusions to Atlantic's policy plainly, unambiguously and independently eliminate coverage."  Additionally, Atlantic argued that plaintiffs' bad faith and WCPA claims should be dismissed if the Court finds that the insurer's denial of coverage was reasonable.

Atlantic argued that it properly declined Diamond's claim based on any of three policy exclusions.  First, Atlantic asserted that the policy excluded rain damage that resulted from Diamond's failure to use a suitable waterproof cover on the roof.  Second, Atlantic argued that the policy excluded any damage resulting from operations that involved the application of a membrane roofing system requiring heat for application.  Third, Atlantic asserted that the policy excluded any property damage that arose from Diamond's ongoing operations.

Under Diamond's commercial general liability policy, Atlantic was responsible to pay all sums that Diamond became legally obligated to pay as damages because of "property damage."  The policy defines property damage as "[p]hysical injury to tangible property, including all resulting loss of use of that property."  Atlantic also had a duty to defend Diamond against any lawsuit seeking damages arising from property damage Diamond caused.


Rain Cover Exclusion

Diamond's policy included a roofing endorsement that contained the following exemption:

This insurance does not apply to any claim, loss, costs or expense due to "property damage" arising out of rain, snow, hail or any combination of these if a suitable waterproof temporary covering, able to withstand the normal elements and large enough to cover the area being worked on, has not been properly secured in place.  This cover is to be put into place any time any insured leaves the job site.  Relative to roofing operations, the use of tar paper and/or felt paper does not constitute suitable waterproof temporary covering.

Atlantic asserted that Diamond failed to properly secure a suitable waterproof covering over the roof prior to leaving the worksite the night before the rain damage occurred.  Atlantic argued that the Polyglass base sheet was not a "temporary covering" within the meaning of the policy exclusion.   Even if it was considered a temporary covering, Atlantic argued that Diamond failed to properly install the Polyglass base sheet such that it did not provide "suitable waterproof protection."  Atlantic further asserted that the base sheet was an improper cover because the building had a flat roof that did not allow for drainage.  Atlantic supported its position with a report written by a structural engineer, Peter Mattes, who concluded that "the cause of the leaking water was a failure of the watertight seal of the roofing underlayment, due to an improper use and installation of the underlayment."  Mr. Mattes' opinion was partially based on photos taken of the roofing project the day before the damage occurred, which showed several fishmouths along the base sheet.

In opposition, the plaintiffs argued that there is an issue of fact as to its use of the Polyglass base sheet as a waterproof cover.  The plaintiffs provided a declaration from a roofing industry consultant, Aaron Nelson, who stated that a correctly installed Polyglass base sheet is waterproof and that such base sheets are often used as overnight coverings in the roofing industry because they are waterproof.  Additionally, Mr. Kuzmenko stated that he instructed his crew to check the base sheet for proper adhesion prior to leaving the job site.  According to Mr. Kuzmenko, his crew removed all fishmouths in the base sheet by taping down gaps in the seams, rolling the gaps, and using heat application where necessary.  Mr. Kuzmenko also stated that the pictures Mr. Mattes relied on were taken prior to his crew repairing the fishmouths on the base sheet.

Based on the evidence presented, the Court concluded that genuine material issues of fact existed regarding whether the Polyglass base sheet provided a suitable waterproof covering.  Accordingly, the Court denied that portion of Atlantic’s motion pertaining to the rain cover exclusion.


Heat Application Exclusion

The policy's roofing endorsement also exempts coverage for:

Any claim, loss, costs or expense for "bodily injury," "property damage" or "personal and advertising injury" as a result of any operations, from initial inspection and pre-installation work to ongoing operations and including completed operations, involving any hot tar, wand, sprayed or sprayed-on material, torch or heat applications, hot membrane roofing or any membrane roofing system requiring heat for application.

Atlantic asserted that this provision applied because "Diamond's operations on the condominium's roof involved a membrane roofing system that required heat for application" and Diamond applied heat to some areas of the base sheet in order to ensure adhesion.  Atlantic relied on various out-of-jurisdiction cases where courts have applied this provision to exclude coverage for any property damage resulting from the provision of a membrane roofing system requiring heat for application.

