Coverage Pointers - Volume XX, No. 9

Volume XX, No. 9 (No. 519)

Friday, October 19, 2018

A Biweekly Electronic Newsletter

 

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874

         

Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

 

Lake Placid Office

2577 Main Street

Lake Placid, NY 12946

Phone: 518-523-2441

Fax: 518-523-2442

 

www.hurwitzfine.com

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

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

 

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

 

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

 

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

 

 Dear Coverage Pointers Subscribers:

 

Do you have a situation?  We love situations. 

 

Greetings from the West Coast.  Jen Ehman, Andrea Schillaci, and I are attending the DRI Annual Meeting in San Francisco.  Always great to renew old friendships, make new ones and get caught up-to-date in the latest developments and trends in the law. Our office prides itself in involvement in national organizations, to make certain that we understand and embrace the needs of our industry and corporate clients.  We strive to be on the cutting edge of legal changes, efficiencies, and trends.

 

Sad time of year for those who know me best.  We closed down our summer home for the season.  Known affectionately as Crescent Dreams, or The Land of the Blue Martinis, it’s our place on Lake Erie in Southern Ontario, with a 17 minute commute to the office (including crossing an international bridge and clearing customs).  Because we may only live there for one day short of six months a year, we finished our term on Canadian Thanksgiving and locked the place up tight. 

 

Anyway, we immediately left town to head west, in order to drown our sorrows in Dim Sum.

 

My focus case this week comes from the Fourth Department.  It’s one of the first, real good and definitive post-Burlington cases.

 

The Pioneer Central School District case was decided on October 5. Dawn Ayers an employee of Kleanerz, (a company insured by Preferred), was injured when she slipped on snow and ice in a school parking lot.  Kleanarz provided janitorial services for the school but had no responsibility for snow and ice removal.  Trade contract indemnity was also provided in the contract.

 

Preferred provided additional insured coverage, as required by the School-Kleanarz contract, for any accident "caused, in whole or in part, by" the "acts or omissions" of Kleanerz or of those acting on Kleanerz's behalf.

 

Preferred contended that Pioneer does not qualify as an additional insured under the policy and that the indemnification provision in the janitorial services contract did not create coverage for Pioneer.

 

The Fourth Department concluded that Pioneer was not an additional insured under the policy inasmuch as Ayers' injuries were not proximately caused by Kleanerz.   This is one of the first post-Burlington cases that demonstrate its impact on diminishing the breadth of additional insured clauses.

 

The policy's additional insured endorsement provides that the injury must have been "caused, in whole or in part, by" Kleanerz's conduct, and thus it requires that the insured must have been a proximate cause of the injury, not merely a "but for" cause (see Burlington Ins. Co. v NYC Tr. Auth., 29 NY3d 313, 321 [2017]). Here, it is undisputed that Kleanerz was not responsible for clearing ice and snow from the parking lot and that Ayers' fall resulted from her slipping on the ice or snow.

 

As in Burlington the fact that the plaintiff was an employee of the named insured was not enough to establish additional insured coverage.  Burlington is beginning to mean something.

 

Insurance Agency Advertising – 100 Years Ago:

 

 

Dunkirk Evening Observer

Dunkirk, New York

19 Oct 1918

 

EFFICACIOUS PROTECTION is what a fire insurance policy guarantees, provided the policy is written by a responsible company.  We represent only companies of unquestioned standing.  For those who have proven their willingness and ability to meet claims satisfactorily,  we should like to service you.

 

KAISER & STARR

The Pioneer Fire Insurance Agents

425 Central Avenue

 

Jen’s Gems:

 

Greetings!

 

I am currently with Dan Kohane and Andrea Schillaci in San Francisco attending DRI’s Annual Meeting.  It is always so much fun to catch up with colleagues and friends from across the country.  The program this year also has a number of great speakers in the lineup.  Tomorrow Dr. Condoleezza Rice, the 66th Secretary of State, is scheduled to speak about “A Look at Diplomacy and Security Around the World.”  Should be interesting.  Also, I hope to catch a few sites while I am out here.   

 

Beyond Annual Meeting, registration is also open for DRI’s 2018 Insurance Coverage and Practice Symposium (“ICPS”), which will take place November 29-30, 2018, at the Sheraton New York Times Square in New York, New York.  This is the flagship program of the year designed for insurance executives, claims professionals, and outside counsel who specialize in insurance coverage and casualty claims. This year’s ICPS will feature “hot” topics such as the availability of coverage for sexual abuse and harassment claims in the #MeToo era, claims arising from the opioid epidemic, the potential uses and coverage implications of blockchain technology and virtual currency, how social media is changing insurer’s approach to Coverage B, and new coverage issues generated by emerging technologies such as artificial intelligence, robots, and self-driving cars. Up to 12 hours of CLE/Claims Adjusters Accreditation credit is available.  To view the brochure online, register, or book your hotel, please click here: http://bit.ly/2018ICP.

 

Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

Murder, She Wrote:

The San Francisco Examiner

San Francisco, California

19 Oct 1918

 

Wife Accused of

Soldier’s Murder

 

MARYSVILLE, October 18.—Mrs. Rita Cortopassi is charged with the murder of her husband, Private Tony Cortopassi of Camp Fremont, in a complaint filed in the Justice of the Peace Court in Placer county, by R. Chaippi, a brother-in-law of the deceased.  Justice of the Peace Seaton fixed October 22 as the date for the hearing of the case. 

Editor’s Note: She was indicted the following month and then acquitted in a jury trial in January.  Justice came a lot more quickly a century ago.

 

John’s Jersey Journal:

 

Dear Subscribers:

 

A few weeks ago my family went whitewater rafting and told me how great it was. They rafted five miles down the Genesee River over the course of two hours. They convinced me that I might enjoy it and should go.

 

So I did. I went right after a heavy rainfall and the river had been the highest it had been all year. The water was 13.8 feet high (and the rafting company does not go rafting at 14 feet or higher due to safety concerns). We enjoyed huge rapids, which almost knocked us out of the boat a few times. We did not have to do much paddling either. The river was running so fast we only really had to steer away from the rock walls. So fast, we were at the halfway point in 12 minutes and reached the bottom in only 30 minutes. It was exhilarating and a lot of fun! I would definitely go again.

 

The New Jersey state and federal courts are getting busier considering and deciding insurance issues. In the attached issue, we have a case decided by the New Jersey Appellative Division. The Court reaffirmed that insurance fraud does not pay, and New Jersey has harsh penalties for those who engage in insurance fraud.

 

The Plaintiff, Jeff Scholes, had moved from Florida to New Jersey. He garaged his car in New Jersey. When he looked into car insurance, he noticed that Florida insurance rates were much cheaper. So he bought a Florida auto policy by listing a friend’s address in Florida (sound like fraud?). After living in New Jersey for five years, Scholes was involved in a car accident in South Orange, New Jersey. He then sued the other driver alleging personal injuries.

 

Under New Jersey law, every owner of an automobile principally garaged in New Jersey must maintain automobile liability coverage under provisions approved by New Jersey’s Commissioner of Banking and Insurance with $15,000 in PIP benefits. New Jersey law provides that any person injured in an automobile accident who fails to comply with this cannot sue for recovery of economic or noneconomic loss. The purpose of the law is to motivate compliance with the insurance law, and if a person does not comply with New Jersey law, they should not be able to draw from the pool of accident-insurance funds to which they did not contribute.

 

Scholes admitted that the car was principally garaged in New Jersey. The Florida policy was not approved by the Commissioner and did not have the required $15,000 in PIP. Therefore, his claims in his personal injury action were barred, resulting in dismissal of his lawsuit against the other driver.

 

This case has no effect upon visitors driving through New Jersey.

 

Also, we have a case from the U.S. District Court of New Jersey, where summary judgment bouncing a claim of bad faith denial was awarded to the carrier. The Court found that the question of coverage was fairly debatable, and as such, the carrier did not act in bad faith when they denied the claim.

 

John

John R. Ewell

[email protected]  

 

The Daily Quiz – How Would You Do?

 

The Buffalo Times

Buffalo, New York

19 Oct 1918

 

The Daily Quiz

What Do You Know?

 

1. How many registration days a year are there for Philadelphia voters?
2. What is the correct pronunciation of Lille?
3. What is a firkin?
4. By whom were the North and South poles respectively discovered?
5. Who wrote “The Song of the Shirt”?
6. What is a postilion?
7. What is the meaning of “ibid”?
8. Why is a certain kind of leather called Cordovan?
9. Where is the so-called “Panhandle” of West Virginia?
10. What conqueror was described as “The Scourge of Good” and when did he live.

 

Answers Will Appear Monday.

Editor’s Note:  You don’t have to wait until Monday:  I cheated and the answers are below.

 

Peiper on Property and Potpourri

 

Greetings from the gates of dawn of Day 8.  I’m currently dispatched to the honeymoon capital of the world, or more accurately the former honeymoon capital of the world, where I’m engaged in a whopper of a who dunnit trial.  While the policyholder has put forth quite a wall in opposition to our claims, tomorrow begins our time to tell our side of the story.  Here’s to shining some much needed light on a story that’s been obscured by the clouds. 

 

I’ll be back to normal form next issue, where we can then take up the Appellate Division’s most recent momentary lapse of reason. 

 

Until then, shine on. 

 

Steve

Steven E. Peiper

[email protected]

  

Jews Seek Recognition in League of Nations

 

 

Buffalo Morning Express and

Illustrated Buffalo Express

Buffalo, New York

19 Oct 1918

 

JEWS SEEK RECOGNITION.

Mass Meeting asks for admission

to the League of Nations.

By the Associated Press

 

Paris, Thursday, Oct. 17.—A great mass meeting of Jews was held at Vienna on October 14th and a resolution was passed asking that the Jewish people be admitted into the league of nations with rights equal to those of other nationalities.

 

The Jews also asked that they be represented at the peace conference.

 

It was pointed out that the large number of Jews in Austria entitled members of that race to consideration in the formation of Austrian federal states, which had been suggested in official circles. 

 

Hewitt’s Highlights: 

 

Dear Subscribers:

                                

Welcome to another serious injury threshold column. We have spent the Fall 10 degrees hotter than it should be and then last night it went down to 38 degrees. I wish we could ease into the Winter. I buckled under family pressure and put the heat on last night. I was trying to wait until November!  We have some interesting cases today, mostly from the Fourth Department. It is very important if a defendant’s expert states that range of motion is normal, to set forth what testing what done, what is the normal range, and what specifically they are basing that conclusion on. Otherwise, courts will deny the motion.  Another issue that arose is defendant can make a prima facie case by showing that plaintiff suffers a pre-existing condition. However, plaintiff can demonstrate an issue of fact by showing that it was asymptomatic before the accident. In another case, the Fourth Department held a chiropractor is qualified to read CT or MRI scans, which in that case, showed changes pre- and post-accident, raising an issue of fact as to whether the changes were degenerative and the condition pre-existing.

