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Coverage Pointers - Volume XXI, No. 10

Volume XXI, No. 10 (No. 549)
Friday, November 1, 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:

It’s hard to believe it’s November 1 – almost springtime!

Virtually every day my direct dial (716.849.8942) rings with a familiar refrain “I have a situation”, says the caller and the fun begins.  Well, we love situations and if we can help unravel a mystery, plot a strategy, help focus an investigation or empower you to go forward, we’re delighted to help.

We send our heartiest congratulations to Ryan Maxwell and CJ Englert on passing the New York State Bar Examination.  We are delighted, but not surprised.

Another issue, chock full of good stuff for your coverage and reading pleasure.  From rescission of auto policies to protecting claims files from discovery to construction defect to regulatory changes, New Jersey, Connecticut and beyond.  Coverage Pointers has it all.  Read the notes and summaries below but don’t forget to read the issue, attached, and pass it around to your colleagues.

Baseball Stuff:

So, the Washington Nationals were successful in the World Series.  Was it the first Washington Major League World Series victory?  Nah.  The original Washington Senators were founded in 1901.  In 1905, the team became the Washington Nationals and then started using the “W” logo for the next 52 years.  The name Nationals (Nats) and Senators were both used by the media forever, winning the World Series in 1924 against the New York Giants.  In 1960, the team closed up shop in DC and moved to Minnesota and became the Twins (starting in 1961).

That same year, a new Major League franchise team, the Washington Senators started playing in D.C.  That team last a decade in the Washington and then moved to Dallas-Fort Worth in 1972 to become the Texas Rangers.

In 1948, in the Negro League, the Washington franchise, the Homestead Grays defeated the Birmingham Black Barons, four games to one. Willie Mays, age 17, played center fried for the Barons.

In 2005, after being with a Major League team for 33 years, the Montreal Expos, being sold to a new owner, moved to D.C. and became the Washington Nationals.

And the Astros?  They game into the majors in 1962, as the Houston Colt 45’s, in the National League, at the same time as the New York Mets.  Three years later, when the Astrodome was open, they name was changed to the Astros.  The Astros remained in the National League until 2013, when they were realigned to the American League.  In 2017, that team became the first major league team to win pennants in both the National League (2005) and the American.

Coverage Pointers Editorial Promotion – John Ewell:

Agnes Wilewicz has been and remains my right-hand, namely Associate Editor, for CP and I thank her for her continued and superb service.  We are pleased to announce the promotion of John (Jersey Journal) to the post of Assistant Editor.  John will back up Agnes in helping edit issues of our august publication.  This newsletter is a labor of communal love among our entire coverage team, with our columnists completing their respective submissions by deadline each issue, every other week.  Then, the editorial staff organizes, edits, and prepares each issue for timely submission (and that’s what we’ve done for going on 21 years). Congrats, John!

FDCC Insurance Industry Institute:

Next week, I’ll be joining my FDCC friends at the Insurance Industry Institute in New York City. It’s a fabulous program and I’ll be moderating a panel focusing on the War Exclusion as it impacts on cyber-war in the 21st century.  Great program offerings and here’s a link to the brochure.   November 6-8 in the Big Apple.

I am not a Halloween fan, so I’ll be working on this issue with the drapes drawn and the lights out.  Don’t soap my car.

  • 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!).  Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.
     

  • 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.
     

  • Products Liability Pointers (coming soon): Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving.  Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up-to-date with the latest developments and trends, and providing useful practice tips and litigation strategies.  This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework and governmental agencies.  Contact Brian F. Mark at [email protected] to subscribe.

 

Wilewicz’ Wide-World of Coverage:

Dear Readers,

I hope everyone had a very Happy Halloween! In our house, we have a split of opinions about the holiday – I’m not a huge fan and never have been, while my husband and daughter go all out. They buy upwards of 1,000 pieces of candy (and we always run short), they decorate both inside and out with all manner of creepy things, and they plan their costumes for months in advance. This year, my daughter is dressing as Rory Gilmore from the Gilmore Girls, in full Chilton school uniform. It works out, as it’s something she can wear to school without offending the dress codes, while appealing to my mom sensibilities since it includes a long-sleeved sweater. Meanwhile, there was some debate as to how to dress up the dog, but we couldn’t come up with anything fitting or on theme before we ran out of time. Suggestions for next year welcome?

Now, this week in the Wide World of Coverage, we have a Second Circuit case that isn’t substantively coverage-related but does relate to a years-long coverage matter involving dozens of national and international carriers, so it might be of interest to some. Relating to the on-going saga of the World Trade Center litigation, Underwriting Members of Lloyd’s v. Al Rajhi Bank discusses whether personal jurisdiction in the United States even exists to bring a foreign bank into court in a terrorism case. In the past, personal jurisdiction was lacking because the Second Circuit had held that providing indirect funding to an organization that was hostile to the U.S. did not constitute intentional conduct that was “expressly aimed at the residents of the United States”, sufficient to confer jurisdiction. In this case, however, the allegations were more direct. With clearer allegations of specific intent on the part of the bank, the Circuit Court remanded the matter back down to explore the factual basis for those claims. The saga, even over 18 years since 9/11, continues in litigation.

Until next time!

Agnes
Agnes A. Wilewicz

[email protected]

Do Kiss Your Wife – or Else:

Evening Public Ledger

Philadelphia, Pennsylvania

01 Nov 1919

 

MORE KISSES DEMANDED BY PHILADELPHIA WIVES

May Declare a Strike if Husbands Do Not Show Greater  Devotion to Home

Many Agree With Woman Who Seeks Divorce Because “Hubby” Failed in Osculatory Duty

            There may be another strike in Philadelphia—a strike of wives for more kisses and greater devotion to home on the part of their husbands.

            Suffragists, clubwomen, business women and housewives were willing to talk on the subject today, though no one was ready to be “quoted.”  One leading suffragist and clubwoman, however, refused to commit herself.

            “I am not sure of my ground,” she admitted.

            But there were Plenty of others who agreed Mrs. Amelia Skerl, of Jamaica, who brought suit against her husband in a New York court because he was too busy even to kiss her good-by before he left in the morning, should be granted a divorce.

            It was really this divorce suit that brought the “insurgents” here to voice their sentiments for the first time.

            “I know just how it is,” said one clubwoman.  “My husband and I are devoted, but I can tell you exactly how he will act every evening.  He comes in promptly at 6:15, gives me a peck on each cheek, devours his dinner, throws the dog off the couch and settles himself among the cushions with a paper and a cigar.  At 10 o’clock he takes a glass of hot milk and goes to bed.  It is just as though I didn’t exist, except as a sort of comfort-maker.”

            Another woman gave her version of these “pecks on the cheek.”

            “I suppose I couldn’t ever say  that my husband failed to kiss me.  But his kisses are of a most formal variety.  They are just mechanical pecks; he sort of has the habit, I guess.

            “Anyway, I think a husband should be shaken up a bit to appreciate his home duties.  He doesn’t need to hut up like a clam at night just because he has been busy in an office all day.”

            In other words, instead of the present:  “Two pecks on the cheek; act of consuming dinner; slippers, smoking jacket, soft couch, book and cigars; gruff ‘goodnight,’ curtain,” the wives propose to demand “ ‘Hello, sweetheart,’ hearty kiss; pleasing comments on dinner and day’s work; ‘want to go to the theatre tonight?’ and additional osculatory fervor.”

Barnas on Bad Faith:

Hello again:

Today I had the pleasure of presenting with my colleague, Anastasia McCarthy, on litigation and coverage concerns associated with the New York Child Victims Act to the Erie County Bar Association.  We have a number of knowledgeable speakers at the firm who are ready, willing, and able to provide training on the liability and coverage issues presented by the Child Victims Act.  Don’t hesitate to reach out to us if you’re interested in having us come out to your office to provide training or instruction on these hot issues.

I have two cases in my column today that both boil down to two pretty simple holdings.  In Smith, the Louisiana Supreme Court holds that the statute of limitations, or prescriptive period, for a bad faith claim in Louisiana is the ten-year period for breach of contract.  In Cawthorn, the Eleventh Circuit applies Florida law and holds that a consent judgment between the insured and plaintiff does not meet the “excess judgment” requirement to state a cause of action for bad faith.

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

Brian
Brian D. Barnas

[email protected]

But, Avoid Kissing Your Fiancé:

The Washington Times

Washington, District of Columbia

01 Nov 1919

Make Kissing Difficult If You Want to Win

DEAR MISS FAIRFAX:

            I have been engaged to a young many for about three years, and when he leaves me in the evening I expect him to kiss me sometimes—naturally we being engaged, but he always refuses—saying someone might see us.  When he calls, if there is anyone else around, he seems to think nothing of giving all his attention to the other party—whether it is a special friend of his or not.  Do you think that is proof that he no longer cares as one being engaged should?  I love him dearly, and he knows it.

                                                                                                BROKEN BLOSOMS.

            No man wants the kisses that come too easily nor wants to give the kisses that are expected of him.  Somehow kisses don’t come under the category of things you can demand like a transfer or expect like three meals a day.  From now on, let him seek your kisses and you’ll find he’ll like that arrangement better.   And so will you.

Wandering Waters:

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

The NBA 2019-2020 season is in full swing. The Lakers are off to a hot start with the only loss coming on opening night to the Clippers.  Much criticism was directed to the Lakers after the opening night loss. Following the opening night loss, the Lakers have won three straight games.  While the wins have come against some of the weaker teams in the NBA, the play of some of the crucial members of the Lakers are promising.  LeBron is doing an excellent job orchestrating the offense and averaging double digits in assists with only a minor drop in point production.  Anthony Davis is playing even better than advertised and has been the vocal point for the Lakers both offensively and defensively this season. The Lakers will truly go as far as Anthony Davis can take them.

In addition to the Lakers’ stellar play, the Miami Heat are off to an excellent start.  Finally, with Jimmy Butler returning to the lineup, I am interested to see how good the Heat are for the 2019-2020 season. The Heat may have a chance to grab one of the top four seeds in the Eastern Conference. 

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

Larry
Larry E. Waters

[email protected]

“I’ll Take Jail Rather than Going Home to Hubby”:

 

The Evening World

New York, New York

01 Nov 1919

Wife in Cleveland’s “Love Triangle” And Jury of Women Who Convicted Her

            Mrs. Goldie Drossen of Columbus with her three children fled from Columbus, O., with Clay Buttery, a soldier.  The woman and the man were arrested and the woman, tried in Cleveland by a jury of women acting in an advisory capacity to Justice Sawiski.  The woman-jury brought in a verdict of guilty with a recommendation for mercy.  The Judge sentenced both to three months and $200 fine.  He offered a suspend sentence on the woman if she would return to her husband.  She chose the workhouse.  The jury condemned the Judge for not accepting their leniency plea and for suggesting that the woman return to her husband.

            Judge Sawiski replied:  “This woman has violated the law.  She tried to excuse her offense by calling it love.  Some call it romance, some call it soul-mating.  I call it vicious piffle, the law calls it a crime.”

