Volume XX, No. 6 (No. 517)
Friday, September 7, 2018
A Biweekly Electronic Newsletter
As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
Happy New Year. Shana Tovah. May you have a sweet New Year.
Happy Post-Labor Day. It is sad, around here, as the summer is coming to an end. We have our end-of-the-year attorney’s party (complete with Kohane’s Pulled Pork from the smoker), on Saturday up at Crescent Dreams, our Canadian summer home. Over 60 will be attending so lots of prep work to do which has been ongoing for several days.
Great response to our offer for coverage training and a number of programs already scheduled. Here’s a current list of training program offerings: https://www.hurwitzfine.com/training-opportunities . Contact me to work on dates and times. We can do them live or by video.
The courts are completing their summer recesses and few decisions have come down from the New York appellate courts over the past two weeks. It’s only the second or third time in 20 years I haven’t a single case on which to report in my column.
Noticing lots of disability/ADA discrimination lawsuits being commenced in the NYC area against policyholders that have opted not to purchase EPLI coverage. Of course, any port in a storm and we’ve been dealing with coverage position letters responding to requests for coverage under CGL and D&O policies. Seems these cases come in waves.
It remains a mystery to me how few personal injury plaintiffs lawyers have any real depth of understanding about insurance coverage. One would think they would have an interest.
We see a number of attempts to broaden the definition of “household” to try to expand the number of people who are entitled to claim insured status under homeowners policies. Of course, the broader the definition, the more folks are excluded by intra-insured exclusions. The yin and the yang.
Federation of Defense & Corporate Counsel:
Back recently from the Annual Meeting of the Federation of Defense & Corporate Counsel, celebrating over 80 years of service to the insurance industry and corporate clients. It was my 58th consecutive meeting (two meetings a year) and I’ve been a member since 1990 and served as its President in 2006-2007. I did a little homework and found the first newspaper article referencing the organization which was founded as the Federation of Insurance Counsel, then morphed its name to the Federation of Insurance and Corporate Counsel and finally to the Federation of Defense & Corporate Counsel. Here was the article:
The Philadelphia Inquirer
Philadelphia, Pennsylvania
30 Aug 1937
Lawyers to Meet
ATLANTIC CITY, N. J., Aug. 29.—The Federation of Insurance Counsel, a group of 150 leading lawyers for some 30 major companies, will hold its first annual convention here tomorrow and Tuesday.
The program will consistent of analyses of legal problems encountered by insurance men in accident cases.
Interested in learning more, perhaps about membership?: Visit the website: www.thefederation.org and contact me for additional information.
100 Years Ago – May-December Marriage:
The Los Angeles Times
Los Angeles, California
7 Sep 1918
MOTHER HAS ELOPED
At Least She Did Not Invite Children
to Her Marriage with
Octogenarian
“Mother married? Well, she didn’t tell me about it!” laughed Mrs. Arthur W. Urban of No. 735 Camulos Street last night.
Justice Forbes yesterday performed a marriage ceremony for Oscar Calkins, 80, and Mrs. Ruth J. Brundage, 47. Mr. Calkins is a retired merchant of New York City and had been marred three times previously. This is Mrs. Brundage’s third venture.
“Mother and Mr. Calkins have gone together places for about two years. Lots of times they go riding with my brother in his machine,” said the daughter.
They didn’t last night, however, for the brother, Claude Brundage of No. 946 Vista Drive, motored out of sight with his wife just as neighbors saw Mrs. Ruth Brundage and an elderly man come up the steps and ring at the bell.
Mrs. Brundage has a dressmaking shop at the corner of Daly and Pasadena avenue, and she also sews buttons and mends tears for men who have mishaps in that line. When Mr. Calkins, who is quite spray in spite of his eighty years, winters here each year, he lives around the corner on Daly avenue with his niece.
But mother has eloped.
Peiper on Pigskin Prognostications:
With little action, again, in the Courts, we focus on the pressing issues of the day. Thursday, September 6, 2018, serves as the official opening day of the season. No, not the NFL Season, the Fantasy Football league season.
For those uninitiated, it’s what has been driving conversation around millennial water coolers for the past month or so with “draft prep.” I am not a millennial, but am a first generation Fantasy Footballer (though, admittedly my interest weakens every year). At the insistence of several good friends from college, we’re very close to entering into our second decade. Through 56K dial modems, and data less cell phone plans, we’ve kept the group together, more or less, since the inaugural season of 2001. No money has ever been lost, or won for that matter; and the same stories (and same jokes) are still funny if only for a few hours each year on draft night.
In any event, upon consideration, I think that a work FFL is entirely appropriate. Nevertheless, as with everything in life, ground rules are important. In keeping with our Dos and Don’ts theme, we offer the 2018 Fantasy Football Dos and Don’ts.
Do – Talk trash to your co-workers.
Don’t – Feel the need to temper trash talking based upon results
Do – Try. Like, you know, set your roster every week.
Don’t – Discuss fantasy football in the company of ANYONE not in the league. They don’t care. Trust me.
Do – Talk trash. Oh yeah, we covered that one already.
Don’t – Take wins or losses too seriously. I, honestly, could care less about results. They are merely distractions from my more important “dos” referenced above.
Do – Open the league to everyone. Results, again, are irrelevant.
Don’t - Avoid human contact because you’re spending every waking hour listening to podcasts about the latest waiver wire moves. (You know who you are, and yes, I’m speaking directly to you).
That’s it for now. Happy fall, everyone.
Steve
Steven E. Peiper
Watch What You Wear:
Rutland News
Rutland, Vermont
7 Sep 1918
CURRENT AFFAIRS
IN BRIEF PARAGRAPHS.
A woman has been sentenced in Hartford, Conn., to twenty days in jail for wearing the uniform of a United States Army officer. Women should be content with wearing their husbands’ trousers.
Hewitt’s Highlights:
Dear Subscribers:
Welcome to a new edition of Coverage Pointers and my serious injury column. The column is small this week, with only one case published since the last edition. That case involves the granting of summary judgment and dismissal of a case because plaintiff failed to provide a reasonable explanation for a gap in treatment. The court called the gap of over a year “lengthy.”
Here on Long Island, children went back to school, which means the roads are crowded again. (Well they are always crowded but even more so). My boys were looking forward to it, as a chance to see their friends again. Of course, with school comes Fall Baseball and Soccer and lots of running around again.
Happy New Year to all who celebrate Rosh Hashanah.
