Coverage Pointers - Volume XXI, No. 11

Volume XXI, No. 11 (No. 550)
Friday, November 15, 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.

 

Do you have a situation?  We love situations.

It was a fairly quiet week in the courts, but we bring you all that there is to report.  For new subscribers, let me just review what we do with this fine and steady publication.  On alternating Fridays, for the past 20+ years, we bring you summaries of every appellate insurance case decided in the New York, New Jersey and Connecticut courts within the two weeks previous to the issue.

We also provide you selected cases from the New York federal district courts and the New York trial level (Supreme) court and other coverage cases from throughout the country.  In addition, we provide you with the most popular feature of our newsletter (if measured by feedback), stories from the newspapers from 100 years ago.  This is our 550^th issue with continuous publication since July 1999.

We love the response we get from our subscribers.  Feel free to reach out with your “situation” and if we can help empower you to make the right decision, we’ll do that with pleasure.

Mediation Services:

Recently, Mike Perley and I were certified, joining Ann Evanko, as federal court mediators by the United States District Court for the Western District of New York.  We are delighted to help you in that capacity.

My particular passion includes intercompany and coverage mediations.  Bring them on.

Insurance Industry Institute:

It was a pleasure meeting so many at the FDCC Insurance Industry Institute.  Here’s our article on the War Exclusion  with a focus on cyber coverage.  Thanks to Rich Traub and Rick Welsh, my co-panelists.

Newsletters:

We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know.

• 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.

  Two Rubber Sawbucks Leads to 90 Days:

  Buffalo Courier

  Buffalo, New York

  15 Nov 1919

   

  $20 CHECK DRAWS 90 DAYS INTEREST

  George C. Bryson of No. 102 Grey Street pleaded guilty before Judge Brennan in City Court yesterday to passing a worthless check for $20 to Leo J. Schiferle of No. 538 Sycamore Street.

  It was also alleged by the police that Bryson had passed two other bad checks.  He was sent to the penitentiary for three months. 

   

Jen’s Gems:

Greetings,

It was nice to see many of you last week in Hartford for DRI’s Complex Claims  Forum.  I was unlucky enough to speak on a panel about the changes to the statute of limitations in many states for sexual assaults of minors and the associated coverage implications.  My co-panelists were a group of smart and interesting folks including Rhonda Tobin from Robinson & Cole, Suzanne Whitehead from Skarzynski Marick & Black, and Steven White from Liberty Mutual.

In turns of my column this week, I report on an interesting trial court decision addressing a coverage dispute between the general liability carrier and auto carrier for an accident which occurred during unloading of pallets of cement from a flatbed truck.  The decision is interesting because it discusses a situation which I see often.  The situation where the incident occurs during unloading but the allegations in the complaint include general allegations going to the maintenance of the jobsite and specific decisions about the manner and method by which the unloading would be accomplished.  This decision does a nice job of discussing the differences in the policies and is definitely worth a read.

Until next issue…

Jen

Jennifer A. Ehman

[email protected]

 

German Women No Longer Verboten:

The Oneonta Star

Oneonta, New York

15 Nov 1919

 

NOW WALK WITH FRAULEINS

Order Forbidding Fraternization by Soldiers Is Revoked by Maj. Gen. Allen

Coblens.—The army regulation prohibiting American officers and soldiers from fraternizing with Germans has been revoked in an order issued by Maj. Gen. Allen.

The rule against fraternizing became effective in December soon after Maj. Gen. Dickson and the American army of occupation reached the Rhine.  The British and French are reported to have lifted their ban several months ago.

For the last month the regulation in the American area had not been strictly enforced and there has been considerable promenading by American soldiers with German girls.

The revocation of the fraternizing order in no way affects the regulation prohibiting American soldiers from marrying German women.

Peiper on Property and Potpourri:

This week’s issue brings another light load of cases upon which to report.  With each passing year, it feels as though the insurance related decisions become fewer and shorter.  We’re doing our part, however, as I have four forthcoming decisions at various points in the process.