Boron’s Benchmarks:

Did I just hear you say that you, too, want to author a bi-weekly column such as Boron’s Benchmarks?  Great, but the column name Boron’s Benchmarks is already taken.  Although copyright transfer of the column name IS available for a fee.  Changing one letter of my column name may not get you around the copyright thing.   If you decide to try going the one letter changed route, I’d advise against changing the column’s first letter from “B” to “M” for obvious reasons.

Now for some advice as to the actual column-writing process, be forewarned that if you’re anything like me – and I hope to God you are not, for your sake – on occasion you’ll likely be confronted as you are preparing your column by unwanted, absolutely random, distractive thoughts floating in and out of your brain just when you need to be getting your column to press.

 “With that said” (shout out to “Wandering Waters”), on to previewing the case I selected for my column and your perusal.  I ask you to consider the issue of a necessary party.  What’s a necessary party, you ask?  A late Friday afternoon Happy Hour meet-up with friends after a tough work week?  Yes.  Celebrating your favorite team’s World Series Game 7 victory?  Yes.  But I ask you to focus (easier said than done sometimes) your attention on whether a liability claimant in an underlying action – whose interest has not been reduced to a judgment against an insured – should nonetheless be considered a necessary party to a declaratory judgment action initiated by the insurer against its insured to resolve liability insurance coverage issues.  The Tennessee Supreme Court opined two weeks ago on this issue in Tennessee Farmers Mutual Insurance Company v DeBruce, holding that only the insurer and insured were necessary parties to the insurer’s declaratory judgment action.  Claimant was not a necessary party, and therefore, the Tennessee Supreme Court denied Claimant’s motion to intervene in the declaratory judgment action.

Eric
Eric T. Boron

[email protected]

Sober Halloween Celebrations Shunned – During Prohibition”

Buffalo Evening News

Buffalo, New York

01 Nov 1919

DRY HALLOWE’EN LACKS CARNIVAL CUSTOM OF OLD

Folks Out to Celebrate, But Fail to Find Enthusiasm in Prohibition Beverages

            Buffalo celebrated its first prohibition Hallowe’en with a bovine attempt at merriment, as far as the shimmy-she-wabble palaces were concerned.

            Folks went about methodically to have a good time.  They want to their accustomed haunts.  They st at the tables and date soddenly.  They danced rhythmically, but without spontaneity.  They drank that dull and stolid liquid, “the beverage.”  They went through all the ritual of having a good time.

            They hadn’t learned to play, to really enjoy themselves, it seemed, without a stimulant.  There was a noticeable contrast to the situation of other days in the few leading restaurants that have weathered the storm.  Where in previous years there have been popping of wine bottle corks, hilarious laughter, joyous dancing and vivacity there was last night a spirit of quietness and reserve.  The crowds were smaller and the carnival customs of wearing foolish little paper caps, tossing confetti and blowing toy balloons about were conspicuously absent.  The old jazzapation was gone.

Barci’s Basics (On No Fault):

Hello Subscribers!

My month has really ramped up since the last time I wrote you! It’s been a busy few weeks of court conferences and depositions; plus, there are a number of no-fault arbitrations for which to prepare in the near future. There has also been a lot of celebrating going on as bar results came out (shout out to CJE & RPM for passing!!) and another associate in our office winning her first trial (shout out to AMM!!). In the midst of all this work and celebrating, last weekend I drove up to LeMoyne College in Syracuse, New York, to see my cousin play soccer (shout out to Bentley Women’s Soccer for the win!). It was a beautiful day to watch a match, and then we went over to Skaneateles, New York, to have lunch on the lake. It was my first time in Skaneateles (pronounced skinny-at-less for those not from New York and reasons unknown to me), which was such a cute town! Beautiful views, good food, and lots of nice shops. Seems like a great place for a day trip or weekend overnight if you are in the WNY/Upstate NY area and looking for a picturesque place to get away to. Next up is Halloween, which is celebrated in my house by ordering pizza, wearing animal-print onesies, watching the Halloweentown movies, and handing out candy to trick-or-treaters. If you are in the neighborhood, stop by and say hi!

On the no-fault front, I only have one case for you this week. There were a number of unreported no-fault decisions this cycle that unfortunately did not give any factual background on the decisions, so we are left with one case from the First Department that discusses the evidence required to meet the carrier’s burden to show that a claimant failed to meet a policy condition, which in this case was to appear for EUO.

That’s all folks,

Marina
Marina A. Barci
[email protected]

TR Fan Club:

The Chat

Brooklyn, New York

01 Nov 1919

Roosevelt

Editor Chat:

            No other name mentioned in any part of the world or in any language in which newspapers are printed would attract the instant attention that would be accorded to the name of Roosevelt.  He was an American.  His was an American life.  It was a development of the American citizen that the founders of our liberty and the writers of our great Constitution desired to have developed under our form of government.  His birth was an incident of the East; his physical development an incident of the broad West and his mental development encompassed the whole of these our United States of America.  We have lived with him and too near him to appreciate to the full extent his great character, but our children and our children’s children will point with pride to this great American.  Let us all learn from his life to love our country, to love justice; no class, no race, no ambition to take advantage of our fellow citizen; no foreign forms of government but a stern insistence on American principles under our form of American government.  I hope every one will make some contribution to make a Roosevelt memorial a success, so that the world will forever be reminded that there lived a ideal American in Roosevelt.

                                                                                    R. J. ATKINSON.

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Congratulations are in order for those graduates of the University at Buffalo School of Law that have passed the July 2019 administration of the New York State Bar Exam. I am proud to say that the Class of 2019 is a special group and there is much to be excited about as we head into our professional futures. For those who did not, chin up and on to the next. Although life has its downs, it’s the downs in life that make the inevitable ups worthwhile and enduring. And I think I speak for many when I say that there is a community of people cheering you on and willing to assist you wherever necessary—so don’t lose sight of those that support you unconditionally in your path to attainment.

My son Phillip will trick-or-treat for the third time of his life today, taking on the role of Marshall on the Paw Patrol. His pup pack will come in handy for collecting all that candy. Logan, entering his first Halloween festivities, has promised to give dad and mom all of his share of the bounty. His two-week old diet has certain restrictions tending to favor my sweet tooth over his.

In this week’s column, the Legislative List includes discussion of a pending bill expanding the “combined single limit” for certain for-hire vehicles as well as an enactment that will require pharmacies to make reasonable attempts to notify certain patients of Class I drug recalls. In our Regulatory Wrap-Up, DFS has published a proposed amendment to the valuation of life insurance reserves under Insurance Regulation 213. Additionally, in From the Filings Cabinet, we have a DFS filing disapproval discussing the minimum mandatory definition of “bodily injury” in the automobile insurance context.

Until next time,

Ryan
Ryan P. Maxwell

[email protected]

The Sky’s the Limits in Auto Policy:

The New York Times

New York, New York

01 Nov 1919

An Automobile Liability Policy Without Limits

______

Responsible Corporations,Firms or Individuals in New York State

Are Offered an Automobile

(Commercial or Pleasure) Liability Policy Without Limits at Cost

______

NO BROKERS

NO COMMISSION

25% OF Premiums on Last Year’s Policies Returned as Dividends To Policyholders

______

Interboro Mutual Indemnity Insurance Company

109-111 East 15th Street

New York

CJ At The Threshold:

Hello all:

Fall is in full swing here in Buffalo. I spent this past Sunday with my wife’s family picking out pumpkins and other various items of fall décor (apparently the leaves I’ve neglected to rake up are not adequate decoration). It’s also about time for us to humiliate our dog by dressing him up as a banana split for Halloween, a costume which usually stays on only long enough for a quick picture before being violently shaken off. I hope that you all have the opportunity to relax in front of the fire with a good book or at least enjoy some hot cider (whiskey optional) before the leaves on the ground give way to snow.

I’ve selected two First Department cases for my column this week. The first is meant to serve as a reminder that when a jury finds that the threshold has been met for one category, a jury can then award damages for injuries that do not meet the threshold. For the second case I decided to editorialize a bit. I first offer an overview of the decision, and then a note explaining the underlying motion arguments and adding some commentary as to why I feel the court ruled the way it did. Please let me know if this type of editorial note is helpful, if so I’ll do them more often.

Until next time,

CJ
Charles J. Englert, III

[email protected]

City Exiles Black Citizens:

 

New York Herald

New York, New York

01 Nov 1919

MOB DEPORTS 200 NEGROES

Corbin, Ky., Is Roused by Robberies

And Attacks on Whites

            CORBIN, Ky., Oct. 31.—Angered by a series of robberies and attacks on white men, a mob here last night rounded up practically all negroes in Corbin, except the older residents, placed more than 200 on departing trains and forced the rest to leave on foot.

            During the demonstration a large number of shots were fired.  One negro was killed, according to reports, and two others wounded.  The town is quiet today.

John’s Jersey Journal:

Dear Subscribers:

Happy Halloween! Each year Erin and I like to dress up and go out with friends. This year I was Bert Macklin and Erin was Janet Snakehole from Parks & Rec. With an FBI jacket and a pair of aviators, it was the easiest costume ever. Not that I did any work (thanks Erin!).

New Jersey Courts were quiet on insurance. Perhaps they did not want to take attention away from the very interesting executive order Governor Murphy recently penned:

New Jersey Governor Issues Executive Order

Seeking Ban on Personal Liability Insurance to Firearm Owners

On September 10, 2019, New Jersey Governor Phil Murphy signed Executive Order 83 into effect to prohibit or otherwise restrict the sale of personal liability insurance to firearm owners. The Executive Order spans several pages, some of which are directed at banks and financial institutions that finance or do business with gun manufacturers and distributors.

It also takes aim at insurers who sell, market, or distribute insurance products that “encourage firearm use”. Press Release. Governor Murphy ordered the Commissioner of Banking and Insurance, within 30 days, to take action to prohibit and/or limit the sale, procurement, marketing or distribution of insurance products that may serve to encourage the improper use of firearms”. It is interesting that Governor Murphy sees insurers as “encouraging” the “improper use of firearms”.

The Executive Order does not define what constitutes the “improper use of firearms”. It appears to be primarily directed at a specific insurance product—personal firearm liability insurance. Personal firearm liability insurance is a standalone policy typically marketed as self-defense coverage for lawful gun carriers, including protection against civil liability and the cost to defend against civil and criminal legal actions. This Executive Order instructs the Department of Banking and Insurance to create regulations banning or otherwise restricting the sale of such policies to New Jersey residents.

Department of Banking and Insurance Commissioner Marlene Caride issued a statement on Executive Order 83, saying:

Gun violence continues to claim innocent lives at an alarming rate. We cannot allow this to be the new normal. The department recently took enforcement action against a company for illegally operating an NRA-sponsored insurance program that encourages firearm[] use. We are continuing to investigate other firearm-related insurance programs for potential violations of state insurance laws. I want to thank the governor for taking executive action to fight gun violence. As a state, we have a responsibility to act in the best interest of our residents and to ensure that our policies and practices put public safety above all.

In early September 2019, Lockton Affinity, a surplus lines insurer licensed in New Jersey, agreed in a consent order to pay a $1 million fine in connection with its personal firearm liability insurance called Carry Guard. The Department of Banking and Insurance’s investigation found that the Carry Guard website was maintained and hosted by the NRA and emails sent by the NRA were solicitations of insurance. While Lockton was licensed as a surplus lines insurer, the NRA is not licensed as an insurance producer. As a result, the Department of Banking and Insurance fined Lockton $1 million. In May 2018, New York’s Department of Financial Services imposed a $7 million fine upon Lockton for essentially the same reasons (WSJ). 