Until next time,
Rob
Robert Hewitt
Crying in the Suds – a Century Ago:
The Morning Call
Allentown, Pennsylvania
7 Sep 1918
BREWING OF BEER CEASES IN
U.S. ON DECEMBER FIRST
(By Associated Press)
Washington, Sept. 6.—Manufacture of beer in the United States will be prohibited after December 1 next as a war measure.
This announcement was made tonight by the food administration, which said the decision had been reached at a conference between President Wilson and Representatives of the Fuel, Food and Railroad administrations and the War Industries Board.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
Today was the first day of Seventh Grade in our household, and this year is shaping up to be a busy one already. With new classes (but at least no more Chinese language courses), volunteering opportunities, and starting Junior Varsity volleyball, our schedules are likely to be jam-packed for the foreseeable future. We wouldn’t have it any other way, apart from perhaps wishing that time would slow just a little. I’m not ready to have a high schooler in the house!
So, getting right into things in this Wide World, the Second Circuit again has still not issued any coverage/insurance-related opinions in the past few weeks. Perhaps (hopefully?) this means that a whole slew of them will be coming down the pike in the coming weeks? In the meantime, we have for you an interesting one out of the Fifth Circuit Court of Appeals instead.
In Imperium Insurance v. Shelton, we have a legal malpractice case involving the rescission of coverage. There, a law firm bought malpractice coverage. In its application for insurance, they indicated that they were not aware of any cases or legal work that might result in a claim or suit. However, the carrier later discovered that there were at least two cases where the firm had dropped the ball, either by failing to appear in court on conferences they knew about (i.e. they actually had counsel in the courthouse on another matter who knew about the case but did not even pop into the courtroom to check in) or, in one case, failing to submit federal court documents so that a client could be eligible for a multi-district litigation settlement. Since those were material misrepresentations on their application, that ended up resulting in malpractice suits, the carrier was entitled to rescind the policy all together. Where a carrier would not have issued the same policy, or would have issued it but at a higher premium charged, the carrier can establish materiality sufficient to rescind. While this case stemmed from Mississippi law, we note that it is similar in New York, where intent is not a variable. As long as the material misrepresentation was false, a policy can be voided.
That’s it for now. Until next time!
Agnes
Agnes A. Wilewicz
Lukefish wanted for Dowry:
The Tacoma Times
Personal
September 7, 1918
Young man, 33, steadily employed, would like to meet respectable girl. Object: matrimony. Norwegian preferred. D-1 Times
Barnas on Bad Faith:
Hello again:
The NFL season is upon us. Expectations are pretty low for our Buffalo Bills this year, but either way a new season always brings promise with it. My Blue Jays once had quite a bit of promise, but those great years of 2015 and 2016 seem like so long ago now. This was only reinforced by the recent trade of former AL MVP Josh Donaldson to the Indians for a lowly “player to be named later.” I’ll be rooting for the Indians this postseason hoping that the Bringer of Rain and Edwin Encarnacion can finally get to a World Series.
Things also aren’t looking nearly as promising for Spurs. We were flying high after a 3-0 win against Manchester United at Old Trafford, but a 2-1 defeat against Elton John’s favorite club Watford at Vicarage Road has dampened the spirits. Things don’t get any easier with a fixture against Liverpool coming out of the international break. If Spurs have any hope of finishing at the top of the table, they can’t afford to be dropping points in winnable games, even this early in the season.
I have a Washington Court of Appeals case in my column today. There, the court concluded that the title insurance company acted in bad faith as a matter of law by unreasonably failing to defend the insured. There’s also a Pennsylvania case where the insurer’s motion to dismiss the insureds’ conclusory allegations of bad faith succeeded.
Have a nice weekend.
Signing off,
Brian
Brian D. Barnas
Air Mail in Infancy – 37 Hours from Chicago to NYC:
The Buffalo Commercial
Buffalo, New York
7 Sep 1918
The first New York to Chicago air postman has arrived after a trip of about thirty-seven hours. Before long such a performance will be a matter of every-day occurrence.
Off the Mark:
Dear Readers,
I hope everyone had a relaxing Labor Day. I spent the day hauling boxes to the new abode. It wasn’t that bad as the wife made sure the boxes weren’t too heavy. I did get to relax with the family as we tried one of the local restaurants after a few trips to the new place. The food was good and no further trips were made on account of being too full.
This edition of “Off the Mark” discusses a recent construction defect case from the US District Court for the Northern District of California. In First Mercury Ins. Co. v. Kinsale Ins. Co., the Court examined the applicability of the “damage to your work” exclusion, whether the alleged damages occurred during the relevant policy periods, and whether additional insured coverage was owed to the general contractor. The Court found that the “damage to your work” exclusion was applicable, but only granted partial summary judgment as the underlying arbitration award did not parse out the amounts awarded for each portion of damage, holding that exclusion only applies to damage to an insured’s own work. The Court found issues of fact as to when the damages occurred. As such, the Court denied the remaining portions of the plaintiff’s motion for summary judgment.
Until next time …
Brian
Brian F. Mark
[email protected]
Check and Mate:
Santa Ana Register
Santa Ana, California
7 Sep 1918
BAD CHECK ARTIST IS
CAPTURED IN BATTLE
SAN BERNARDINO, Sept. 7.—Emery Salyard, alleged bad check artist said to have many charges against him, was on his way to Bakersfield today, having been lodged in jail here late yesterday after a twelve-hour battle with sheriff’s deputies and a posse. He is wanted for bad check work in Kern County.
Salyard was traced here from Portland, Ore., where it is charged he bought an automobile with a forged $3200 check. He was found in found in the San Bernardino Mountains and surrounded. Using an armament of two repeating rifles, two shotguns and two automatic pistols, he stood off the posse for hours. When his ammunition gave out he surrendered.
Detectives say he is one of the cleverest men in his trade on this coast.
Wandering Waters
Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.
I am going to break from tradition and discuss something other than the NBA. After nine years of vegetarianism, I recently had my first Buffalo wing. Since such time, I have been on a “wing tour” here in Buffalo. I have received many suggestions as to who makes the best wings in Buffalo. I will admit that it is difficult to form an opinion as to who makes the best wings in Buffalo, as I have not had much experience over the last nine years. However, I can honestly say every wing so far tastes better than soy chicken.
With that being said, this week we have one case from the United States District Court, Eastern District of New York. I hope you enjoy.
Until next time….
Larry
Larry E. Waters
Killed by Insurance Man, Only to Rise Again:
Detroit Free Press
Detroit, Michigan
7 Sep 1918
SAYS WOMAN WAS “SLAIN”
BY INSURANCE MAN’S PEN
In the records of the Metropolitan Life Insurance company, Mrs. Julia A. Sauve, of Buffalo, who formerly lived at 75 Fourteenth avenue, Detroit, is dead, quite dead.
