Coverage Pointers - Volume XXI, No. 1

Volume XX1, No. 1 (No. 540)
Friday, June 28, 2019

A Biweekly Electronic Newsletter


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

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

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

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


Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

Happy 20th Birthday Coverage Pointers!

This is Issue number one of our twenty-first year of publication.  Thank you for your loyalty and friendship.

Greetings from NYC where I was overlooking the Hudson River from the JAMS office, mediating a case, when I started working on this letter.  It resolved at about 6:00 PM and I’m finishing this from the JFK Jet Blue terminal..

Speaking of mediation, Mike Perley and I have been certified as neutrals and mediators by the US District Court for the Western District of New York, joining Ann Evanko.  Three days of certification training.  If you have a matter where you need a mediator or an arbitrator, please let us know.

We welcome Michael Dischley as an associate in our Melville office.  He works in the firm’s litigation and insurance coverage departments. His practice is focused on NYS Labor Law, construction site accidents, premises liability, automobile and commercial trucking litigation, toxic tort, product liability, professional liability, insurance law, and general liability insurance defense.  That office continues to expand to serve our clients.

I have a few interesting cases in my column.  In one case, coverage by estoppel was established when AIG defended a case for a couple of years without reservation. In another, there’s a good discussion about “loading and unloading” of a motor vehicle.  In yet another, the Third Department deals with the question of enforceability of non-approved policy language.

The “Marketing” Blog:

I’ve continued blogging on LinkedIn, trying to teach young lawyers how to become experts their craft and use it to educate the industry, their sisters and brothers at the bar and their clients. Good, solid legal work and following some basic rules leads to a lawyer who is respect, admired and receives the attention of those they serve. Those skills have multiple rewards, including business generation.  Visit me on LinkedIn if you’re interested.  Over 35,000 views.

Lawyers need these attributes to succeed and they were posited her as marketing skills.  They are lawyering and client relationship skills of course.

This was my initial posting:

OK, so the questions are coming in from #younglawyers. How does one generate business as lawyer in an #insurance defense firm? Start out by being a great lawyer. Start out by being REALLY good at something! Pick something you like. Premises liability? Auto defense? Insurance coverage? Bad faith? Makes no difference but REALLY like it. Dedicate yourself to becoming the best in your community. Be the GO TO person. Give back to your sisters and brothers at the bar. Write on it. Speak on it. Talk to your clients about it. Go out and teach. This takes time, it takes effort, it takes dedication.

Followed by:

Want To Be a Successful Marketer? Be Responsive .

Want To Be a Successful Marketer? Publish and Present.

Want To Be a Successful Marketer? Build Relationships.

Want To Be a Successful Marketer? Join and Participate in Defense Organizations.

Want To Be a Successful Marketer? Be an Information Resource.

Want To Be a Successful Marketer? Learn and Understand Your Client's Business.

Want To Be a Successful Marketer? Break Bread with your Clients.

Want To Be a Successful Marketer? Use Social Media Effectively.

Want To Be a Successful Marketer? Close the File.

Want To Be a Successful Marketer? Be Professionally Generous; Words from the Masters Part 2

Want To Be a Successful Marketer? Be Professionally Generous; Words from the Masters

Want To Be a Successful Marketer? Be Professionally Generous.

Potenza’s Legislative Potables by V. Christopher Potenza:

Choose Your Own Adventure: Important Legislative Changes Impacting the Defense of Civil Claims

Two amendments passed the Legislative Session: one requires a defendant to choose before trial whether to take the liability offset of the monetary amount of the settlement or the still unknown liability percentage of the settled defendant to be determined by the jury; the other amendment permits a plaintiff to recover directly against a third-party defendant found to be liable to the defendant in certain actions. There is link to the blog up above.

Don’t forget to subscribe to our other publications:

Labor Law Pointers:  Hurwitz & Fine, P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected]  to subscribe.

Premises Pointers:  This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court, and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!).  Contact Jody Briandi at [email protected] to be added to the mailing list.

Til Death Do Us Part:

Poughkeepsie Eagle-News
Poughkeepsie, New York

28 Jun 1919


Verdict Is Accompanied by Useless Recommendation for Clemency For Physicians.


Condemned Man Still Protects Innocence --
Stunned” at Finding, He Says.

Mineola, N. Y., June 27.—Counsel for Dr. Walter Keene Wilkins, found guilty by a jury in the Supreme Court here today of murder in the first degree for killing his wife, Julia, at their Long Beach home, February 27, announced tonight that he would carry the case to the Court of Appeals and to the Governor if necessary.  The verdict carried with it a recommendation for clemency which under the law, the court cannot heed.  The only penalty permitted in this state for first degree murder is death in the electric chair.

The jury that convicted the aged physician was out nearly 23 hours, establishing a record for Nassau County. Foreman Paries said twenty ballots were taken during the twenty-two hours and sixteen minutes the case was in jury’s hands.  On the first ballot the jury stood six for conviction, five for acquittal and one was undecided.  On the fourteenth ballot the jury stood eleven to one for conviction.  It took seven hours to sway the twelfth man.

Editor’s Note:   This was a sensational murder trial, with Dr. Wilkins accused of murdering his wife with a lead pipe because he had taken up with a beautiful mistress.  The day after his conviction, he hanged himself, after someone had smuggled a rope into the jailhouse.


Jen’s Gems:

Nothing this week.

Jennifer A. Ehman

[email protected]


Dancing Girls Ain’t Dancing”:

The Buffalo Times
Buffalo, New York

28 Jun 1919

Olean Citizens Claim  Dancing Girls Lack Pep
Special to The Buffalo Times

OLEAN, June 28.—Dancing girls with carnival companies do not put enough pep in their dancing, according to complaints made by several citizens to the city authorities.  They stay too long in once place and do not lift their dainty tootsies from the stage, according to protests.

Four carnival companies played Olean this summer.  Three showed within three weeks.  And citizens have petitioned the common council that no more carnival permits be granted.

The dances were too much Oriental, decided citizens.  The girls were attractive enough, it was agreed, but their movements were not uplifting, particularly in regard to their feet.

John’s Jersey Journal:

I practice insurance law in New York and New Jersey. As many of you know, New York has strict time limits for raising exclusions and condition breaches in bodily injury cases—interpreted to be about 30 days. One of the things that I love about New Jersey is that it does not have such strict timing. New Jersey insurance insurers have a reasonable time to investigate and should promptly inform the insured of their coverage defenses. New Jersey courts have been quite generous allowing a fair amount of time for a carrier to investigate and raise coverage defenses.

In today’s case, one insurer pushed the envelope by waiting 20 months to disclaim. The Appellate Division held that the 20-month delay was untimely as a matter of law. After receiving notice of a sexual assault claim, the carrier apparently believed no suit would be filed and closed its file. When suit was filed nearly two years later, the insurer immediately disclaimed, but it was too late. The case is a good reminder that coverage letters should be promptly issued even in jurisdictions like New Jersey where carriers have a bit more time to breath.

The Appellate Division also examined the phrase “based on”. Unsurprisingly, the Court found that the term “based on” is quite narrow. The counseling point is that insurers should use “arising out of” language in their exclusions. “Arising out of” language is very broad, making the exclusion apply to a wider variety of circumstances.

As for me, I am enjoying summer. This week I sold my Scion FRS. It was fun while it lasted, but I won’t miss getting stuck in two inches of snow. I am surprised how little I miss the car. I am now cruising in a Chevy Silverado. A little bit more useful, especially for picking up building materials and buying furniture. This will only enable Erin’s Facebook Marketplace deals. Donald loves it too. And if you’re moving, you now know someone else with a truck. Just return it with a full tank of gas.

John R. Ewell
[email protected]

Actually, This is Pretty Cool:

The Buffalo Enquirer
Buffalo, New York

28 Jun 1919


How to Tell a Person’s Age?

Among many ingenious schemes for telling a person’s age this is one of the easiest and best.  Let the person whose age is to be discovered do the figuring.  Supposed, for example, if it is a girl, that her age is fifteen, and that she was born in August.  Let her put down the number of the month which she was born and proceed as follow:

                     Number of month..................................        8

                     Multiply by two......................................      16

                     Add five................................................      21

                     Multiply by fifty......................................                      1,050

                     Then add her age, fifteen......................                      1,065....................................................

                     Then subtract 365, leaving.....................    700

                     Then add 115........................................    815

She then announces the result, 815, whereupon she may be informed that her age is fifteen, and August or the eighth month, is the month of her birth.  The two figures to the right in the result will always indicate the age, and the remaining figure or figures, the month the birthday comes in.  This rule never fails for all ages up to 100.  For ages under ten a cipher will appear prefixed in the result, but no account is taken of this.  Try it on your friends.

Peiper on Property and Potpourri:

After one of the wettest Springs in history, Western New York has finally turned the corner to Summer.  The kids are out of school, the sun is shining, and the H&F softball team will finally get to game #2 on the schedule.  For those counting at home, that’d be 5 straight weeks of rain, wind, cancellation and frustration.

The recent sunshine did not, however, slow down the courts over the past two weeks.  This week’s column includes a full array of cases ranging for marine cargo policies to some basic civil practice reminders.  We’d ask that you take a closer look at the Pier One decision in particular.  There are few cases which confirm the right to recovery legal fees as part of a common law indemnity award, but not as many as you’d expect.  While the Appellate Division certainly explains you are not entitled to fees spent in “prosecuting” the indemnity claim, the Pier One decision appears to reaffirm the rule that you are, indeed, entitled to fees spent in a defense of an action that was caused by someone else’s negligence.  It’s a rare, but helpful, outlier of the American Rule on legal fees.

I also have to take some space to get something off of my chest.  All too frequently, in the SUM arena I hear of communications between claimant’s counsel and the claims professional for the SUM policy.  This has long been the standard, but with litigation seeming more favored that SUM Arbitration the interactions are occurring with increasing frequency.  Simply stated, communication between retained counsel and party employees are strictly forbidden--- or at least they should be.

Claims professionals are unique in civil litigation in that they have skills that an ordinary litigant may not.  In fact, the claims professional might reach out to you to discuss resolution of their case.  Even if they do, YOU CANNOT SPEAK TO THEM without consent of their retained counsel.  This is a pretty standard ethics rule, and it is seemingly forgotten in SUM litigation.  Regardless the litigation…if there is litigation, a lawyer cannot speak to a represented party PERIOD.  So please plaintiff’s counsel make your first call to the carrier’s lawyer.  Once you get you consent (which you likely will) you’re free to call anyone you want.  Until you do, however, you’re trampling on some pretty basic ethics rules and frankly just acting plain discourteous.