So far, the Commissioner of Banking and Insurance has taken no action. But action does not seem far behind. It now appears that personal firearm liability policies will soon be prohibited in New Jersey.

Some homeowners policies eliminate coverage for expected or intended injury and then provide a limited give back where reasonable force is used to protect persons or property. Would such homeowners policies fall within the scope? Do homeowners policies encourage the “improper use of firearms”? It would seem not. However, until the regulations are issued, insurance policies “that encourage the improper use of firearms” remains unclear and ambiguous.

What appears to be an unintended consequence of prohibiting personal liability firearm insurance is eliminating compensation for victims. Many of these policies provide coverage for civil damages; up to $300,000 (Second Call Defense) or a $1,000,000 (CCWSAFE). Say, for example, self-defense is claimed in a civil action but the jury ultimately determines it was not self-defense. Outlawing such insurance also eliminates compensation that would otherwise be available to victims. Neither the Executive Order nor the press release address this.

Decades ago, auto insurers could deny liability coverage to drunk drivers. Today, auto policies cover drunk drivers because hindsight has shown that otherwise it is the victims that suffer. Will this paradox arise again with New Jersey’s plan to ban insurance coverage for gun owners?

John
John R. Ewell

[email protected]

Blame Hubby – a Century Ago:

The Boston Globe

Boston, Massachusetts

01 Nov 1919

POLICE CHIEF’S PLEA WON WOMAN’S RELEASE

            BROCKTON, Oct 31—Chief Michael E. Stewart of the Bridgewater police made a strong plea for Mrs. Hannah B. Brownell, aged 18, in the Police Court today when Mrs. Brownell, a bride of only a few months, appeared to answer a charge of larceny.  Her husband, Charles B. Brownell, aged 24, was held in $1100 for the Grand Jury on a like charge, having pleaded guilty to five counts.  Chief Stewart said the young woman was influenced by her husband to do what she did and Judge Warren A. Reed dismissed the charges against her.

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

In today’s edition, we take a look at Connecticut’s approach to the cooperation clause in first-party coverages. In Amica v. Levine, the insured refused to submit to an IME for continued medical benefits. She claimed, among other reasons, that there was no doctor in the entire state of Connecticut that was up to the level of her out-of-state specialist. Now, granted Connecticut is a small state with a great bit of Boston and New York City envy, but we do have two top-notch teaching hospitals, with UConn and Yale. The Court of Appeals concluded that Levine’s excuse was unreasonable. Read on for more details.

Lee
Lee S. Siegel

[email protected]

Me Too Movement isn’t New:

The Buffalo Times

Buffalo, New York

01 Nov 1919

 

Freed of Charges Of Searching For “Moles” on Women

            PORT LESTER, N.Y., Nov. 1.—It took the jury ten minutes to decide today that Philip R. Fisher, the New York exporter, was not the stranger who with a revolver and a flashlight has aroused the community by searching for a woman with a mole on her back.  The trial lasted seven hours, and as the two complainants were unable to identify Fisher as their assailant the jury exonerated him.

            Adelaide Zamba of Rye could not positively identify Fisher as the man who accosted her in Grace Church Street last week, frightened her escort away and made her strip off her waist while by the light of his flash he looked for a mole, which he alleged had decorated the shoulder of a girl who had stolen his apples.

            Fisher testified that at the time Miss Zamba was accosted on the street he was eating in a restaurant in Grand Central Station, New York.

Off the Mark:

Dear Readers,

It’s been a bit gloomy and rainy lately on Long Island.  At least the colder weather hasn’t arrived yet.  The kids have been eagerly awaiting Halloween and are very excited to go trick-or-treating.  Hopefully, the rain lets up while they run around the neighborhood getting candy.  Happy Halloween everyone!

This edition of “Off the Mark” brings you a recent construction defect case from the United States District Court for the Eastern District of Pennsylvania.  In Utica Mut. Ins. Co. v. Voegele Mech., Inc., the Court examined a carrier’s coverage obligations to its insureds relative to claims arising out of faulty workmanship.  The Court, in finding no duty to defend, noted that any distinction between damage to the work product alone versus damage to other property is irrelevant so long as both foreseeably flow from faulty workmanship.  The Court further held that it was foreseeable that the faulty installation of air conditioning units and windows could lead to water damage and the growth of mold and that it flies in the face of logic to say that the alleged damage was the result of an "accident" rather than the faulty workmanship.

Until next time …

Brian
Brian F. Mark

[email protected]

Poor Drunkards, No Home Any Longer – 100 Years Ago”

Star-Gazette

Elmira, New York

01 Nov 1919

Dry Law Closes Noted “Paper Pickery,” Home For Jersey Drunkards

            Camden, N. J., Nov. 1.—Camden’s municipal work house was closed today by prohibition.  Known as the “Paper Pickery” and famous as an institution for the utilization of human derelicts, the work house since 1912 has been operated by habitual drunkards committed there by the police magistrates.  Waste paper gathered by the Highway department has been baled by the prisoners and the city has been reaping a yearly profit of $4,000 over the operating expenses and the cost of boarding the inmates.  In additional all the brooms for the street sweeping machines and the hand-brooms used by the white wings were made by the prisoners at a nominal cots.  Only three workmen have been at the pickery for the last week.  Their sentences were up some time ago, but they preferred to remain because they had no other place to go.

            “This industry can’t operate without their help,” said Street Commissioner Sayre today, “as the last of the baled paper was carted away.”

            The pickery will be used as a warehouse.

Headlines from this week’s issue, attached:

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

  • Under Pennsylvania Law, an Insurer Cannot Retroactively Rescind Motor Vehicle Liability Policy to Deprive Innocent Victim of Auto Accident, Access to Liability Coverage.  Rule Similar in New York
  • Failure to Report Hit and Run Accident to Police within 24 Hours Justifies Permanent Stay of Uninsured Motorists Arbitration

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Claim File in a Tort Defense Case is Categorically Privileged
  • Question of Fact as to Whether Contract was Ever Ratified Precludes Summary Judgment on Indemnity Claim
  • Brother Cannot Establish Permission to Use Vehicle, Coverage was Properly Denied as a Result

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz

[email protected]

  • Second Circuit Remands Matter in 9/11 Litigation for Further Information on Jurisdictional Issues in Claims by Insurance Carriers against Bank

 

JEN’S GEMS
Jennifer A. Ehman

[email protected]

  • Court Finds Duty to Defend Triggered Based Upon Extrinsic Evidence

 

BARNAS ON BAD FAITH
Brian D. Barnas

[email protected]

  • A Consent Judgment is Insufficient to Establish Causation as Required for a Cause of Action for Bad Faith under Florida Law
  • Bad Faith Claim in Louisiana has a 10-Year Prescriptive Period

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

  • Governor Murphy’s Recent Executive Order on Personal Firearm Liability Insurance discussed in the Cover Note

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

  • Cooperation Clause Requiring IME Not Void Against Public Policy

 

OFF THE MARK
Brian F. Mark
[email protected]

  • US District Court, in Finding no Duty to Defend, Holds that any Distinction Between Damage to the Work Product Alone Versus Damage to Other Property is Irrelevant so long as both Foreseeably Flow from Faulty Workmanship

 

WANDERING WATERS
Larry E. Waters

[email protected]

  • Plaintiff’s Motion for Default Judgment against the Defendant Granted 
  • Defendant’s Motion to Dismiss Granted as Plaintiff Failed to Make a Prima Facie Case for Jurisdiction

 

BORON’S BENCHMARKS
Eric T. Boron

[email protected]

  • Reversal of Appellate Ruling; Tennessee Supreme Court Holds Trial Court Did Not Abuse Its Discretion in Denying Claimant’s Motion to Intervene in Insurer v Insured DJ Action on Coverage Issue

 

BARCI’S BASICS (ON NO FAULT)
Marina A. Barci

[email protected]

  • Summary Judgment Denied to Carrier Because Insurer Was Unable to Prove Assignee Failed to Appear for EUO

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]

The Legislative List

  • Pending Bill Would Clarify That $1.5 Million Combined Single Limit for For-Hire Vehicles Carrying Eight or More People Extends to Injury to or Destruction of Property
  • Pharmacies Owe Patients Taking Recalled Drugs Reasonable Attempts at Notification Within Three Days of Recall

 

Regulatory Wrap-Up

  • Superintendent Proposes Express Adoption of NAIC Valuation Manual for The Setting of Reserves of All Life Insurance Companies and Fraternal Benefit Societies and All Accredited Reinsurers of Life Insurance, Annuity Contracts, or Accident and Health Insurance

 

From the Filings Cabinet

  • DFS Advises That New York Regulations Prohibit Form Filings Restricting the Definition of “Bodily Injury” Below the Parameters of 11 NYCRR 60-1.1

 

CJ At the Threshold
Charles J. Englert III

[email protected]

  • One Serious Injury Opens the Door for Damages for Other Injuries Causally Related
  • A Different but Equally Plausible Cause of Plaintiff’s Injury Raises a Triable Issue of Fact

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • Covered Fire Loss or Excluded Vandalism?

 

It’s a busy time over here.  Hope to see you in NYC next week.

All the best to you and yours.

Dan

 

Hurwitz & Fine, P.C. is a full-service law firm providing legal services throughout the State of New York and provide insurance coverage advice and counsel in New Jersey and Connecticut.

In addition, Dan D. Kohane is a Foreign Legal Consultant, permit no. 000241, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.


NEWSLETTER EDITOR
Dan D. Kohane

[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz

[email protected]

ASSISTANT EDITOR
John R. Ewell

[email protected]

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

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

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

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

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

Michael F. Perley

Eric T. Boron

Brian D. Barnas

Larry E. Waters

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

Marina A. Barci

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

Diane F. Bosse
 

Topical Index
 

Kohane’s Coverage Corner

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)

Ryan’s Capital Roundup

CJ At the Threshold

Earl’s Pearls

 

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

10/23/19       Williams v. Penn National Insurance

Appellate Division, Second Department
Under Pennsylvania Law, an Insurer Cannot Retroactively Rescind Motor Vehicle Liability Policy to Deprive Innocent Victim of Auto Accident, Access to Liability Coverage.  Rule Similar in New York
This appeal arises from a three-vehicle accident that occurred on May 27, 2013, at an intersection in Brooklyn. The drivers of two of the vehicles, Williams and  Marks (“plaintiffs”) sued separate actions against Janvier, the driver of the third vehicle. Janvier was insured by Penn National Insurance (“Penn”). The two actions were joined for discovery and trial.

Penn had issued a personal automobile policy to Janvier, effective as of March 25, 2010, in Pennsylvania, based on Janvier's representations in his application for insurance that, inter alia, he resided in that state and his vehicle was garaged there. The policy was renewed in 2011, 2012, and 2013.