But, says Detective Charles Lambert, Mrs. Sauve is with the quick, not the dead. She was slain, but it was only by a drop of ink, not a bomb, bullet, bayonet, poison gas, etc.
And the detective, bringing Harry Tucker, life insurance agent, before Justice Stein Friday, accused Tucker of turning the little trick of "killing" Mrs. Sauve, a trick which the detective charges gained Tucker $73 of the insurance company’s money.
Tucker induced Mrs. Sauve to ask for the cash surrender value of a $138 policy, Lambert says. But, charges Lambert, Tucker collected the whole $138, and reported her dead. Then he turned over to Mrs. Sauve the difference between $138 and $73, and she went her way rejoicing and unsuspecting she was “dead.”
The company, says the detective, is now looking over its records to see whether more policy holders met death at the point of a busy little fountain pen. The alleged cemetery filler extraordinary was hold for trial in the recorder’s court.
Boron’s Benchmarks:
Boron’s Benchmarks will be back in two weeks.
Eric
Eric T. Boron
Certificates of Insurance Not Worth Much Even 100 Years Ago:
Winston-Salem Journal
Winston-Salem, North Carolina
7 Sep 1918
INSURANCE CERTIFICATES NOT
ESSENTIAL TO PROTECTION
Persons named as beneficiaries under war risk insurance are protected by their insurance whether their certificates have reached their hands or not. The certificate is merely an evidence that the policy exists; the policy contract is effective without the certificate. This is the substance of a Treasury Department statement, occasioned by the fact that the mailing of certificates has proved too large an undertaking for the available clerical force. More than 2,000,000 certificates have been mailed already and others are being dispatched with all possible rapidity.
The Treasury Department authorizes the statement that up to the close of business on August 30th more than $30,000,000 of Government insurance has been written to protect America’s fighting forces and their families. The applications for August will total about $5,000,000,000.
Jerry’s No-Fault Navigation
Dear Subscribers,
Hello and welcome to Jerry’s No-Fault Navigation. Your eyes and ears to the no-fault regulations. This week, I take you to the Billie Jean King National Tennis Center where my wife and I were lucky enough to take in a few matches. Federer. Nadal. Serena Williams. It doesn’t get much better than that! While sitting there, I took note of the fact that a tennis match is similar to a courtroom battle. You have the umpire sitting higher up in a chair, you have a time clock for the first serve, and each player gets challenges. Similarly, you have the judge sitting higher up behind the bench, you have the time constraints under the statute of limitations in starting an action, and attorneys object during trial. One difference, among many, is that no one ever cheers as you enter or leave the courtroom.
While time clocks are rarely enforced in tennis, the same is not true in the law. Recently, the Appellate Division, Second Department, followed precedent regarding the statute of limitations for an action to recover no-fault benefits from a self-insured. Short on time? Put the racket down, and quickly read on.
Jerry
Jerry Marti
Motorless Sundays:
Buffalo Evening News
Buffalo, New York
7 Sep 1918
Only These Cars Exempted
Under Motorless Sunday Rule
In reply to many inquiries received by the Buffalo NEWS concerning the exception made in the motorless Sunday request, the following cases are listed:
In view of the difficulty, if not the impossibility, of differentiating between the various uses to which automobiles are applied, the United States Fuel administration believes that the greatest measure of economy can be effected with the least interference with the business of the country through the discontinuance of the use of all classes of motor vehicles, motor boats, and motor cycles, on Sundays.
The United States Fuel Administration therefore requests that in the section of the United States east of the Mississippi river there shall be a discontinuance of use of the vehicles above specified, including all such as are operated for hire, on each Sunday hereafter until notification that the need for such discontinuance has ceased.
The following exceptions are made:
1. Tractors and motor-trucks employed in actual transportation of freight.
2. Vehicles of physicians, used in performance of professional duties.
3. Ambulances, fire apparatus, police patrol wagons, undertakers’ wagons, and conveyances used for funerals.
4. Railway equipment using gasoline.
5. Repair outfits employed by telephone and public service companies.
6. Motor vehicles on errands of necessity in rural communities where transportation by steam or electricity is not available.
In addition to the above, appeal is made to the patriotic men and women of America, east of the Mississippi river, to undertake, voluntarily, additional conservation in the operating of their own automobiles, wherever possible. The United States Fuel Administration believes that all consumers of gasoline will observe the spirit of this request. In that event no mandatory order governing the use of gasoline will be necessary.
Editor’s Note:
The Federal Fuel Administration was a World War I-era agency of the Federal government of the United States established by Executive Order 2690 of August 23, 1917 pursuant to the Food and Fuel Control Act, managed use of coal and oil. To conserve energy, it introduced daylight saving time, shortened work weeks for civilian goods factories, and encouraged Heatless Mondays.
Even prior to a declaration of war by the United States, shortages of coal were experienced in the winter of 1916-17. To address concerns about a steady supply of fuel to support military and industrial operations and for use by consumers, in 1917 the Federal Fuel Administration was established and US President Woodrow Wilson appointed Harry A. Garfield to lead the agency. Garfield in turn selected local administrators for each state. Fuel committees were organized down to the county level.
The activities of the administration included setting and enforcing the prices of coal. The administration had broad powers to set the price of coal at various points (mine, dock) and the cost of transportation (by rail), and in regard to end use (home, factory, or business, etc.).
Daylight Saving Time was formally adopted in the United States in 1918 by the Fuel Administration. The Standard Time Act of 1918 established both standard time zones and set summer DST to begin on March 31, 1918. The idea was unpopular, however, and Congress abolished DST after the war, overriding President Woodrow Wilson's veto. DST became a local option and was observed in some states until World War II, when President Franklin Roosevelt instituted year-round DST, called "War Time," on February 9, 1942. It lasted until the last Sunday in September 1945. The next year, many states and localities adopted summer DST.
By mid-1922, the administration's activities were declining and some states were taking a more active role in managing coal production.