That’s enough for now.  Best wishes to all for a safe and enjoyable July 4th Holiday.  We’ll see you again in two weeks.

Steven E. Peiper

[email protected]

Texting While Walking Illegal, 100 Years Ago:

Press and Sun-Bulletin
Binghamton, New York

28 Jun 1919


Birmingham, Eng., June 28.—You must not read a newspaper on the streets in Birmingham.  John Turner did it and was fined $2.50 for causing an obstruction of traffic.  The arresting constable testified that Turner bought a paper from a newsboy and began reading it, causing a crowd to gather to see what the new was.

The newsboy also was fined $2.50 for causing a crowd to collect by selling papers while standing on the sidewalk.  Newsboys must keep moving in Birmingham.

Hewitt’s Highlights: 

Dear Subscribers:

School ended down here on Wednesday and my children are thrilled to begin their summer vacation. As is my teacher wife. They have many activities planned and will be keeping busy. They had an end-of-the-school-year school party at the Long Island Ducks game, a local independent league baseball team. My wife surprised me by putting up on the scoreboard a happy birthday message to me.

In this edition, we have a case that demonstrates how difficult it is to overturn a jury verdict. The jury was entitled to pick between two conflicting expert reports. Another case reminds plaintiffs their experts must address findings of degeneration, and must set forth a specific basis for their findings of causation.                                              

Until next issue,

Robert E.B. Hewitt III
[email protected]

What Should We Do With Vamps?

New-York Tribune
New York, New York

28 Jun 1919

Hotels Puzzled by
“Vamp” Problem

Would Willingly Protect Men Patrons, but Have to Use the Utmost Care

It is easy to talk about “freezing out” the vampires who make their habitat in hotel corridors, but will Magistrate McAdoo please tell the hotel men of New York just how to accomplish the delicate process?

From numerous hotel men yesterday The Tribune obtained statements concerning their earnest desire to protect their patrons from undesirable associates, but calling attention at the same time to the dangers of suits for damages from irate persons who considered their dignity had been injured by the hotel’s chaperonage.

“Every hotel retains detectives who keep an eye on the visitors,” said one of the managers of the Hotel Astor, “but the detective must be very careful about questioning those who are apparently loungers without business in the hotel.

Mistakes Are Too Dangerous

“A policeman can put questions to a stranger that no private detective has a right to—and we see by the papers recently how often even the policeman makes mistakes.  Now, if that mistake were made by a hotel employee, we should have a suit on our hands.”

At the Hotel McAlpin it was said that the hotel had long been famous for its “woman in black,” who is the terror of loungers.  She presides over the corridors, a dark and omnipresent shadow, who eagle eye nothing escapes.  If a person stays too long in one of the comfortable chairs, she is likely to receive a meaningful smile form the “woman in black.”  If the visitor is waiting to keep an appointment with someone who is late, or has other reasonable excuse for lingering, she generally explains this with great volubility, and the black shadow passes on; if she hasn’t, the shadow flits around that particular corner more frequently than ever.

As for hotel corridors in general, they are more free from loungers, both male and female, than before the war, according to one of the mangers of the Waldorf-Astoria.

Wilewicz’ Wide-World of Coverage:

Dear Readers,

We will soon be entering the dog days of summer, and in our house we took that very literally this year. Indeed, after months of our daughter’s begging, negotiating, and a PowerPoint Presentation screened for both parents in multimedia detail, we got a dog. About a week ago we rescued a five year old shepherd retriever mix from our local SPCA, though she originally came from out of state. We don’t know much about her back story, but she’s crate-trained, super friendly (to everyone but dogs that are bigger than her), a little chubby, and an all-around 60 pound cuddlebug. I had dogs as a kid and recall the amount of work involved, but my daughter has promised to walk, feed, and play with her every day (don’t all kids?), so we’ll see how this goes.

Now, between all the upstate/downstate travel this month, the typical end of the school year fiasco, and the dog, mercifully the Second Circuit was quiet these past couple of weeks. I’m sure that they’ll be back in full swing covering coverage next time, and I’ll be right here reporting on anything that comes out.

Until then!

Agnes A. Wilewicz

[email protected]

No Bones About It:

Altoona Tribune
Altoona, Pennsylvania

28 Jun 1919


In Gotham Hotel Nearly Four Years—Medical Student May Have Left It

New York, June 27.—A brown leather bag filled with human bones was found tonight in the checking room of a Mills hotel here.  According to the police, the bag was checked in the hotel in November,1915, and has been awaiting a claimant since then.

The bones include the skull of a man about 40 years old.  Some of them appeared to have been cut with a saw which gave rise to the theory that they may have been the property of a medical student.

Dr. George Hohmann, assistant medical examiner, declared the bones were the relics of a murder.

“They show ever indication that a murder had been committed,” he said, “because of the way they are mutilated.”

The leather case in which the bones were found bore the blurred initials “I.N.A.”

Each bone was wrapped separately in packages of copies of New York newspapers bearing the dates of Sunday, September 12, 13, 15 and Monday, September 27, 1915.

Barnas on Bad Faith:

Hello again:

Last issue in discussing a recent bad faith discovery case from the South Carolina Supreme Court, I closed my cover note with the following observation “[t]oo many times courts see a bad faith cause of action and jump to the conclusion that the attorney-client privilege is inapplicable.  This is particularly problematic in New York, where some bad and overbroad case law is often cited for the proposition that the attorney-client privilege is not applicable in bad faith cases.  Hopefully this more nuanced case-by-case analysis becomes the norm around the country.”

As fate would have it, I have just such a case to report on in this week’s issue in a case that was handled by our office.  The result is a favorable one for the insurer.  The short text order decision is contained in the issue.  By way of background, the plaintiff was injured walking across a roadway when she slipped and fell, and the insurer disclaimed coverage under the auto policy it had issued.  A defense was assigned, and the insurer commenced a declaratory judgment action seeking a declaration that there was no coverage.  Ultimately, the court found an issue of fact on the insurer’s summary judgment motion in the declaratory judgment action, which was discontinued.  The case proceeded to trial and resulted in an excess verdict against the insureds.

A bad faith action was then commenced by the plaintiff on assignment.  In the bad faith action, the plaintiff sought discovery of not only the underlying defense file but also the insurer’s file from the declaratory judgment action, which included communications with counsel who handled the DJ.  Plaintiff, relying on the overbroad bad faith discovery case law I referenced last week, argued that the attorney-client privilege was inapplicable in the bad faith action.  We argued that the attorney-client privilege that was at issue in this case was the one between the insurer and its counsel, not the privilege between the insured and assigned defense counsel.  The case law that policyholders/insureds often cite in bad faith cases for the proposition that the attorney/client privilege does not apply in bad faith cases almost always interprets whether the privilege applies to communications between the insured and assigned defense counsel.

Here, the insurer had certainly not waived its privileged communications with its retained counsel in the declaratory judgment action.  The court denied Plaintiff’s motion for disclosure of the documents from the declaratory judgment file.  Even though Plaintiff alleged that the insurer’s pursuit of the declaratory judgment action was in bad faith, the court concluded that that claim did not undermine the insurer's right to have its own privileged communications within the declaratory judgment litigation itself.  Plaintiff could still evaluate her bad faith case without knowing the insurer’s communications with counsel within the declaratory judgment action.

Finally, there’s no way I could go through my entire cover note without typing the words the Toronto Raptors are NBA Champions!  I, unfortunately, had to miss the parade because I was on trial, but the high of winning the title still hasn’t faded.  However, now we’re on to endlessly obsessing about whether Kawhi Leonard is going to resign; life as a sports fan.

That’s all for now.  Have a great weekend.

Brian D. Barnas

[email protected]

For Those Who Follow, She’s Still Looking:

Independence Daily Reporter
Independence, Kansas

28 June 1919


Lonely widow, worth $100,000 wishes to hear from honorable gentlemen under 60.  Object matrimony.  Write Mrs. Hill, 14 East Sixth street, Jacksonville, Fla.

Off the Mark:

Dear Readers,

The trip to South Carolina was excellent.  No issues with the flight, the kids behaved (for the most part), and the weather was perfect.  While the weather is getting hot, the courts seem to be cooling down already for the summer.  I did not come across any noteworthy construction defect decisions.

However, as some of you may already be aware, Florida recently passed a new statute, §624.1055, which provides a statutory right to liability insurers to seek contribution for defense costs incurred on behalf of an insured from other liability insurers that also have a duty to defend the insured.

Prior to the statute being passed, Florida courts adhered to the holding of Argonaut Ins. Co. v. Maryland Cas. Co., 372 So.2d 960 (Fla. 3d DCA 1979).  Under Argonaut, an insurer was not permitted to seek contribution from other insurers for defense costs of a mutual insured.  The reasoning behind the holding was that “the duty of each insurer to defend its insured is personal and cannot inure to the benefit of another insurer.” Id.  The negative effect of the Argonaut holding was that it allowed insurers to sit back and not take action while other insurers complied with their duty to defend obligations and defended the insured.

The new statue, which was signed by the Governor of Florida on June 18, 2019, essentially reverses Argonaut and should have a big impact on construction defect cases. Notably, the new statute also provides that there is no right of contribution for defense costs incurred before a liability insurer receives notice of the claim.  The full text and the changes of the new law can be viewed here.

Until next time …

Brian F. Mark

[email protected]


Fire Safety in Cars – a Big Issue 100 Years Ago:

The Ithaca Journal
Ithaca, New York

28 June 1919
Your Car’s Private Fire Department

Better To Be Sure Than Sorry

YOU PROBABLY CARRY A FIRE EXTINGUISHER on your car.  If you do not, you are grossly negligent and are paying unnecessarily high for your fire insurance on this account.  Have you looked recently to see if there is anything in your extinguisher?  Sometimes the fluid leaks out gradually and all escapes and sometimes a meddlesome person or a practical joker discharges the fluid, returns the extinguisher to its place and does not tell the owner to whom “ignorance is bliss” until a fire starts.  Are you sure  that the extinguisher will work properly?  You can find out by removing it from its bracket, discharging its contents into a can and then returning the discharged liquid.  An extinguisher that has been carried for a long time out to be tested, so that unjustified dependence may not be place upon it.  Do other people, who drive your car, know how to detach the extinguisher, how to operate it and how to place the liquid most effectively?  If not, they should be instructed.  Is the extinguisher kept where it can instantly be reached.  It should be, for a few seconds delay may be decisive as to whether your car will be saved or not.  If your car takes fire, do not be deterred from trying to save it, by fear that an explosion is imminent, such a thing is very rare.  The thing to do is to “go to it,” discharging the liquid on the seat of the flames and the chances are in favor of success.