 

Have a Happy Halloween. My boys are going Trick or Treating as Super Mario riding Yoshi and Super Mario’s archenemy Bowser.

 

See you next edition.

 

Rob

Robert Hewitt

[email protected]  

 

WW I Trudges Forward:

 

The Buffalo Commercial

Buffalo, New York

19 Oct 1918

 

AMERICAN SQUADRON

BAGGED DOZEN HUNS

 

Not one of 140 Plans Failed to Return

After Bombing Raid

 

WITH THE AMERICAN ARMY NORTHWEST OF VERDUN, Oct. 19, 11 a.m. (by the Associated Press).—All the aviators who took part in the all-American bombing expedition behind the German lines northwest of Verdun Friday have been accounted for.  One of the 140 airplanes taking part in the raid had been reported missing but it returned during the night.

 

Latest reports from the different squadrons show that the scout planes in protecting the bombers brought down twelve enemy machines.

 

Observers report that excellent results were obtained at the various points bombed by the expedition.  While the bombing squadrons attacked the towns and villages, two squadrons of pursuit airplanes, flying at low altitudes, attacked enemy troops along the roadways with small bombs and machine gun fire. 

 

Wilewicz’ Wide-World of Coverage:

 

Dear Readers,

 

This missive comes to you from our H&F home-away-from-home, JetBlue's Terminal 5 at JFK airport. Lots of running around in the past few weeks, but hopefully the travel season (and the court docket?) slows soon, to give everyone a breather. Things didn't slow this summer, not even in August! Further, I'm only just back from the week-long ABA TIPS Leadership Conference on Amelia Island, just outside of Jacksonville, Florida. And what a whirlwind that was (though we were entirely sparred from the hurricane, so no pun intended there).

 

First, Jacksonville was nothing like what I'd expected. Having never been, I had a blank slate, but was pleasantly surprised by the southern hospitality everywhere. Moreover, that part of the State seems very different from the rest of FL.  Atop that, Amelia Island was a gorgeous enclave, that I'd love to return to. We made a brief afternoon detour one day to St. Augustine and, as the oldest city in America (est. 1565), it did not lack charm and character. With its unique blend of Old World and New, I'd highly recommend a visit, if you're ever in the area.

 

Second, and more important, the conference was phenomenal. It was exclusively for those in leadership positions in the ABA's Torts and Insurance Practice Section. Having recently been appointed as such, I wasn't sure what to expect. However, everyone was so welcoming, helpful, and knowledgeable. We met to plan upcoming meetings, conferences, and potential CLEs. It was substantive and informative. I'll echo once more - if anyone had any interest in learning about the many opportunities for coverage people in the ABA, drop me a line.

 

Finally, do check out some info on upcoming meetings put on by TIPS:

 

• February 20-23, 2019: 27th Annual Insurance Coverage Litigation Midyear Conference.

 

• February 27-March 2, 2019: 2019 Insurance Coverage Litigation Committee CLE Seminar.

 

• January 26, 2019: Insurance Coverage for Product Liability Claims. This is a one-hour complimentary breakfast-time seminar, chock-filled with valuable information and practice advice.

                                                

• January 30, 2019: D&O Insurance Cyber Liability Forum. This interactive forum identifies hot-topic director’s and officers’ coverage issues.

 

• Save-the-date: May 1-5, 2019. TIPS Section Conference in New York City!

 

• Save-the-date: August 8-14, 2019. ABA Annual Meeting in San Francisco! 

 

Lots more information on the newly redesigned TIPS home pages as well. There is access to free CLE programs, and much more. Hope to see you at an upcoming event!

 

Best,

 

Agnes

Agnes A. Wilewicz

[email protected]  

 

 Protecting Soldiers from Insurance Agents:

 

The Philadelphia Inquirer

Philadelphia, Pennsylvania

19 Oct 1918

 

AGENTS ARE NOT NEEDED

IN SOLDIERS’ INSURANCE

 

Government Provides Free Legal

Advice and Attention to

All Relatives’ Claims

 

Special to The Inquirer.

 

WASHINGTON. Oct. 18.—Dependents and beneficiaries of officers and men who have claims under the War Risk Insurance act, do not need outside assistance in collecting claims of allowances, allotments, compensation or insurance, according to statement made today.

 

The Bureau of War Risk Insurance of the Treasury Department arranges all such matters and settled all claims without charge, and outside agents who impose upon claimants are subject to sever punishment.

 

In every announcement of a death from the War Department goes the statement that the employment of legal aid in collecting insurance is not necessary.  Through an arrangement made by the Treasury Department such legal advice as may be felt necessary may be secured through the co-operation of the special committee for war service of the American Bar Association or through the local legal advisory boards of each draft district.

 

The War Risk Insurance act provides that the payment of an attorney or legal adviser employed in the preparation of execution of the papers necessary shall not exceed $3 in a single case.  No claim agents or attorneys are recognized by the War Risk Insurance Bureau of the Treasury Department except in the event of a disagreement as to a claim, in which case a fee not to exceed five per cent of the amount recovered may be paid by the agent.

 

The War Department is co-operating with the Treasury Department to protect the beneficiaries of officers and men who have died or been killed, against the activities of certain claim agents who seek to defraud the dependents of the dead heroes. 

 

Barnas on Bad Faith:

 

Hello again:

 

Anyone who takes the time to read this column with any degree of frequency knows how much I love sports.  I will restate my opinion that October is the best sports month there is.  Today is one of those days that demonstrates why that’s the case.  All four major professional sports leagues are in action today.  Want to watch the Red Sox try to make the World Series again [gross]?  You can do that tonight.  Want to watch the Sabres try for a rare win on the west coast?  You can do that tonight.  Want to watch Lebron’s debut with the Lakers?  You can do that tonight.  Want to watch two mediocre NFL teams (sorry Broncos and Cardinals fans) play in what will likely be a forgettable Thursday night game?  You can do that tonight!  We are in that short window where the baseball playoffs are winding down, the NHL and NFL are in full swing, and the NBA is starting up.  It’s glorious and I fully intend to enjoy it.

 

I have two cases in my column today.  The first is Wausau, which is a bit strange in that the insurance company is moving to dismiss its own declaratory judgment action.  Wausau had commenced a declaratory judgment action after an excess verdict seeking a declaration that it had not acted in bad faith.  The insureds counterclaimed arguing that it had.  The underlying plaintiff was also named in the action.  After extensive discovery, Wausau moved to dismiss its complaint, arguing that the counterclaim for bad faith should control.  The court allowed this, but did find that Wausau had to pay for the attorneys’ fees that the Claimant.

 

In the Yahoo case the court concluded that there was an issue of fact on the insured’s bad faith cause of action.  Apparently the insurer cited to an exclusion that was not in the relevant policy in denying coverage.  The court concluded that there was an issue of fact for a jury to determine regarding whether this was mere negligence or whether it, among other things, was bad faith claims handling.

 

Have a nice weekend.

 

Signing off,

                  

Brian

Brian D. Barnas

[email protected]

 

A Real Head Shot:

The Indianapolis Star

Indianapolis, Indiana

19 Oct 1918

 

BULLET THROUGH HEAD;

NO PAIN TO BRAVE HOOSIER

 

[Special to The Indianapolis Star.]

 

SOUTH BEND, Ind., Oct. 18—Lieut. William Mack of the Three Hundred and Fifth Infantry, in active service in France, has been awarded the distinguished service cross for bravery displayed in an attack on the Germans during which he swam the Vesle River in daylight on Sept. 2, tying a rope by which his men were enabled to cross the river.  In a house in Bazoches on the opposite side he attacked the enemy concealed there and returned, wounded by machine gun fire, but with valuable information. 

 

How it feels to be shot is told by Lieut. Mack in a letter to his cousin, Miss Caroline Walbridge, as follows:

           

“I got a machine gun bullet through the head two days ago and it didn’t hurt a bit.  It went into my face about an inch or an inch and a half in front of the left ear and came out two inches in front of my right ear, passing below the eyes and brain and above the roof of my mouth.  The holes are neat little punctures that will hardly show at all when the thing is healed up.  I have not been unconscious a minute, and outside of a dull headache, suffer no pain.”

 

Telling of the incident which lead up to being wounded, Lieut. Mack stated:  “I went out on a daylight patrol across a river; had to swim it and tie a rope for the rest of the patrol to cross on.  Our orders were to gain contact with the enemy.  We did.  He had two hidden machine guns that he opened up on us after we had advanced about 300 yards.  Two of our party were killed, but we managed to kill three boche and to accurately locate their position.  I had a little trouble to get back across the stream, because I was a little weak from loss of blood, but made it all right and was not fired on again until I got inside our own lines.

 

Off the Mark:

 

Dear Readers,

 

Now that the weather is rapidly cooling off, the courts are back in full swing.  This edition brings you two recent construction defect cases.  In Ohio N. Univ. v. Charles Constr. Servs., the Supreme Court of Ohio examined whether a general contractor's CGL policy covers claims for property damage caused by a subcontractor's faulty work.  Based on its precedent, the Court noted that property damage caused by the contractor's own faulty workmanship does not involve an "occurrence" such that the CGL policy would cover the loss.  The Court concluded that property damage caused by a subcontractor's faulty work is not fortuitous and does meet the definition of an "occurrence" under a CGL policy.  As such, the Court held that the CGL carrier was not required to defend or indemnify its insured relative to the underlying construction defects action. 

 

In Nat’l Builders Ins. Co. v. RQ Bldg. Prods., the US District Court for the Southern District of Florida, Fort Lauderdale Division agreed with a Magistrate Judge’s finding of a duty to defend where the underlying complaint alleges facts which fairly and potentially bring the suit within the policy coverage despite the lack of an allegation as to precisely when the damage occurred.

 

Brian

Brian F. Mark

[email protected]

 

 

Answers to Saturday’s Quiz (above):

 

The Buffalo Times

Buffalo, New York

21 Oct 1918

 

 

1. There are four registrations a year for Philadelphia voters—three in the fall and one in the spring.
2. Lille should be pronounced as though “Leel.”
3. A firkin is a small cask for liquids, butter, fish, etc.
4. Lieut. Peary discovered the North Pole, Capt. Amundsen the South Pole.
5. Thomas Hood wrote “The Song of the Shirt.”
6. A postilion is one who rides the near horse of the leaders or the near horse when one pair only is used and there is no driver on the box of the coach.
7. “Ibid” is an abbreviation of the Latin “ibiden,” meaning “in the same place.”
8. Cordovan leather is so called after the Spanish city of Cordoba, or Cordova, once famed for its tanneries.
9. the “panhandle” of West Virginia separates the southern part of the western boundary of Pennsylvania from Ohio.
10. Attila, the Hun conqueror, eventually defeated at Chalons, was called “The Scourge of God.”  He died in 453 A.D.