In opposition, the plaintiffs argued that the Court should not read the exclusion so broadly.  The plaintiffs asserted that the exclusion only applies when property damage is caused "as a result of any operations" that involve the use of "torch or heat applications, hot membrane roofing or any membrane roofing system requiring heat for application."  The plaintiffs argued that the exclusion does not apply because the water damage was caused by holes in the base sheet and had nothing to do with its application of heat or the use of the membrane roofing system.

The Court found the exclusion to be ambiguous because it is unclear whether and to what extent the relevant property damage must be related to the insured's operations. The provision could be interpreted broadly, as Atlantic suggests, to exempt all property damage that arises from operations involving the use of certain roofing methods.  However, the plaintiffs also offered a reasonable interpretation—that the property damage must be related to the operations where the applicable roofing methods are used.

In light of the ambiguity, the Court noted that it was free to consider extrinsic evidence that goes to the parties' intent concerning the exclusion's scope.  The Court reviewed Diamond’s insurance application, in which the company disclosed that it uses torch applied roofing materials on five percent of its projects. The Court found that Atlantic’s issuance of policy notwithstanding this disclosure suggested that the exclusion should not be read broadly—if it were, Atlantic would have issued a policy that did not cover some of Diamond's operations.  The Court also agreed with the plaintiffs that Diamond's proposed interpretation would lead to nonsensical results.  Atlantic's reading would exclude coverage for any damage that occurred while Diamond was using torch applied roofing materials— damage caused by a worker dropping a hammer from the roof and hitting a pedestrian, or damage caused by a helicopter crashing into the roof.   Construing the clause narrowly and against the insurer, the Court concluded that the exclusion only applies where there is some causal link between the property damage and the operations that involved the use of "torch or heat applications, hot membrane roofing or any membrane roofing system requiring heat for application."

As there was a genuine material issue of fact as to whether the water damage resulted from Diamond's use of heat on the Polyglass base sheet, the Court denied that portion of Atlantic’s motion pertaining to the heat application exclusion.


J(5) Ongoing Operations Exclusion

Atlantic argued that the policy's ongoing operations exclusion also exempts coverage of the water damage.  This exclusion eliminates coverage for property damage to "that particular part of real property on which [the insured] or any contractors or subcontractors working directly or indirectly on [the insured's] behalf are performing operations, if the 'property damage' arises out of those operations."  The Court noted that this type of ongoing operations clause has been characterized as a "business risk exclusion" that is intended to preclude coverage for the insured's negligent or defective workmanship.  Such exclusions have been applied to damage that occurred at the time the insured is performing operations.

In this case, there is no dispute that the water damage occurred while Diamond's operations were ongoing.  Diamond had not completed installing the new roof when the water leak occurred.  Diamond discovered the water damage when it returned the next day to finish the roof.  Mr. Kuzmenko stated that the holes that allowed water to leak into the building were caused by his crew moving equipment and supplies over the roof.

Therefore, the Court held that the damage arose directly from Diamond's operations installing the roof.

The plaintiffs argued that the j(5) provision "only excludes damage while work is actively being performed on the project." However, the Court found that the plaintiffs' interpretation was not supported by the plain meaning of the j(5) exclusion, nor the relevant case law dealing with similar clauses.  The Court concluded that based on the undisputed facts, the property damage at issue arose from Diamond's ongoing operations at the Bellevue Park Condominiums.  As the j(5) exclusion was applicable, the Court granted that portion of Atlantic's motion based on the plaintiffs' breach of contract claim.


Bad Faith and WCPA Claims

The plaintiffs alleged that Atlantic acted in bad faith when it failed to respond to Diamond's demand that the insurer defend it against Bellevue Park's lawsuit.  The plaintiffs further alleged that Atlantic acted in bad faith by failing to disclose Mr. Mattes' report with its denial of coverage letter and issuing Diamond a policy despite knowing the contractor used a method of roofing that the policy purportedly did not cover.