Thereafter, in a letter dated July 22, 2013, Penn notified Janvier that his policy was rescinded because, inter alia, he had misrepresented that he was a resident of Pennsylvania when, in fact, he resided in New York. Penn National Insurance enclosed a check in the amount of $3,455.51, representing the premium payments made by Janvier under the policy since 2010, plus interest. In separate letters, both dated July 31, 2013, Penn National Insurance advised each of the plaintiffs that it completed its investigation into their respective claims and determined that "there is no coverage for this incident."

In its answers to the plaintiffs' complaints, Penn having been sued as well, the carrier sought a declaration that it had no duty to defend or indemnify Janvier in connection with any claim arising from the subject accident. Penn alleged fraud and therefore, under Pennsylvania law, it had a right to declare the policy void ab initio.  The plaintiffs alleged that that they did not participate in the alleged fraudulent procurement of the policy, and that Penn National Insurance may not deny coverage under the policy to them, innocent third parties, based on misrepresentations made by its insured.

Under Pennsylvania law, an insurer may rescind an automobile insurance policy retroactively on the basis of fraud or misrepresentation "as to the actual perpetrator of the fraud, where the fraud could not reasonably have been discovered within the 60 day period immediately following issuance of the policy". However, it may not deny coverage under the policy with respect to claims made by third parties "who are innocent of trickery, and injured through no fault of their own".

Editor’s Note:  While this was decided under Pennsylvania law, the New York rule is not substantially different. One cannot rescind a New York auto policy to retroactively deny coverage to an innocent victim of an automobile accident.  Teeter v. Allstate Ins. Co., 9 App.Div.2d 176, affd. 9 N.Y.2d 655.  However, cases following Teeter have held that the person who commits fraud or material misrepresentations can be denied coverage for their own claims.

10/23/19       Progressive Direct Insurance Company v. Ostapenko
Appellate Division, Second Department
Failure to Report Hit and Run Accident to Police within 24 Hours Justifies Permanent Stay of Uninsured Motorists Arbitration

This appeal deals with a motion to stay an uninsured motorist arbitration claim.

Ostapenko was allegedly injured when the vehicle she was driving was struck in the rear by another vehicle that then left the scene. The vehicle Ostapenko was driving was insured by the Progressive. Ostapenko filed a request for uninsured motorist arbitration.

Progressive commenced this proceeding to permanently stay arbitration based in Ostapenko’s failure to report the accident to the police within 24 hours.

The Supreme Court should have granted that branch of the petition which was to permanently stay arbitration. The subject insurance policy required the insured or someone acting on the insured's behalf to report the collision within 24 hours or as soon as reasonably possible to a "police, peace or judicial officer or to the Commissioner of Motor Vehicles." Ostapenko's failure to comply with this requirement in the absence of a valid excuse vitiates coverage.

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

10/29/19       Dabo v. One Hudson Yards Owner, LLC
Appellate Division, First Department
Claim File in a Tort Defense Case is Categorically Privileged

Plaintiff commenced a personal injury action against One Hudson, and as part of that action sought production of the insurer’s claims file.  This included the insurer’s accident investigation report and other documents obtained for the defense of One Hudson.  Plaintiff argued that the documents were nevertheless discoverable because the an insurer’s file is kept in the ordinary course of business. 

In reversing the trial court, the Appellate Division noted that a first party insurer’s file is discoverable when the documents therein are prepared in the course of determining whether to pay or reject a claim.  Here, there was no indication that coverage from the carrier was at issue.  As such, absent any hardship shown by the plaintiff, the carrier’s investigative reports remain privileged.

Peiper’s Point – Kudos to the Appellate Division for recognizing the difference between a tort claims file and a coverage claims file.  Here, the entirety of the file was created for the defense of its insured.  The sole purpose of that file is “in anticipation of litigation,” and thusly exempt from disclosure.

10/22/19       Crovato v. H&M Hennes & Mauritz, LP
Appellate Division, First Department
Question of Fact as to Whether Contract was Ever Ratified Precludes Summary Judgment on Indemnity Claim

Defendant JKT sought contractual indemnity under an agreement it allegedly entered into with Signature.  During the course of deposition testimony, a question of fact arose as to whether the signatory of the contract for Signature had authority (actual or apparent) to bind the company to the terms of the document.  This, of course, included the contractual indemnification term.  With this question unresolved, JKT’s motion for summary judgment was predictably denied.  In so holding, the Court also noted that Signature’s performance of the contract was not sufficient to establish the agreement was ratified through “subsequent behavior.”  This was because of testimony provided Signature which said it performed the work through reliance on a purchase order with a scope of work (and presumably) not the contract. 

On the other hand, JKT’s claims for indemnity under its contract with another party, Superior, were successful.  In that document, Superior agreed to indemnity JKT and H&M for liability which arose from Superior’s negligence.  With questions of fact related to both Superior and JKT’s respective negligence, the Court granted a conditional order of summary judgment in favor of H&M and JKT. 

Peiper’s Point – A quick thought on this one.  We can understand the decision as to H&M who established, apparently, itself free of negligence.  In such a case, they are entitled to shift any exposure directly to Superior if Superior is negligent.

But, with respect to JKT, we note Courts usually deny all claims on a question of fact where the potentially active negligence of the movant (JKT) is not settled.  Recall, JKT cannot be indemnified for its own negligence under GOL 5-322.1.  With this in mind, we were a bit surprised to see JKT also obtain a conditional order.

10/17/19       American County Ins. Co. v. Umude     
Appellate Division, First Department
Brother Cannot Establish Permission to Use Vehicle, Coverage was Properly Denied as a Result

Plaintiff insured a vehicle owned by Amoghene Umude.  Amoghene’s brother, Mark, apparently took the automobile without his brother’s consent and was involved in an accident.  Mark, nevertheless, seeks coverage for his actions in this lawsuit.  The carrier presented evidence that its named insured, Amoghene, testified that he never gave his brother permission to use the vehicle and that he was asleep when Mark took the keys without his knowledge.  Amoghene also reported to the police that Mark did not have permission to use the vehicle.  Due to Amoghene’s formal complaint, Mark was indicted and criminally prosecuted

In response, Mark argued that he had implied permission to use the vehicle.  He submitted written statements from non-parties who allegedly spoke of Mark’s prior use.  The statements were rejected because although they were notarized, the declarant did not attest to the truth of their statements or issue the statements while being duly sworn.  All other offered proof was properly excluded hearsay.  

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]

10/15/19       Underwriting Members of Lloyd’s v. Al Rajhi Bank
United States Court of Appeals, Second Circuit
Second Circuit Remands Matter in 9/11 Litigation for Further Information on Jurisdictional Issues in Claims by Insurance Carriers against Bank

Dozens of insurance companies and corporations sued Al Rajhi Bank for financial injuries they claim to have suffered as a result of the September 11, 2001 terrorist attacks (“9/11 attacks”). In this decision, the dismissal of those claims was discussed, as it related to the personal jurisdiction over the defendant. In brief, the plaintiffs “principally allege that Al Rajhi Bank provided financial services and donations to charities that it knew financially supported al Qaeda and provided financial services to known extremist operatives. They further allege that Al Rajhi Bank’s provision of financial services was done with the specific intent to further al Qaeda’s terrorism against the United States”. They argued that the Southern District of New York had jurisdiction to hear the matter because of that alleged financial support or because the bank and al Qaeda had entered into a conspiracy to target U.S. interests.

The Second Circuit had previously held that “providing indirect funding to an organization that was openly hostile to the United States does not constitute intentional conduct that is expressly aimed at residents of the United States”. Thus, those defendants were not subject to personal jurisdiction of the U.S. This case, however, was different. Here, there were direct allegations that the bank had specific intent to further terrorism. Construing all reasonable inferences in favor of the plaintiff insurance companies and corporations, that specific intent was “more direct and one step closer to al Qaeda” when compared with previous support that was found to be have been inadequate. Moreover, given that factual issues persisted on the jurisdictional question, the court remanded the matter back down to determine when the alleged support was given, what was given, whether it was “earmarked” for specific U.S. targets, and how the defendant was involved. Thus, over 18 years following the attacks, the litigation continues.

 

JEN’S GEMS
Jennifer A. Ehman
[email protected]

10/18/19       Cookies on Fulton, Inc. v. Aspen Specialty Ins. Co.
Supreme Court, New York County
Hon. Melissa A. Crane
Court Finds Duty to Defend Triggered Based Upon Extrinsic Evidence

This decision arises out of a personal injury action filed by Furkat Ibrokhimov.  It was alleged that Ibrokhimov fell from a ladder while working at plaintiffs’, Cookies On Fulton, Inc., Cookies Children Togs, Inc. and Cookies Uniforms, LLC’s (collectively “Cookies”) store in Brooklyn.  At the time of the incident, he was employed as an electrician by Besson Corp., which, pursuant to a contract with Cookies, had agreed to perform certain “construction/repair work includ[ing] the erection, laddering, demolition, repair, alteration, electrical installation.”  Ibrokhimov filed suit against Cookies asserting violations of New York Labor Law §§ 200, 240 and 241.  The complaint included the standard allegations that his employer agreed to perform “construction/repair work include[ing] the erection, laddering, demolition, repair, alternation, electrical installation.”

Cookies tendered their defense to their CGL carrier Aspen.  Aspen denied the claim based upon the “Exclusion-Designated Ongoing Operations” provision of the policy, which stated:

“This insurance does not apply to ‘bodily injury’ or ‘property damage’ arising out of the ongoing operations described in the Schedule of this endorsement, regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.”

The referenced schedule described the ongoing operations as “[a]ny construction or renovation-related activity except for janitorial or maintenance related work.”

Cookies pushed back arguing that there was extrinsic evidence which established that Ibrokhimov was not engaged in “construction or renovation-related activity” but rather “janitorial or maintenance work.”  Specifically, Cookies relied on an affidavit of merit filed in the Underlying Action in which Ibrokhimov represented that “while changing light fixtures I was caused to be injured by the screw gun that fell from the top of that ladder and hit me causing me to [fall] from the ladder and the ladder fell on me.”  Cookies further pointed to an invoice from Besson describing the work as “electric maintenance work” to change “3rd fl. Storage lights.”  Aspen’s response was that “hanging a lightbulb is considered routine maintenance, but changing a light fixture falls within the protection of the New York Labor Law as a construction or renovation related activity, the precise language set forth in Aspen’s policy exclusion.”

Cookies then commenced this action asserting a single cause of action for refusal to defend and indemnify.  The claim also included a plea for punitive damages based upon the alleged bad faith reliance on the exclusion, which Cookies submitted was a violation of the implied covenant of good faith and fair dealing.  Aspen moved to dismiss reiterating its argument in the disclaimer, and with respect to the punitive damages claim, Aspen argued that its disclaimer was at most a breach of contract rather than a violation of an independent duty.

The court considered these arguments noting that the Underlying Complaint suggested that the accident was construction-related which would bar coverage.  However, the affidavit of merit and invoice Cookies supplied suggested that Ibrokhimov may have been performing routine maintenance work. Consequently, there was a "reasonable possibility of coverage" and Cookies was entitled to a declaration that Aspen must defend the Underlying Action.  The court also noted that the Aspen policy exclusion did not specifically define what constitutes construction, renovation, janitorial or maintenance work.  Construing the language against the insurer, the court found that the changing of light fixtures may fall within the ambit of maintenance work.  The ordinary meanings of "construction" and "renovation" implicate a substantially more ambitious undertaking.  However, the court was clear that it could not issue an order at this juncture declaring that Aspen had a duty to indemnify.  The duty to defend is broader than the duty to indemnify, and the latter duty must await the determination of liability in the Underlying Action.