We do report on a Fourth Department decision which affirms the long-standing rule that an appellant cannot raise a legal argument for the first time in her or his appellate brief.  This remains true even, as in the case reviewed, where the issue is the application of a statute of limitations defense.

With no Holidays, little case law, and no hockey tournaments to discuss this week, I’m afraid I’ve little left to say.  On to the Thanksgiving, and the Cowboys/Bills 4:30 afternoon tilt.  The Red, White and Blue, by the way, have not played on T-Day since 1994, and haven’t won on T-Day since 1975.  (that, coincidentally, was the last year the Patriots didn’t win the AFC East!)   We don’t predict victory this Thanksgiving either, but who cares as we’ll all be passed out by halftime anyway.

That’s it for now.  See you in two weeks.

Steve

Steven E. Peiper

[email protected]

 

“Reds” a Huge Issue in 1919:

New York Herald

New York, New York

15 Nov 1919

 

SOLDIERS RAID I. W. W. HALL IN LOS ANGELES

Supposed Members Are Injured as Place Is Wrecked.

Los Angeles, Nov. 14.—Industrial Workers of the World headquarters at Germain Hall were raided by uniformed ex-service men armed with clubs tonight and the place wrecked after a melee in which several supposed members of the radical organization were injured.  Two men were taken to the Receiving Hospital.

San Francisco, Nov. 14.—Nine men were arrested and a quantity of alleged Red literature was seized late to-day in two raids on radical headquarters.  Police Captain John O’Meara, who conducted the raids, declared all members of the I. W. W. must leave town or go to jail.

O’Meara said the raids were the result of information that boys and girls of school age frequented these places and were being taught socialistic and radical principles.

“Children of school age and particularly girls go there for books and pamphlets,” O’Meara declared.

The two places raided were the Industrial Workers of the World headquarters and the People’s Institute.  The latter, according to O’Meara, is the educational bureau of the radical organizations in San Francisco.

Wilewicz’ Wide-World of Coverage:

Dear Readers,

A wide world indeed – I’m just back from a long weekend in Cancun, Mexico, where family and friends celebrated one of my best friends marrying his best friend. The event was at an all-inclusive resort in Puerto Morelos, Quintana Roo, and though I’m not a huge fan of such places, a good time was had by all. In particular, the number of times I heard my daughter say “I love this place!” made it worth it entirely. The ceremony itself was beautiful and moving, and just as they said their vows a rainbow appeared over the ocean behind them. To get in some culture between all the beach-life, we did a full-day excursion to see the Mayan ruins of Chichen Itza, which were awe-inspiring. The pre-Hispanic city is largely intact, which is quite impressive, given its 1,000+ year age, and though you can’t climb the pyramids anymore, the size and scale of the buildings is remarkable in and of itself. With this trip, I’m done traveling for a while, and hunkering down for the winter, which has certainly arrived here in New York.

Now, in the wide world of coverage, it appears that the Second Circuit is taking a siesta from interesting coverage decisions of late. As the Mexican state of Quintana Roo is outside of any U.S. federal jurisdiction, this columnist was at a loss to find any other Circuit Court cases that were a propos this week. I’ll be back next time with the latest, to be sure.

Until next time, stay warm everyone!

Agnes

Agnes A. Wilewicz

[email protected]

More Conflict with the I.W.W.:

New York Herald

New York, New York

15 Nov 1919

 

I. W. W. HAD PLAN FOR MASSACRE

Confession Shows Reds Were To Greet Centralia  Marchers With Volley

LEGION MEN IN HUNT

More Trouble Expected as Armed Radicals Begin to Surround Town.

Special Dispatch to THE SUN

CENTRALIA, Wash., Nov. 14.—A confessional that a thoroughly prepared plot existed to break up by a rifle volley the armistice day parade during which four soldiers were killed was to-night in the hands of D. C. Cunningham, Assistant County Attorney.  The statement was obtained from one of the Reds now a prisoner, who it is said was in the councils of the ringleaders from the start and sat in at the final secret session of the I. W. W. held Sunday, at which the last diabolical detail was arranged.