Wandering Waters:

I hope all of you had a wonderful week and welcome to another edition of Wandering Waters.  

The NBA season has officially ended with the Raptors securing its first title in history. The Finals proved to be one of the more thrilling series in recent memory. Although Kawhi carried the Raptors for a majority of the Playoffs, he had some help in the final game from his teammates.  Nonetheless, Kawhi secured his second MVP of the NBA Finals.

Now that the NBA Playoff season is over, all interest has turned towards the offseason. The offseason began with a lot of noise as the Lakers finally secured its second superstar.  After months of trying, the Lakers finally secured Anthony Davis.  Now the Lakers arguably have two of the top five players in the NBA and the Lakers have a decent amount of cap space to build the roster for next season.  With the Warriors having two of its top players injured and unable to play for more than half of the 2019-2020 season, the Lakers believe they have a chance to capture a title.

With that said, we have two cases from the Southern District of New York. Until next time……

Larry E. Waters

[email protected]

Court Reporter Bragging Rights:

Middletown Daily Herald
Middletown, New York

28 June 1919
Pass the Salt!

Two reporters were boasting of the speed of their shorthand writing.

“Whenever I am reporting at a meeting on a warm evening, all the people try to get near to my table.

“Why?” asked the other.

“Because,” said the pen pusher, “my hand goes so fast that it creates a current of air like a fan.”

“A mere nothing,” said number two.  “ I always have to report on wet paper, or else the current of air caused by the movement of my hand would blow it away.  Besides the paper has to be wetted every few minutes, because the friction caused by the rapid movements of my arm would set fire to it in no time.”

Boron’s Benchmarks:

Dear Subscribers:

The latest from my High-Courts-Of-States-Not-Named-New-York Beat….

While of course the beat goes on, I’ve been unable to drum up any pure insurance coverage cases decided during the last two weeks by a high court of a state not named New York.  But fear not, I’ve selected and written on two high court cases decided on June 14, 2019, in Alabama and Kansas, respectively, that are of significant interest to insurers.

The Supreme Court of Alabama’s affirmance of summary judgment for Country Mutual Insurance Company in Donaldson v Country Mutual is instructive on the issue of vicarious liability of an insurer for the conduct of its agent.  Take a moment and review the Alabama Supreme Court’s analysis and determination that an insurance agent working under an “agent’s agreement” was not an “employee” of the insurer he was selling policies for.  Rather, he was an independent contractor.

The Kansas Supreme Court case of Hilburn v Enerpipe, Ltd, declares unconstitutional a Kansas state law capping a plaintiff’s compensation in a personal injury action.  Each state has laws governing the damages which can be recovered in personal injury lawsuits, though not too many have statutory caps on the damage amounts which may be awarded to a plaintiff. Those of you who work exclusively on liability claims in New York may be surprised to learn that some states do, in fact, have statutorily imposed damages caps limiting the amount of compensation a plaintiff may recover.  While it is beyond the scope of today’s column to differentiate and/or analyze the various caps of the various states that have caps, suffice to say that even among those states with caps each may nonetheless treat medical malpractice actions quite differently from products liability cases in terms of whether any cap is applicable, and if so, whether both economic and non-economic damages are capped, or just one of them, on such varied types of cases.  In any event, after Hilburn v Enerpipe, Ltd., the state of Kansas can be removed from the list of states that have enforceable statutory caps for damages passed by the state legislature on noneconomic injuries in personal injury actions.

Hope you have a great 4th of July celebration, and return to work after the holiday with all of your fingers intact.

Eric T. Boron

[email protected]

World War I Treaty Signed:

Buffalo Evening News
Buffalo, New York

28 Jun 1919


Chinese Representatives Refuse Terms.

General Smuts Signs Under Protest

Event Take Place in Hall Where Germany Humbled France In 1870

VERSAILLES, June 28.—The greatest war in history formally ended with the signing of the peace treaty.

The ceremony took place in the historic palace of Versailles proceeding with clock-like regularity.

The German delegates, Foreign Minister Mueller and Colonial Minister Bell were ushered into the Hall of Mirrors at 3:08 o'clock. Premier Clemenceau immediately opened the meeting by assuring the Germans the treaty text was identical with the one presented to them.

Mueller was the first to sign, placing his signature on the document at 3:12. Bell followed him.  President Wilson, the first of the allied, delegates to sign, wrote his name on the treaty at 3:14.  Premier Lloyd George signed two minutes later.

The Chinese refused to sign.

General Smuts, representing South Africa, signed under protest, issuing a statement setting forth his objections to the treaty.

The signing was by delegations. In the following order: Germans, Americans, British (including colonials), French, Italians, Japanese and smaller nations.

Clemenceau declared the proceedings closed at 3:50, the entire ceremony occupying [sic] 41 minutes.

"The conditions of peace are now an accomplished fact; the proceedings are closed,”  Clemenceau said.

The allied delegates remained seated as the Germans departed at 3:52.

Barci’s Basics (On No Fault):

Hello Subscribers!

Summer finally seems to have arrived, which means I need to mow my lawn much more frequently. We tend to be pretty lax about yardwork in my house, so we usually let the lawn grow for about two weeks before we cut it. But with the frequent rain and our busy schedules, it was probably about 3 weeks this time. I am going to have to be much more diligent if the rain is going to continue like this all summer, especially considering it took me almost 2 hours to get the whole lawn mowed last night, and that didn’t even include edging! I’m sure my neighbors were thrilled with me around 10pm…

On the no-fault front I have two cases for you, both concerning no-fault IME’s. The first case is a quick reminder that an assignor’s failure to appear for scheduled IME’s is a basis for the insurance company to deny benefits to the assignee-provider. The second case discusses the medical necessity burden that insurers need to meet when relying on an IME doctor’s opinion to deny paying benefits to the assignee-provider.

That’s all folks,

Marina A. Barci

[email protected]

Spare the Rod:

The Evening World
New York, New York

28 June 1919


Magistrate Steers Holds Miss Wilson Acted Within Her Authority.

If two schoolboys stage a Willard-Dempsey in the back of the class room, each as a perfect right to step in between them and, personifying law and order and everything, wallop one of them on the “beezer” if he refuses to respect the Marquis of Queensberry.

This decision, couched in words not so inelegant, was handed down to-day by Magistrate Steers in the Flatbush Court, Brooklyn, in the case of Dominic Bernardo, aged thirteen, against Miss Frances Wilson, a teacher in Public School No. 42, St. Mark’s and Classon Avenues.

Dominic’s story was that on Friday of last week another boy hit him.  Dominic hit him back and teacher came after them and slapped Dominic “two or three times.”

“it appeared to me,” said Miss Wilson, “that Dominic was the aggressor.  I had to slap him several times to break him loose from the other boy.”

“Case dismissed,” said the Magistrate.  “In the view of the law the teacher stands in the place of the parent.  No parent could be arrested by chastising a disobedient child.”

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Samuel Huntington: the first President of the United States of America. A statesman, soldier, patriot, and self-taught lawyer, Samuel Huntington is next up in our continuing visit with famous Connecticut jurists. Huntington was a delegate from Connecticut to the Continental Congress, he signed the Declaration of Independence, and the Articles of Confederation. He was the President of the Continental Congress from 1779 to 1781, Chief Justice of the Connecticut Supreme Court from 1784 to 1785, and the Governor of Connecticut from 1786 until his death in 1796. Huntington taught himself the law while apprenticing as a cooper in Scotland, Connecticut. The town of Shelton, Connecticut, was originally named Huntington in his honor. Interestingly, some historians credit Huntington as being the first president of the United States. These historians believe the title rightfully belongs to Huntington, as he was the president of the Continental Congress when the Articles of Confederation were ratified in 1781. Arguing that the Articles of Confederation established the United States as a country, these historians say that proves that Huntington was the true first president. Still, don’t look for revisions to our text books any time soon.

While Huntington was ever busy, the Connecticut courts were a little light on issuing insurance-related decisions this past fortnight. Check back again for more Connecticut insurance coverage news and notes.

Lee S. Siegel

[email protected]

Pre-Nup Insurance:

The Evening World
New York, New York

28 June 1919


Justice Greenbaum Hold That Arrangement as to Marriage Is Valid

Mrs. Katherine Pope Burke, well known in society, who lives in Elizabeth, N.J., was to-day awarded possession of a $10,000 life insurance policy which her husband, Charles Russell Burke, had promised her if she married him.

Justice Greenbaum decided that the pre-nuptial arrangement was valid.

Headlines of Today’s Issue, Attached:

Dan D. Kohane
[email protected]

  • AIG Estopped from Denying Coverage when It Defended without Reservation
  • A Third Party (as Compared to an Owner) Might Not have Coverage For “Loading and Unloading” a Motor Vehicle
  • Insurance Carrier that seeks Contribution from Other Carriers Must Request that Contribution in a Timely Matter Additionally, Non-Approved Policy Language that Does Not Violate Public Policy is Still Enforceable

Robert E.B. Hewitt III

[email protected]

  • Plaintiff Could Not Show Issue of Fact with Report by Physician Who Examined Him Three Years After Accident And Did Not State Basis for Causation Opinion
  • Plaintiff’s Expert Failed to Address Degeneration Found by Defendant’s Expert
  • The Jury Is Entitled to Believe One Expert Over Another


Steven E. Peiper

[email protected]


  • CD&C Clause in Marine Policy Provides Coverage for Warehouse Fire Loss


  • Question of Fact over Scope of Work Performed Necessitates Denial of Summary Judgment Motion


  • The CPLR does not Permit an Extension of the Time to Serve a Complaint nor Amending the Pleading to Name the Correct Entity Where the Statute of Limitations has Expired
  • Party Seeking Common Law Indemnity Cannot Recover the Costs of Prosecuting that Action
  • Rejection of Defendant’s Excuse as Unreasonable Does not Collaterally Estop it from Seeking Recovery against the Broker


Agnes A. Wilewicz

[email protected]

  • Happy Fourth of July everyone!