In response, Atlantic argued that it had no record of ever receiving Diamond’s tender letter.  Atlantic’s claims adjuster stated that "had it received the tender, Atlantic would have reviewed the complaint, re-evaluated its coverage position, and responded to the tender."

The Court found a genuine material issue of fact as to whether Atlantic breached its duty of good faith by failing to respond to Diamond's tender. The Court noted that under Washington law, insurers have a statutory duty to "acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies."

Insurers also have a duty to conduct a reasonable investigation after receiving a claim or tender of defense.  The Court held that an issue of fact existed regarding whether Atlantic's failure to respond was unreasonable—that is, whether Atlantic received Diamond's tender and failed to act.  Viewing the evidence in the light most favorable to the plaintiffs, the Court held that a reasonable jury could find that Atlantic acted unreasonably in failing to respond to Diamond's tender.

Atlantic argued that it could not have acted in bad faith by failing to defend Diamond because the policy unambiguously excluded coverage.  However, the Court noted that Atlantic was mistaking a bad faith claim premised on an insurer's breach of the duty to defend—which Diamond did not assert in its complaint—with a bad faith claim premised on an insurer's failure to adequately respond to a claim.

Atlantic also argued that the plaintiffs did not meet their burden of demonstrating that the insurer's alleged failure to respond caused Diamond harm.   It is well established law that a showing of harm is an essential element of an action for bad faith handling of an insurance claim."  An insured can demonstrate harm by showing it incurred expenses as a result of the insurer's bad faith actions.

The Court found that the plaintiffs failed to present evidence that Diamond was directly harmed by a result of Atlantic's failure to respond to its tender.  Although Diamond had to hire Mr. Freeman to defend it against Bellevue Park's lawsuit, it did so in response to Atlantic's denial of coverage, not the insurer's non-response to Diamond's tender of defense.  The further held that Diamond would have had to hire Mr. Freeman even if Atlantic had responded to its tender of defense because, as already determined, the insurer's denial of coverage was reasonable under the j(5) exclusion.  Aside from retaining Mr. Freeman, the plaintiffs provided no evidence that Atlantic's failure to respond to Diamond's tender of defense caused the insured harm.  Accordingly, the Court granted Atlantic's motion as to the plaintiffs' bad faith claim.

To prevail on a WCPA claim, the plaintiffs must show: (1) an unfair or deceptive act or practice (2) in trade or commerce, (3) which affects the public interest and (4) injured the plaintiff's business or property, and (5) that the unfair or deceptive act complained of caused the injury.   An insurer's breach of its duty of good faith constitutes a per se violation of the WCPA.

As the plaintiffs' WCPA claim is based on the same allegations supporting its bad faith claim and the plaintiffs have failed to make the requisite showing that Atlantic's failure to respond to Diamond's tender caused the plaintiffs harm, the Court granted Atlantic's motion as to the plaintiff's WCPA claim.

In light of the analysis above, the Court granted Atlantic’s motion for summary judgment.


Larry E. Waters
[email protected]


08/22/18       Union Mutual Fire Insurance Company v.  DiBartolomeo

United States District Court, Eastern District of New York

Plaintiff’s Motion for Default Judgment Granted because Defendant was Properly Served, Ignoring the Default Would Prejudice Plaintiff, and Plaintiff is Entitled to Declaratory Relief Because of the Insured’s Material Misrepresentation on His Application for Insurance

Plaintiff issued a Commercial General Liability Policy to Defendant.  The Policy provided coverage from December 30, 2014 to December 30, 2015. The Policy listed only one designated risk location (the “Premises”).  The Policy also contained certain conditions, which provided that “[b]y accepting this policy, you agree: [t]he statements in the Declarations are accurate and complete; [t]hose statements are based upon representations you made to us; and [w]e have issued this policy in reliance upon your representations.”   On Defendant’s application for insurance, Defendant represented that the Premises had only two apartment units.