Mr. Cunningham said that ten of the men now in jail will be formally charged with murder, and that an eleventh, Bert Bland, is being sought by a posse.  Bland fled during the riotous roundup of radicals that followed the street slaying.  He is held responsible by the County Prosecutor for the shooting of Warren Grimm, commander of the Centralia post of the American Legion.  His description has been placarded throughout the State, and his capture is regarded as certain.

Barnas on Bad Faith:

Hello again:

Anyone who reads this with any degree of regularity knows how much I live and die with my sports teams.  After a few good starts, it has been a lot of dying lately.  After a hot start, the Bills have dropped two of three games and face some difficult games at the end of the schedule.  Not to be outdone, the Sabres have lost five in a row and have come crashing back to earth from the top of the standings yet again.  For good measure, Syracuse football is 3-6 and is last in the nation with 45 sacks allowed, Syracuse basketball scored 34 points in an entire game in the season opener, UB basketball lost to Dartmouth at home to open its season, and Spurs sit a lowly 14^th in the Premier League table and look completely inept.  Not great, Bob!

In my column this week I have an appraisal case from the Seventh Circuit where the court concluded that State Farm did not breach the insurance contract or act in bad faith during its handling of a breach of contract claim and the insured’s demand for appraisal.  Congrats to Eric McNamar and company from Lewis Wagner on their handling of this one.

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

Brian

Brian D. Barnas

[email protected]

A Mooving Violation – A Century Ago:

 

Buffalo Courier

Buffalo, New York

15 Nov 1919

 

HELD ON CHARGE OF RECEIVING COW

William Goebel of No. 715 Sherman Street was held for the grand jury by Judge Brennan in City Court yesterday charged with criminally receiving stolen property.  He waived examination.

Goebel, it is alleged, bought a cow valued at $200 for $70 from three men who are accused of stealing the cow from the barn of James Smith in William Street.

Off the Mark:

On trial this week.

Brian

Brian F. Mark
[email protected]

Sleeping Sickness – 100 Years Ago:

The Brooklyn Daily Eagle

Brooklyn, New York

15 Nov 1919

SLEEP SICKNESS HOPELESS

The condition of Mrs. Dorothy Mintz, the “sleeping sickness” patient at the Willard Parker Hospital, Manhattan, is declared to be practically hopeless by Health Commissioner Royal S. Copeland.   Following a long conversation with the physicians attending Mrs. Mintz Commissioner Copeland declared that Mrs. Mintz was responding poorly to the liquid food treatment and that the food treatment had apparently no effect on the patient.

Before Mrs. Mintz entered the hospital she spoke English fluently, in addition to German.  Yesterday Commissioner Copeland reported that Mrs. Mintz had forgotten all of her English, and efforts to converse with her in English were fruitless.  It was necessary to speak to her in German.

Boron’s Benchmarks:

Dear Subscribers:

As a glass-is-half-full-kind-of-guy, I say that a Western New York Fall that lasts a month and a half is better than going right from Summer into Winter.  Which actually happened once here.  On October 12-13, 2006, Lake Storm “Aphid” dumped up to two feet of heavy, wet, lake-effect snow in and around Buffalo - the 6^th greatest snowfall ever, as of that time, in Buffalo’s storied weather history.  So, we should be thankful that Mother Nature in 2019 gave us a few precious weeks of classic Fall weather to enjoy … before plopping about 10 inches of snow throughout the Western New York region over the course of the last 36 hours (as I type this).

It’s fine.  We choose to live here in Western New York in part because we appreciate the variety that the change of seasons brings us.  And many of us would go so far as to say, “so what if we have a year, now and then, when it snows from November to April”?  Or, “from October to May”?  Or, from…OK…I’ll stop there. 

Hey, only a few places have a more glorious Summer season than we do, so we’ll look forward to Summer 2020 … while simultaneously looking down where we step tonight, lest we hit a patch of black or brown or white or plaid ice as we walk out to brush off and scrape off our cars after work.