Jennifer A. Ehman

[email protected]

  • Court Finds Independent Contractors or Subcontractors Exclusion Applied; Conditions Where Not Met to Remove Exclusion from the Policy


Brian D. Barnas

[email protected]

  • Discovery of Insurer’s File from Related Declaratory Judgment Action was not Permitted in Bad Faith Action
  • Discovery of Insurer’s File from Related Declaratory Judgment Action was not Permitted in Bad Faith Action, Redux


John R. Ewell

[email protected]

  • Twenty-month Delay in Disclaiming Coverage Was Unreasonable under New Jersey law


Lee S. Siegel

[email protected]

  • Check back next time for the latest from Connecticut

Brian F. Mark
[email protected]

  • All’s quiet on the construction defect front

Larry E. Waters

[email protected]

  • Court Grants Plaintiff’s Motion for Voluntarily Dismissal as Plaintiff Satisfied all Relevant Factors Warranting a Voluntary Dismissal
  • Court Granted Plaintiff’s Motion to Compel in part and denied in part


Eric T. Boron

[email protected]

  • Summary Judgment For Insurer Affirmed – No Vicarious Liability – Tortfeasor, an Agent for Insurer, Was an Independent Contractor and Not an Employee
  • Limits Imposed By Kansas Legislature On Non-Economic Damages Ruled Unconstitutional


Marina A. Barci

[email protected]

  • Assignor’s Failure to Appear for Scheduled IME’s is Basis for to Deny No-Fault Benefits to Assignee-Provider
  • IME Doctor Versus Provider Doctor Testify Regarding Medical Necessity of Treatment to be Paid by No-Fault Benefits; Comes Down to Credibility Issue


Earl K. Cantwell

[email protected]

·       No Insurance Recovery for Contractor’s “Voluntary Payments”

All the best and have a glorious Fourth.


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

Dan D. Kohane
[email protected]

Agnes A. Wilewicz

[email protected]

Jennifer A. Ehman

[email protected]

Dan D. Kohane, Chair
[email protected]

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

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Lee S. Siegel

Brian D. Barnas

Brian F. Mark

John R. Ewell

Larry E. Waters

Eric T. Boron

Marina A. Barci

Diane F. Bosse

Joel R. Appelbaum

Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Eric T. Boron

Brian D. Barnas

Larry E. Waters

Jennifer A. Ehman, Team Leader
[email protected]

Marina A. Barci

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

John’s Jersey Journal

Lee’s Connecticut Chronicles

Off the Mark

Wandering Waters

Boron’s Benchmarks

Barci’s Basics (on No Fault)

Earl’s Pearls

Dan D. Kohane
[email protected]

06/27/19       Temple Beth Sholom, Inc v. Commerce & Industry Ins. Co.
Appellate Division, First Department

AIG Estopped from Denying Coverage when It Defended without Reservation

Temple relied to its detriment on the defense provided by defendant Commerce, which was in conflict with the defense Commerce provided to the general contractor, and as a result, Temple lost control of its defense. Commerce was properly estopped from denying coverage by virtue of its conduct in handling the underlying claim.

Moreover, Commerce accepted coverage, without reservation, and without having investigated the tender or having failed to uncover facts that were readily available through a review of the contracts and an interview of its insured, through no fault of Temple.

Finally, it is undisputed that Temple, pursuant to the subcontract, was required to be added as an additional insured to the policy; that the subcontract contemplated that Boyle would perform all of the asbestos removal for Temple's project, including any possible additional work that might become necessary during the construction phase; and that the work performed by Duran, a Boyle employee, constituted both "ongoing operations" and "your work" as defined under the policy. Accordingly, the work performed by Duran at the time of his accident falls within the scope of both additional insured endorsements in the policy.

Atta lawyer:  Chris Bradley

06/18/19       New York City School Construction v. New South Ins. Co. Appellate Division, First Department
A Third Party (as Compared to an Owner) Might Not have Coverage For “Loading and Unloading” a Motor Vehicle

The language regarding New South's coverage of SCA under the New South policy is straightforward and unambiguous. Since the accident occurred while the subject vehicle was parked, and not "while driving," SCA is not a covered "Insured" under the New South policy.

While “loading and unloading” can constitute “use and operation” for the purposes of holding an owner derivatively liable under Vehicle and Traffic Law § 388, here SCA is not the vehicle owner, and the owner, Sukhman Construction Inc., is not a party to the underlying action.

Editor’s Note:  interesting decision, indeed.

06/13/19       State of New York v. Flora
Appellate Division, Third Department
Insurance Carrier that seeks Contribution from Other Carriers Must Request that Contribution in a Timely Matter.  Additionally, Non-Approved Policy Language that Does Not Violate Public Policy is Still Enforceable

In 2013, State commenced this action pursuant to Navigation Law article 12 seeking to hold defendants strictly liable for $921,904.41 — the cost of cleaning up and removing petroleum product contamination of groundwater and soil at a spill site). The State sought to recoup the petroleum cleanup and removal costs from Richmond Automotive and its partners, as well as defendant Kirkwood Heating Oil, Inc. — a corporation that periodically supplied petroleum products to the underground petroleum storage and dispensing system — and Kirkwood's insurance company, defendant Utica Mutual Insurance Company.

Utica Mutual answered and thereafter commenced a third-party action for contribution and/or indemnification against Kirkwood's other insurers during the years in which the petroleum discharges and contamination allegedly occurred — as relevant here, third-party defendants American Automobile Insurance Company (AAIC), National Surety Corporation (NSC) and Arch Insurance Company. After joining issue, AAIC and NSC moved for summary judgment claiming that they did not receive timely notice of the alleged incident, as required by the insurance policies they issued to Kirkwood from August 1991 through August 1997. Arch moved for summary judgment based on a MTBE exclusion. It established that it applied.

In opposition, Utica Mutual argued that the MTBE exclusion is unenforceable because Arch did not comply with the filing requirement of Insurance Law § 2307, which states that "no policy form shall be delivered or issued for delivery unless it has been filed with the superintendent [of financial services] and either he [or she] has approved it, or [30] days have elapsed and he [or she] has not disapproved it as misleading or violative of public policy" (Insurance Law § 2307 [b]; see Insurance Law § 107 [a] [41]). However, as Supreme Court correctly noted, the failure to file under Insurance Law § 2307 "does not, by itself, void the policy clause . . .[; rather,] such clause is void only if the substantive provisions of the clause are inconsistent with other statutes or regulations".  This exclusion was not inconsistent and therefore enforceable.

Utica Mutual also challenged the lower court’s  determination that AAIC and NSC were entitled to summary judgment dismissing complaint against them based upon Utica Mutual's failure to provide prompt notice of the "accident or loss," as required by each of the insurance policies that AAIC and NSC issued to Kirkwood during the relevant time period.

If multiple insurers exist and the insured gives only one of those insurers timely notice of a claim, the insurer that received notice may obtain reimbursement from another insurer only if it gives the other insurer notice of the claim that is reasonable under the circumstances.

The undisputed record evidence establishes that Kirkwood first received notice of the petroleum contamination in May 2007, that Utica Mutual received notice of the contamination within a few weeks thereafter and that Utica Mutual learned in July 2007 that the cause of the contamination may have been faulty spill locks that were installed in 1989 at Richmond Automotive. AAIC and NSC's submissions further demonstrated that, notwithstanding its knowledge of the contamination beginning in 2007, Utica Mutual did not provide notice to AAIC and NSC until late August 2010 or early September 2010.

As the evidence established that Utica Mutual delayed more than three years in notifying AAIC and NSC of the underlying incident, AAIC and NSC established their prima facie entitlement to summary judgment dismissing the third-party complaint against them based upon the absence of the prompt notice, as required by their policies. The burden thus shifted to Utica Mutual to establish a reasonable excuse for its failure to provide AAIC and NSC with timely notice of the incident (To that end, Utica Mutual argued that it was not until August 2010 that it learned that AAIC and NSC had previously provided insurance coverage to Kirkwood and that it provided AAIC and NSC with notice of the incident within a month of learning of the prior coverage.

Justifiable ignorance of insurance coverage may excuse a delay in giving notice if "reasonably diligent efforts were made to ascertain whether coverage existed”. Insufficient proof was offered by Utica to demonstrate whether it was justifiably ignorant of AAIC's and NSC's prior insurance coverage. Utica Mutual produced no evidence to show that it made any effort to discover AAIC's and NSC's existence before July 2010.  This was a pre-prejudice statute case.

Robert E.B. Hewitt III

[email protected]

06/19/19       Santiago v. Riccelli Enters. Inc.
Appellate Division, Second Department

Plaintiff Could Not Show Issue of Fact with Report by Physician Who Examined Him Three Years After Accident And Did Not State Basis for Causation Opinion

On December 18, 2013, the plaintiff was a passenger in a vehicle operated by his wife when it collided with a vehicle operated by the defendant Martin E. Ferguson, who was an employee of the defendants Riccelli Enterprises, Inc., and Riccelli Enterprises, LLC. The plaintiff commenced this action to recover damages for injuries allegedly sustained by him as a result of the accident. In the bill of particulars, the plaintiff alleged, inter alia, that he sustained injuries to the cervical and lumbar regions of his spine, and to his left shoulder. The defendants 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 accident. In support of their motion, the defendants submitted, inter alia, the affirmed reports of a radiologist who reviewed MRI films taken after the accident of the cervical and lumbar regions of the plaintiff's spine and the plaintiff's left shoulder. The radiologist opined that the injuries to those body parts were caused by degeneration, and that the MRI films showed no evidence of traumatic injury. In opposition, the plaintiff submitted the affirmed report of an orthopedic surgeon who examined him more than three years after the accident. The plaintiff's orthopedic surgeon opined that the accident was the cause of the plaintiff's injuries but failed to state his basis for that conclusion. The Appellate Division found that plaintiff had failed to raise an issue of fact.

06/08/19       Diakite v. PSJA Corp.
Appellate Division, First Department

Plaintiff’s Expert Failed to Address Degeneration Found by Defendant’s Expert

Defendants satisfied their prima facie burden of showing that plaintiff did not sustain a serious injury to his cervical spine, lumbar spine, or right shoulder by submitting the reports of their neurologist and orthopedic surgeon, who found that plaintiff had normal range of motion and opined that any alleged injuries had resolved with no permanent or residual effects. Defendants also submitted a radiologist's report which opined that plaintiff's MRIs showed degenerative conditions, including osteophytes, disc desiccation and hypertrophic spurring. Defendants also observed a three-year gap in treatment, from eight months after the accident, April 2013, to December 2016, which plaintiff failed to explain.

In opposition, plaintiff failed to raise a triable issue on causation. He submitted unaffirmed medical records, which showed that his own diagnostic studies revealed degeneration and osteoarthritis in his spine, and a report of an expert who examined him four years after the accident. The expert failed to refute or address the findings of preexisting degeneration in plaintiff's own medical records, or explain how the accident, rather than preexisting conditions, was the cause of the alleged spinal injuries. The expert's bare statement was similarly insufficient to raise an issue of fact as to whether the shoulder condition was causally related to the accident.