Lastly, Cookies' plea for punitive damages was dismissed. The purpose of punitive damages is not to remedy private wrongs but to vindicate public rights.  Cookies failed to make the requisite allegations that the insurer's actions "were aimed at the public or showed the requisite moral turpitude."  Cookies' further assertion that its "claim for punitive and extra-contractual damages is one for consequential damages for breach of contract" under the covenant of good faith and fair dealing confused two very distinct forms of relief.   Unlike punitive damages, consequential damages do not seek to right a public wrong, but are actual, compensatory damages which are available only when they have resulted from "an insurer's failure to provide coverage if such damages ('risks') were foreseen or should have been foreseen when the contract was made.”  Cookies did not plead any damages other than the costs associated with Aspen's failure pay for its defense and potential indemnification.

 

BARNAS ON BAD FAITH
Brian D. Barnas
[email protected]

10/25/19       Cawthorn v. Auto-Owners Insurance Company
United States Court of Appeals, Eleventh Circuit
A Consent Judgment is Insufficient to Establish Causation as Required for a Cause of Action for Bad Faith under Florida Law

David Madison Cawthorn and Bradley Ledford were traveling together from Florida to North Carolina on April 3, 2014. Ledford was driving a vehicle owned by his father’s business, Bob’s RV.  While his friend drove, Cawthorn slept in the passenger seat. Ledford fell asleep at the wheel and crashed into a concrete barrier.  He sustained no injuries, but Cawthorn, whose feet were on the dashboard, sustained serious injuries resulting in paralysis from the waist down.

Bob’s RV had $3 million in total coverage with Auto-Owners.  Ledford was a scheduled driver under the policy.  The full policy limits were reserved within a month of the claim being reported.

Auto-Owners requested an authorization from Cawthorn for his medical records but could not get the proper form.  On June 11, Cawthorn’s father called Auto-Owners assigned adjuster Pamela McLean.  According to McLean, she merely reminded Cawthorn that she still needed the authorization form.  Mr. Cawthorn said that McLean refused to tell him how much money he received and advised him not to hire a lawyer.

According to Cawthorn, he would have accepted the policy limits prior to the June 11, 2014 phone call.  Cawthorn sued Bob’s RV for negligence.  Auto-Owners tendered the $3 million by August 7, 2014.

During settlement negotiations, Cawthron’s counsel proposed a settlement agreement requiring Auto-Owners to pay $3 million and including a $30 million consent judgment against Ledford.  Auto-Owners agreed to pay the $3 million but declined to be a party to the consent judgment.  On October 20, 2016, Cawthorn and Ledford executed the agreement.  There was no line for Auto-Owners to sign.  Ledford assigned his rights to sue Auto-Owners for bad faith to Cawthorn.

Cawthorn filed a bad faith suit seeking $30 million alleging that Auto-Owners handled the insurance claim in bad faith.  Auto-Owners moved for summary judgment.  Under Florida law a bad faith plaintiff must show that (1) the insurer owed the insured a duty, (2) the insurer breached its duty, (3) and the breach caused the insured to suffer (4) an injury.

The Eleventh Circuit concluded that there was no causation in this case.  Causation is proven when there is an excess judgment above the policy limits.  While Florida law recognizes three exceptions to the excess judgment rule, the consent judgment in this case did not qualify.  The court reasoned that the consent judgment was more akin to a private contract that is acknowledged and recognized by the court.  While some Florida courts had previously concluded that a consent judgment would satisfy the excess judgment rule, those cases all were situations where the insurer was a party to the consent judgment.

10/22/19       Smith v. Citadel Insurance Company
Supreme Court of Louisiana
Bad Faith Claim in Louisiana has a 10-Year Prescriptive Period

Beverly Smith filed suit against Darlene Shelmire and her insurer as a result of an automobile accident on July 27, 2010.  On February 26, 2015, following a trial on the merits, the district court entered judgment in favor of plaintiff against Ms. Shelmire and GoAuto in an amount in excess of the insurance policy limits. The judgment was noticed and mailed to all counsel on March 5, 2015.  GoAuto devolutively appealed that judgment, but Ms. Shelmire did not file an appeal.  The court of appeal ultimately affirmed the district court’s judgment on March 10, 2016.  Thereafter, Ms. Shelmire assigned her rights to pursue a bad faith action against GoAuto to Ms. Smith.

Through her assignment of rights, Ms. Smith filed the instant suit against GoAuto on March 10, 2017, and amended her petition on September 27, 2017, asserting a bad faith claim based on GoAuto’s violation of its duties under La. R.S. 22:1973(A) as well as the jurisprudentially recognized duty of good faith pre-existing the statute.  GoAuto answered the petitions and subsequently filed an exception of prescription.  In its exception, GoAuto argued the prescriptive period for a bad faith claim against an insurer is subject to a one-year prescriptive period.  Plaintiff opposed the exception arguing a bad faith claim against an insurer is a contractual action and subject to a ten-year prescriptive period.

First, the court concluded that the bad faith suit was not started within one year.  The bad faith action accrued on April 15, 2015, when the insured was exposed to an excess judgment.  The bad faith action filed on March 10, 2017 was not timely under a one-year prescriptive period.

However, the Louisiana Supreme Court concluded that a ten-year prescriptive period applied.  In so doing, it resolved a split in authority among Louisiana lower and federal courts.  The court noted that the duty of good faith is an outgrowth of the contractual and fiduciary relationship between the insured and insurer, and the duty of good faith emanates from the contract between the parties.  The duty of good faith under the statute would not exist separate and apart from an insurer’s contractual obligations.  Accordingly, the ten-year prescriptive period applicable to a breach of contract cause of action applied, and the action was timely filed.

 

JOHN’S JERSEY JOURNAL
John R. Ewell
[email protected]

Governor Murphy’s Recent Executive Order on Personal Firearm Liability Insurance discussed in the Cover Note.

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]

 

09/10/19       Amica Mutual Insurance Company v. Levine
Connecticut Court of Appeals
Cooperation Clause Requiring IME Not Void Against Public Policy

The Connecticut Court of Appeals unanimously affirmed, per curiam, a trial court decision finding that an insured’s failure to submit to an Independent Medical Examination prejudiced the insurer and voided coverage. Levine was injured in an automobile accident and sought to have her medical expenses paid by her insurer, Amica. The carrier requested that Levin submit to an IME but she refused and Amica denied coverage and brought this declaratory judgment action. Amica claimed that Levine’s refusal to undergo an IME prejudiced its ability to evaluate Levine’s claim for benefits. Levine objected Amica’s urologist, claiming that he was not an expert who matched Levine’s out-of-state physician's expertise in interstitial cystitis. She claimed that “there appears to be no urologist in Connecticut who match[es] Dr. [Robert] Moldwin's knowledge and expertise regarding this particular disease.”

The Amica policy contained the standard cooperation language: “Part E—Duties After an Accident or Loss: We have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us ... B. A person seeking any coverage must: 1. Cooperate with us in the investigation, settlement or defense of any claim or suit.... 3. Submit, as often as we reasonably require: a. To physical exams by physicians we select. We will pay for these exams.”

A cooperation clause in a liability insurance policy requires that there be a fair, frank, and substantially full disclosure of information reasonably demanded by the insurer to enable it to prepare for, or to determine whether there is, a genuine defense, the Court held. In the absence of a reasonable excuse, an insured’s failure to comply with the insurance policy provisions generally results in the forfeiture of coverage, relieving the insurer of its obligation to pay. The Court cautioned, however, that the lack of cooperation must be substantial or material.

Amica argued that her excuse was an unreasonable breach of the policy, while Levine argued that the IME provision was a violation of Connecticut public policy. Levine claimed that the IME provision violates General Statutes § 52-178a2 and Practice Book § 13-11.3. But these provisions pertain to requests for physical examinations in personal injury actions, not to insurance policies. They are plainly inapplicable to the parties' contractual agreement set forth in the policy, the Court concluded. And, the defendant’s contention that the IME provision violates the informed consent doctrine was also rejected. In Connecticut, lack of informed consent is a cause of action based on medical negligence (which in Connecticut is different from medical malpractice). The defendant's citation to decisions from other states which reference statutory authority in those states is inapt in the absence of a similar statute in Connecticut.

Instead, the Court concluded that the IME was necessary for Amica to evaluate Levine’s claims for benefits. Without the IME, it could not do so, and therefore Amica demonstrated that it was prejudiced by Levine's failure to submit to an IME, “in that it prevented the plaintiff from being able to properly evaluate the claim and to determine whether, and to what extent, the defendant's treatment and the expenses incurred for medical care were causally related to the accident.”

 

OFF THE MARK
Brian F. Mark
[email protected]

10/15/19       Utica Mut. Ins. Co. v. Voegele Mech., Inc.
United States District Court, Eastern District of Pennsylvania
US District Court, in Finding no Duty to Defend, Holds that any Distinction Between Damage to the Work Product Alone Versus Damage to Other Property is Irrelevant so long as both Foreseeably Flow from Faulty Workmanship

This declaratory-judgment action arises out of an arbitration demand related to a remodeling project that was allegedly defectively performed.  Pine Run Retirement Community (“Pine Run”) contracted with McDonald Building Company “(“McDonald”) to complete renovations at its facilities, which included the replacement and installation of new air conditioner units and the integration of new construction and replacement components with existing construction.  Under the construction agreement, McDonald assumed the duties of a construction manager.  McDonald subcontracted the replacement and installation of the AC units to Voegele Mechanical, Inc. (“Voegele”).  Pursuant to the subcontract, Voegele was obligated to obtain broad form commercial general liability coverage.  Accordingly, Utica insured Voegele under a commercial general liability policy that provided coverage and contained additional insured provisions for contractors' completed operations.

Pine Run commenced an AAA arbitration action (the "AAA Complaint") against McDonald pursuant to the construction agreement wherein Pine Run alleged, among other things, that McDonald negligently and/or defectively supervised and performed the replacement and installation of the AC units at Pine Run resulting in "substantial and widespread water infiltration and mold in patient rooms at the Health Center."

After installation of the AC units, a Pine Run housekeeper noticed water damage in three patient rooms.  Pine Run found similar damage in other rooms that had AC units installed by McDonald.  Pine Run engaged an independent third party, TBS, to investigate and determine the cause of the water damage observed in patient rooms.  TBS determined that McDonald improperly installed the packing, fabricated pans, flashing and related material during the installation of the new AC units.  The forensic removal and inspection of McDonald's work further confirmed that McDonald had defectively installed the AC units, resulting in leakage.

Pine Run's continued inspections of the property revealed water penetration at multiple other AC locations.  Functional drainage flashing and weather-resistive barrier seals at the AC sleeves were found to be deficient, allowing water and air penetration.  Pine Run alleged that the systemic defects in McDonald's installation of the ACs was so fundamentally deficient that there was water damage at all AC locations.