This edition of Boron’s Benchmarks, the column that covers rulings of the high courts of the 49 states not named New York, directs your attention to a Memorandum Decision issued on November 4, 2019, by the West Virginia Supreme Court, addressing, among other things, an insured’s claim for negligent procurement of appropriate insurance.

Have a great two weeks, folks!

Eric

Eric T. Boron

[email protected]

He LOVED Marriage:

The Evening World

New York, New York

15 Nov 1919

YOUTHFUL WOOER FOUND GUILTY OF WEDDING THREE

Girl Bride in Court When Verdict Is Brought in Against George Leslie Miller.

Three girl brides sat to-day in the County Court, Brooklyn, when a jury filed before Judge May with a verdict of guilty of bigamy in the case of George Leslie Miller, twenty-two years old, of No. 923 Greene Avenue.  Miller will be sentenced Monday.

According to testimony, Miller had annexed two wives before he was eligible to vote.  He took the third a few months ago.

At Long Island City, in June 1916, Miller married Miss Edna McNeil.  He left her that fall and on July 19, 1918, led to the altar Miss Harriet Halsey of No. 340 East 22^nd Street, Brooklyn, whom he induced to go to Philadelphia.  June 9 of this year his first marriage was annulled and on June 30 he quarreled with Miss Halsey at the Brooklyn home of her parents and left her.

On July 26, Miller sent Miss Halsey her last remittance and two days later was married in the Church of the Holy Cross by the Rec. Father Coppinger to Miss Alice Murphy of No. 952-A Flatbush Avenue, whose dreams were unspoiled until Miss Halsey located the young man and had him arrested.

“George,” said one of the young women, “could furnish a two-room flat so beautifully with oratory and paint and the bird-like happiness to be found in it that no girl living could turn him down.”

Barci’s Basics (On No Fault):

Hello Subscribers!

I’m going to say it – it is officially winter here in Buffalo, NY. Only two days ago I was clearing out the garage to make way for my car and get the snowblower in position. It’s a good thing too, since yesterday I had to break the snowblower out to clear the driveways and sidewalks. Then, of course, you have to shovel the tough to reach parts and put salt down. I was in full snow gear to do this – snow boots, snow pants, ski jacket, hat, gloves, scarf—the works. I know winter technically doesn’t start until December 21, but snow sticking on the ground, temperatures in the teens, and snow pants out means its winter in my book. I am trying hard not to complain though, as I typically enjoy the winter months (and the snow) for skiing, ice skating, and finding a cozy fire by which to read. As the Norwegian’s say, the secret to enjoying winter = koselig.

On the no-fault front, I have one case for you out of the Fourth Department. I cannot remember the last time I reported on a Fourth Department no-fault decision, so this is exciting! The case boils down to the court deciding that the master arbitrator exceeded his authority in overturning the original arbitrator’s award. Give it a read!

That’s all folks,

Marina

Marina A. Barci

[email protected]

Jim Crow Laws – Sadly, Alive and Enforced, 100 Years Ago:

The Gadsden Daily Times-News

Gadsden, Alabama

15 Nov 1919

JIM CROW LAW WILL REMAIN

Congress Refuses to Sanction Abolishment of Rule in South.

By Associated Press.

Washington, Nov. 15.—By a vote of 142 to 12 the house today refused to incorporate a provision in the Esch railroad bill that would compel the abolishment of Jim Crow cars on southern railroads.

The amendment was offered by Representative Madden, of Illinois.

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

This week marks a milestone for two WNY Men’s volleyball staples that are more than worthy of the recognition. Longtime Hamburg High School Varsity Coach, Brian Carroll, and WEVA Official, Frank Cwiklinski, will be inducted into the WNY Boys’ Volleyball Hall of Fame on Friday.