 

Wandering Waters

 

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

 

Although the NBA season has officially started, I have been unable to enjoy.  Currently, I am participating in my very first trial.  I am very excited to have such an opportunity early in my legal career.  For the subscribers who read my column in anticipation of all NBA news and rumors, I apologize. 

 

With that being said, this week we have one case from the United States District Court, Eastern District of New York. 

 

Until next time…. 

 

Larry

Larry E. Waters

[email protected]  

 

Boron’s Benchmarks:

 

Dear Subscribers:

 

We use acronyms in the insurance world to save time.  By the time you say “Commercial General Liability”, I can say “CGL” three times.  An even better example is “Supplemental Uninsured/Underinsured Motorist insurance coverage”, which, as you know, is referred to in the insurance world as “SUM” coverage, for short. 

 

Do you know what the ultimate time-saver/acronym/product in the insurance world would be?  “CE” insurance.  “CE”, standing for, “Covers Everything”.  Time-saver indeed!  No need for anyone to ever again have to buy multiple insurance policies just to cover different kinds of risks, damage or loss.  And, there would be no need for “CE” policies to contain all those lengthy, sometimes hard to follow policy terms, provisions, exclusions, endorsements and conditions.  “CE” Policies would need to be only one single paragraph long: 

 

“By purchasing this policy “You” are covered for every “Occurrence”.  “Occurrence” is defined in this policy as “Everything”. “You” is defined in this policy as “Everyone” and “Everything”. “Everything” is defined in this policy as “Limitless to the degree of infinity squared, and then cubed again”.

 

If you’ve gone along this far with me on this far-fetched premise, then you’ve no doubt already thought to yourself that the premium pricing on a “CE” insurance product is going to make it cost prohibitive, even for a Dan Kohane to afford.  And, just as importantly, CE insurance would have the potential to put insurance coverage attorneys out of business…at least until the litigation eventually started up about what the “CE” policy terms and provisions really mean.

 

So, let’s be thankful for our real world of many and varied insurance products, whose policies cover some things but not everything, and which provide us with interesting legal and coverage conundrums to consider and analyze, such as the October 9, 2018 Supreme Court of Ohio decision I’ve written about over in that other part of this edition of Coverage Pointers.  It’s a ruling that ponders whether a general contractor’s CGL policy, which includes a products-completed-operations-hazard (“PCOH”) clause, covers claims for property damage caused by a subcontractor’s faulty work.   

 

I hope you are all well, and that this material may be helpful for you and/or your work.  Have a great two weeks. 

 

Regards,

 

Eric

Eric T. Boron

[email protected]

 

Object Matrimony – Lots of Details:

 

The Tampa Tribune

October 19, 1918

 

Personal – Lady desires to correspond with gentleman; object, matrimony.  Address, giving age PO. Box 133 Savannah GA

 

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.  Does anyone shop at a brick and mortar store anymore?  Amazon.com, with other retailers in tow, have set the trend for online shopping.  Easy and convenient.  The United States Postal Service is taking note, recently proposing a 9 to 12 percent increase to the shipping service used by Amazon.com.  What will FedEx and UPS do?  Time will tell.

 

Speaking of the mail, part of an applicant’s prima facie proof for no-fault benefits includes proof that the bills were mailed to the insurance carrier.  Although seldom disputed these days, sometimes the issue of mailing becomes the basis for denying a no-fault claim.  For details, please read on.

 

Jerry

Jerry Marti

[email protected]

 

 

Headlines from this week’s issue:

 

 

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

 

• Lawsuit against Contractor for Failure to Provide Insurance will Continue;  Motion to Dismiss Pleadings Insufficient
• Parties to Continue Discovery in Uninsured Motorist Proceeding; Default in Article 75 Proceeding Vacated
• “Recently Completed Construction” Exclusion Does Not Apply to Later Decision to Dismantle and Relocate Walls a Year After Construction was Over
• Fourth Department embraces Burlington.  Where Named Insured Employer was Not Responsible for Snow and Ice Removal, Employee Injury Caused by Ice Does Not Trigger Additional Insured Coverage under Employer’s GL Policy’s AI Clause

 

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

Robert E.B. Hewitt III

[email protected]

 

• Defendant’s Medical Evidence Met Her Prima Facie Case
• Plaintiff Raised Issue of Fact as to Serious Injury
• Plaintiff Raised an Issue of Fact as to Serious Injury to His Lumbar Spine
• Defendant’s Expert Failed to Show Objective Testing or other Reasons Why He Claimed that Plaintiff Had Full Range of Motion
• Changes in Plaintiff’s CT Scans Post Accident and Battle of the Parties’ Experts Warranted Denial of the Motion

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

• MetLife was not Vicariously Liable for Torts Allegedly Committed by the Private Investigator of an Independent Contractor

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

• Nothing this week.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

• Out west.

 

JERRY’S NO-FAULT NAVIGATION

Jerry Marti

[email protected]

 

                                                                             

• Arbitrator Denies No-Fault Claim based on No Proof of Mailing

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

• Court Granted Insurer’s Motion to Dismiss its Own Declaratory Judgment Action so it could Litigate the Insureds’ Bad Faith Claim as a Defendant
• Issue of Fact as to whether Insurer Committed Bad Faith by Denying Coverage based upon an Exclusion that was not in the Relevant Policy

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

• New Jersey Court Bounces Personal Injury Claim Where Plaintiff Committed Insurance Fraud
• District Judge Dismisses Claim of Bad Faith Denial Because Question of Coverage Was Fairly Debatable

 

OFF THE MARK
Brian F. Mark

[email protected]

 

• US District Court Affirms Finding of a Duty to Defend Where Underlying Complaint Alleges Facts Which Fairly and Potentially Bring the Suit within Policy Coverage.

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

• Defendant’s Motion for Summary Judgment Granted because Plaintiff was a Resident of the Insured’s Household as Defined under the Policy

                           

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

• CGL Policy – Reversal of Court of Appeals’ Ruling Requiring Insurer to Defend and Indemnify the CGL Policyholder/General Contractor Against Suit by the Property Owner Arising From Property Damage Caused By the GC’s Subcontractor’s Faulty Work Product – Occurrence - Fortuity

 

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

 

• When is a Collapse a Collapse?

 

 That’s it for today.  Remember, if you have a situation, contact us.

 

 

 

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

[email protected]

 

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Edward B. Flink

Brian D. Barnas

Brian F. Mark

Eric T. Boron

John R. Ewell

Larry E. Waters

Diane F. Bosse

Joel R. Appelbaum

 

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

 

Michael F. Perley

Edward B. Flink

Eric T. Boron

Brian D. Barnas

James L. Maswick

 

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

Jerry Marti

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

 

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

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

Off the Mark

Wandering Waters

Boron’s Benchmarks

Earl’s Pearls

 

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

 

10/17/18       County of Westchester v. Unity Mechanical Corp.

Appellate Division, Second Department

Lawsuit against Contractor for Failure to Provide Insurance will Continue;  Motion to Dismiss Pleadings Insufficient

The County of Westchester entered into a contract with the defendant Unity Mechanical Corp. (“Unity”) to perform boiler maintenance work at the Westchester County Courthouse. As required by the terms of the contract, Unity procured general commercial liability insurance from the defendant Liberty Mutual Insurance Company (“Liberty”), naming the County as an additional insured. Unity's employee, Gragnaniello, allegedly sustained injuries while performing boiler maintenance work at the courthouse and commenced a personal injury action against the County and its lessor, the Dormitory Authority of the State of New York (“DASNY”).

 

The County sent Unity the notice of claim in the underlying action and requested that Unity defend and indemnify it pursuant to the contract. However, neither Unity nor Liberty provided the defense or indemnification, and the underlying action proceeded with discovery without their involvement. Summary judgment on the issue of liability was eventually granted in favor of Gragnaniello and against the County in the underlying action. Thereafter, Liberty disclaimed coverage. The County settled the underlying action with Gragnaniello.

 

The County commenced this action, prior to the Gragnaniello settlement, against Unity and Liberty seeking, inter alia, a judgment for any amounts the County was obligated to pay to Gragnaniello as well as its defense costs in the underlying action.

 

Unity moved to dismiss the pleadings based upon documentary evidence.  This was not a motion for summary judgment, but a motion directed against the pleadings.  The Second Department held that the papers submitted were insufficient to justify granting a motion to dismiss at this stage.

 

Unity's motion was supported by an affidavit from a senior technical claims specialist employed by Liberty to which was appended the contract between Unity and the County as well as copies of correspondence and emails exchanged among counsel for the County, Liberty, and Unity. Unity asserted that, in response to the County's demand for defense and indemnification, Liberty had requested from the County, among other documentation, a copy of the executed contract between the County and Unity to aid in the investigation of the claim. According to Unity, the County sent the bid proposal, which contained only an unexecuted copy of the contract, and a copy of the certificate of liability insurance, which stated that the County was an additional insured under the Liberty policy pursuant to a written contract.

 

Unity contended that the County had failed to cooperate with Liberty's request for a copy of the executed contract between the County and Unity and therefore Liberty was within its rights to disclaim coverage. Unity also contended that Liberty's rights were prejudiced by what Unity claimed was the County's voluntary assumption of the defense of DASNY in the underlying action. In opposition to Unity's motion, the County submitted, inter alia, an affirmation from its counsel and copies of various letters and emails exchanged among the parties. The County contended that its contract with Unity required Unity to defend and indemnify the County from the Gragnaniello lawsuit and that the refusal of Liberty to provide coverage did not relieve Unity from its contractual obligations to the County.

 

Here, many of the materials submitted by Unity in an effort to establish that Unity and Liberty were not obligated to defend and indemnify the County in the underlying action did not constitute documentary evidence within the meaning of CPLR 3211(a)(1). Without these materials, Unity failed to establish that the County failed to cooperate with Liberty's investigation of the claim and thereby waived coverage under the policy.

 

Further, Unity failed to submit any documentary evidence as to whether the County voluntarily assumed the defense of DASNY. Moreover, Unity failed to submit any documentary evidence demonstrating that any failure on the part of the County to cooperate with Liberty constituted a breach by the County of its contract with Unity or that any breach by the County occurred prior to Unity's alleged refusal to defend and indemnify the County. Therefore, Unity did not utterly refute the County's allegations or conclusively establish a defense as a matter of law.