After the Policy was issued, Plaintiff received notice of a claim resulting from alleged injuries suffered by a tenant at the Premises.  During Plaintiff’s investigation of the claim, Defendant signed a statement wherein Defendant confirmed that the Premises has three apartment units. Thereafter, Plaintiff issued a Disclaimer and a Supplemental Disclaimer of coverage based upon Defendant’s misrepresentation on his application with regard to the number of apartment units at the Premises.  Plaintiff also advised Defendant that it was rescinding the Policy, tendering back the Policy premium in its entirety, and advised Defendant that cashing the enclosed Policy premium check would constitute an accord and satisfaction.  Subsequently, Defendant cashed the Policy premium check issued to him by Plaintiff.  

Plaintiff commenced this declaratory judgment action, seeking a declaration that the Policy issued to Defendant be rescinded and avoided pursuant to New York Insurance Law Section 3105.  Despite Plaintiff’s proper service, Defendant did not answer or otherwise move with respect to Plaintiff’s Complaint.  The Clerk Court entered a notation of default against Defendant and Plaintiff filed the current Default motion thereafter.

The Court began its analysis with the established standards for entry of Default Judgment in federal court.  The Court noted that pursuant to Federal Rules of Civil Procedure 55(a), the entry of default is not discretionary.  Further, the court noted that when deciding a motion for default judgment a court must evaluate three factors: (1) whether the defendant’s default was wilful; (2) whether defendant has a meritorious defense to Plaintiff’s claims; and (3) the level of prejudice the non-defaulting party would suffer as a result of the denial of  the motion for default judgment.

Here, the court determined Plaintiff has satisfied all three factors.  First, Defendant has not responded to the Complaint despite proper service.  Second, Defendant’s failure to respond to the Complaint and Plaintiff’s efforts to move forward its case were sufficient to demonstrate that ignoring the default would prejudice Plaintiff.  Third, Defendant could not establish a meritorious defense because Defendant has failed to appear in the action.  As such, the Court determined a default judgment against Defendant would be proper.

Nevertheless, the Court had to determine whether Plaintiff was entitled to a declaration that the Policy issued to Defendant was Void ab initio pursuant to Section 3105 of the New York Insurance Law.  In its analysis, the court first defined a representation as “a statement as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance . . . at or before the making of the insurance contract as an inducement to the making thereof.”  Second, the court defined a misrepresentation “as a false representation, and the facts misrepresented are those facts which make the representation false.”  Third, the court acknowledged that “a fact is material so as to void ab initio an insurance if, had it been revealed, the insurer or reinsurer would either not have issued the policy or would have only at a higher premium.”  In addition, the court recognized that a misrepresentation “may be deemed material even if innocently or unintentionally made by the insured, in which case the insurance policy is void ab initio.”  Critically, the court determined that a misrepresentation as to the number of apartment units at a given location is material.

Applying the well-established New York law, the court concluded that Defendant made a material misrepresentation on his application for insurance.  In support, Plaintiff submitted evidence that the Defendant represented the Premises had only two apartment units, despite the Premises having three apartment units.  Further, Plaintiff submitted documentary evidence and an affidavit from one of its chief underwriters that Plaintiff would not have issued the same policy if the application had disclosed that the Premises consisted of three apartment units.  Accordingly, the court concluded that Defendant made a material misrepresentation in his application and Plaintiff would not have issued the same policy had it been advised of the actual number of apartment units contained in the Premises.

In sum, the Court recommended that Plaintiff’s motion for default judgment be granted and that the underlying Policy issued by Plaintiff to Defendant be declared void ab initio.

As this is a very recent decision, please contact me if you will like a copy of this opinion.


Eric T. Boron
[email protected]


08/16/18       American Mining Ins Co v. Peters Farms LLC

Supreme Court of Kentucky     

CGL – Property Damage – Accident – Doctrine of Fortuity – Occurrence

In a 4-2 opinion issued last week, the Supreme Court of Kentucky reversed a trial court’s judgment in favor of Peters Farms, LLC (“Peters”) against the American Mining Insurance Company (“American Mining”), which judgment had been upheld in 2016 by the Court of Appeals, in ruling that American Mining need not provide coverage of property damages suffered by Peters, resulting from American Mining’s insured Ikerd Mining, LLC (“Ikerd”)’s wrongful extraction of coal from land owned by Peters.  The Kentucky Supreme Court held Ikerd’s innocent trespass/conversion incident did not constitute an accidental occurrence triggering coverage under Ikerd’s CGL policy with American Mining.