Coach Carroll leaves a lasting impression on everyone with which he has ever played alongside, coached, or conversed. He was recognized for accomplishments spread over his Orchard Park High School playing career and 23 years as Hamburg’s boys varsity coach. As a coach, he amassed a 391-188 overall record, including six ECIC Division titles, seven Section VI Titles, two NY State Championships, and coached over 25 All-WNY players. As the director of Southtowns Volleyball Club for 15 years, I had the privilege of coaching alongside of him at STVBC and saw first-hand the impact he had on athletes, coaches and others. Congratulations and cheers to you, Brian, who I am happy to have as a mentor, colleague, coach, and friend.

Frank was the official that you said “hello” to at every tournament you ever attended. Frank learned the game of volleyball while on a tour of duty in Vietnam, watching intently as a group of Airmen from New Mexico masterfully executed point after point. Frank, a longtime Corrections Officer, set for the Wende State Correctional Facility team and was a member of a police team that maintained an eight-year reign of gold medals at the NY State Police Olympics. He is a member of USA Volleyball with the Western Empire Volleyball Association Officials Group, attaining a Junior National rating. It is always a pleasure to interact with Frank, and I congratulate him on his long-overdue, formal recognition by the volleyball community at large. Informally, we have recognized him for years…

Congratulations goes out to Scott Leary as well. Although I am less familiar with him, his induction on the merits of an impressive career at Orchard Park High School, including leading the Quakers to an undefeated 25-0 season in 1991 and a State Title, places him well within the confines of the Hall of Fame. Cheers, Scott!

And now we get down to brass tacks, as they say…

Frist, a general reminder to carriers and as was covered in a previous edition of Ryan’s Capital Roundup, DFS has advised against the filing of conditional forms based upon the speculative future of the Federal Terrorism Risk Insurance Act of 2020. Numerous filing disapprovals from DFS during this period have cited this very reason.

In this week’s column, the Legislative List includes a newly enacted law clarifying the statute of limitations for public and wholesale water suppliers to sue for contamination of a source of water supply. Additionally, From the Filings Cabinet offers insight into DFS’ opinion regarding “credits” to decrease deductibles in homeowners’ policies.

Until next time,

Ryan

Ryan P. Maxwell

[email protected]

 

The Sheboygan Press

Sheboygan, Wisconsin

15 Nov 1919

LONELY WIDOW, age 30, worth, $40,000 wishes to hear from honorable gentlemen under 60.  Object matrimony.  Write Mrs. Hill, 14 East 6^th St., Jacksonville, Fla.

Editor’s Note:

For regular readers of this newsletter, I’ve reported on Mrs. Hill’s ads in different newspapers over a period of months.  I don’t know what ever happened to her (there’s an empty lot at 14 East 6^th Street now), and I haven’t figure out her game.  She always described herself as a “lonely widow” but her net worth fluctuated with interesting irregularity.  My guess is that Mrs. Hill is the 1919 equivalent of a Nigerian Prince.  Her ads appeared in papers across the US and Canada and her net value changed considerably:

9/23/1917	$50,000	Tampa
9/23/1917	$50,000	Tampa
8/25/1918	$500,000	Buffalo
10/27/1918	$500,000	Pittsburgh
11/24/1918	$500,000	Pittsburgh
5/11/1919	$40,000	Albuquerque
5/18/1919	$100,000	Tucson
6/22/1919	$100,000	Leavenworth (KS)
8/25/1919	$100,000	Saskatchewan
10/18/1919	$40,000	Jackson (MS)
11/17/1919	$40,000	Montgomery
1/18/1920	$300,000	Pittsburgh
2/29/1920	$300,000	Pittsburgh
3/14/1920	$300,000	Winston-Salem
5/15/1920	$40,000	Saskatchewan
5/30/1920	$40,000	Tucson
6/1/1920	$40,000	Tucson
7/15/1920	$37,000	Lenoir (NC)
8/3/1920	$55,000	Saskatchewan

 

FYI, $500,000 (her greatest stated worth) in 1918 would be the equivalent of $9,169,087.59 in 2019 dollars. Her value 100 years ago today would be a mere $609,049.70 in 2019 dollars.