Headlines from the attached issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Crickets.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
- No Explanation for Lengthy Gap in Treatment
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- Applicant Seeking to Vacate a Default Must Establish an Explanation for Why Service was not Received
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
- Fifth Circuit finds that Attorney Insureds Under Legal Malpractice Policy made Material Misrepresentations in Application, Resulting in Proper Voiding of Policy (Mississippi law)
JEN’S GEMS
Jennifer A. Ehman
- Court Finds Insured Premises Does Not Include Lake Located a Few Hundred Feet from Insured Building
JERRY’S NO-FAULT NAVIGATION
Jerry Marti
- Three Year Statute of Limitations for No-Fault Claims against Self-Insureds
BARNAS ON BAD FAITH
Brian D. Barnas
- Conclusory Bad Faith Claim Dismissed
- Insurer’s Unreasonable Failure to Defend its Insureds Constituted Bad Faith
JOHN’S JERSEY JOURNAL
[Jolly Jaunting in Jamaica]
John R. Ewell
- On his honeymoon – we cut him some slack.
OFF THE MARK
Brian F. Mark
- US District Court Finds Damage to Your Work Exclusion Applicable, but only Grants Insurer Partial Summary Judgment as Underlying Arbitration Award did not Identify the Amounts Awarded for Each Portion of Damage. Issues of Fact were also Found as to when the Damages Occurred.
WANDERING WATERS
Larry E. Waters
- New York Insurance Law §3420 Applied to Defendant’s Commercial General Liability Policy because Such Policy was Issued to a New York State Corporation and the Risk was Located in New York State
BORON’S BENCHMARKS
Eric T. Boron
- Not this week.
EARL’S PEARLS
Earl K. Cantwell
- Insured’s Attorneys’ Fees Denied
See you in a couple of weeks.
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Agnes A. Wilewicz
ASSISTANT EDITOR
Jennifer A. Ehman
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
Michael F. Perley
Jennifer A. Ehman
Agnieszka A. Wilewicz
Edward B. Flink
Brian D. Barnas
Brian F. Mark
Eric T. Boron
John R. Ewell
Larry E. Waters
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Edward B. Flink
Eric T. Boron
Brian D. Barnas
James L. Maswick
NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
Jerry Marti
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Diane F. Bosse
Topical Index
Hewitt’s Highlights on Serious Injury
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Jerry’s No-Fault Navigation
John’s Jersey Journal
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
Crickets.
It’s the end of the summer and the courts have been so quiet that there isn’t a single case upon which to report. In twenty years, this may be only the second or third time that this is the case.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
08/29/18 Atken v. Jackson
Appellate Division, Second Department
No Explanation for Lengthy Gap in Treatment
The Appellate Division affirmed the grant of summary judgment dismissing the case for lack of serious injury due to the unexplained gap in treatment. Plaintiff failed to treat for the period of May 2014 through summer 2015. The Court found neither plaintiff nor her physician provided a reasonable explanation for this lengthy gap, thus the case could be dismissed.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
08/28/18 Stevens v. Stepanksi
Appellate Division, Second Department
Applicant Seeking to Vacate a Default Must Establish an Explanation for Why Service was not Received
Plaintiff commenced the instant lawsuit against the Greenville Inn, in March of 2013. The Complaint was served upon Greenville, via the Secretary of State, later that month. In June, plaintiff sent a copy of the Complaint to Greenville’s listed address advising that it was currently in default. In September, when no Answer was provided, plaintiff moved for a default judgment which was then granted on October 31, 2013. The default was served upon Greenville, again at their listed address, under cover dated November 13, 2013.
At an inquest in February of 2015, the trial court heard evidence of damages which resulted in an award of $775,000. The judgment was entered in June of 2015. In December of 2015, plaintiff served “information subpoenas” on two shareholders for Greenville. Both, James Delaney and William Alford, responded by saying they had no knowledge of the pending lawsuit, default motion or judgment.
By way of Order to Show Cause in February of 2016, Greenville moved to vacate the judgment. Greenville submitted affidavits from Messrs. Delaney and Alford that alleged that they had no knowledge of the Complaint, and that Greenville was operating in March of 2013 when the Complaint was allegedly served. The men also stated that they did not know why the certified mail from the Secretary of State was not received. In denying the application, the trial court noted that no one from Greenville offered any evidence as to why the Complaint, via certified mail or otherwise, was not received.
In affirming the trial court’s ruling, the Appellate Division noted that “mere denial of receipt of a summons and complaint is not sufficient to establish lack of actual notice.” Rather, a party seeking to vacate a default must proffer evidence of how mail is usually received and why, under usual circumstances, the Complaint would have been received if the mailing was correct. Failing to do so resulted in the default being upheld.
Where, as here, there is no reason for the default, it follows that the Court need to address the merit of any potential defense in the possession of the defendant.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
07/13/18 Imperium Insurance Company v. Shelton & Associates
United States Court of Appeals, Sixth Circuit
Fifth Circuit finds that Attorney Insureds Under Legal Malpractice Policy made Material Misrepresentations in Application, Resulting in Proper Voiding of Policy (Mississippi law)
In January 2013, Jason Shelton applied for legal malpractice insurance on behalf of himself and his law firm, Shelton & Associates. In his application, he represented that he (and the firm) was not aware of any “legal work or incidents that might reasonably be expected to lead to a claim or lawsuit against them”. Relying on these representations, Imperium issued the firm a claims-made malpractice policy. During the next policy year, however, the firm was sued in two malpractice suits by former clients. While the carrier initially provided a defense, they filed a declaratory judgment action to determine the rights under the policy. During discovery, however, it came to light that Shelton attorneys could have reasonably expected claims being made against them. In one case, there was evidence of arguably years of mishandling of a file, including failure to appear at conferences, despite having an attorney in the courthouse that was aware of the hearing but just left. In another case, a large MDL involving the firm’s representation of individuals who allegedly were injured after taking the drug VIOXX, the attorneys failed to submit requisite forms in order for their clients to be eligible for settlements. They later acknowledge the mistakes and apologized to those clients for not effectively communicating during the process.
Under Mississippi law (like many other States), if “an applicant for insurance is found to have made a misstatement of material fact in the application, the insurer that issued a policy based on the false application is entitled to void or rescind the policy.” “To establish that, as a matter of law, a material misrepresentation has been made in an insurance application, (1) it must contain answers that are false, incomplete, or misleading, and (2) the false, incomplete, or misleading answers must be material to the risk insured against or contemplated by the policy.” Whether that misrepresentation was intentional, negligent, or just a mistake or oversight is immaterial. [n.b., While this is a federal court case in Mississippi, we note that the same standard applies in States like New York as well.]
In this case, Shelton and other attorneys in his firm were aware of the bad legal work at issue and could have reasonably expected that it might lead to a malpractice claim. Thus, the representation to the contrary was false. Since the insurer would not have issued the same policy, or might have issued it at a higher premium, it was a “material” misrepresentation under the law. Since the carrier had met its burden, it could thus rightfully not only deny the claims, but also rescind the coverage entirely.