 

Here, Unity submitted no evidence demonstrating that any fact alleged in the complaint was "indisputably not a fact at all”.

 

10/17/18       Progressive Direct Insurance Company v. Spicer

Appellate Division Second Department

Parties to Continue Discovery in Uninsured Motorist Proceeding; Default in Article 75 Proceeding Vacated

Spicer sought uninsured motorist benefits after he allegedly was injured in a hit-and-run motor vehicle accident, and commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration.  Spicer failed to appear in the proceeding and by default, the lower court granted the petition and stayed arbitration.  Spicer then moved to vacate the default and the lower court granted the motion and directed the parties to complete discovery.  There was sufficient proof of merit to the defense as well.

 

Progressive appealed from the order opening up the default.

 

In the end, Spicer was required to demonstrate a reasonable excuse for the default and a potentially meritorious defense to the petition. The appellate court found that the lower court properly had exercised its discretion in determining that Spicer demonstrated a reasonable excuse for his default in appearing based on law office failure and the medical condition of his counsel's wife.

Editor’s Note:  Just my bi-monthly reminder for those insurers seeking to dispute uninsured or underinsured motorist petitions.  When a demand for arbitration is received and there are legal issues involved, an insurer has but 20 days to file a motion to stay arbitration in court or lose its right to contest those legal issued.  That is the “Article 75 proceeding” referenced in the summary.  Failure to bring that proceeding will waive the insurer’s right to challenge most legal issues that come up in these proceedings.

 

10/11/18       Tower 111, LLC v. Mt. Hawley Insurance Company
Appellate Division, First Department

“Recently Completed Construction” Exclusion Does Not Apply to Later Decision to Dismantle and Relocate Walls a Year After Construction was Over

Construction of the building at issue was completed in June 2011. After construction of the building was finished, plaintiff Tower 111, LLC (“Tower”) decided to dismantle and relocate three elevator-machine-room walls on the first floor of the building so that the space would be suitable for a prospective tenant. The plaintiff in the underlying personal injury action was injured while removing the elevator-machine-room walls in October 2012, more than a year after construction of the building was complete.

 

The sole issue on appeal is whether RLI’s policy's designated work exclusion applies to the underlying personal injury action. The language at issue states that there is no coverage for:

 

"Claims arising out of construction recently completed or that might still be ongoing from finishing the construction of the building. Does not include non-structural build-out work for tenants on premises."

 

Tower is entitled to coverage from RLI because the unambiguous exclusion is inapplicable to the claims made in the underlying personal injury action. The designated work exclusion does not apply because the undisputed facts establish that the removal of the elevator-machine-room walls did not "arise out of construction recently completed or still ongoing from finishing the construction of the building." To the contrary, the elevator-machine-room walls were being removed and relocated to make space for a prospective tenant over one year after the construction of the building had already been completed.

 

The second sentence of the exclusion, which relates to non-structural build-out work, is not applicable because it provides only an exception to the exclusion and is relevant only if the claims arise out of "recently completed" or "ongoing" construction work, which they do not.

 

10/05/18       Pioneer Central School District v. Preferred Mutual Ins. Co.

Appellate Division, Fourth Department

Fourth Department embraces Burlington.  Where Named Insured Employer was Not Responsible for Snow and Ice Removal, Employee Injury Caused by Ice Does Not Trigger Additional Insured Coverage under Employer’s GL Policy’s AI Clause

Pioneer CSD (“Pioneer”) commenced this action against defendant Preferred Mutual Insurance Company (“Preferred Mutual”) seeking a declaration that Preferred Mutual is obligated to defend and indemnify Pioneer in an underlying personal injury action.

 

Kleanerz provided janitorial services to Pioneer pursuant to a contract containing an indemnification provision through which Kleanerz agreed to indemnify Pioneer in actions for bodily injury "arising or resulting from any act, omission, neglect or misconduct of [Kleanerz]." Kleanerz was insured by Preferred under a policy containing an additional insured endorsement listing Pioneer as an additional insured for bodily injury "caused, in whole or in part, by" the "acts or omissions" of Kleanerz or of those acting on Kleanerz's behalf.

 

Dawn Ayers, a Kleanerz employee, commenced the underlying personal injury action against Pioneer, alleging that she was injured when she slipped on snow or ice in the parking lot of Pioneer Middle School after completing her shift. Pioneer filed a third-party summons and complaint against Kleanerz and thereafter commenced this action against defendants, seeking a declaration that Preferred was obligated to indemnify Pioneer either as an additional insured under Kleanerz's policy with Preferred Mutual or pursuant to the indemnification provision in the janitorial services contract between Pioneer and Kleanerz.

 

Preferred contended that Pioneer did not qualify as an additional insured under the policy and that the indemnification provision in the janitorial services contract did not create coverage for Pioneer.

 

The Fourth Department concluded that Pioneer was not an additional insured under the policy inasmuch as Ayers' injuries were not proximately caused by Kleanerz.   This is one of the first post-Burlington cases that demonstrate its impact on diminishing the breadth of additional insured clauses.

 

The policy's additional insured endorsement provided that the injury must have been "caused, in whole or in part, by" Kleanerz's conduct, and thus it required that the insured must have been a proximate cause of the injury, not merely a "but for" cause (see Burlington Ins. Co. v NYC Tr. Auth., 29 NY3d 313, 321 [2017]). Here, it was undisputed that Kleanerz was not responsible for clearing ice and snow from the parking lot and that Ayers' fall resulted from her slipping on the ice or snow.

 

Although Pioneer contended that Kleanerz caused the accident by instructing Ayers to exit Pioneer Middle School through a door located near the area where Ayers subsequently slipped, Kleanerz's instructions to Ayers "merely furnished the occasion for the injury" by "fortuitously placing Ayers in a location or position in which . . . [an alleged] separate instance of negligence acted independently upon [her] to produce harm" and were not a cause of the accident triggering the additional insured clause of the policy.

 

The court further concluded that the indemnification provision in the janitorial services contract did not create coverage under the insurance policy. The insurance policy covers liability assumed in an "insured contract" between Kleanerz and a third party. An "insured contract" is defined in the policy as "[t]hat part of any other contract or agreement pertaining to [Kleanerz's] business . . . under which [Kleanerz] assume[s] the tort liability of another party to pay for bodily injury' . . . to a third person or organization, provided the bodily injury' . . . is caused, in whole or in part, by [Kleanerz] or by those acting on [Kleanerz's] behalf." Here, the injuries were not "caused, in whole or in part, by" Kleanerz's acts, and thus the indemnification provision of the janitorial services contract did not fall within the "insured contract" coverage provided by the insurance policy.

 

Preferred Mutual had no duty to indemnify Pioneer and consequently no duty to defend [Pioneer] in the pending Ayers action.  Moreover, because the policy did not provide coverage to Pioneer, Preferred Mutual was not required to timely disclaim coverage.

Editor’s note:  Congrats to Mary Fitzgerald at the law firm of Schnitter Ciccarelli Mills, PLLC for helping to uphold the limitations imposed on the AI endorsement under Burlington.  The fact that Ayers was an employee of the named insured, Kleanerz, was not enough to trigger AI coverage when the named insured had no responsibility for snow and ice removal.

 

The only issue we have with the decision is the discussion at the end of the decision about the “insured contract”.  Even if the accident arose under the indemnity agreement and the contract constituted an “insured contract”, that finding would not create additional insured coverage or any duty on the part of Preferred to provide coverage to Pioneer.  It would create contractual liability coverage for Pioneer and would obligate Preferred to defend and indemnify Pioneer for the contractual liability claims.  We recognize that there are a couple of wrongfully decided cases out there that suggest the contrary and someday, some appellate court, will straighten those out.

 

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

Robert E.B. Hewitt III

[email protected]

 

10/17/18       Almonte v. Rost

Appellate Division, Second Department

Defendant’s Medical Evidence Met Her Prima Facie Case

The plaintiff commenced this action to recover damages for personal injuries that he alleges he sustained in a motor vehicle accident on October 18, 2014. The defendant met her prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the lumbar region of the plaintiff's spine and the plaintiff's left shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained serious injuries to these body parts under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d) 

 

10/17/18       Pickle v. Johnson

Appellate Division, Second Department

Plaintiff Raised Issue of Fact as to Serious Injury

The plaintiff commenced this action to recover damages for personal injuries that she alleges she sustained on June 23, 2011, when the motor vehicle she was driving collided with a motor vehicle driven and owned by the defendant, in Shirley, Suffolk County. The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject. In opposition, however, the plaintiff raised a triable issue of fact as to whether she sustained serious injuries to her left shoulder and the cervical and lumbar regions of her spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).

 

10/17/18       Walcott v. Smilchensky

Appellate Division, Second Department

Plaintiff Raised an Issue of Fact as to Serious Injury to His Lumbar Spine

The plaintiff commenced this action recover damages for personal injuries that he allegedly sustained in a motor vehicle accident on July 11, 2011. The defendant moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the plaintiff's spine did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).  In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained a serious injury to the lumbar region of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).

 

10/05/18       Goodwin v. Walter

Appellate Division, Fourth Department

Defendant’s Expert Failed to Show Objective Testing or other Reasons Why He Claimed that Plaintiff Had Full Range of Motion

Plaintiff commenced this action seeking to recover damages for injuries that she sustained when a vehicle driven by defendant struck a vehicle driven by plaintiff. The Appellate Division held that defendant failed to meet her initial burden of presenting competent evidence establishing that the injuries do not meet the serious injury Although the physician who examined plaintiff on behalf of defendant concluded that plaintiff had "full active range of motion of her cervical spine," "full active range of motion of all the joints of her upper and lower extremities," and "full mobility of all of the musculature of her upper and lower extremities," the physician failed to explain the basis for those conclusions, such as any objective tests that he performed that supported the conclusions. Thus, defendant's failure to make a prima facie showing requires denial of the motion with respect to the permanent consequential limitation of use and significant limitation of use categories and the burden did not shift to plaintiff to raise an issue of fact with respect to those categories. However, the Appellate Division held that defendant submitted evidence establishing that plaintiff's injuries were caused by a preexisting condition, i.e., ankylosing spondylitis, a genetic condition. Thus, plaintiff had the burden to come forward with evidence addressing defendant's claimed lack of causation. Plaintiff then raised a question of fact by submitting the affidavit of her treating chiropractor and the affirmation of her primary care physician. Plaintiff's primary care physician asserted that plaintiff's preexisting condition was asymptomatic prior to the accident, and both the primary care physician and the treating chiropractor asserted that, after the accident, plaintiff had a quantified limited range of motion in her neck.