The factual background of the case is as follows.  Beginning in 2007, Ikerd removed 20,212 tons of coal from land belonging to Peters. Of that amount, 19,012 tons were wrongfully mined under Ikerd’s alleged mistaken belief as to the correct location of Peters' boundary lines. The other 1,200 tons were mined by Ikerd knowing that the land thereunder belonged to Peters, but pursuant to a disputed oral lease agreement between Ikerd and Peters. Peters claimed that the lease was an ongoing negotiation that was never finalized.  In 2010, Peters sued Ikerd and its insurer, American Mining, for Ikerd’s alleged willful and wanton trespass onto Peters' property and conversion of coal from it. American Mining took the position that the losses claimed by Peters from Ikerd’s trespassory mining activities were not an “occurrence,” and thus not covered by Ikerd’s CGL policy. During the course of litigation, Ikerd became insolvent, leaving the insurer American Mining as the only source for recovery.  Following a bench trial, the Circuit Court entered judgment in favor of Peters. American Mining appealed. The Court of Appeals affirmed. American Mining sought discretionary review, which was granted, bringing the CGL policy coverage issue before the Kentucky Supreme Court.

Ikerd’s CGL policy with American Mining set forth the standard CGL definition for the term “occurrence” – “an accident, including continuous or repeated exposure to substantially the same general harmful conditions”.  The Supreme Court’s opinion acknowledged the term “accident” was not defined in the CGL policy, and so, as an undefined policy term, it must be given its “plain” and “ordinary” meaning when interpreting the policy.  Supreme Court’s determination of the meaning to be applied to the term “accident” in the CGL policy reflected Supreme Court’s consideration and application of the doctrine of fortuity.  

Generally, it is a fundamental requirement in insurance law that insurers only pay for losses that are “fortuitous”, that is, are accidental in some sense.  In the property and liability insurance contexts, the doctrine of fortuity is evaluated from the point of view of the insured; in this case, Ikerd’s point of view.  “The doctrine of fortuity involves analysis of the insured’s intent and control”, as Supreme Court stated here.  This approach makes sense, because if the victim’s viewpoint is used, coverage would almost always exist, even when, for example, an insured intentionally caused the victim’s injury, such as by intentionally firing a gun at the victim, because from the victim’s viewpoint the resultant gunshot injuries would nonetheless be “fortuitous”.

Applying the fortuity doctrine, the Kentucky Supreme Court framed the coverage question as follows:  “whether Peters is covered by Ikerd’s CGL policy depends upon Ikerd’s intent and control regarding its excavation and conversion of Peters’ coal”.  As to the intent issue, Supreme Court found that although it may not have been Ikerd’s intent to mine Peters’ coal (the bulk of the mining by Ikerd of Peters’ land was done under Ikerd’s mistaken understanding as to where property border lines were), Ikerd did intend to mine and sell the coal it extracted from Peters’ land, regardless of whether what turned out to be trespass onto/into Peters’ land was willful or innocent.  Further, Supreme Court held that Ikerd’s conversion of Peters’ coal “is an intentional tort” and “there is no such thing as conversion by accident”.  As to the control issue, Supreme Court found Ikerd had complete control over its employees and any subcontractors who extracted the coal from Peters’ property.  As such, Supreme Court could not say that the resulting damage to Peters’ property was an accident.  Because Peters’ property damage did not result from an “accident”, it was not an occurrence covered by Ikerd’s CGL policy with American Mining.

Next time you find yourself faced with a situation in which you must determine whether there is coverage for a property damage claim made against a CGL policy arising from circumstances including issues/allegations of trespass or conversion, consider applying the doctrine of fortuity to your coverage assessment.  Or, give us a call, because, as Dan is (perhaps overly?) fond of saying, we love situations, and are always ready, willing, and able to help you deal with them.       

Editor’s Note:  But it’s true, Eric!