JEN’S GEMS
Jennifer A. Ehman
08/24/18 Automobile Ins. Co. of Hartford, Connecticut v. Damadian
Supreme Court, New York County
Hon. Barbara Jaffe
Court Finds Insured Premises Does Not Include Lake Located a Few Hundred Feet from Insured Building
This decision arises from the tragic death of a young medical student. The student and several friends rented a house owned by the defendant in Saratoga, New York. The defendant did not live in the house but rented it to others. It was located near a lake called Steward Pond, and as part of the rental, defendant provided the renters with a kayak for use on it.
The student died when he took the kayak on the lake, and ultimately fell in and drowned. The administrator of the student’s estate commenced a lawsuit against the defendant.
We note that the original plaintiff in this case is identified as Traveler’s. There is no indication in the decision as to Traveler’s role, but my guess would be that it provided homeowners’ coverage for the house defendant did live in at the time of the incident. Traveler’s commenced this action seeking recovery of past costs from NCIC, which provided coverage for the rental property, to the extent that it was determined NCIC had a duty to defend in the underlying action.
Based on the terms of the policy issued by NCIC to the defendant, NCIC agreed to provide coverage for liability for bodily injury or property damage “caused by an occurrence to which this coverage applies,” and which “results from the ownership, maintenance or use of the insured premises and operations necessary or incident to the insured premises.” “Insured premises” was defined as the house and “related private structures, and grounds at that location,” as well as “any premises used by [defendant] in connection with [the house].” The policy also covered bodily injury or property damage "resulting from the ownership or maintenance of watercraft, while ashore on the insured premises," but excluded from coverage, liability "resulting from the ownership, operation, use, occupancy, renting, loaning, entrusting, supervision, loading or unloading by any insured of motorized vehicles or watercraft, except as provided [under other coverages]."
Defendant asserted that the lake was within the definition of insured premises noting that it was only 500 feet away. He submitted that as insured premises included any premise used by him in connection with the house (i.e., the lake) coverage was available. Defendant also noted that in the underlying action there was a claim that he failed to check properly, inspect, repair and maintain the kayak at issue. Further, as the claim involved maintenance, which would have been performed while the kayak was on shore, the defendant argued that the watercraft exclusion did not apply.
In response, NCIC submitted that the insured premises does not and cannot include the lake, observing that the lake is a body of water that is separated from the house by a municipal road and real property which was not owned by the defendant, and not part of the deeded property or tract of land. It also asserted that the watercraft exclusion applied.
In considering these issues, the court found that under no analysis may the lake be deemed “a related private structure or ground at the premises location.” It also found that although there was no dispute that defendant and his renters used the lake in connection with the house, it was disputed whether the lake may be deemed a “premises.” In the court’s view, relying on Black’s Law Dictionary, the lake was not part of the grounds of the house, nor was it a house or building. The court also noted that lack of legal authority for defendant’s position that the mere fact that the primary purpose of the house related to the ability to use and access the lake was sufficient to deem the lake a part of the insured premises.
Ultimately, the court concluded that the defendant failed to meet his burden of establishing the existence of coverage. And, conversely, NCIC established that the insured premises affirmatively did not include the lake. It also held that absent the student’s death occurred in the lake and not ashore on the premises; thus, the watercraft exclusion applied.
JERRY’S NO-FAULT NAVIGATION
Jerry Marti
08/22/18 Shirom Acupuncture, P.C. v. NYC Office of Comptroller
Appellate Division, Second Department
Three Year Statute of Limitations for No-Fault Claims against Self-Insureds
In this no-fault action, the plaintiff rendered medical treatment to a patient for injuries sustained during a motor vehicle accident involving a vehicle owned by the City of New York and operated by one of its employees. The patient had assigned his right to receive first-party no-fault benefits to the plaintiff provider. Over three years after the self-insured defendant made partial payment of the requested first-party benefits, the plaintiff commenced an action against the defendant to recover the unpaid balance. In turn, the defendant moved to dismiss the complaint as time-barred under CPLR 3211(a) reasoning that the three-year statute of limitations found in CPLR 214(2) applied to the action and had expired prior to its commencement. The plaintiff opposed the motion, arguing that the action was governed by the six-year statute of limitations set forth in CPLR 213(2) and therefore was timely commenced. The Appellate Division, in citing the Court of Appeals, held that the three-year statute of limitations applied to self-insureds since it was an action to recover upon a liability created or imposed by statute, and not a contractually based obligation which carries a six-year period of limitation.
BARNAS ON BAD FAITH
Brian D. Barnas
09/04/18 Frantz v. Nationwide Insurance Company
United States District Court, Middle District of Pennsylvania
Conclusory Bad Faith Claim Dismissed
On or about November 1, 2013, M.F. was operating an off road ATV on his father’s property. He was struck by a motor vehicle, thrown from the ATV, and suffered severe and permanent injuries. At the time of the accident, Mr. Frantz had a homeowners policy with Nationwide. The policy provided coverage for personal injury loss, property damage, and bodily injury up to $300,000. M.F. resided with Mr. Frantz at the time of the accident.
After the accident, Mr. Frantz notified Nationwide of his son’s injury and filed a claim, which was denied. Of note, at the time he sought coverage for his family’s home and vehicles, Mr. Frantz informed Nationwide that he and his family were ATV users and wanted coverage for such use. Coverage for ATV use was specifically requested from Nationwide’s sales representative. Once he purchased the policy, Mr. Frantz believed that his family’s ATV use was covered under the policy.
Mr. Frantz and M.F. filed a lawsuit against Nationwide alleging breach of contract and bad faith. Nationwide moved to dismiss. Nationwide argued that coverage under the policy was excluded based on an exclusion for injuries to the named insured or an insured as defined by the policy. Unquestionably, M.F. was an insured under the policy.
Plaintiffs did not dispute this, but argued that they had a viable breach of contract claim based upon the “reasonable expectations” doctrine. This doctrine provides that where an insurer or its agent creates a reasonable expectation of coverage in the insured, but subsequently makes a unilateral change to the terms of the policy applied for and paid for, the insured’s reasonable expectations of coverage may prevail over the unambiguous language of the policy. Plaintiffs alleged that the doctrine applied because Mr. Frantz specifically applied for ATV coverage and was never informed he would not have coverage for his ATV use. Nationwide argued that the doctrine had no application because he received precisely the coverage he asked for. Indeed, the policy’s motor vehicle exclusion contained an exception for vehicles designed for recreation off public roads, like an ATV.