McDonald's defective installation of the AC units prompted Pine Run to perform additional inspections of the Health Center to determine if other construction work performed by McDonald was defective, which revealed multiple, substantial construction defects resulting in extensive damage to the facility.  Further testing revealed substantial and widespread water infiltration and mold in patient rooms throughout the Health Center.  McDonald's negligent and faulty work also caused damage to the Health Center's Roof due to leakage from the AC installations.

As a result of those factual allegations setting forth instances of the defective and negligent installation of the AC units, Pine Run asserted three causes of action: breach of contract, breach of implied warranties, and breach of expressive warranties.

McDonald sought to join Voegele as a party to the arbitration, asserting that McDonald qualified as an additional insured under Voegele's commercial general liability policy with plaintiff Utica Mutual Insurance Company ("Utica").  Utica subsequently filed a declaratory-judgment action seeking a declaration that it owed no obligation to defend or indemnify its named insured, Voegele, or alleged additional insured, McDonald.

The Utica policy states in pertinent part:

This insurance applies only to "bodily injury" or

"property damage" only if:

(1) The "bodily injury" or "property damage" is

caused by an "occurrence" that takes place in the

"coverage territory";

(2) The "bodily injury" or "property damage" occurs

during the policy period; ...

The policy defines "occurrence" as an accident, "including continuous or repeated exposure to substantially the same general harmful conditions."

In its motion for summary judgment, Utica argued, among other things, that it was entitled to summary judgment and a declaration that it owed no obligation to defend or indemnify McDonald in the underlying arbitration action because the four corners of the arbitration complaint alleged contractual and warranty claims against McDonald for supposed improper or defective work at Pine Run, which do not qualify as an "occurrence" as defined in the general liability policy.

The Court noted that "in the context of a declaratory judgment action to determine an insurer's obligations, Pennsylvania courts consistently apply what is known as the 'four-corners rule.'"  "That is, when a policyholder is sued, 'an insurer's duty to defend is triggered, if at all, by the factual averments contained in [the underlying] complaint[.]'"  "And '[i]f the allegations of the underlying complaint potentially could support recovery under the policy, there will be coverage at least to the extent that the insurer has a duty to defend its insured in the case.'"

In deciding whether a duty to defend existed, the Court first reviewed the language of the insurance policy to determine when it provides coverage and then examined the AAA Complaint to ascertain whether its allegations constituted the type of instances that trigger coverage.

As set forth above, the Utica policy defines “occurrence” as an "accident ... including continuous or repeated exposure to substantially the same general harmful conditions." The policy does not define "accident."

The Court looked to Pennsylvania case law interpreting a policy containing similar language, which took notice that the dictionary defined "accident" as "'[a]n unexpected and undesirable event,' or 'something that occurs unexpectedly or unintentionally.'"  The case law discussed by the Court noted that the key term in the ordinary definition of 'accident' is 'unexpected,' which implies a degree of fortuity that is not present in a claim for faulty workmanship."  As such, that court in the case relied on reasoned that "provisions of a general liability policy provide coverage if the insured work or product actively malfunctions, causing injury to an individual or damage to another's property."  But, "[c]ontractual claims of poor workmanship d[o] not constitute the active malfunction needed to establish coverage under the policy."  That court further noted that "the coverage is for tort liability for physical damages to others and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained."  Accordingly, the court held that because the plaintiff had alleged "only property damage from poor workmanship to the work product itself," the contractor’s "faulty workmanship [did] not constitute an 'accident' as required to set forth an occurrence under the [commercial general liability] policies."  Thus, the insurer "had no duty to defend or indemnify its insured.

The Court next reviewed Pine Run's claims, which were framed as breach of contract, breach of implied warranties, and breach of express warranties.  However, the Court noted that it is well-settled law in Pennsylvania that it is the nature of the allegations themselves, not the particular cause of action that is pled in the complaint that determines whether coverage has been triggered.  McDonald did not dispute the fact that the claims were framed as breach of contract and breach of implied and expressed warranties, but rather argued that the Complaint contains numerous, specific allegations of negligence sufficient to support a tort action, especially in regard to the installation of the AC units, which constitute an "occurrence."  Utica, on the other hand, argued that the contractual and warranty claims in the Complaint do not constitute an "occurrence" as defined in the Utica policy and thus, did not trigger Utica's duty to defend.

The Court found that the gravamen of Pine Run's suit is that as a result of McDonald's negligent defective installation of the AC units and refusal to correct the defects, Pine Run has incurred, and continues to incur, significant damages.

Thus, the Court determined that Pine Run's allegations do not amount to an "occurrence"—that is, an unforeseeable, "fortuitous event."  McDonald countered by asserting that third-party property damage triggered coverage under the commercial general liability policy.  The Court disagreed with McDonald’s argument and stated that the case law held that any distinction between damage to the work product alone versus damage to other property is irrelevant so long as both foreseeably flow from faulty workmanship."  The Court further found that it was certainly foreseeable that the faulty installation of air conditioning units and windows could lead to water damage and the growth of mold.  It flies in the face of logic to say that Pine Run's alleged damage was the result of an "accident" rather than the faulty workmanship of both McDonald and Voegele, mainly Voegele in the form of its subcontracted-for work and McDonald in the form of deficient oversight as the general contractor for this project.  As it is axiomatic that the Utica policy coverage is not triggered by the AAA Complaint, the Court determined that Utica had no duty to defend McDonald or Voegele in the arbitration proceeding.  Accordingly, as the Court determined that Utica had no duty to defend either party, Utica was also not required to indemnify either party in relation to the same proceeding.

 

WANDERING WATERS
Larry E. Waters
[email protected]

10/22/19       Arch Specialty Ins. Co. v. L&L Interior Contracting Services 
United States District Court, Eastern District of New York
Plaintiff’s Motion for Default Judgment against the Defendant Granted 

Plaintiff sued for breach of contract, unjust enrichment, and account stated. Following proper service of the action, Defendant had not answered and/or appeared. Subsequently, Arch moved for a default against the Defendant on the breach of contract claim and account stated claim.  Thereafter, the Clerk of Court issued entry of default against the defendant on January 9, 2019.

The Court began its analysis with a discussion on liability.  The Court noted that it is required to accept all facts alleged in the complaint as true and draw all reasonable inferences in Plaintiff’s favor.  The court determined that Plaintiff’s allegations sufficiently established Defendant’s liability for the breach of contract claim.  However, the Court found that Plaintiff could not establish liability for the account stated claim.  In support of its determination, the Court explained that since the breach of contract claim and the account stated claim arise from the same allegations that Defendant failed to pay monies owed, Plaintiff’s claim for account stated is precluded by the default judgment on Plaintiff’s breach of contract claim.

Next, the Court considered the damages on the default judgment.  Plaintiff submitted an unpaid invoice, and also moved for attorney’s’ fees and litigation costs.  The Court began by recognizing under New York law that “[w]hile a party’s default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages.”   Following the rule of New York law, the Court determined that Plaintiff’s submitted unpaid invoice establish damages to a reasonable degree.  Further, the Court determined that the Plaintiff was entitled to recover its litigation costs pursuant to Fed. R. Civ. P. 54(d)(1).

However, the Court concluded that Plaintiff had not establish it was entitled to attorneys’ fees.  In its reasoning, the Court pointed to New York law holding that attorneys’ fees are generally “the ordinary incidents of litigation and may not be awarded to the prevailing party unless authorized by agreement between the parties, statute, or court rule.”  In this matter, the Court noted that Plaintiff failed to identify any agreement, statute, or court rule authorizing an award of attorney’s fees, and therefore, Plaintiff was not entitled to any such recovery.

Accordingly, the Court directed the Clerk of the Court to enter judgment against the Defendant.

10/25/19       Allstate Insurance Company et. al. v. MAH et. al.
United States District Court, Eastern District of New York

Defendant’s Motion to Dismiss Granted as Plaintiff Failed to Make a Prima Facie Case for Jurisdiction

This matter originates from a lawsuit filed by Allstate Insurance Company, Allstate Fire & Casualty Insurance Company, and Allstate Property & Casualty Insurance Company (“Allstate”) against several Defendants including Hackensack Surgery Center, LLC, (“HSC”) alleging fraudulent scheme by which the Defendants obtained payment for unnecessary medical procedures.  HSC moved to dismiss the action for lack of personal jurisdiction.

The Complaint alleges that HSC is an ambulatory care facility located in New Jersey and organized under New Jersey law. The members who owned HSC included Dr. Daniel Yoo and Dr. Richard Braver. Dr. Yoo is also the owner of Western Janeda Orthopedics of New Jersey, LLC (“Western Janeda”) with offices in Queens, New York.  The Complaint alleges that Dr. Yoo referred a number of patients from Western Janeda to HSC for medical procedures.  The patients referred were New York residents, who had been in motor vehicle accidents in New York state.  Allstate covered the patients under New York No-Fault Law.  At some point, it is alleged that HSC sought reimbursement from Allstate to cover services fee under New York No-Fault law. Following Allstate’s denial, HSC initiated arbitrations in New York against Allstate under New York’s No-Fault Insurance laws.  Subsequently, Allstate filed a lawsuit alleging complex insurance fraud involving several parties including Dr. Yoo, Western Janeda, and HSC.

The Court began its analysis with discussion on personal jurisdiction. Plaintiff argued that the Court had jurisdiction over HSC because HSC consented to jurisdiction.  The Court rejected Plaintiff’s argument.  While the Court acknowledged that the initiation of arbitration in New York can constitute consent to personal jurisdiction, it was not the case here.  In this matter, the Court noted that even though HSC initiated arbitration in New York, HSC did not initiate arbitration in New York on the particular issue of personal jurisdiction.  As such, the Court rejected Plaintiff’s first argument. 

Next, the Court considered Plaintiff’s alternative argument that the Court had jurisdiction over HSC pursuant to §302(a)(3)(i) of the New York Civil Practice Law and Rules.  The Court explained that to meet the standard Allstate must make a prima facie showing of both a tortious act by HSC causing injury in New York and sufficient conduct in New York to justify personal jurisdiction. 

The Court began its analysis of Plaintiff’s argument by using the “injury-situs test.” As noted by the Court, the “injury-situs test” asks a New York court to locate the “original event which caused the injury” as distinguished from both the “initial tort” and the “final economic injury and the felt consequences of the tort.”  Applying the relevant rule of law, the Court found Plaintiff met the first requirement for CPLR §302(a)(3)(i). The Court reasoned that the initial reliance on the allegedly fraudulent reimbursement requests occurred in New York, so that is where the first effect of the tort is located.

However, the Court determined Plaintiff failed to meet the second part of CPLR §302(a)(3)(i), which requires that the Defendant regularly does or solicit business or engages in any other persistent course of conduct or derives substantial revenge from goods or used or consumed services rendered” in New York.  In support of its conclusion the Court found first that “[a]n out-of-state medical provider is not subject to New York long arm jurisdiction solely on the basis that it treats New York patients or accepts New York Insurance. In addition, the Court noted that neither accepting New York patients nor accepting New York insurance is a basis for long-arm jurisdiction.  Further, the Court explained that “[i]f medical providers accept New York no-fault insurance, this will most necessitate at least some arbitration in New York State…these arbitrations are part of accepting New York patients with New York insurance, rather than a separate course of conduct.”