06/19/19       Canale v. Khananayev
Appellate Division, Second Department

The Jury Is Entitled to Believe One Expert Over Another

The plaintiff allegedly sustained personal injuries when, while walking across an intersection, she was struck by a vehicle owned by the defendant 24 Avenue Car Service and operated by the defendant Vitaliy Khananayev. Thereafter, the plaintiff commenced this action to recover damages for personal injuries. A jury trial on the issues of serious injury and damages was held. At trial, the plaintiff's treating orthopedic surgeon testified, inter alia, that the plaintiff had an injury to her right knee that required arthroscopic surgery, which he performed. The surgeon opined that the injury was acute in nature and causally related to the accident. Additionally, he testified that the accident caused or exacerbated a permanent injury to the cervical region of the plaintiff's spine.

The defendants presented the testimony of a neurologist and a radiologist. The neurologist testified that there was no objective evidence that the plaintiff had sustained a neurological injury. The radiologist testified that based upon his review of pertinent MRI films, the plaintiff's injuries were due to degeneration and were unrelated to the accident. The defendants submitted photographic evidence of the plaintiff engaging in various physical activities shortly after the accident.

The jury found that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The plaintiff moved pursuant to CPLR 4404(a) to set aside the verdict as contrary to the weight of the evidence and for a new trial on the issue of damages. The Supreme Court denied the motion. The Appellate Division agreed with the Supreme Court finding a jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached its verdict on any fair interpretation of the evidence. Where conflicting expert testimony is presented, the jury was entitled to accept one expert's opinion and reject that of another expert. The Appellate Division held that although the plaintiff presented evidence that she sustained a serious injury to her right knee and the cervical region of her spine as a result of the accident, the defendants presented evidence that the plaintiff's alleged injuries were caused by degenerative changes unrelated to the accident. This conflicting testimony presented credibility issues for the jury to resolve, and the jury's resolution of those credibility issues in favor of the defendants was supported by a fair interpretation of the evidence and, thus, may not be disturbed.

Steven E. Peiper
[email protected]

06/25/19       By Design LLC v. Samsung Fire & Mar. Ins. Co. Ltd.
Appellate Division, First Department
CD&C Clause in Marine Policy Provides Coverage for Warehouse Fire Loss

Plaintiff lost 19 containers of merchandise in a warehouse fire that occurred at a premises owned by Jordan Logistics.  The containers were temporarily stored with Jordan because upon arrival in the United States from abroad it was determined the retailers who were to take ultimate custody of the items were not yet ready to receive the shipment.

After the fire, By Design submitted a claim to Samsung under what appears to have been a marine policy.  That policy, however, contained a coverage extension for Consolidation, Deconsolidation & Containerization for goods temporarily stored with a warehouse for, inter alia, distribution  or redistribution from overseas vessels.  As the plain language of the clause applied to the loss, the Appellate Division found that the policy was triggered.

Rivera v. 203 Chestnut Realty Corp.
Appellate Division, Second Department
Question of Fact over Scope of Work Performed Necessitates Denial of Summary Judgment Motion

Plaintiffs commenced the instant action after their apartments were destroyed by fire.  At the time of the incident, 203 Chestnut (owner of the apartments) had retained Delco to perform painting at the premises.  During the course of the litigation, Chestnut settled plaintiff’s claims but continued to seek contribution from Delco.

Delco, however, moved for summary judgment against the plaintiffs. In support of its position, Delco pointed to the fire marshal’s report which concluded the loss was started by electrical failure.  Delco noted that it did not perform any electrical work, and as such it could not be responsible for the cause of the fire.  In opposition, however, some of the plaintiffs stated that they observed Delco performing electrical work in the apartment where the fire started.  On that basis, a question of fact precluded dispositive relief.

Delco was, however, entitled to dismissal of plaintiff’s negligence per se claims.  While a violation of State statute that imposes a specific duty will, automatically, give rise to liability, violations of local ordinances and/or administrative rules only constitute some evidence of negligence.  As such, plaintiff’s allegations that Delco violated local laws was insufficient to support its claims for negligence per se.

Finally, the Court ruled that Delco’s motion to dismiss Chestnut’s cross-claims should have been granted.  General Obligations Law 15-108 mechanically precludes a settling party from pursing contribution claims.  Moreover, Delco established there was not contract between it and Chestnut; let alone a contractual indemnity provision.


06/20/19       Fadlalla v. Yankee Trails World Tours, Inc.
Appellate Division, Third Department
The CPLR does not Permit an Extension of the Time to Serve a Complaint nor Amending the Pleading to Name the Correct Entity Where the Statute of Limitations has Expired

Five days before the expiration of the statute of limitations, plaintiff commenced the instant lawsuit against Yankee Trails World Tours, Inc.  The Complaint was then served through the Secretary of State.  There would have been no problem except for the fact that Yankee Trails, Inc. was the actual owner of the vehicle which caused plaintiff’s claimed injuries.

Yankee Trails, Inc. appeared, and immediately moved to dismiss for failure to effectuate proper service and due to the expiration of the statute of limitations.  Plaintiff cross-moved under CPLR 306-b (extending time to serve) and 305(c)(amending the summons and complaint), respectively. The trial court granted plaintiff’s application to extend the time to serve Yankee Trails.  Subsequently, the trial court also granted plaintiff’s application to amend the Summons and Complaint to name Yankee Trails as the correct defendant.

In reversing the trial court, the Appellate Division noted that it was undisputable that plaintiff named the incorrect defendant (World Tours) and that statute of limitations expired before the mistake was realized.  Under such circumstances, CPLR 306-b cannot be used to extend service upon an entity where a valid claim was NOT asserted timely.  Likewise, CPLR 306(c) could not be used to correct the name of a party in this instance because Yankee Trails was never actually sued.  World Tours, despite its similarity with Yankee Trails, is an entirely separate corporate entity with different corporate management.

Justice Egan dissented.  In support of his position, he argued that the trial court actually was permitted broad discretion under CPLR 306-b where there was good cause shown.  Here, Judge Egan noted that plaintiff’s counsel had been in communication with the carrier who insured both Yankee Trials and World Tours for months prior to filing suit.  Upon learning of his mistake, counsel promptly took steps to remedy the caption.  Finally, he again, noted that notice of the pending action to the insurer meant that Yankee Trails was not prejudiced by the confusion between the two similar sounding companies.

06/19/19       Swan v. Pier One Imports (US), Inc.
Appellate Division, Second Department
Party Seeking Common Law Indemnity Cannot Recover the Costs of Prosecuting that Action

As the story apparently goes, Pier One retained Advanced, Tricon and TCM to perform work as part of a renovation project at one of its stores.  Swan was injured at the jobsite and sued, among others, Pier One and Advanced.  In turn, Pier One commenced a third-party action against Tricon, and a second third-party action against TCM.  In both cases, Pier One sought contractual indemnification. 

Pier One was ultimately successful on a motion against Tricon, and received an Order that Tricon was required to defend, indemnify and pay Pier One’s “reasonable litigation costs.”

Almost a year later, the Court granted plaintiff’s application for summary judgment pursuant to Labor Law § 240(1).  At that time, however, the Court granted the dismissal of plaintiff’s claims against Tricon.
At the conclusion of the trial, the Court issued a directed verdict granting Pier One contractual indemnity against TCM.  The also ruled that plaintiff had no comparative negligence.

The jury went on to find Advanced negligent in the main-party action commenced by Swan.  As such, TCM and Tricon both moved for common law indemnification against Advanced.

As part of that application, TCM and Tricon sought recovery of fees, costs and disbursements incurred in the litigation, the costs incurred pursuant to Pier One’s indemnity award, and the fees and costs the incurred in prosecuting the common law indemnity claims.  The trial court denied the application for fees and costs.

With regard to fees incurred in prosecuting the claim against Advanced, the Appellate Division ruled that no such recovery was permitted.  However, the court appears to suggest that recovery of fees incurred in defense of the plaintiff’s lawsuit are, in fact, recoverable.

06/18/19       Gjonaj Realty & Mgt. Corp. v. Capacity Group of NY, LLC
Appellate Division, First Department
Rejection of Defendant’s Excuse as Unreasonable Does not Collaterally Estop it from Seeking Recovery against the Broker

This action arises out of an underlying personal injury action.  In that action, Gjonaj defaulted.  Its application to vacate the default was denied when the Appellate Division rejected its argument that it relied upon representations of its broker, Capacity, assuring that the suit had been properly tendered to Gjonaj’s insurer.

Gjonaj then commenced the instant action seeking to recover any losses owed in the underlying action due to the broker’s negligence.  Capacity moved to dismiss the current Complaint on the basis of the collateral estoppel doctrine.  This time the Court rejected Capacity’s argument therein noting that it only decided the reasonableness of Gjonaj’s excuse for its failure to timely appear.  That decision, however, did not address the reasonableness of its reliance upon Capacity’s statements that the suit had been tendered.  As such, the requisite “identity of issue” was lacking.

Agnes A. Wilewicz

[email protected]

Happy Fourth of July everyone!

Jennifer A. Ehman

[email protected]

06/26/2019    Union Mutual Fire Ins. Co. v. Patti
Supreme Court, New York County

Hon. Arthur F. Engoron
Court Finds Independent Contractors or Subcontractors Exclusion Applied; Conditions Where Not Met to Remove Exclusion from the Policy

This decision arises out of an incident in which the underlying plaintiff allegedly sustained injury when he was struck by a door that fell from a balcony at a premises where American’s Real Home Improvement (“American”) was performing work.  The building was owned by defendant, Rajvinder Kaur Patti (“Patti”).  The injured plaintiff eventually brought suit naming American and Patti.

At the time of the incident, Patti was insured under a policy of insurance issued by plaintiff, Union Mutual.  The policy contained an exclusion which provided that the company would only afford “independent or contractor’s coverage when all of the following conditions have been met: 1)  With respect to work performed on your behalf by independent contractors or subcontractors, if (1) each such independent contractor or subcontractor carries insurance providing coverage for the ‘bodily injury’ or ‘property damage’ that would be subject to the exclusions in paragrap[h] 2…and; (2) such insurance provides coverage and limits at least equal to that provided by this policy but for the exclusions in paragrap[h] 2… and (3) you have been named as an additional insured on such insurance coverage, then the exclusions in paragrap[h] 2…shall not apply and this policy is excess over such insurance.”  Otherwise, if those conditions were not met, then the policy excluded “bodily injury” or “property damage” arising out of any and all work performed by independent contractors and subcontractors.

Union Mutual ultimately brought this action against Patti based upon this exclusion.  The action also named American and its insurance carrier, United Specialty.  Union Mutual alleged (as additional relief) that United Specialty had an obligation to defend and indemnify Patti as an additional insured under its policy.  American and United Specialty moved to dismiss the complaint.  They asserted that while the policy included an additional insured endorsement, it required an agreement in writing in a contract or agreement that such person or organization be added as an additional insured on the policy, which was not present here.