Despite this argument, the Court allowed the breach of contract action to go forward. The Court noted that the reasonable expectations doctrine is a fact-intensive inquiry that is generally ill-suited for resolution on a motion to dismiss. Plaintiffs had pled enough facts to allow the case to move forward.
However, the Court did dismiss the bad faith claim. Plaintiffs did not plead any facts to support a finding of bad faith. They relied solely on bare-bones conclusory allegations, which are not sufficient to state a bad faith claim under Pennsylvania law. Moreover, insofar as the claim was predicated on Nationwide’s purported bad faith in soliciting the purchase of the insurance policy at issue, those allegations did not state a claim to relief.
08/28/18 Robbins v. Mason County Title Insurance Company
Court of Appeals of the State of Washington, Division II
Insurer’s Unreasonable Failure to Defend its Insureds Constituted Bad Faith
In 1978, the Robbins’s purchased two tracts of land, which included tidelands formerly owned by the state of Washington. They also purchased title insurance from MCTI, which provided that MCTI would insure the Robbins’s against loss or damage sustained by reason of any defect in, or lien or encumbrance on title. The policy contained several general exceptions, including public or private easements not disclosed by the public records.
After purchasing the property, the Robbins’s entered into contracts with a number of commercial shellfish harvesters. One of the harvesters notified the Squaxin Island Tribe (the “Tribe”) of his intent to harvest selfish on the property. The Tribe then notified the Robbins’s of its intent to harvest shellfish on their property pursuant to the Shellfish Implementation Plan and its rights under the 1854 Treaty of Medicine Creek. According to the Tribe, it was entitled to 50% of the harvestable shellfish.
The Robbins’s notified MCTI of the Tribe’s claim, and MCTI declined to defend them from the Tribe’s claim under the policy. According to MCTI there was no coverage for the claim. The Robbins’s filed suit alleging breach of the duty to defend and bad faith.
Initially, the court concluded that MCTI had a duty to defend. The policy’s insuring agreement required MCTI to defend the insured with respect to all demands and legal proceedings founded upon a claim of title, encumbrance or defect which existed or is claimed to have existed prior to the date of the policy. The Court concluded that the Tribe’s assertion of its right to harvest shellfish was a demand founded on an encumbrance of title. The Court also concluded that encumbrance existed when the policy existed because the Tribe’s right to the shellfish on the land was codified in the 1854 Treaty.
The Court also held that the exception for public or private easements did not apply because the Tribe’s treaty rights did not qualify as an easement. The Court accepted the Robbins’s argument that the Tribe’s rights were closer to a profit a prendre than an easement. As such, the exception was inapplicable.
Turning to the bad faith argument, the Court concluded that MCTI unreasonably breached its duty to defend and acted in bad faith as a matter of law. MCTI did not defend under a reservation of rights. Instead it denied coverage despite what the Court described as an exception that was ambiguous at best when applied to the facts of the case. Thus, the Court concluded that MCTI acted unreasonably in denying a defense and held that it acted in bad faith as a matter of law.
JOHN’S JERSEY JOURNAL
John R. Ewell
On his honeymoon – we cut him some slack.
OFF THE MARK
Brian F. Mark
08/21/18 First Mercury Ins. Co. v. Kinsale Ins. Co.
U.S. District Court for the Northern District of California
US District Court Finds Damage to Your Work Exclusion Applicable, but only Grants Insurer Partial Summary Judgment as Underlying Arbitration Award did not Identify the Amounts Awarded for Each Portion of Damage. Issues of Fact were also Found as to when the Damages Occurred.
This declaratory-judgment action arises out of an underlying construction defects action related to the renovation of a home owned by Alex and Danna Slusky (“the Sluskys”). The alleged construction defects included "a black, viscous substance oozing from various window and door assemblies" and "oxidation (i.e., rusting) and discoloration of the stucco that had been applied on the Home by Klein Plastering (“Klein”) and the paint that had been applied to the stucco by Thompson Brooks, Inc. (“TBI”). The renovation of the home was completed in December 2011, and the Sluskys moved into the home in January 2012. TBI was the general contractor hired to perform the renovation work and Klein was the subcontractor that performed the stucco work on the home. TBI painted the stucco that Klein installed.
First Mercury Insurance Company filed this declaratory-judgment action seeking a declaration as to its duty to defend and indemnify Klein and TBI under commercial general liability ("CGL") policies that First Mercury issued to Klein from November 1, 2009, to November 1, 2014. First Mercury named Klein, TBI, and Kinsale Insurance Company (“Kinsale”), the carrier that issued CGL policies to Klein following the First Mercury policies, as defendants. First Mercury filed an amended complaint and Klein filed a counter-claim against Kinsale.
The Underlying Action went to arbitration, initially against TBI alone, on the basis of the black viscous substance that appeared in the home between the first and second year after the Sluskys moved in. On June 30, 2017, the Sluskys updated their statement of claim and summary of damages to include the cost of remediating the stucco on the home. TBI then initiated an arbitration demand against Klein that was consolidated into the Underlying Action. First Mercury and Kinsale represented Klein subject to a complete reservation of rights. First Mercury denied TBI's request for a defense as an additional insured under Klein’s policy.
Following several days of evidentiary hearings, the arbitrator issued an Interim Award finding that, although "[t]he top coat of stucco was to be at least 1/8 inch thick[,]" certain areas were not covered with the requisite thickness. Without this protection, chlorides in the marine air at the site of the home "became acidic and penetrated to the metal [in the stucco] and caused it to corrode." The arbitrator further found that "[t]he weight of the evidence is that to properly repair the stucco system those areas installed by Klein should be removed and re-installed with the proper embedment of lath and thickness of top coat." The arbitrator held TBI liable to the Sluskys for breach of contract damages totaling $2,065,841, and held Klein liable to indemnify TBI for $593,566 as damages for breach of contract. Following the issuance of a final award by the arbitrator, which incorporated the Interim Arbitration Award, TBI filed a petition in San Francisco County Superior Court to confirm the Interim and Final Arbitration Awards. A hearing on the petition was held on July 27, 2018.