Earl K. Cantwell
[email protected]


04/27/16       Staggs v. Farmers Insurance Exchange

United States District Court, D. Oregon

First Things First – Assess the Jurisdiction of your Case

Plaintiffs sued on a fire loss, a coverage dispute ensued, and Farmers Insurance moved to dismiss the action in United States District Court, arguing that the Court lacked subject matter jurisdiction because there was no “diversity jurisdiction” between the parties. Plaintiffs were citizens of Oregon, and Farmers is a reciprocal insurance exchange with its primary place of business in California. Some Farmers policy holders, like the Plaintiffs, are Oregon citizens. The legal dispute essentially was whether Farmers was a citizen of Oregon or California for purposes of determining subject matter (diversity) jurisdiction.

Federal courts have limited jurisdiction, with subject matter jurisdiction only over cases as authorized by the Constitution and Congress. The Court has diversity jurisdiction over actions involving more than $75,000 in controversy, and between citizens of different states. Diversity jurisdiction requires “complete diversity” between the parties - that is each defendant must be a citizen of a different state from each plaintiff. For diversity purposes, a corporation is deemed a citizen of any state in which it is incorporated or has its principal place of business, so normally there are two, and only two, states of “citizenship” for corporations.

In a reciprocal insurance exchange, individuals and businesses pool risk by agreeing to indemnify each other against losses. The policyholders, referred to as ‘subscribers’, act through a common attorney-in-fact and are really both insurers and insureds. Insurance exchanges do not have a corporate structure. Rather, they are simply an unincorporated association of individuals and businesses who swap and allocate liabilities among themselves. As an unincorporated association, a reciprocal insurance exchange can be viewed as a citizen of any state in which its subscribers are citizens. Farmers is an unincorporated association, and its citizenship hinges on the citizenship of its subscribers.

Plaintiffs countered by arguing that Farmer’s principal place of business was located in California, but Farmers is not a corporation and Plaintiff’s reliance on this theory did not change Farmer’s legal form, or the fact that it has Oregon citizen members. The Court conducted its subject matter jurisdiction inquiry as hinging on the citizenship of the association’s members.

The Court noted that there is some split in authority in the federal courts as to whether members of a reciprocal insurance exchange are truly subscribers and members or simply customers. Focusing on California law, this Court concluded that a reciprocal insurance exchange’s subscribers are members, and if there are members in Oregon there was not complete diversity of citizenship.

Farmers is organized under California law which defines subscribers as members of an insurance exchange. Since the Plaintiffs are Oregon citizens and Farmer’s members / subscribers, the Court ruled that Farmers is also an Oregon citizen, and therefore the Court lacked subject matter (diversity) jurisdiction.

In any litigation, thought must be taken at the outset to whether there is personal jurisdiction over a party in a given venue. Another issue, as in this case, is whether the case and controversy is within the court’s subject matter jurisdiction. For diversity of citizenship purposes, corporations, including most insurance companies, are deemed citizens of the state in which they are incorporated and where their principal place of business is located. Therefore, most corporations, including insurance companies, have two (and only two) states of citizenship for purposes of diversity of citizenship.

This leads in many cases to serious consideration of whether a case filed in a state court can or should be removed in federal court on the basis of diversity of citizenship. There are often good procedural and substantive reasons for insurance companies to consider removing a claim, coverage case, or other dispute to federal court thus lifting the case out of the state court system. However, the time period for removal is very strict and absolute, 30 days from first notice of suit, so any removal petition must be filed promptly.

Of course, the dismissal in this case did not mean that the case was dismissed on the merits, but rather would simply be re-submitted and re-filed in the Oregon state court system. Farmers Insurance must have perceived some advantage within the state court system as preferable to litigation in federal court. An interesting issue would have been presented if Farmers did not aggressively move to dismiss and not place the jurisdiction issue squarely before the Court. However, federal courts are notoriously aggressive about protecting and enforcing their jurisdiction, and the Court at some juncture might have inquired concerning this issue and even raised it on its own sua sponte directing the parties to address the issue whether there was diversity jurisdiction in the case.


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