 

10/05/18       Mays v. Green

Appellate Division, Fourth Department

Changes in Plaintiff’s CT Scans Post Accident and Battle of the Parties’ Experts Warranted Denial of the Motion

Plaintiff commenced this action seeking damages for injuries she sustained when the vehicle that she was driving was rear-ended by a vehicle driven by defendants.  Defendants contended that plaintiff's injuries were not causally related to the accident but, rather, resulted from a preexisting condition. We reject that contention. In support of the motion, defendants submitted medical records of plaintiff demonstrating that she complained of back pain seven months before the accident. At that time, a CT scan was performed and showed that plaintiff had a "mild broad-based posterior disc bulge" at L2-3. A post-accident CT scan, however, showed a disc extrusion at L2-3. Consequently, the Appellate Division found that defendants failed to meet their initial burden inasmuch as their own submissions raised a triable issue of fact whether plaintiff's injury was exacerbated by the accident in question.

 

Even assuming that defendants satisfied their initial burden, plaintiff raised a triable issue of fact by submitting medical evidence establishing that the subject accident caused a worsening of plaintiff's preexisting disc bulge. Furthermore, plaintiff's chiropractor, who had treated plaintiff from the time of the subject accident until her later surgery, concluded in his affidavit that the accident aggravated a previously asymptomatic condition, resulting in permanent injuries. The Court rejected the argument by defendants that a chiropractor is not competent to render an opinion based on CT or MRI film studies. Plaintiff’s motion for summary judgment was also denied because it was not possible to determine as a matter of law whether the injuries of plaintiff that were objectively ascertained after the accident were the same injuries that were objectively ascertained before the accident. The conflicting opinions of the parties' respective experts warranted a trial on the issue of serious injury

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

10/17/18       McHale v. Metropolitan Life Insurance Company

Appellate Division Second Department

MetLife was not Vicariously Liable for Torts Allegedly Committed by the Private Investigator of an Independent Contractor

The complaint alleged that the defendant "John Doe," a private investigator working as an employee or contractor of the defendant Scope Surveillance & Investigations, Inc. (Scope), committed civil assault and battery against the plaintiffs.  Prior to this alleged incident, the defendant MetLife had contracted with Scope to provide investigative services in connection with claims made to MetLife.  The plaintiffs alleged that Doe was investigating them in connection with a claim they had submitted to MetLife.  The plaintiffs commenced this action against, among others, MetLife, Scope, and Doe alleging, inter alia, that MetLife was vicariously liable for the torts allegedly committed by Doe.

 

MetLife moved to dismiss.  Here, the contract between MetLife and Scope provided that Scope's affiliates and agents were solely personnel of Scope and not MetLife, and that Scope would have full responsibility for the actions and omissions of all personnel employed by Scope or any agents who are involved in performing the Services and for any losses arising therefrom.  The contract likewise contained a clause in which Scope agreed to indemnify MetLife for losses resulting from negligent or wrongful acts.  Although, as the plaintiffs point out, a rider to the contract sets forth Minimum Standards for private investigators employed by Scope, the requirement that the work be done properly is a condition just as readily required of an independent contractor as of an employee and not conclusive as to either.

 

Since the contract between MetLife and Scope conclusively established that Scope, and therefore Doe, were independent contractors of Met Life, and because the plaintiffs failed to point to any relevant exception to the rule that an employer is not liable for the torts of an independent contractor, the contract conclusively disposed of the plaintiffs' claims.  Likewise, the complaint contained no allegations that MetLife was aware of any propensity of Scope or its agents to engage in the conduct which caused the plaintiffs' alleged injuries.  Thus, there was no viable cause of action to recover damages for negligent hiring.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

Nothing this week.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

Out west.

 

JERRY’S NO-FAULT NAVIGATION

Jerry Marti

[email protected]

 

10/16/18       RES Physical Medicine & Rehab. Services and Travelers   

American Arbitration Association            

Arbitrator Denies No-Fault Claim based on No Proof of Mailing

After a motor vehicle accident on October 18, 2016, the eligible injured party sought treatment with the Applicant for pain management.  Thereafter, the Applicant filed for arbitration based on the non-payment of a claim for medical treatment.  In defense of this action, Travelers denied the claim arguing it had never received the bill.  Specifically, the Travelers claims adjuster detailed the procedures used for receiving bills, and in an affidavit, confirmed that the bill was never received by the insurance carrier.  In opposition, the Applicant argued that it had faxed the bill to Travelers.  In his decision, the Arbitrator noted that the fax transmission report did not indicate a fax number or otherwise show that it was sent to Travelers.  Accordingly, the Arbitrator denied the claim in its entirety.

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

10/17/18       Wausau Underwriters Ins. Co. v. Reliable Transport. Specialists

United States District Court, Eastern District of Michigan

Court Granted Insurer’s Motion to Dismiss its Own Declaratory Judgment Action so it could Litigate the Insureds’ Bad Faith Claim as a Defendant

The case stems from an underlying lawsuit filed by Holt against Reliable Transportation Specialists, Ushe, and Containerport Group after Holt was struck by a tractor trailer operated by Ushe.  At trial, Holt obtained a verdict against Reliable and Ushe in the amount of $8,735,142.35.  Reliable and Ushe took the position that Wausau was responsible to pay the entire amount of the judgment because of its bad faith failure to settle within the $1,000,000 policy limits.

 

In the Fall of 2017, Wausau, Reliable, Ushe and Holt reached an agreement pursuant to which: (1) Wausau paid its $1,000,000 policy limit plus supplementary payments owed pursuant to policy terms; (2) the application for leave to appeal to the Michigan Supreme Court would be withdrawn; and (3) Holt agreed to forego further collection on the judgment against Reliable and Ushe until the action pending before this court is resolved, including all appeals.  Wausau paid Holt $1,545,462.55 on behalf of Reliable and Ushe.  A partial satisfaction of judgment as to Reliable and Ushe was entered by the trial court on November 29, 2017.

 

Prior to that agreement, Wausau had commenced a declaratory judgment action seeking a declaration that it was only responsible for paying the policy limit and not the entire verdict.  Wausau initiated its declaratory judgment action against Reliable, Ushe and Holt while the underlying verdict was being appealed by Reliable and Ushe.  Despite naming Holt in the action, Wausau took the position that he was not entitled to proceed and that it only named him to protect its insured from immediate collection efforts.  Reliable and Ushe filed counterclaims for breach of contract and tort, alleging that Wausau acted in bad faith against its insured by refusing to negotiate a settlement of the Holt Litigation within the policy limits.

 

Wausau moved to dismiss its own declaratory judgment complaint without prejudice.  Wausau argued that it initiated the declaratory judgment action when it was unclear if the verdict would survive post-judgment motions and appeal.  With the underlying action resolved, it argued that the counterclaims for breach of contract and bad faith should control.

 

The court noted that Wausau’s declaratory judgment action had been pending for three years.  21 depositions had been conducted and there was extensive discovery conducted.  Holt expended hundreds of hours of attorney’s fees defending the declaratory judgment action.  The defendants accused Wausau of engaging in an about-face trial strategy.  They argued that it did not want the jury to know it had sued its insured and Holt, and it did not want the burden of proving its case.

 

While the court did not opine that it believed Wausau was acting nefariously, it did agree to dismiss the case.  However, the court noted that Wausau’s declaratory judgment action required the defendants to expend a great deal of time and effort engaging in discovery.  Accordingly, while the court agreed to the dismissal, it ordered Wausau to pay all of Holt’s attorney’s fees incurred in the declaratory judgment action.

 

10/12/18       Yahoo! Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA

United States District Court, Northern District of California

Issue of Fact as to whether Insurer Committed Bad Faith by Denying Coverage based upon an Exclusion that was not in the Relevant Policy

This insurance coverage dispute stems from several class action lawsuits filed against Plaintiff Yahoo! Inc. over its practice of scanning the content of e-mails.  Yahoo tendered the lawsuits to its insurer, Defendant National Union First Insurance Company of Pittsburgh, PA, who denied coverage. Though National Union eventually retracted the denial for some claims, Yahoo had by then put on its own defense and had settled the e-mail scanning claims, paying over $4 million in the process.  Yahoo sought to establish that National Union breached its duty to defend, its duty to indemnify, and committed bad faith when it denied and delayed coverage.

 

Yahoo argued that National Union’s decisions to deny coverage of the E-mail Scanning Lawsuits were breaches of the covenant of good faith and fair dealing and demonstrates bad faith.  In support, Yahoo argued that (1) National Union cited an exclusion for “Insureds in Media and Internet Type Businesses” that was not retained in the relevant policy; (2) National Union cited this same deleted exclusion in the initial denial of coverage for the Holland lawsuit; (3) National Union used an incomplete copy of the 2011 Policy to determine whether the Holland lawsuit was a covered claim; and (4) National Union insinuated that Yahoo’s inaction and failure to submit “information easily at hand” was the reason it denied coverage for the Holland lawsuit.

 

The court denied Yahoo’s motion for summary judgment on the bad faith claim.  Though the above facts were not subject to a material dispute, there was more than one inference that can be drawn from this evidence.  A reasonable jury could find, as National Union argues, that there was no bad faith because its errors were simply mistaken coverage decisions and that it otherwise acted reasonably under the circumstances.  Conversely, a reasonable jury could find that National Union committed bad faith by failing to investigate Yahoo’s claims thoroughly.  To that end, the evidence could support the finding that National Union undertook an incomplete review of its own claims file when it declined coverage for the Holland lawsuit because, had it done so, it would have discovered its response to the Sutton and Penkava lawsuits, which accurately cited the coverage grant of the policy. In addition, the evidence could support a finding that National Union committed bad faith by conducting a negligent review of its own policies, relying on standards known to be improper when denying coverage, and attempting to shift the blame for its erroneous coverage decision to its insured.  To that end, the record contained at least two instances in which National Union cited policy exclusions that were not actually part of the policy, and one instance where it made a coverage decision with incomplete information.

 

Because the court was unable to draw inferences from the evidence and resolve the claim as a matter of law, it was up to a jury to decide whether National Union’s claims-handling with respect to the E-mail Scanning Lawsuits constitutes bad faith.

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

10/16/18       Scholes v. Hausmann

New Jersey Superior Court, Appellate Division

New Jersey Court Bounces Personal Injury Claim Where Plaintiff Committed Insurance Fraud

Plaintiff and defendant were involved in an automobile accident in South Orange, New Jersey. Plaintiff suffered injuries. The vehicle he was driving was titled and registered in his name using a friend’s address in Florida, despite plaintiff living and working in New Jersey for approximately five years. He failed to obtain a New Jersey driver’s license or to register his vehicle in New Jersey. Plaintiff acknowledges that his vehicle was principally garaged in New Jersey. At his deposition, plaintiff testified he continued to maintain his “Florida automobile insurance because . . . Florida insurance was less expensive than New Jersey insurance.”