The court began by considering the motions to dismiss.  The court agreed that the agreement between Patti and American did not contain an insurance procurement provision and did not require either party to indemnify or insure the other.  The court also noted that the agreement submitted was not executed until after the date of loss.  While Patti also presented a certificate of insurance, this was dated after the loss.  The court further highlighted the certificate’s language which made it clear that the certificate conferred no rights upon the certificate holder and required an endorsement for the certificate holder to be an additional insured.  Accordingly, the court granted American and United Specialty’s motion to dismiss.

Next, the court considered Union Mutual’ s motion for summary judgment.  In the court’s view, it was undisputed that the underlying plaintiff’s injuries arose from the construction occurring at the premises.  And, based upon the documentary evidence discussed above, the court found that conditions which would remove the exclusion from the policy had not been met since Patti was not named as an additional insured under the United Specialty policy.  Accordingly, summary judgment was awarded in favor of Union Mutual.

Note:  Nice outcome, Brian Barnas!

Brian D. Barnas

[email protected]

06/26/19       Sanders v. Progressive Insurance Company
United States District Court, Eastern District of New York
Discovery of Insurer’s File from Related Declaratory Judgment Action was not Permitted in Bad Faith Action

Plaintiff in this bad faith insurance action seeks the carrier's files relating to a declaratory judgment action brought in state court by the carrier after the carrier had disclaimed coverage. ECF [22]. Plaintiff's motion is denied. Under New York law, which applies in this diversity action and by agreement of the parties, a carrier may withhold privileged documents created after the disclaimer of coverage and/or for a related declaratory judgment coverage action because such documents concern the privileges of the carrier, not of the insured, and those privileges may be maintained by the carrier even in a bad faith action. See Landmark Ins. Co. v. Beau Rivage Restaurant, Inc., 509 N.Y.S.2d 819 (2d Dep't 1986); see also Bertalo's Restaurant Inc. v. Exchange Ins. Co., 658 N.Y.S.2d 656 (2d Dep't 1997).

The privilege log submitted at ECF [26] shows that the documents sought were created either after the disclaimer decision was made or in connection with the carrier's own litigation in declaratory judgment proceeding. Fields v. First Liberty Ins. Corp., 954 N.Y.S.2d 427 (Sup. Ct. Suffolk County 2012). Even though Plaintiff alleges that the carrier's pursuit of the declaratory judgment action was in bad faith in that it delayed payment of the policy such that the underlying plaintiff did not accept the policy in full satisfaction of damages, that claim does not undermine the carrier's right to have had its own privileged communications within the declaratory judgment litigation itself. That an ancillary impact of that declaratory judgment litigation may have been the harm that Plaintiff claims herein, Plaintiff does not need to know the carrier's strategy within the declaratory judgment action in order to evaluate whether the timing of the proffer of the policy after an arguably adverse court decision in the declaratory judgment action adversely impacted the defendant in the underlying personal injury action (whose claim was assigned to the current Plaintiff). Ordered by Magistrate Judge Vera M. Scanlon on 6/26/2019.

06/03/19       Peterson v. Western National Mutual Insurance Company
Court of Appeals of Minnesota

Discovery of Insurer’s File from Related Declaratory Judgment Action was not Permitted in Bad Faith Action

Peterson was injured in an automobile accident and suffered whiplash.  She was covered by an auto policy issued by Western with $250,000 in UIM coverage.  Two medical professionals determined that she would need Botox treatments for the rest of her life to deal with chronic headaches.  The tortfeasor’s policy had liability limits of $45,000.  Peterson put Western on notice of a potential UIM claim.  Thereafter, she settled with the driver for $45,000.

On July 22, 2014, Peterson sent a written demand for the available UIM policy limits.  Western made numerous requests for medical documentation from Peterson over a period of approximately 11 months, many of which had previously been submitted.  Peterson had also authorized Western to obtain her medical records.  In June 2015, Peterson sent a letter seeking an update on the status of her claim.  Western never responded, and Peterson sued two months later.

During the litigation, Western had an IME performed, which found no causal relationship between the headaches and the accident.  Western’s’ counsel concluded that Peterson had been fully compensated by her settlement with the tortfeasor.  In its analysis of the claim, Western determined that it had a 100% probability of defeating the claim.  The case was mediated unsuccessfully: Western offered $2,000 and Plaintiff demanded $200,000.  Western’s national counsel tried a different case with similar injuries in Hennepin County, and the jury awarded $1.1 million.  Counsel reported the verdict to Western’s trial counsel, who concluded that it had no impact on his evaluation of Plaintiff’s claim.

Before trial, Western increased its offer to $50,000, which was declined.  The case was tried, and the jury awarded damages of $1.4 million.  Western tendered the policy limits, and the court gave Peterson permission to amend her complaint to add a bad faith claim.  The bad faith claim proceeded to trial, and the district court found that Peterson proved that Western lacked a reasonable basis to deny her claim and that it knew of, or acted with reckless disregard of, the lack of a reasonable basis for denying the claim.  The district court awarded $100,000 plus $97,940.50 in attorney’s fees.

On appeal, the court considered whether the district court misinterpreted the first prong of Minnesota’s first party bad faith statute.  The first prong requires an insured to show that the insurer did not have a reasonable basis for denying benefits.  Reasonable basis is not defined by the statute, and the court concluded that both parties presented reasonable interpretations, which rendered the statute ambiguous.  Western argued that Peterson was required to prove that there were no facts or evidence upon which Western could rely to deny coverage to satisfy the first prong.  This reading was consistent with Iowa case law.  Peterson, in contrast, argued that she only had to prove that a reasonable insurer under the circumstances would not have denied or delayed payment.  This approach was consistent with Wisconsin law.

Since the statute was ambiguous, the court consulted the legislative history, where the Wisconsin standard was specifically discussed.  The court concluded that an insurer must conduct a reasonable investigation and fairly evaluate the results to have a reasonable basis for denying an insured’s first-party insurance-benefits claim.  If, after a reasonable investigation and fair evaluation, a claim is fairly debatable, an insurer does not act in bad-faith by denying the claim. 

The court then considered whether the court below had followed this standard.  The court below found that Western delayed settling or denying Peterson’s claim for nearly one year without properly investigation; ignored Peterson’s evidence supporting her claim; prepared a claims summary that misstated facts; and failed to evaluate and weigh competing opinions.  Thus, the appellate court held that the district court found that Plaintiff had satisfied the first prong because Western lacked a reasonable basis for denying plaintiff’s claim.

The second prong of the Minnesota statute required Peterson to show that Western National knew, or acted in reckless disregard, of the lack of a reasonable basis for denying the claim.  The appeals court concluded that Peterson also satisfied the second prong because Western assigned nothing more than nuisance value to the claim and assigned a 100% probability of success to the case.

There was a one judge dissent, who argued that there was sufficient evidence in the record for Western to have a reasonable basis for its evaluation of the claim.  The dissent argued that the district court dismissed Western’s consideration of any information except Peterson’s medical records and expert opinions.  The court trivialized any reliance on the fact that this claim arose from a minor collision with minimal property damage, no obvious physical injury, and no claim for UIM benefits until nearly five years after the collision.  The dissent further emphasized that Western National reviewed the medical records provided by Peterson; it simply disagreed that those records required the conclusion that Peterson’s medical expenses resulting from the 2009 collision exceeded the amounts she had already received.

John R. Ewell
[email protected]

05/28/19       C.M.S. Investment Ventures v. American European Ins. Co.
New Jersey Superior Court, Appellate Division
Twenty-month Delay in Disclaiming Coverage Was Unreasonable under New Jersey law

CMS was the owner of an apartment building in Irvington, New Jersey and plaintiff Robert McCoy and his son were its principals. A.G. resided in a ground-floor unit. A.G. had complained to CMS management that a window in her unit was in disrepair and failed to lock properly. There were no bars installed over the window. CMS allegedly failed to respond to A.G.’s concerns. On March 29, 2013, an intruder broke into A.G.’s apartment through the window and sexually assaulted her. A.G. asserted a premises liability claim against CMS. She alleged CMS breached a duty of care to her by failing to adequately maintain the property, by failing to keep the premises safe, and by not taking precautions to protect tenants from reasonably foreseeable criminal activity.

CMS was insured by AEIC. CMS's policy contained commercial general liability coverage. The CGL coverage contained an assault and battery exclusion:


We will not provide any coverage under this policy for any claim, demand or suit based on Assault and Battery, or out of any act, actual or alleged, or omission in connection with the prevention or suppression of such acts, whether caused by or at the instigation or direction of any "insured", their employees, patrons or any other person or entity.

All claims, accusations or charges of negligent hiring, placement, training, management or supervision arising from actual or alleged assault or battery are also not covered and will have no duty to defend any "insured" person or entity from such claims, accusations and charges.

On May 10, 2013, McCoy, through CMS’s insurance broker, submitted a general liability loss notice to AEIC seeking coverage for A.G.’s claim. AEIC opened a claim. McCoy spoke with the adjuster and assumed AEIC would handle the claim. The adjuster sent letters to A.G.’s attorney seeking information about the break-in and sexual assault. A.G.’s attorney did not respond to either letter but instead, on February 5, 2014, requested AEIC reimburse A.G. for medical payments. The adjuster denied coverage and invoked an exclusion under CMS’s policy for medical payments incurred as a result of an injury sustained on a normally occupied premises. On March 19, 2014, the adjuster closed the file but neglected to inform McCoy.

Thereafter, McCoy and his son sold CMS to an investor. The contract for sale contained no reference to A.G.’s claim because McCoy thought the claim was resolved.

On January 25, 2015, A.G.’s attorney wrote to AEIC to initiate a claim under CMS’s policy. McCoy was served with A.G.’s complaint on April 3, 2015, and, on April 6, 2015, AEIC sent a letter to CMS disclaiming coverage (20 months after notice of the sexual assault). AEIC characterized A.G.'s lawsuit as an allegation of assault and battery and utilized the assault and battery exclusion to deny coverage.

CMS filed a complaint seeking a declaratory judgment against AEIC for defense and indemnification. CMS moved for summary judgment and argued the assault and battery exclusion was ambiguous and AEIC should be estopped from denying coverage. The trial court granted summary judgment finding that the exclusion did not apply and that the disclaimer was untimely.

The Court began by analysis by noting the phrase "any claim, demand or suit based on Assault or Battery” “needed to be interpreted.” In other cases, assault and battery exclusions have used the phrase “arising out of,” i.e., “NO coverage of any kind . . . is provided by this policy for Bodily Injury and/or Property Damage arising out of or caused in whole or in part by an assault and/or battery.” New Jersey courts have interpreted “arising out of” to mean “originating from,” “growing out of” or “having a substantial nexus [to].” "Whether used to define or exclude coverage, the phrase 'arising out of' is given a broad definition."