First Mercury filed a motion for summary judgment seeking three declarations: (1) "that the cost of repairing the defective stucco work performed by Klein was excluded from coverage under the 'damage to your work' exclusion in the policies issued by First Mercury" (under Exclusion l, also known as the "business risk" exclusion); (2) "that any third party consequential damage that might be considered outside the business risk exclusions, e.g.[,] potentially the discoloration to surface paint applied to the stucco by TBI, was not within the scope of coverage because this property damage did not occur during the First Mercury policy periods[;]" and (3) that First Mercury owed no duty to defend or indemnify TBI because "[t]he only additional insured coverage provided to TBI was limited to damage that occurred during ongoing operations" and "the arbitration demand alleges that the discoloration to this surface paint occurred in late 2016 or 2017[.]"
All defendants filed oppositions to the motion for summary judgment. Klein asked the Court to deny the motion with regards to requests 1 and 2, or, alternatively, defer ruling on the motion until the parties have obtained further discovery. Kinsale did not oppose request 1 but asked the Court to continue the motion on the issue while Kinsale prepared its own motion for summary judgment regarding the same exclusion. Kinsale opposed First Mercury's request 2, and asked the Court to deny the motion or, alternatively, defer ruling in order to allow Kinsale to conduct discovery. TBI's opposition only addressed request 3, as it relates to First Mercury's duty to defend or indemnify TBI. Klein and Kinsale did not substantively address request 3 in their oppositions.
Exclusion l
In its motion, First Mercury argued that it had no duty to indemnify Klein in the Underlying Action because the damages attributed to Klein for the cost of repairing the stucco work were excluded from coverage under Exclusion l, the "damage to your work" exclusion. Klein argued that First Mercury conceded that the cost of repainting the stucco did not fall within Exclusion l, that the Underlying Action did not parse out the cost of repairing the stucco from the cost of repainting it, and thus there were factual questions as to the extent of First Mercury's coverage. Kinsale did not oppose First Mercury's request for a declaration on this point but asked the Court to continue the hearing on this issue by sixty days so that Kinsale may prepare its own motion for summary judgment on the same exclusion.
The Court noted that under California law, CGL policies "are not designed to provide contractors and developers with coverage against claims their work is inferior or defective." "Rather, liability coverage comes into play when the insured's defective materials or work cause injury to property other than the insured's own work or products." If it were otherwise, the insured would have less incentive to take care in its own workmanship, being able to pass the cost of replacement and repair on to its insurer.
The First Mercury policy provides in pertinent part:
SECTION I — COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY
DAMAGE LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured
becomes legally obligated to pay as damages
because of "bodily injury" or "property damage"
to which this insurance applies. We will have
the right and duty to defend the insured against
any "suit" seeking those damages. However,
we will have no duty to defend the insured
against any "suit" seeking damages for "bodily
injury" or "property damage" to which this
insurance does not apply. We may, at our
discretion, investigate any "occurrence" and
settle any claim or "suit" that may result. . . .
b. This insurance applies to "bodily injury" and
"property damage" only if:
(1) The "bodily injury" or "property
damage" is caused by an "occurrence"
that takes place in the "coverage territory";
and
(2) The "bodily injury" or "property
damage" occurs during the policy period. .
. . .
2. Exclusions
This insurance does not apply to: . . .
l. Damage to Your Work
"Property damage" to "your work" arising out of
it or any part of it and included in the "products
completed operations hazard." . . .
SECTION V — DEFINITIONS
. . .
13. "Occurrence" means an accident,
including continuous or repeated exposure to
substantially the same general harmful conditions.
. . .
16. "Products-completed operations hazard":
a. Includes all "bodily injury" and "property
damage" occurring away from premises you
own or rent and arising out of "your product" or
"your work" except:
(1) Products that are still in your physical
possession; or
(2) Work that has not yet been completed
or abandoned. However, "your work" will
be deemed completed at the earliest of the
following times:
(a) When all of the work called for in your
contract has been completed.
(b) When all of the work to be done at the
job site has been completed if your
contract calls for work at more than one
job site.
(c) When that part of the work done at a
job site has been put to its intended use by
any person or organization other than
another contractor or subcontractor
working on the same project.
Work that may need service, maintenance,
correction, repair or replacement, but
which is otherwise complete, will be
treated as completed. . . .
17. "Property damage" means:
a. Physical injury to tangible property, including
all resulting loss of use of that property. All
such loss of use shall be deemed to
occur at the time of the physical injury that
caused it; or
b. Loss of use of tangible property that is not
physically injured. All such loss of use shall be
deemed to occur at the time of the
"occurrence" that caused it.
. . .
21. "Your work" means:
a. Work or operations performed by you or on
your behalf; and
b. Materials, parts or equipment furnished in
connection with such work or operations. . . .
Exclusion l denies coverage for "damage to your work," and Klein did not contest that the damages attributable to Klein's own defective stucco installation were excluded from coverage. However, at issues was whether the policy also excluded coverage for the damage to the surface paint, which TBI applied over the stucco.
The Court cited to a California Court of Appeals case that examined a similar CGL policy that provided coverage for damages to the work product of others caused by the insured, but excluded coverage for damages to the work product of the insured and for the costs of repairing the insured's defective work. The Court found that the insured's defectively installed stucco damaged TBI's paint job when the corner beads and metal lath under the stucco corroded. The policy First Mercury issued covers "property damage," defined as "[p]hysical injury to tangible property," caused by an "occurrence," or "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
First Mercury essentially conceded that the damage to the surface paint was not subject to Exclusion l. First Mercury never argued that the paint damage is excluded from coverage under Exclusion l, but rather, sought a declaration that the paint damage was not covered because of the time period in which that damage occurred.
The Court concluded that the declaration First Mercury sought was overbroad under the facts of the case. As First Mercury noted, the arbitration award did not parse out or otherwise identify the amount of damages awarded to repaint the exterior of the stucco. In its request for a declaration, First Mercury asked the Court to declare the entire cost attributed to Klein in the Underlying Action (i.e., the $593,566) was excluded by Exclusion l. The Court found that if the damage amount for which Klein was held liable in the Underlying Action was comprised of both the cost of replacing the stucco work and also repainting it, and if the former was excluded under Exclusion l but the latter potentially was not, it could not fully grant the declaration that First Mercury sought. Because the parties did not dispute that the damage to Klein's stucco work itself was excluded under Exclusion l, the Court only granted, in part, First Mercury's motion for a declaration on this point. However, the Court denied First Mercury's motion to the extent it sought a declaration that the damage to the surface paint was excluded from coverage under the "damage to your work" exclusion in the policies issued by First Mercury (Exclusion l).
Damage outside the policy period
With regard to its second declaration sought, Mercury argued that "[t]he paint damage was both alleged and proven to have occurred in late 2016 or early 2017" and so, because First Mercury's policy period ended in November 2014, damage to the paint was not covered. Klein and Kinsale opposed this request on the grounds that there are questions of fact regarding when the damage to the surface paint occurred.