As a result of his injuries, plaintiff applied for personal injury protection (“PIP”) benefits through his Florida GEICO automobile insurance policy. The Florida policy was not approved by the New Jersey Commissioner of Banking and Insurance, and it only provided $10,000 per person in medical benefits coverage.

Defendant moved for summary judgment, arguing N.J.S.A. 39:6A-4.5(a) barred plaintiff's claims because the Commissioner did not approve his insurance policy and therefore, he was uninsured under the statute. Based upon plaintiff's misrepresentations, defendant also argued that insurance fraud was committed pursuant to N.J.S.A. 2C:21-54.6, which was enacted to prevent reverse rate evasion. Plaintiff countered that N.J.S.A. 39:6A-4.5(a) violates procedural due process because it provides no notice of the prohibited conduct and does not distinguish between New Jersey and out-of-state insurance.

 

Every owner of an automobile principally garaged in New Jersey must maintain automobile liability insurance coverage under provisions approved by the Commissioner, including mandatory medical expense benefits coverage of $15,000 per person.

N.J.S.A. 39:6A-4.5(a) provides:

Any person who, at the time of an automobile accident resulting in injuries to that person, is required but fails to maintain medical expense benefits coverage mandated by [New Jersey statutes] shall have no cause of action for recovery of economic or noneconomic loss sustained as a result of an accident while operating an uninsured automobile.

 

The effect of this statue is to limit a plaintiff’s ability to sue when he or she has not complied with the compulsory insurance law and gives the uninsured driver a very powerful incentive to comply with the compulsory insurance laws: obtain automobile liability insurance coverage or lose the right to maintain a suit for both economic and [non-economic] injuries. N.J.S.A. 39:6A-4.5(a) advances a policy of cost containment by ensuring that an injured, uninsured driver does not draw on the pool of accident-victim insurance funds to which he did not contribute.

 

In order to find that plaintiff was required to maintain New Jersey medical expense benefits coverage, it must be established that his vehicle was principally garaged in New Jersey. To determine where an automobile is principally garaged, the pivotal factor is where the vehicle “is primarily or chiefly kept” or “kept most of the time” not where the owner intends to reside. Plaintiff admitted that his vehicle was principally garaged in New Jersey.

 

Since plaintiff primarily garaged his vehicle in New Jersey, he was required to maintain automobile liability insurance coverage under provisions approved by the Commissioner, including mandatory PIP coverage of $15,000 per person.  Plaintiff had a Florida insurance policy that the Commissioner did not approve, and the policy did not provide medical expense benefits coverage of $15,000 per person. Therefore, the Court held that N.J.S.A. 39:6A-4.5(a) barred plaintiff’s personal injury lawsuit.

 

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

 

10/09/18       Orban v. Liberty Mutual Fire Ins. Co.

United States District Court, District of New Jersey

District Judge Dismisses Claim of Bad Faith Denial Because Question of Coverage Was Fairly Debatable

Liberty Mutual (“Liberty”) issued an insurance policy (the “Policy”) to Plaintiffs, Natalie and David Orban (“Plaintiffs”). The Policy excludes coverage for various types of loss, including “loss caused directly or indirectly by . . . [w]ater [d]amage, meaning . . . [w]ater below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure” (the “Water Damage Exclusion”). The Water Damage Exclusion applies “regardless of any other cause or event contributing concurrently or in any sequence to the loss.”

 

The Policy also includes a Sinkhole Collapse Endorsement, providing insurance for “direct physical loss to property . . . caused by Sinkhole Collapse.” It defines “Sinkhole Collapse” as “actual physical damage arising out of, or caused by, sudden settlement or collapse of the earth supporting such property and only when such settlement or collapse results from subterranean voids created by the action of water on limestone or similar rock formations.”

 

Plaintiffs commissioned five parties to determine whether this damage was the result of a sinkhole collapse, including Frey Engineering. Frey Engineering concluded that the damage was caused by a sinkhole.

 

In 2015, Liberty was notified of cracks in the basement floor and foundation wall of Plaintiffs’ house. Liberty investigated the claim. Specifically, Liberty hired two engineers—Chris Reith and Peter Svaboda—to inspect the building at the premises and determine the cause of loss.  Based upon the engineers’ reports, Liberty denied the claim. Prior to disclaimer, Liberty’s adjuster received a copy of the Frey report. The adjuster concluded that the Frey report was wrong because it conflicted with Reith’s and Svaboda’s conclusions.

 

Plaintiffs sued Liberty alleging, among others, breach of contract and bad faith denial of insurance claim. Liberty moved for summary judgment on all claims.

 

The Court found an issue of fact on the breach of contract claim. The Sinkhole Collapse Endorsement included in the Policy covers “actual physical damage arising out of, or caused by, sudden settlement or collapse of the earth supporting such property and only when such settlement or collapse results from subterranean voids created by the action of water on limestone or similar rock formations.” Plaintiff’s expert, Frey, concluded that the damage was caused by a sinkhole.

 

Liberty argued that, even if the damage was caused by sinkhole collapse, Plaintiffs cannot recover because of the Policy’s Water Damage Exclusion. The Water Damage Exclusion, by its terms, excludes coverage for “loss caused directly or indirectly by [water damage,] regardless of any other cause or event contributing concurrently or in any sequence to the loss.” According to Liberty, “if Plaintiffs’ loss was caused even in part by Water Damage, . . . there is no coverage for Plaintiffs’ claims.”

 

The Court found that, even if Liberty’s interpretation of the Policy is correct, there was a genuine dispute of fact as to whether Plaintiffs can claim any loss that was not caused in part by water damage. Liberty’s two experts concluded that the loss was caused in part by water damage and one of Plaintiff’s experts concluded that the loss was not caused in part by water damage. Summary judgment was denied on the breach of contract claim.

 

The Court granted summary judgment to Liberty on the bad faith denial claim. In New Jersey, a claim of bad faith requires a showing that the insurer knowingly or recklessly lacked a reasonable basis to deny the claim. A bad faith claim must fail where the insurer’s denial of the claim was fairly debatable. The Court found that Liberty refused to pay Plaintiffs’ claim on the basis of reports written by two engineers, Reith and Svaboda. No facts had been put forth to show that these reports were wholly fraudulent, or were crafted without any investigation or expertise.

 

The Court held that fact that these two engineers arrived at conclusions consistent with Liberty’s decision to deny Plaintiffs’ claim demonstrates that that decision was fairly debatable. Therefore, on the bad faith denial claim summary judgment was granted to Liberty.

 

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

 

OFF THE MARK
Brian F. Mark

[email protected]

 

10/09/18       Ohio N. Univ. v. Charles Constr. Servs.

Supreme Court of Ohio
Supreme Court Holds that a Subcontractor’s Faulty Work Does Not Meet the Definition of “Occurrence” Because it is Not Based in Fortuity.

This declaratory-judgment action arises out of an underlying construction defects action related to the construction of a new luxury hotel and conference center.  In 2008, Ohio Northern University ("ONU") contracted with Charles Construction Services, Inc., to build The University Inn and Conference Center, a new luxury hotel and conference center on ONU's campus.  Charles Construction promised to perform all the work itself or through subcontractors.  The contract required Charles Construction to maintain a CGL policy that included a products-completed operations-hazard ("PCOH") clause.  Charles Construction obtained a CGL policy that included a PCOH clause and terms specifically related to work performed by subcontractors from Cincinnati Insurance Company ("CIC"). 

 

In September 2011, after work was completed, ONU discovered that the inn had suffered extensive water damage from hidden leaks that it believed were caused by the defective work of Charles Construction and its subcontractors. In the course of repairing the water damage, ONU discovered other serious structural defects. 

 

In October 2012, ONU sued Charles Construction for breach of contract and other claims related to the inn's damage.  Charles Construction answered and filed third-party complaints against several of its subcontractors.  ONU filed its second and final amended complaint in February 2014. 

 

Charles Construction submitted a CGL-policy claim to CIC and asked CIC to defend it in court and indemnify it against any damages.  CIC intervened in order to pursue a declaratory judgment against Charles Construction and to submit jury interrogatories related to insurance coverage.  CIC explained that it would defend Charles Construction while reserving its right to argue that the CGL policy did not cover ONU's claim.

 

After CIC intervened, it sought a declaratory judgment that it did not have to defend or indemnify Charles Construction under the CGL policy.  In January 2015, CIC filed a motion for summary judgment relying on case law, which it characterized as holding that "claims for defective workmanship are not claims for 'property damage' caused by an 'occurrence.'"  ONU filed a cross-motion for summary judgment arguing, in part, that the PCOH clause and subcontractor-specific terms distinguished this case from the case law relied on.  Charles Construction filed a memorandum supporting ONU's position.  The trial court issued judgments in favor of CIC, reasoning that the court's prior holding in the case law relied on by CIC "constrained" it and that consequently, CIC could deny Charles Construction's claim and had no duty to defend Charles Construction.

 

Charles Construction and ONU appealed to the Third District Court of Appeals.  The majority determined that the case law at issue remained good law as applied to construction defects caused by the insured's own work.  However, the Third

District read the cited case narrowly and noted that it did not address any PCOH or subcontractor-specific CGL policy terms.  It found the CGL policy language to be ambiguous as to whether it covered claims for property damage caused by subcontractors' defective work, and because ambiguous language is construed against the insurer, it reversed the judgment of the trial court.  Thereafter, CIC appealed.

 

At issue on appeal was whether the general contractor's CGL policy covers claims for property damage caused by a subcontractor's faulty work.  The Court began its analysis by noting that it had previously held that an insurance claim filed by a contractor under its commercial general liability ("CGL") insurance policy for property damage caused by the contractor's own faulty workmanship does not involve an "occurrence" such that the CGL policy would cover the loss.  The Court’s prior holding was based on the CGL policy's definition of "occurrence" as an "'accident, including continuous or repeated exposure to substantially the same general harmful conditions.  Because the CGL policy did not define "accident," the Court looked to the word's common meaning and concluded that an "accident" involves "fortuity."  The Court held that under the language of the CGL policy, property damage caused by a contractor's own faulty work is not accidental and is therefore not covered.

 

The Court acknowledged that there was no question that the damage to the inn was "property damage" that was discovered after work was completed.  But without an "occurrence" as defined in the CGL policy, there is no coverage for any property damage.