Here, the exclusion used the term “based on”. The Court turned to Webster’s dictionary for the answer. The term "based" is a transitive verb meaning to "make," "form" or "serve" as the foundation of "any claim, demand or suit[.]" The Court noted that:

Use of the preposition “on” followed by “Assault and Battery” puts a limit on possible claims, demands or suits subject to the exclusion. Read together, the exclusion applies to claims, demands or suits where “Assault and Battery” forms or serves as the claim’s foundation.

New Jersey case law suggests an injury can have several proximate causes, and when one cause is excluded under the policy, it does not necessarily mean all causes of the injury are excluded.

From this the Court reasoned as follows. If A.G.’s claim were based only on the sexual assault, the exclusion would apply; however, A.G. sued CMS under a premises liability theory alleging CMS’s negligent maintenance of the property caused her injury. New Jersey courts have held landlords responsible for creating an unreasonably enhanced risk of loss resulting from foreseeable criminal conduct. Thus, the Court found that A.G.’s claim sounds in negligence, not an intentional tort, and should have been covered by AEIC.

In addition, the Court ruled the AEIC was estopped from denying coverage. An insurer is entitled to a reasonable period of time to investigate whether the particular incident involves a risk covered by the terms of the policy. Once an insurer has had a reasonable opportunity to investigate, or has learned of grounds for questioning coverage, it then is under a duty to promptly inform its insured of its intention to disclaim coverage or of the possibility that coverage will be denied or questioned. Even an insurer which does not acknowledge coverage may be estopped by an unreasonable delay in disclaiming coverage, or in giving notice of the possibility of such a disclaimer.'

AEIC knew A.G. was sexually assaulted in her apartment since McCoy first reported the claim. AEIC was entitled to a reasonable amount of time to investigate the claim; however, AEIC’s adjuster closed the file without rendering a coverage decision or informing McCoy. Without hearing from AEIC, McCoy could assume AEIC resolved the claim. Indeed, McCoy sold his interest in CMS under the impression AEIC handled the claim. The Court ruled that AEIC acted unreasonably by waiting twenty months to disclaim coverage. The Court affirmed the grant of summary judgment to the insured.

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

Lee S. Siegel

[email protected]

Check back next time for the latest from Connecticut.

Brian F. Mark
[email protected]

All’s quiet on the construction defect front.


Larry E. Waters

[email protected]


06/14/19       Gemini Insurance Company v. Integrity Contracting Inc.
District Court, Southern District of New York
Court Grants Plaintiff’s Motion for Voluntarily Dismissal as Plaintiff Satisfied all Relevant Factors Warranting a Voluntary Dismissal

This decision stems from Plaintiff moving to voluntarily dismiss the action without prejudice pursuant to the Federal Rules of Civil Procedure 41(a)(2). Plaintiff sought dismissal shortly after the Court’s denial of both parties’ motions for summary judgment. As part of the dismissal, Plaintiff offered to discontinue the litigation of the Declaratory Judgment Action and assume Defendant’s defense of the two underlying bodily injury claims.

In its motion papers, Plaintiff argued that it brought this motion diligently, and that dismissal at this stage would avoid significant effort and expense in bringing the Declaratory Judgment Action to trial.

The Court began its analysis with the factors relevant to the consideration of a voluntary motion to dismiss without prejudice established by the Second Circuit.  First, the Court found that Plaintiff filed its motion promptly upon learning that Defendant would not consent to a dismissal in light of the Court’s recent summary judgment ruling. Second, the Court found the record did not reveal any evidence of vexatious action on the part of the Plaintiff. Third, the Court found Plaintiff filed its motion before either party had begun trial preparations. Fourth, the Court found Plaintiff filed that the duplicative expense of relitigation would be slight as there was still issues of fact that required additional dedication of resources. Fifth, the Court found that Plaintiff’ explanation for seeking dismissal was rational and persuasive.

While Defendant did not dispute that Plaintiff met the factors warranting a voluntarily dismissal, Defendant did requests two conditions on the granting of Plaintiff’s dismissal.  First, Defendant requested that the dismissal be conditioned on Plaintiff assuming the defense of the two personal injury matters. Second, Defendant requested that it be permitted to amend its answer to include a counterclaim for declaratory judgment.  The Court rejected both conditions.  Here, the Court reasoned that Plaintiff explicitly consented to assume Defendant’s defense in the Personal Injury Actions, subject to reservation of rights, commencing from the date of Defendant’s initial notice of the Personal Injury Actions.  Further, the Court reasoned that the deadline for Defendant to move to amend its answer had elapsed almost two years prior and to permit Defendant to amend its answer would not be efficient.

In sum, the Court dismissed the entire Declaratory Judgment action without prejudice. The Court also ruled that as stipulated Plaintiff would defend Defendant in the two underlying personal injury actions. Further, the Court ruled that discovery obtained in the Declaratory Action may be used in any future action related to the insurance policy at issue.

06/14/19       99 Wall Development Inc. v. Allied World Specialty Ins.
District Court, Southern District of New York

Court Granted Plaintiff’s Motion to Compel in part and denied in part

Defendant issued a Commercial Inland Marine Property Insurance Policy to Plaintiff (the “Policy”).  On July 29, 2016, Plaintiff had a water related loss from rain water that leaked through the roof of the building causing damage to the building elevators. Subsequently, on October 6, 2016 Plaintiff had second water related loss when water leaked from a water tank on the 25th floor of the building, causing extensive damage to various condominium units and common areas.

In connection with the water related loss, Plaintiff submitted claims to Defendant. During its investigation, Defendant advanced certain amounts to Plaintiff and ultimately paid more amounts that it deemed were covered under the Policy.

In February 2017, Defendant informed Plaintiff that it needed to further investigate the delay and causes for it.  In May 2017, Defendant informed Plaintiff of its final coverage position that the Policy did not cover costs associated with the delay in the project.

In turn, Plaintiff filed this current action for breach of contract against Defendant. Plaintiff also alleged that Defendant acted in bad faith throughout its investigation and adjustment of its insurance claims.  Thereafter, Plaintiff moved to compel production of certain documents listed on Defendant’s privilege log.

The Court began its decision with a discussion on the scope of discovery.  The Court noted that in diversity cases such as the pending one, a court looks to state law for determine privilege. The Court noted that under New York law, the attorney-client privilege protects communications between client and counsel made for the purpose of obtaining or providing legal advice that were intended to be an in fact kept confidential. In addition, the Court noted that draft documents sent to counsel for legal review may be protected by attorney-client privilege if the draft and communications concerning it were intended to be and maintained as confidential.  Further, the Court noted that “drafts of documents prepared by an attorney for subsequent transmission to third parties may be “protected by the attorney-client privilege” if the draft contains “confidential information communicated by the client to the attorney that is maintained in confidence.”

Next, the Court discussed the Work Product Doctrine. The Court acknowledged that “[u]nlike the attorney-client privilege, the work product protection in diversity cases is governed by federal law.”  As such, the Court stated that the key factor in determining the applicability of the Work Product Doctrine is whether the documents were prepared with an eye toward, or in anticipation of, or because of the prospect of litigation.” Therefore, the Court found that it must determine if the materials would have been prepared in essentially similar form irrespective of the litigation.  

In its analysis, the Court found that Defendant “was overly zealous in withholding and redacting documents as privileged and/or work product.”  The Court found that reserve information was relevant under the relevance standard of the Federal Rules of Civil Procedure 26(b)(1). In support the Court noted that New York District Courts have found reserve information relevant where bad faith has been alleged.

In addition, the Court found that reinsurance information was relevant.  While the court noted that the relevance of reinsurance information is determined on a case-by-case basis, the Court reasoned that such information was relevant here because “it sheds light on Defendant’s internal evaluations of the extent of Plaintiff’s loss.”

Next, the Court moved on to the privilege issue. The Court found that majority of the documents withheld or redacted were in fact not privileged because they did not seek or convey legal advice.  However, the Court found that the documents that contained counsel’s legal assessment of claims, revealed legal advice sought or conveyed by counsel, and reflected counsel’s investigation of the claim for purposes of providing legal advice on coverage and the current litigation including reserve information were in fact privileged.

In sum, the court granted in part and denied in part Plaintiff’s motion to compel.

Eric T. Boron

[email protected]

06/14/19       Donaldson v. Country Mutual
Supreme Court of Alabama
Summary Judgment For Insurer Affirmed – No Vicarious Liability – Tortfeasor, an Agent for Insurer, Was an Independent Contractor and Not an Employee

On June 14, 2019, the Supreme Court of Alabama affirmed the summary judgment granted to Country Mutual Insurance Company (“Country Mutual”) by the trial court.  Supreme Court determined the plaintiff Daniel Kyle Donaldson (“Donaldson”) failed to submit substantial evidence of the existence of a genuine issue of material fact to support his claims against Country Mutual and to defeat Country Mutual's summary judgment motion.

The pertinent background facts are as follows.  Donaldson was a construction worker injured in November 2015 when struck by a motor vehicle owned and operated by Country Mutual’s agent Gregory Ryan Johnston (“Johnston”) while Donaldson was working in a construction zone on the west side of Bailey Cove Road in Madison County, Alabama.  As a result of the collision, Donaldson suffered severe injuries to one of his legs that ultimately required the amputation of the leg.  Donaldson sued Johnston and Country Mutual, asserting negligence and wantonness against Johnston, and, that Country Mutual was vicariously liable for Johnston’s conduct under theories of agency and respondeat superior. At the time of the accident, Johnston was working as an insurance agent under an “agent's agreement” with Country Mutual and a number of other companies that are collectively referred to in that agreement as “Country Insurance and Financial Services.” Per the agent’s agreement, Johnston solicited applications for the insurance products of Country Mutual and the other named companies, bound coverage and delivered insurance policies as approved by those companies, transmitted premiums received from policyholders to those companies, and provided customer service to policyholders. The agent's agreement expressly identified Johnston as an “independent contractor” and stated that “nothing in this Agreement shall be construed to create the relationship of employer and employee” between the parties.

Predictably, Country Mutual’s motion for a summary judgment argued Johnston was not its agent or employee but, instead, was an independent contractor. Country Mutual further argued that, even if Johnston was determined to be its employee, his conduct at the time of the accident was beyond the e outside the scope of his alleged employment.

In opposition, Donaldson argued that a genuine issue of material fact existed as to whether Johnston was an employee of Country Mutual.  Donaldson also asserted there was a genuine issue of material fact as to whether Johnston was acting within the scope of his employment with Country Mutual at the time the accident occurred.