First Mercury essentially argued that there is no coverage because damage did not manifest within the policy period. The Court noted that such an argument has been rejected by the California Court of Appeals. First Mercury asserted, without citation, that paint discoloration, unlike, for example, structural damage to a home, was not a latent defect. Therefore, First Mercury argued that the date on which the paint discoloration was first observed was at least presumptively the date of occurrence absent evidence to the contrary. First Mercury based its motion on testimony of Alex Slusky and the Slusky’s expert that they first noticed the discoloration to the surface paint in late 2016 or early 2017.
In determining this issue, the Court noted that it had no undisputed facts before it as to when the damage to the surface paint occurred or how that information will be determined. The Court further noted that First Mercury's argument rested on the assumption that the Sluskys observed the paint discoloration at the same time when it first occurred. However, the possibility remains that the paint discoloration occurred earlier than first observed. The precise date of the paint discoloration was not at issue in the Underlying Action. Moreover, discovery had not yet begun when First Mercury filed its motion. Accordingly, the Court agreed with the defendants and found that First Mercury's motion was premature. As such, the Court denied that portion of First Mercury’s motion seeking a declaration that the damage to the surface paint was excluded from coverage based on occurrence outside the First Mercury policy periods.
Additional Insured status of TBI
First Mercury argued that because the Sluskys moved into the home in January 2012, the damage would have had to occur before January 2012 at the latest in order for TBI to be potentially insured. TBI argued that factual questions existed as to whether the damage on the surface paint occurred prior to November 1, 2014, the last date of coverage of the First Mercury policies, and thus the Court should deny the motion. Defendants Klein and Kinsale did not brief this issue.
In support of this portion of its motion, First Mercury pointed to the policy language contained within the additional insured endorsement stating that TBI's status as an additional insured ends when Klein's operations for TBI are completed.
Because there was insufficient evidence in the record as to when the damage to the surface paint of the home first occurred, the Court denied that portion of First Mercury’s motion seeking a declaration that it had no duty to defend or indemnify TBI.
WANDERING WATERS
Larry E. Waters
08/28/18 Liberty Insurance Underwriters v. Greenwich Ins. Company
United States District Court, Eastern District of New York
New York Insurance Law §3420 Applied to Defendant’s Commercial General Liability Policy because Such Policy was Issued to a New York State Corporation and the Risk was Located in New York State
The current matter stems from a personal injury action commenced in New York State Court. The personal injury action alleged that an employee of Noble Elevator Co. Inc. (“Noble”) was injured while on a construction project in Bay Shore, New York. Noble, a New York corporation, was hired by T.G. Nickel & Associates (“T.G. Nickel) as a subcontractor for the construction project in Bay Shore, New York.
Prior to the personal injury action, Plaintiff Liberty Insurance Underwriters, Inc. (“Liberty”), issued a commercial general liability policy to T.G. Nickel. Defendant Greenwich Insurance Company (“Greenwich”), issued a commercial general liability policy to Noble (the “Greenwich Policy”). T.G. Nickel was a named as an additional insured on the Greenwich Policy. The Greenwich Policy also provided for notice of a claim or suit to be given “as soon as practicable.”
Since T.G. Nickel was named as an additional insured on the Greenwich Policy, Liberty provided notice of the personal injury action and tendered the defense of its insured T.G. Nickel to Greenwich. However, Greenwich denied Liberty’s claim for numerous reasons including late notice.
The current decision stems from Liberty and Greenwich’s cross-motions for partial summary judgment on whether New York Insurance Law Section 3420 applied to the Declaratory Judgment action. Liberty argued that New York Insurance Law §3420 applied to the Greenwich policy and therefore a showing of prejudice was required by Greenwich to disclaim based upon late notice.
The court recognized that the sole issue for consideration was whether New York Insurance Law § 3420 applied to the Greenwich Policy, which would require Greenwich to make a showing of prejudice to succeed on its late notice defense. The court noted also that New York Insurance Law § 3420 provides that a “failure to give any notice required to be given by such policy within the time prescribed therein shall not invalidate any claim made by the insured . . . unless the failure to provide timely notice has prejudiced the insurer.”
The court began its analysis by noting that the critical determination was whether the Greenwich Policy was issued and delivered in New York within the meaning of New York Insurance Law §3420. Although “issued and delivered” were undefined in the statute, the court turned to the New York Court Appeals recent decision in Carlson. In Carlson, the New York Court Appeals determined that “issued and delivered” included policies that cover both insureds and risks located in New York.
Applying the recent decision in Carlson, the court concluded that New York Insurance Law § 3420 applied to the Greenwich policy. In its determination, the court reasoned that there was no dispute that Noble and the construction site in Bay Shore (the “risk”) were both located in New York. As such, the court determined that the prejudice requirement of New York Insurance Law §3420 applies to Greenwich late notice. Accordingly, the court granted Liberty’s motion for partial summary judgment.
BORON’S BENCHMARKS
Eric T. Boron
Not this week.
EARL’S PEARLS
Earl K. Cantwell
07/13/18 Brown v Wright National Flood Insurance Company
United States District Court, S.D. Florida
Insured’s Attorneys’ Fees Denied
This case arises from a coverage dispute concerning the insured’s property in Marathon, Florida, under a Standard Flood Insurance Policy issued by the Defendant. The property suffered damage from Hurricane Irma on September 10, 2017. Plaintiff eventually sought a money judgment against the insurer, including attorneys’ fees and costs pursuant to Florida state law. Wright National moved to dismiss the claim for costs and attorneys’ fees.
The Court cited authority that matters pertaining to the Standard Flood Insurance Policy, including issues relating to claims handling, must be heard in a Federal Court and are governed exclusively by Federal law. Therefore, the claim for attorney’s fees and costs under State law was rejected because these claims were pre-empted by Federal law. The Court cited other cases holding that on policies issued under the National Flood Insurance Program, an award of attorneys’ fees or other, similar costs under state law is pre-empted and disallowed.
Therefore, the Plaintiff’s claim for attorneys’ fees and costs brought under Florida statutory law was dismissed with prejudice.
Generally, a party is not entitled to seek a recovery for costs and attorneys’ fees absent a contract or statute providing for their recovery. In this case, there was such a statute under Florida law, but it was deemed not applicable and pre-empted by Federal law under the Flood Insurance Program.
© Hurwitz & Fine, P. C. 2018
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