 

ONU argued, and the trial court held, that the CGL policy's subcontractor specific terms and the PCOH clause showed that the parties intended for the policy to cover the damages at issue.  Those provisions state the following:

 

SECTION I—COVERAGES

COVERAGE A. BODILY INJURY AND PROPERTY

DAMAGE LIABILITY

* * *

2. Exclusions:

This insurance does not apply to:

* * *

j. Damage to Property

 

"Property damage" to:

* * *

(6) That particular part of any property that

must be restored, repaired or replaced because

"your work" was incorrectly performed on it.

* * *

Paragraph (6) of this exclusion does not apply to

"property damage" included in the "products

Completed operations hazard."

 

In "Section V—Definitions," the CGL policy defines

"products-completed operations hazard" as follows:

 

19. "Products-completed operations hazard":

a. Includes * * * "property damage" occurring away

from premises you own or rent and arising out

of * * * "your work" except:

* * *

(2) Work that has not yet been completed or

abandoned.

 

The CGL policy then lists the instances in which "your work" is deemed completed.  The parties did not dispute that work on the inn was completed by the time that the water-related damage was discovered.  However, the Court noted that the CGL policy's definition of "your work" must still be considered:

 

29. "Your work":

a. Means:

(1) Work or operations performed by you or on your

behalf; and

(2) Materials, parts or equipment furnished in

connection with such work or operations.

b. Includes:

(1) Warranties or representations made at any time

with respect to the fitness, quality, durability,

performance, or use of "your work"; and

(2) The providing of or failure to provide warnings or

instructions.

 

Finally, the CGL policy provides the following exclusion for "property damage" to "your work," which includes an exception to the exclusion when a subcontractor performs the work:

 

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."

 

This exclusion does not apply if the damaged work

or the work out of which the damage arises was

performed on your behalf by a subcontractor.

 

The Court again noted its prior determination that "claims for faulty workmanship, such as in this case, are not fortuitous in the context of a CGL policy.  In this case, the Court similarly held that a subcontractor's faulty work does not meet the definition of an "occurrence" because it is not based in fortuity.

 

The Court focused on the language within the Coverage A portion of the CGL policy as being critical to the policy's overall effect.  It states that CIC agrees to pay for property damage under certain circumstances.  But the damage must be due to an "occurrence," which the policy defines as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."  Again, there is no question that the water-related damage to the inn was "property damage" and was discovered after work had been completed.  The Court held that unless there was an "occurrence," the PCOH and subcontractor language had no effect, despite the fact that Charles Construction had paid additional money for it.  The Court went on to state that if the subcontractors' faulty work were fortuitous, the PCOH and subcontractor-specific terms would require coverage. The Court noted that CGL policies are not intended to protect owners from ordinary "business risks" that are normal, frequent or predictable consequences of doing business that the insured can manage and held that the subcontractors' faulty work in this matter was not fortuitous.

 

Charles Construction, ONU, and their amici curiae argued that parties to a construction contract understand that contractors buy coverage for defects discovered after completion through the PCOH clause and that CGL policies and PCOH clauses have changed over time to assure that subcontractor work is covered.  In support, they noted that over the past several years, courts have agreed with their arguments.

 

The Court acknowledged that its reasoning in this case contrasts with recent decisions of other courts, but noted that the language requiring that "property damage" be caused by an "occurrence" remains a constant in the policies.  As such, the Court reiterated its precedent that faulty workmanship is not an occurrence as defined in CGL polices like the one at issue in this matter.

 

In conclusion, the Court held that property damage caused by a subcontractor's faulty work is not fortuitous and does meet the definition of an "occurrence" under a CGL policy.  Therefore, CIC was not required to defend or indemnify Charles Construction relative to the underlying action.  Accordingly, the Court reversed the judgment of the court of appeals and reinstated the judgment of the trial court.

 

10/05/18       Nat’l Builders Ins. Co. v. RQ Bldg. Prods.

U.S. District Court for the Southern District of Florida, Fort Lauderdale Division
US District Court Affirms Finding of a Duty to Defend Where Underlying Complaint Alleges Facts Which Fairly and Potentially Bring the Suit within Policy Coverage

This decision relates to a United States Magistrate Judge’s Report and Recommendation on the plaintiff's motion for summary judgment.  The US District Court agreed with the Magistrate Judge’s finding that the allegations in the underlying construction defect complaint gave rise to a duty to defend.  The Court noted that under Florida law, an insurer has a duty to defend "when the complaint alleges facts which fairly and potentially bring the suit within policy coverage."  Such a duty "depends solely on the allegations in the complaint filed against the insured."

 

The plaintiff argued that the Magistrate Judge’s recommendation ignored Florida law which precludes courts from drawing even reasonable inferences to create a duty to defend where there are no allegations of any property damage during construction.  The starting point of plaintiff's objections was its claim that the underlying complaint did not allege "when the allegedly defective work resulted in water intrusion and when that water intrusion damaged the property."  The plaintiff objected to the Magistrate Judge's conclusion that the underlying complaint clearly stated that water intrusion occurred as a result of RQ's negligent workmanship in designing and installing windows, which led to toxic fungi and/or dust mites and that "the defects and conditions were latent and in existence at the time [the underlying plaintiffs] took occupancy of the residence." . . . . The Magistrate Judge held that, for purposes of determining whether a duty to defend exists, it was not unreasonable to conclude that the water intrusion and fungi growth . . . occurred during the period between the time in which the windows were installed and the underlying plaintiffs moved into the property. 

 

The plaintiff argued that "[i]mplicit in this conclusion" is the "improper inference that the damage either had to occur during construction or during the two days after the underlying plaintiffs took occupancy and the last Builders policy ended."  In support, the plaintiff cited cases that forbid inferring causes of action that would have established a duty to defend from unpled allegations or from a party's statements or conduct.

 

The US District Court noted that the Magistrate Judge's conclusion did not find a duty to defend by inferring an unpled cause of action, nor did it rely on a party's statements or conduct.  As such, the Court overruled the plaintiff’s objection.  Furthermore, the Court agreed with the Magistrate Judge that the allegations in the underlying complaint were "not conclusory or without factual support" because the home was completed at the time of sale and possession by the underlying plaintiffs and the windows were necessarily installed before the underlying plaintiffs moved into the home (while the Policies were in effect).  The Court concluded that the underlying complaint alleged facts that fairly and potentially brought the suit within the policy coverage.

 

Specifically, the underlying complaint alleged in paragraph 223 that:

 

[D]efective, negligent and/or inadequate

construction, design, and/or installation of windows

and window components. . . resulted in chronic

water intrusion into the walls, columns, ceilings,

interstitial cavities and/or drywall and baseboard. . .

which caused microbiological contamination in the

form of the growth of toxic and/or allergenic fungi

and dust mites which posed a serious health

hazard to the occupants of the home, have caused

personal injury to the occupants of the home, and

required evacuation of the occupants. . . for the

repair and remediation . . . .

 

In Paragraph 224, the underlying complaint alleged that the defects and conditions were latent and in existence at the time the underlying plaintiffs took occupancy of the residence and that the damages were "continuous and progressive over time."

 

Paragraphs 223 and 224 alleged that RQ Building Products, Inc.'s negligent conduct caused water intrusion, that in turn caused the growth of toxic and/or allergenic fungi and dust mites, and that these defects and conditions were "latent" and "in existence at the time" the underlying plaintiffs took occupancy of the residence—at which point the insurance policy was in effect.  Paragraphs 223 and 224 thus refuted the plaintiff's argument that the complaint failed to allege the existence of resulting property damage during the policy period. 

 

The Court rejected the plaintiff's argument that the underlying complaint deficiently alleged when the damage occurred as such a position has been repudiated by controlling case law.  The Court cited case law holding that an insurer had a duty to defend where underlying complaint "suggested that the damage occurred at some point" during the time the "policies were in effect.

 

Furthermore, the Court acknowledged that the question of when precisely the damage occurred "may be answered at trial, [but] at this point [the] only concern is with the pleadings, not the proof at trial, and it matters not that there ultimately may be no coverage under the policy," because the law establishes that "the insurer may be required to defend a suit even if the later true facts show there is no coverage.

 

The Court noted that even assuming that the allegations in the underlying complaint leave some doubt as to precisely when the damage occurred, it is settled law that "any doubt as to the duty to defend. . . must be resolved in favor of the insured."

 

Accordingly, the Court found that the allegations in the underlying complaint gave rise to the plaintiff's duty to defend the property damage claims. 

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

09/28/18       Angela Maria Defebio v. Allstate Insurance Co.

United States District Court, Eastern District of New York

Defendant’s Motion for Summary Judgment Granted because Plaintiff was a Resident of the Insured’s Household as Defined under the Policy

Defendant Allstate Insurance Company (“Allstate”) issued a Standard Homeowner’s Policy to Rose Juliano with effective dates of January 26, 2012 through January 26, 2013 (the “Allstate Policy”).  Ms. Juliano owned the multifamily property at 61 Duffield Street, Brooklyn, New York (the “property”).  In addition, Ms. Juliano was the only named insured under the Allstate Policy. 

 

The Allstate Policy provided coverage for certain damages arising from bodily injury under Coverage X Family Liability Protection.  In part, Coverage X provided that “Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies and is covered by this part of the policy . . . .” 

 

However, the Allstate Policy contained an exclusion that prevented coverage for bodily injury to an “insured person.”  In part, the exclusion provided “[w]e do not cover bodily injury to an insured person . . . whenever any benefit of this coverage would accrue directly or indirectly to an insured person.”  Under the Allstate Policy, insured person(s) is defined as “you and if a resident of your household: (a) any relative; and (2) any dependent person in your care.” 

 

Plaintiff is the cousin of the named insured, and they both resided in the first floor apartment at the property.  Plaintiff did not have a written lease agreement with the insured nor did Plaintiff pay monthly rent.  Plaintiff occupied one bedroom in the first floor apartment and kept her personal belongings to that room.  Plaintiff had not contributed to the utilities of the first floor apartment since she resided at the property. 

 

On January 16, 2013, Plaintiff was injured when she fell from a ladder while hanging curtains in the first floor apartment at the property.   Ms. Juliano reported the accident to Allstate on January 23, 2016.  After its investigation, Allstate disclaimed coverage 33 days later based upon Plaintiff was an “insured person” as defined within the Allstate Policy.  The Policy excludes coverage for the bodily injury to an insured person.   

 

Subsequently, Plaintiff filed a lawsuit against her cousin, Ms. Juliano, in New York State Supreme Court, Kings County seeking damages as a result of Ms. Juilano’s alleged negligent maintenance of the ladder.  After Ms. Juliano failed to appear, the court entered a judgment against her in the amount of $306,755.00.  Following the judgment, Plaintiff commenced the current action against Allstate on September 20, 2016.  On October 14, 2016, Allstate timely removed the action to the Eastern District.  On October 27, 2017, both parties filed cross-motions for summary judgment. 