Moreover, the Court explained that it is not enough that Dr. Yoo was a part owner of HSC, rather the law requires a showing that Dr. Yoo was acting on behalf of HSC when he referred patients from his Wester Janeda practice.  Absent such allegations in the Complaint, the Court found Allstate failed to plead a prima facia case for personal jurisdiction.

In sum, the Court granted HSC’s motion and dismissed all claims against HSC unless Allstate files an amended complaint curing jurisdiction.

Note: This decision is recent and only available on Westlaw.  Please email me if you would like a copy.

 

BORON’S BENCHMARKS
Eric T. Boron
[email protected]

10/16/19       Tennessee Farmers Mutual Ins. Co. v. DeBruce
Supreme Court of Tennessee
Reversal of Appellate Ruling; Tennessee Supreme Court Holds Trial Court Did Not Abuse Its Discretion in Denying Claimant’s Motion to Intervene in Insurer v Insured DJ Action on Coverage Issue

In a unanimous decision, the Tennessee Supreme Court reversed the Court of Appeals’ grant of claimant’s motion to intervene in an automobile liability insurer's declaratory judgment action and to set aside a default judgment that the insurer, Tennessee Farmers Mutual Insurance Company (“Tennessee Farmers”), obtained against the insured, Brandon DeBruce, holding that the liability insurer had no duty to defend or indemnify the insured, Mr. DeBruce in the claimant's personal injury action due to the Mr. DeBruce’s breach of various conditions to coverage set forth in the automobile liability insurance policy at issue.  The trial court had denied the claimant’s motion to intervene.

The background facts are straightforward.  Claimant alleges the vehicle Mr. DeBruce was driving rear-ended her vehicle in December 2012 on an interstate highway.  Mr. DeBruce was insured by Tennessee Farmers.  The accident was timely reported to Tennessee Farmers, which paid both Mr. DeBruce and claimant for their property damage under Mr. DeBruce’s policy.  Claimant eventually sued Mr. DeBruce in a personal injury action.  Mr. DeBruce failed to notify Tennessee Farmers about claimant’s personal injury lawsuit even though the policy required him to send to Tennessee Farmers “at once ... every summons, legal process or other legal paper received.”  Tennessee Farmers learned about the lawsuit in January 2015 from claimant’s attorney.  Mr. DeBruce did not respond to telephone calls from Tennessee Farmers and twice failed to appear for an examination under oath. Under his policy, Mr. DeBruce had to cooperate with Tennessee Farmers in investigating and defending the claims asserted by claimant’s personal injury lawsuit.

In March 2015, Tennessee Farmers filed a declaratory judgment action against Mr. DeBruce asserting he breached the insurance policy when he did not notify Tennessee Farmers of the lawsuit filed by claimant and failed to cooperate in the insurer’s investigation of the accident. Tennessee Farmers’ DJ sought a declaratory judgment that it did not have to provide a defense to Mr. DeBruce in claimant’s personal injury suit nor indemnify him for any damages awarded to claimant in that suit, because of his breach of the policy conditions.  Mr. DeBruce did not respond to Tennessee Farmers’ DJ complaint.  In June 2015, the trial court granted Tennessee Farmers' motion for default judgment in the DJ action, holding that Tennessee Farmers had no duty to defend or indemnify Mr. DeBruce in the claimant’s personal injury lawsuit based on his breach of the conditions of the insurance policy.

In March 2017, claimant, who was not a party to the DJ, nonetheless moved to set aside Tennessee Farmers’ default judgment against Mr. DeBruce, and further, requested permission to intervene in the DJ.  Claimant asserted she was an indispensable party to the declaratory judgment action because she had a direct interest in the outcome of the DJ. In denying claimant’s motion, the trial court held that she was not a necessary party. The trial court found that claimant’s interest was insufficient to make her a necessary party because she was merely “an incidental beneficiary of the insurance contract” between Tennessee Farmers and DeBruce.

On appeal, the Court of Appeals reversed, relying in part on a prior Tennessee Supreme Court ruling holding parties injured in a bus accident who had obtained a judgment against the bus operator in an Arkansas state court were necessary parties in a Tennessee declaratory judgment action to resolve coverage issues between the bus operator and its insurance company. The Court of Appeals held that without joinder of a necessary party, that is, without joinder of the claimant here, the trial court lacked subject matter jurisdiction over the Tennessee Farmers v DeBruce DJ action, and its judgment was therefore “void”.

The Tennessee Supreme Court, distinguishing its prior holding in the bus accident case,  found that a claimant whose interest has not been reduced to a judgment against an insured – as was the case with the claimant in the matter at hand – has only a “remote interest that has not accrued into a real interest in the insurance policy”. Having only a remote interest, the claimant cannot bring a direct action against the insurance company to recover damages under the policy because of the insured’s negligence, ruled the Tennessee Supreme Court.  Texas and Idaho cases were also cited by the Supreme Court in support of its holding. 

 

BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
[email protected]

10/29/19       Global Liberty Ins. Co. v. Evans
Appellate Division, First Department
Summary Judgment Denied to Carrier Because Insurer Was Unable to Prove Assignee Failed to Appear for EUO

Global moved for summary judgment to declare that it did not owe no-fault benefits to the provider, SLM Acupuncture, P.C., on the basis that the assignor, Evans, failed to attend two properly scheduled examinations under oath (EUOs). In support of its motion, Global provided conflicting claims adjuster’s affidavits and an application for no-fault benefits that was dated 9/15/15 but stamped as received by facsimile on 10/11/11 (tell me how no one caught that, or thought this was strange?).

Evidence was also submitted that Evans appeared at an EUO with counsel, but left after his counsel abruptly announced he would no longer represent Evans (this is also very strange!). The evidence submitted clearly showed issues of fact surrounding whether or not the assignor attended duly scheduled EUOs, so the court denied Global’s summary judgment motion. Global appealed, but the First Department properly affirmed the lower court’s denial.

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell
[email protected]

 

The Legislative List

10/21/19       “Combined Single Limit” for Certain For-Hire Vehicles Awaits Amendment
New York State Legislature
Pending Bill Would Clarify That $1.5 Million Combined Single Limit for For-Hire Vehicles Carrying Eight or More People Extends to Injury to or Destruction of Property

On October 21, 2019, Assembly Bill No. A07789 was delivered to Governor Cuomo. Should the bill pass, it would amend NY VTL § 370 to clarify that the required "combined single limit" of $1.5 million for for-hire vehicles capable of carrying eight or more persons includes coverage for injury to or destruction of property, in addition to bodily injury or death.

Earlier this year, Part III of Chapter 59 of the Laws of 2019 had originally implemented the $1.5 million “single combined limit” contained within NY VTL § 370, but only with respect to bodily injury or death. There was also additional minimum coverage of $10,000 per accident for injury to or destruction of property. This bill, if passed, clarifies that coverage for injury to or destruction of property is not an additional coverage, but rather included within the $1.5 million single combined limit.

If passed, this bill will take effect on the same date that section 13 of part III of Chapter 59 of the Laws of 2019 takes effect.

10/18/19       Mandatory Notice of Class 1 Drug Recalls by Pharmacies
New York State Legislature
Pharmacies Owe Patients Taking Recalled Drugs Reasonable Attempts at Notification Within Three Days of Recall
On October 18, 2019, Governor Cuomo signed into effect Chapter 379 of the Laws of 2019, requiring pharmacies to make reasonable attempts to notify patients within three days by phone or mail of Class I drug recalls where such patients are currently taking such recalled drugs.

The Food and Drug Administration classifies Class 1 recall drugs as ones that have a high probability of exposing patients to products that may cause serious adverse health consequences or death. Until now, pharmacies had no duty to notify patients of the recall. Given that pharmacies offer the most direct point of contact for patients prescribed these drugs, this legislation seeks to protect at risk consumers from potentially harmful medication.

This law adds Section 6811-c to the New York State Education Law. That section defines the term “Class I recall” as “a situation in which the United States food and drug administration deems there is reasonable probability that the use of or exposure to a violative product will cause serious adverse health consequences or death.” Under § 6811-c, in the event of a [“]Class I recall[“] of a prescription drug, pharmacies shall make a reasonable attempt to notify all patients that have been prescribed and who are currently taking such recalled drug dispensed from such pharmacy by phone or by mail within  three  days  of the  pharmacy being notified by the United States food and drug administration, a manufacturer, a wholesaler or by other notice of such recall.”

At this point, I know exactly what you are thinking. “But, Ryan, who pays for the added costs associated with mandatory notice of a Class I recall?” And if you are anything like me, your mind immediately answered, “not the CGL carrier for the manufacturer or wholesaler of the drug under the sistership exclusion, that’s for sure.” The sistership exclusion (exclusion n.) under a standard ISO-form CG 00 01 form provides:

n. Recall Of Products, Work Or Impaired Property 

Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:

(1) "Your product";  

(2) "Your work"; or  

(3) "Impaired property";

if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.

Under this exclusion, a manufacturer and/or wholesaler who has a product recalled will find necessary expenses incurred by others in correcting or mitigating the damage arising out of such a recall excluded from coverage. Although the legislature placed the burden of notifying patients on the party with the most direct contact with patients potentially harmed (i.e., the pharmacy), this statute also leaves the drug manufacturer and/or wholesaler without CGL coverage for inevitable insurance claims arising out of expenses incurred by pharmacies in notifying patients of a Class I recall under § 6811-c.

Notwithstanding the above, these potential claims by pharmacies may very well be covered under third-party expense coverage contained within stand-alone product recall insurance procured by a manufacturer and/or wholesaler. This type of coverage is triggered in the event that a manufacturer or wholesaler’s product is deemed to pose imminent threat of bodily injury.

Regulatory Wrap-Up

10/30/19       Proposed Express Adoption of NAIC Valuation Manual For Valuing Statutory Reserves in Life Insurance
New York Department of Financial Services
Superintendent Proposes Express Adoption of NAIC Valuation Manual for The Setting of Reserves of All Life Insurance Companies and Fraternal Benefit Societies and All Accredited Reinsurers of Life Insurance, Annuity Contracts, or Accident and Health Insurance

On October 30, 2019, the Department of Financial Services published the proposed first amendment to Insurance Regulation 213 (11 NYCRR 103) in the State Register. The amendment serves to expressly adopt the National Association of Insurance Commissioners’ (“NAIC’s”) 2019 valuation manual except where expressly conflicting with existing New York Insurance Law or Regulations. That proposed amendment re-numbers and revises existing sections 103.1 and 103.2 to 103.2 and 103.3 respectively, as well as creates new sections 103.1 and 103.4 through 103.8.

Section 103.4 would govern the valuation of individual term life insurance reserves, establishing that “the minimum aggregate reserve shall be the greater of: (1) the sum of the greater of the cash surrender value and 70% of the minimum reserve for each policy determined under the current valuation requirements; and (2) the minimum aggregate reserve calculated in accordance with the methodology and assumptions prescribed by the Manual prior to reflecting any reinsurance ceded.” See Summary of Proposed First Amendment to 11 NYCRR 103 (Insurance Regulation 213) (the “DFS Summary”).