Alabama’s Supreme Court opined that when determining if a person is the servant or employee of another, rather than an independent contractor, courts look at “whether the entity for whom the work is being performed has reserved the right of control over the means by which the work is done.” (citing Alabama cases as precedent)  Supreme Court stated that for an employer-employee relationship to exist, the purported employer must retain the right to direct the manner in which the individual's work is to be performed, as well as the result the employer desires the individual to accomplish. The Supreme Court further noted that it is the reserved right of control, and not the actual exercise of such control, that governs the relationship, and how the parties characterize their relationship is not necessarily determinative of whether an individual is an independent contractor or an employee.

The Court stated,

“Because working relationships take a wide variety of forms, each case must depend on its own facts, and all features of the relationship are considered together.”

After considering the evidence about Johnston’s interactions with Country Mutual and how Johnston earned money with and through his business, Supreme Court particularly noted that Johnston determined his own work schedule and the hours of operation of his office.  Further, Johnston was not assigned a specific territory; he solicited potential customers at his own discretion and in whatever manner he deemed the most effective. Johnston was supervised in some capacity by an agency manager who oversaw all the agents in North Alabama working with Country Mutual. However, Johnston's agency manager at the time of the accident stated that he was not Johnston's “direct supervisor” because he did not “have authority over him in a typical supervisory capacity.” Johnston's previous agency manager stated that his supervisory duties were to make sure that representatives were “doing things the way that would be in compliance with the law.” Johnston stated that the agency manager “was there if we needed him for questions” and would “help guide” him through customer complaints but indicated that the agency manager did not tell him how to run his business.

Supreme Court then stated,

“[I]ndependent contractors, as the name implies, engage in contractual relationships but otherwise work independently, controlling the direction and performance of their own work.”

and held that “minimal, if any, control” was retained by Country Mutual over Johnston’s business activities and that his relationship with Country Mutual, viewed in its entirety, “shows little indicia of an employer-employee relationship”.

Supreme Court opinion also stated that even if the Court were to assume Johnston was an employee of Country Mutual, “there was not substantial evidence before the trial court showing that the…accident occurred within the…scope of Johnston’s (alleged) employment”.  While Donaldson asserted that the accident occurred while Johnston was driving to Johnston’s office, Supreme Court noted, citing Alabama case law as precedent, that the general rule is that “an employee, traveling to and from his place of work, is not engaged in work for his employer but is acting solely for his own purpose”.

06/14/19       Hilburn v. Enerpipe Ltd.
Supreme Court of Kansas
Limits Imposed By Kansas Legislature On Non-Economic Damages Ruled Unconstitutional

The Kansas Supreme Court ruled in Hilburn v Enerpipe, Ltd on June 14, 2019 that limits imposed by the Kansas Legislature on noneconomic damages are unconstitutional.

This decision strikes down the statutory cap on damages that account for pain, suffering, mental anguish and loss of enjoyment of life following an injury.  The majority opinion held that such a cap or limit violates a person's “inviolate” right to a jury trial under the Kansas Constitution's Bill of Rights, and apparently a person’s right to a jury’s determination as to the appropriate amount of damages, and as such is unconstitutional.

The background facts are that the plaintiff Diana Hilburn (“Hilburn”) was injured when a semi-truck rear-ended the car in which she was a passenger.  Hilburn sued Enerpipe Ltd., owner of the semi-truck that rear-ended the vehicle in which Hilburn was seated, alleging the crash was the result of driver negligence, making the Enerpipe company liable. A jury awarded Hilburn $335,000 in damages, but a district court reduced the award by more than $51,000 through the application of the state's then-$250,000 award cap. Hilburn appealed.  A Kansas state appeals court rejected her argument.  However, the Kansas Supreme Court has now reversed that decision in a 4-2 ruling.

Those who support caps say damages caps hold down insurance costs for the public, by safeguarding against “runaway juries” that award huge verdicts.  Seems reasonable to me.  But not constitutional to the Kansas Supreme Court.

Marina A. Barci

[email protected]

06/14/19       Excel Med. & Diagnostic, P.C. v. Park Ins. Co.
Appellate Term, Second Department

Assignor’s Failure to Appear for Scheduled IME’s is Basis for to Deny No-Fault Benefits to Assignee-Provider

The plaintiff-provider sought to recover assigned no-fault benefits from the insurer. The insurer requested that the assignor appear for an IME. The assignor failed to appear for the scheduled IMEs, so the insurer denied payment of benefits. The plaintiff-provider then sued the insurer, and the insurer moved to dismiss the complaint based on the assignor’s failure to appear. In support of the dismissal, the insurer submitted an affirmation from the IME doctor. An affirmation from an IME doctor is sufficient evidence to establish an assignor’s failure to appear. The plaintiff-provider was not able to challenge the IME doctor’s affirmation, so the insurer prevailed. A good reminder here is that the only way to really challenge an IME doctor’s affirmation is to show that the assignor never received notice of the IME’s or that the IME notices were deficient in some way, for example giving the assignor the wrong address of the IME doctor.

06/13/19       Unitrin Advantage Ins. Co. v. Lake Chiropractice, PLLC
Civil Court, City of New York, New York County

IME Doctor Versus Provider Doctor Testify Regarding Medical Necessity of Treatment to be Paid by No-Fault Benefits; Comes Down to Credibility Issue

First, I would just like to say, what a unique way to name your chiropractic practice. This case arises out of the defendant-providers attempt to collect $8,420.91 in no-fault benefits. The plaintiff-insurer denied the claim on the basis that it was not medically necessary, and that it exceeded the permitted fee schedule amount. The parties ultimately stipulated to the proper fee schedule amount as $6,431.80.

After going through arbitration, master arbitration review, and mediation, a bench trial de novo occurred. At trial, the sole issue was medical necessity and both the IME doctor (Dr. Berke) and treating doctor (Dr. Bernardini) testified. Dr. Bernardini saw the assignor for chiropractic treatment for approximately 10 weeks, 4 time per week, before the IME. At the IME, Dr. Berke spent about 20-30 minutes examining the assignor and found that, although the injuries the claimant complained of were casually related to the underlying accident, no further chiropractic treatment was necessary. Dr. Bernardini issued a rebuttal in response to Dr. Berke’s IME report, disagreeing with his conclusion and stating that all treatments the assignor received after the IME were medically necessary. He opined that his information was more accurate and the continuation of treatment was the correct course, compared to the limited information that Dr. Berke had.

A medically necessary treatment/expense is defined by courts as “services that are reasonable in light of the patient’s injury, subjective and objective evidence of the patient's complaints of pain, and the goals of evaluating and treating the patient.” There is initially a presumption of medical necessity in favor of the claimant and it is the burden of the insurer to establish services were not medically necessary, supported by sufficient factual basis and medical rationale.

Here, the court found Dr. Bernadini’s testimony more credible because he was in a better position to make a determination about the claimant’s medical condition than Dr. Berke. Thus, the insurer failed to establish lack of medical necessity and the provider was entitled to the $6,431.80 plus interest, attorneys fees, and costs.


Earl K. Cantwell

[email protected]

01/04/19       Lee Kennedy Co. v. Arch Insurance
United States District Court, Massachusetts

No Insurance Recovery for Contractor’s “Voluntary Payments”

In this action, the outcome was that a contractor may have been contractually responsible for fixing a subcontractor’s faulty work, but provisions in its CGL insurance policy meant that it could not collect the associated $200,000 in damages from its insurer.

Lee Kennedy was hired to construct a new gymnasium for a school. Arch Insurance amended its policy with Lee Kennedy to include the gymnasium project. After the project was completed, Lee Kennedy was notified regarding flooring system deficiencies, and approximately $200,000 was withheld to offset the anticipated cost of fixing the flooring issues.

Lee Kennedy tendered the claim to Arch for coverage of the anticipated floor-repair costs.  Litigation ensued, and the District Court granted Arch’s motion for summary judgment which was basically premised on an argument that the claimed payments to fix the flooring issues were not “property damage” as defined in the CGL policy.

The insurance policy stated that Arch would pay sums that the insured “…becomes legally obligated to pay as damages because of bodily injury or property damage”. Arch argued that the payments in this case were the result of defective work by a subcontractor, and were non-covered property damage.

Lee Kennedy argued that the subcontractor’s faulty work obligated it as the contractor to remedy the deficiencies under the terms of its contract. Lee Kennedy also argued that the phrase” legally obligated to pay” does not require a demand or formal lawsuit. However, the District Court disagreed, reasoning that the insurance company’s obligation to pay was precluded by exclusions in the Arch policy.

With respect to the argument that Lee Kennedy was contractually obligated to fix the faulty work, the CGL policy excluded from coverage property damage which the insured became obligated to pay as damages by reason of the assumption of liability in a contract or agreement. Therefore, Lee Kennedy’s claim that it had a contractual obligation to fix the faulty work was excluded under the policy.

The District Court stated that the phrase “legally obligated to pay as damages” in a CGL policy generally applies to tort liability and not contractual liability. The Court therefore found that Arch had no obligation to cover Lee Kennedy for its asserted contractual liability for the flooring-related damages.

In order to succeed on its claim against Arch, Lee Kennedy would have had to show that it would have been legally obligated to pay for the flooring defects even if it did not have a contract to build the gymnasium. In essence, Lee Kennedy would have had to prove that it had some other non-contractual legal obligation to remedy the floor. Lee Kennedy was unable to establish that it had any other legal obligation to remedy the flooring defects other than as called for in its contract, and the District Court ruled that Lee Kennedy could not recover from Arch for what it called “voluntary payments”. Perhaps another and better way to make this statement would be that, although Lee Kennedy might have been contractually obligated to remedy the flooring defects and this was not purely “voluntary”, that assumption of liability only arose by virtue of its contract to construct the gymnasium and therefore was excluded under the policy.

This case represents a junction of different insurance policy terms, specifically the “legally obligated to pay” language, and exclusions or limitations where loss or damage arises due to the existence or assumption of liability under a contract or agreement. This case would seem to indicate that the “legally obligated to pay” language does not require an actual legal order or judgment against the insured before coverage can exist. However, the insured would have to establish that it would incur the liability covered under the policy and not be barred by any pertinent policy exclusion.

The Court stated as a general, guiding principle that the “legally obligated to pay as damages” clause commonly found in the definition of damages in a CGL policy applies to tort liability and not contractual liability. This is consistent with another overall interpretation seen in this case (and in many other applications) that at times courts draw distinctions based on the fact that a CGL policy is not intended to be a warranty provision with respect to a contractor’s work.         

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