 

Allstate contends that it is entitled to summary judgment because Plaintiff was a relative of the named insured, lived in the same household as the named insured and, therefore, is excluded from coverage under the Policy.  In opposition, Plaintiff argued that the term “household” in the resident exclusion was ambiguous and, therefore, should be interpreted in favor of coverage.  In addition, Plaintiff argued that Allstate’s 33-day delay in disclaiming coverage was unreasonable as a matter of law. 

 

The court began its analysis with the “Resident Relative Exclusion.”  The court noted that New York law consistently characterizes the term “household, as ambiguous and therefore such interpretation requires an inquiry into the intent of the parties.”  Further, the court noted “the term ‘household’ should be interpreted in a manner favoring coverage where possible, as should any ambiguous language in an insurance policy.”  However, the court recognized that “summary judgment in favor of the insurer is appropriate where the insured does not make an adequate showing that she maintained a separate household.” Further, the court noted that the payment of rent by a family member does not create a separate household.  

 

Applying the relevant New York standard, the court concluded that Plaintiff was a member of Ms. Juliano’s “household.”  In support, the court looked at the living arrangement between Plaintiff and her cousin Ms. Juliano.  Plaintiff occupied a bedroom in the apartment unit she shared with Ms. Juliano.  In addition, Plaintiff occupied the first floor apartment unit without a written lease agreement.  Plaintiff and Ms. Juliano shared the same kitchen, bathroom, and sitting area.  Further, the apartment which they shared had one common entrance, doorbell, and mailbox.  Moreover, all the utilities were in Ms. Juilano’s name.  As the court pointed out, Plaintiff was injured when she was putting curtains up in the kitchen she shared with her cousin, Ms. Juliano.  As such, given the living arrangement, the court concluded that “[n]o reasonable jury could find that the parties did not intent to include Plaintiff as the named insured’s cousin residing in and sharing the same dwelling within the definition of an ‘insured person’ under the [Allstate Policy].” 

 

Further, the court rejected Plaintiff’s argument that Allstate’s disclaimer of coverage after 33-days was untimely as a matter of law.  In its analysis, the court noted “[a] delay will be found unreasonable in situations where the additional investigation was found to have no bearing on the initial reasons for denial of coverage . . . .”  In this matter, the court concluded that Allstate’s 33-day delay before disclaiming coverage was not unreasonable because: (i) Allstate reasonably believed it needed more facts regarding Plaintiff’s living arrangement to decide coverage properly; (ii) the record otherwise reflects a prompt and diligent investigation on behalf of Allstate’s claim consultant and outside investigators; and (iii) the length of the delay was attributable, in part, to Plaintiff and Juliano’s delay in providing their statements to Allstate’s investigator. 

 

In support of its conclusion, the court pointed to the facts of Allstate’s investigation.  The evidence showed that one day following the report by Ms. Juliano, Allstate assigned the matter to an outside investigator.  In addition, after several unsuccessful attempts to contact Ms. Juliano, Allstate obtained a statement from the named insured only 14-days after the claim was first reported.   Further, Allstate disclaimed coverage only after a good faith investigation into Plaintiff’s living situation, which was necessary information to determine whether there was coverage. 

 

In sum, the court granted Allstate’s motion for summary judgment and denied Plaintiff’s motion for summary judgment. 

 

                      

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

10/09/18       Ohio N. Univ. v Charles Const. Servs., Inc.

Supreme Court of Ohio

CGL Policy – Reversal of Court of Appeals’ Ruling Requiring Insurer to Defend and Indemnify the CGL Policyholder/General Contractor Against Suit by the Property Owner Arising From Property Damage Caused By the GC’s Subcontractor’s Faulty Work Product – Occurrence - Fortuity

The Supreme Court of Ohio’s decision in the above-noted case begins by looking back to its decision rendered six years earlier in Westfield Ins. Co. v Custom Agri Systems, Inc., 133 Ohio St.3d 476 (2012), which held that there was no insurer duty under a CGL policy to defend or indemnify its insured general contractor for property damage caused by the general contractor insured’s own faulty work.  That 2012 decision turned on the CGL policy’s definition of an “occurrence” as being, in pertinent part, an “accident”, that is, a fortuitous happening.  The Ohio Supreme Court held in Custom Agri that under the language of the CGL policy at issue there, property damage caused by a contractor’s own faulty work is not accidental, and not fortuitous in the context of a CGL policy, therefore such property damage is not covered by the contractor’s CGL policy. 

 

Now comes the instant October 9, 2018 decision, considering what the Supreme Court of Ohio describes as a general contractor’s CGL policy that is “nearly identical” to the one considered in Custom Agri.   Factually, the difference with the instant case is that rather than the coverage issue being about property damage which has been caused by the general contractor/policyholder’s own faulty work, here the question is whether the CGL policy of the general contractor covers property damage caused by its subcontractor’s faulty work.  To answer that question, the Ohio Supreme Court considered and addressed the effect of additional portions of the CGL policy, specifically, the products-completed-operations-hazard (“PCOH”) clause which covers damages “arising out of completed operations”, as well as other policy terms specifically applicable to work performed by subcontractors.

 

The Ohio Supreme Court noted that if the subcontractors’ faulty work were fortuitous, the PCOH and subcontractor-specific terms of the CLG policy would require coverage.  But the Court determined that “CGL policies are not intended to protect owners from ordinary ‘business risks’ that are normal, frequent or predictable consequences of doing business that the insured can manage”.  In the case at hand, the Court found it could not say that the subcontractors’ faulty work was fortuitous. Accordingly, it was held that the insurer in the case at hand, Cincinnati Insurance Company, is not required to defend the policyholder Charles Construction Services, Inc. against the property damage caused by Charles Construction’s subcontractor’s faulty work. 

 

However, dear reader, please be advised that the reasoning of the Supreme Court of Ohio in the two cases discussed above contrasts, as the Court’s opinion in the instant case acknowledges, with recent decisions of courts in other jurisdictions.  Nationally, the descriptive phrase “well-settled” is not the first phrase you might think to apply to this area of insurance coverage law.

 

I suspect a fair number of our readers deal primarily with New York claims and New York insurance law.  You folks may rest assured that the Ohio Supreme Court’s analysis and reasoning on the construction defect coverage issue under standard CGL policies mirrors how New York appellate courts have dealt to date with similar construction defect coverage disputes.

 

But, do take note, for example, of the United States Court of Appeals for the Tenth Circuit’s recent opinion in Black & Veatch Corp. v Aspen Ins. (UK) Ltd., 882 F.3d 952 (10^th Cir. 2018).  Under similar facts and CGL policy language, the Tenth Circuit recently held that property damage from the subcontractor’s faulty work did constitute an occurrence under the policy, because it was accidental, harmed a third-party’s property, and, a contrary interpretation would, in the eyes of the Tenth Circuit, render the “subcontractor exception” to the “your work” exclusion surplusage, as there would be no reason for the exception if the basic enduring agreement did not encompass such damages.

 

Even state legislatures have weighed in on this issue in recent years.  In South Carolina, a decision of its Supreme Court in 2011 on a construction defect coverage question led to the state legislature stepping in to mollify the perceived bad effect of the ruling, and to pass a state law specifying that the definition of “occurrence” in CGL policies in South Carolina going forward includes property damage “resulting from faulty workmanship, exclusive of the faulty workmanship itself.”

 

It is accurate to say the debate continues across the country as to the availability of coverage under a CGL policy for property damage losses caused by construction defects.  But at least we can now say it is very clear how Ohio courts will analyze and decide similar CGL coverage questions arising from property damage caused by construction defects.

 

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

 

06/19/18       Community Garage, Inc. v Auto-Owners Insurance Co.

Court of Appeals, Michigan

When is a Collapse a Collapse?

The insured operated a commercial truck repair business in Michigan which sustained damage following the failure of several trusses providing structural support to the roof. As a result, the roof began to sag and one of the walls bulged outward due to the sudden pressure overload. All of the walls remained standing and, although the roof sagged, it remained intact. However, the building could not safely be occupied until repairs were completed. The insurance policy excluded coverage for damage due to collapse except for “an abrupt collapse” which was defined as an abrupt falling down or caving in of the building with the result that the building, or part of the building, could not be occupied. A further exclusion specified that “collapse” did not apply to a part of the building that remained standing, even if it separated from another part of the building, or a building that is standing even if it shows evidence of cracking, bulging, sagging, etc.

 

The insured made a claim for the cost of repairs to the building which was denied on grounds that the damage was not a covered “collapse” under the policy. When litigation followed the parties filed cross-motions for summary disposition, and the Trial Court denied the insured’s motion and granted the insurance company’s motion, which was affirmed on appeal.

 

The Appellate Court began with common insurance coverage analysis that the construction and interpretation of an insurance policy is often a question of law that can be determined by the court. The court is to interpret the policy by reading it as a whole and construing policy language in accordance with plain and ordinary meaning of the language, avoiding technical or strained constructions. However, if a court determines a policy to be ambiguous, any such ambiguity is to be construed against the insurer and in favor of coverage. A court must first evaluate whether coverage exists under the policy, and next determine whether any exclusion negates coverage. Although exclusions are strictly construed in favor of the insured, clear and explicit exclusions must be given effect.

 

The insured contended that the damage to its building constituted a “collapse”, but the Court disagreed. A collapse was defined as an abrupt falling down or caving of a building or any part of the building, such that it cannot be occupied for its intended purpose. However, the exclusions denied coverage essentially for any structure or part of a structure that remains standing, even if it has separated from another part of the building, or sustained cracking and bulging. In this case, it was undisputed that, although one of the walls of the building bulged outward and the roof sagged, the wall nonetheless remained intact. In short, the exclusions denied coverage if any part of the building is simply in danger of falling down or caving in, and the present circumstances fell within those limitations. Therefore, both the Trial Court and the Appellate Court rejected the argument that the loss at issue constituted a collapse under the policy language. Giving the terms of the policy their fair and natural meaning, the roof did not fall down or cave in, but merely sagged. Likewise, the wall of the building was bulging, but neither fell down nor caved in completely. Therefore, the Trial Court correctly interpreted and enforced the policy and its decision denying coverage was affirmed.

 

This case presents a good analysis of how the courts approach an insurance coverage debate. This case is also a good example of where the question of coverage was determined on relatively clear facts on motions for summary judgment where the question of coverage was considered to be a question of law for the court, or at least a question of law to the extent it could be applied to the clear and undisputed facts of the claim and loss.

 

As the Court stated, exclusions are normally to be interpreted restrictively against the insurance company and in favor of the policy owner. However, clear and express exclusions should be given their plain meaning and effect.