Section 103.5 would govern the valuation of payout annuity reserves, allowing three separate options” to determine the maximum valuation interest rates for policies and contracts with premium determination dates during 2019: (1) the current requirements prescribed by Insurance Law section 4217(c); (2) the current requirements prescribed by Insurance Law section 4217(c) where the reference rate defined by Insurance Law section 4217(c)(4)(F) is reset monthly for jumbo contracts and quarterly for non-jumbo contracts; or (3) the lesser of the rate determined in accordance with section VM-22 of the Manual with certain adjustments, including setting the prescribed portfolio credit quality distribution to 5% treasuries, 45% AA bonds, 50% A bonds and placing a 200 basis point cap on spreads, and the rate determined in accordance with section VM-22 of the Manual without adjustments.” See DFS Summary.

Section 103.6 would govern the valuation of variable annuity reserves, requiring “the minimum reserve must be the greater of the minimum reserve calculated in accordance with the methodology and assumptions of the Standard Scenario Reserve prescribed by the 2017  Actuarial Guideline XLIII with certain adjustments and the minimum reserve calculated in accordance with the methodology and assumptions prescribed by the Manual. See DFS Summary.

Section 103.7 would serve as a catchall for the valuation of all other reserves, requiring that the minimum reserve for all other individual and group life insurance policies, annuity contracts, and accident and health insurance contracts must be the greater of  the minimum reserve calculated in accordance with the current valuation requirements and the minimum reserve calculated in accordance with the methodology and assumptions prescribed by the Manual. See DFS Summary.

Finally, section 103.8 prescribes the determination of reinsurance reserve credits, where a “credit for reinsurance must equal the difference between the minimum reserve calculated prior to reflecting reinsurance ceded and the greater of the reserve using the current reinsurance accounting requirements and the reserve determined in accordance with the Manual after reflecting reinsurance ceded.” See DFS Summary.

The public comment period for this proposed first amendment to Insurance Regulation 213 is set to expire on December 30, 2019.

From the Filings Cabinet

10/25/19       Mandatory Provisions Under 11 NYCRR 60-1.1 Define “Bodily Injury” for Auto Policies New York Department of Financial Services
DFS Advises That New York Regulations Prohibit Form Filings Restricting the Definition of “Bodily Injury” Below the Parameters of 11 NYCRR 60-1.1

On October 25, 2019, the Department of Financial Services disapproved a filing for, among other reasons, running afoul to mandatory minimum provisions for automobile liability insurance under Department Regulation 35-A (11 NYCRR 60-1.1).

Specifically, the proposed form submitted for review had modified the definition of bodily injury to mean “physical harm to the body, sickness, disease, or death, but does not include:… “ In its disapproval, DFS noted that 11 NYCRR 60-1.1 defines the mandatory minimum definition of “bodily injury”. Essentially, because 60-1.1(a) requires that automobile liability insurance cover “loss from the liability imposed by law upon the insured for damages, including damages for care and loss of services, because of bodily injury, sickness, disease or death sustained by any person . . .”, an insurer may not exclude from the definition any specific type of bodily injury, sickness, disease or death (is there a specific type of death?). By including the qualifying phrase “but does not include: . . . “ and several qualifiers afterwards, the carrier had run afoul of the minimum provisions of 60-1.1(a) for coverage under an automobile liability policy.

Additionally (and to the readership, most interestingly), DFS took issue with the proposed term “physical harm to the body,” finding it “more restricted than ‘bodily injury’ and there is no court case supporting such usage.”

Maxwell’s Minute: Although the grounds for disapproval based upon the phrase “but does not include” seem adequate in and of themselves, your writer is not entirely convinced “physical harm to the body” is any more restrictive than “bodily injury”. I acknowledge that even if this particular form had been approved (I assume DFS makes an effort to avoid that by disapproving forms in conflict with its regulations), New York minimum requirements would control over more restrictive policy language anyway. But, to me, “physical harm to the body” appears to be an attempt by the carrier to avoid the cardinal sin of including the term you are defining in the definition of that term (i.e., “bodily injury” means bodily injury . . . .). In Lavanant v. General Acc. Ins. Co. of America, 79 N.Y.2d 623 (1992), the Court of Appeals noted that it was the inclusion of “sickness or disease” in the definition of “bodily injury” that allowed for claims of compensable mental injury. Therefore, I would posit that merely replacing bodily injury in the definition with “physical harm to the body” does not diminish in any way coverage for bodily or mental sickness or disease under Lavanant.

On the other hand, if “physical” is viewed to qualify each of the terms “harm to the body, sickness, disease or death,” (aren’t all deaths physical?) I would agree that the term is more restrictive than the minimums mandated under New York regulation.
 

CJ AT THE THRESHOLD
Charles J. Englert III
[email protected]

10/22/19       Arias v. Martinez
Appellate Division, First Department
One Serious Injury Opens the Door for Damages for Other Injuries Causally Related

Defendants moved for Summary judgment alleging that plaintiff did not sustain a serious injury as defined by Insurance Law § 5102(d) by submitting affirmed reports of their expert radiologist, who opined that the MRIs of the claimed injured body parts showed no signs of injury, and their emergency medicine physician who opined that plaintiff’s emergency room records were inconsistent with his claimed injuries. Defendants also provided evidence that plaintiff ceased all treatment following a surgery several months after the accident. Plaintiff failed to respond to defendants’ assertions that he ceased treatment; therefore, defendant was granted summary judgment on that claim.

Plaintiff, however, did provide evidence to raise a triable issue of fact with regard to his “significant limitation” claim by providing evidence of diminished ranges of motion in his lumbar spine. The court noted that “[s]hould a jury determine that plaintiff has met the threshold for serious injury, it may award damages for other ‘injuries casually related to the accident, even those not meeting the serious injury threshold’. Pouchine v. Pichardo, 176 A.D.3d 643, 645 (1st Dep’t 2019); see Rubin v. SMS Taxi Corp, 71 A.D.3d 584, 549 (1st Dep’t 2010).

10/24/19       Montoya v. Rosenberger
Appellate Division, First Department
A Different but Equally Plausible Cause of Plaintiff’s Injury Raises a Triable Issue of Fact

Defendant moved for summary judgment arguing that plaintiff’s alleged injuries were either resolved or degenerative in nature. Plaintiff responded to the motion with an affirmed report of his treating physician that causally related his lumbar spinal injuries entirely to the accident, and alleged plaintiff had made “maximal improvement” thus any further treatment was not worthwhile. The Court agreed that the report of plaintiff’s treating physician was sufficient to find that an issue of fact existed, and summary judgment should be denied.

Editor’s Note: The Court’s mention of the plaintiff’s relatively young age (29 at the time of the accident) made me do a deeper dive into the motion papers to find the possible reasons that the decision came out in favor of the plaintiff. The defendant submitted an IME report and focused on the conclusions from the IME physician, focusing on the conclusion that the plaintiff reached his pre-accident status. In opposition, plaintiff pointed out diminished lumbar ranges of motion (and explained the objective procedure for measuring the same), and notably highlights the difference in plaintiff’s pre- and post-accident life. While defendant ignored much of plaintiff’s EBT testimony, focusing only on the fact that plaintiff can work full time, plaintiff used his EBT testimony to outline the leisure activities in which he can no longer participate. In addition to his post-accident lifestyle change, the plaintiff notes in his papers and the court notes that plaintiff had never made previous complaints of back pain.

What does this mean for defense attorneys and insurance adjusters? When you have a claim where the plaintiff is relatively young and without prior complaints of the same kind alleged in their Bill of Particulars finding exactly what the claimant can and cannot do is important. Courts are likely to take the plaintiff’s age into account when determining causation, the best way to combat a relatively young and healthy plaintiff is to provide factors that could contribute to their injuries. In this case, the defendant could have dug into plaintiff’s sports history. For example, if the plaintiff played football through high school and college, he could very well have injured himself in a way that contributed to his current complaints. By digging deeper into the plaintiff’s past history of activity the defendant may have been able to lessen the effect that the plaintiff’s age as compared with the types of injuries presented had on the Court.

 

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

08/22/19        Wells Fargo Bank, N.A. v. Allstate Insurance Company  
Sixth Circuit Court of Appeals
Covered Fire Loss or Excluded Vandalism?

In February 2014, an arsonist set fire to a property and Wells Fargo filed a claim against Allstate for the damage. Allstate denied the claim under an exclusion that excludes coverage for damage caused by vandalism or malicious mischief if the loss occurs after the property has been vacant or unoccupied for more than 30 consecutive days. The terms “vandalism” and “malicious mischief” are not defined in the policy, but Allstate determined that the arson fell within them and denied Wells Fargo’s claim. The District Court ruled in favor of Wells Fargo concluding that arson could fit within the fire loss provision just as easily as it could within the “vandalism or malicious mischief” exclusion. The Trial Court granted summary judgment to Wells Fargo, and that decision was affirmed on appeal.

An insurance policy is a contract whose interpretation in generally a matter of law for the court. Words and phrases used in an insurance policy must be given their natural and commonly accepted meaning unless another meaning is clearly apparent from the definitions or contents in the policy. While arson is clearly a fire loss, if vandalism is the intentional destruction of property, arson would appear to be one way (by fire) to accomplish that objective and result as well.

The Court first noted that there is a well-established legal term for the intentional destruction of property by fire, and that is arson. Fire damage does not appear to be the exclusive domain of “vandalism” or “malicious mischief”.

Clue number two was that the policy’s personal property coverage section listed fire loss separately and differently from a loss caused by vandalism or malicious mischief, meaning that within the policy there was clearly some differentiation or distinction between a fire loss (such as arson) and vandalism or malicious mischief.

Clue number 3 was that in the one instance where the policy does mention the word “arson”, it does so in connection with fire loss not vandalism or malicious mischief.

Wells Fargo argued and the Trial Court agreed that these separate treatments and usages of fire and arson, as opposed to vandalism and malicious mischief, indicated that those terms ought to be treated separately for purposes of a fire loss to the dwelling. Phrased differently, if Allstate was correct that arson should be read as just a variant of vandalism or malicious mischief and not a fire loss, it is “odd” that the only mention of arson in the policy is in connection with fire loss and not vandalism. The interpretive question at hand was whether arson is a vandalism or a fire loss, and the fact that the policy’s only mention of arson comes in the context of fire loss was highly suggestive.

In addition, Ohio subscribes to the rule of interpretation that exclusions in an insurance policy should be interpreted as applying only to that which is clearly intended to be excluded. Therefore, the Trial Court’s grant of summary judgment to Wells Fargo was affirmed.

The issue was whether arson is a covered fire loss or an excluded vandalism. The Court noted that exclusions are generally to be tightly interpreted, and if there was any ambiguity in the policy that is generally also construed against the insurance company and in favor of coverage.

In this case, the Court looked at how the terms were used where they appeared elsewhere in the policy as “clues” to the proper policy interpretation. Reviewing where and how the policy used the relevant words and phrases elsewhere gave rise to a conclusion that the policy could certainly be interpreted, if not best interpreted, as providing that arson is a covered fire loss, and would not be excluded under the terms or meaning of vandalism or malicious mischief.

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