CJ at the Threshold:

Hello all:

Two short weeks ago we were welcoming the cooler Fall temps, however, as I write this the city is blanketed in nearly a foot of snow and the temperature feels more like January than November. Hopefully, this means the local ski areas will open sooner rather than later, which makes having to wake up early in the morning to shovel all the more worth it.

While the inclement weather may slow down our daily commutes, it will never slow down Coverage Pointers. This week I have two cases. The first is a reminder that sometimes plaintiffs can be their own worst enemies. For the second selection we have a short decision from the Second Department, but I decided to dig into the defendant’s moving papers to better understand the information considered by the court.

Until next time,

CJ

Charles J. Englert, III

[email protected]

Lady Astor Runs for Parliament – A Century Ago:

Press and Sun-Bulletin

Binghamton, New York

15 Nov 1919

BALLOTING BEGINS FOR LADY ASTOR

Results of English Parliamentary Election will Not Be Known Until Nov. 28

Plymouth, Nov. 15.—The balloting which will decide whether Lady Astor is to succeed her husband in the House of Commons and as the American wife of a British peer become the first active woman member of Parliament, began in the Sutton constituency of Plymouth early today.

Voting came after a fortnight of intense electioneering, but it will be nearly a fortnight more before it becomes possible for those today claiming the victory for their respective favorites among the three candidates to be sure of the outcome, as the result will not be announced until Nov. 28.  The delay is necessary because of the considerable number of absent voters, largely men serving with the colors abroad.

Lady Astor was one of the first women to vote after the opening of other pools here.  Throughout the division the early activity was pronounced, and the clear, crisp weather which prevailed augured a heavy ballot.

Editor’s Note:  Lady Astor was elected and served in the Parliament from 1919 to 1945!

John’s Jersey Journal:

Buffalonians were in for a bit of shock this week when nearly a foot of snow landed early. I admit that, initially, I was agitated it was so cold and we had so much snow this early. I ended up embracing it, however. Rather than firing up the snowblower, Erin and I headed to the hot tub. We sat in the hot tub as the snow gently fell. It turned out to be a lot of fun watching the snow fall. Erin enjoyed a glass of red wine while I sipped a cold beer. Gradually, a layer of ice formed atop our heads prompting us to retreat into the house. The house is just three steps away in the snow. I’m thinking next time I’ll need a hat. Erin thinks Santa hats might be fun. We’ve since cranked up the temperature to 104° F and can’t wait to do it again.

No coverage cases to report on from New Jersey state and federal courts. No interesting legislation or regulations to report. What we do have though is an interesting federal court decision concerning fraudulent conduct allegedly committed by PIP medical providers. GEICO recently sued a number of doctors and medical practices who rendered services to GEICO’s insureds under the no-fault scheme.

GEICO alleges that they defrauded GEICO that the medical services were fraudulent. Several of the defendants, all anesthesiologists, moved to dismiss certain causes of action in the complaint.

Judicial opinions on motions to dismiss are great places to find succinct statements of the law and what a party must allege to state a claim. The allegations themselves are of the most interest. GEICO sought $5.2 million from the defendants who allegedly billed for unnecessary treatment or for treatments that did not occur at all.

In its 170-page Complaint, GEICO claims that:

• defendants submitted thousands of fraudulent no-fault insurance charges for purported initial examinations, follow-up examinations, pain management injections, anesthesia services, discogram procedures, spinal surgical procedures, and acupuncture services;

• defendants followed predetermined protocols that invented diagnoses and billed for medically unnecessary treatments;

• in many cases the billing codes for services misrepresented and exaggerated the level of service provided;

• the defendant physicians routinely rendered “phony diagnoses”; and

• the fraudulent scheme has been going on for approximately six years.

The allegations detail the education background of the physicians, and even comment on the physicians’ credentials to practice medicine (with quite a bit of snark): Defendant He’s “board certification in anesthesiology is the only legitimate board certification that was ever obtained.”

These “salacious” allegations become even more salacious where it alleged that one of the defendant physicians was arrested for stabbing a 12-year-old boy with the end of a ski pole and repeatedly punching him in the face. This is alleged to have caused the doctor to be unable to secure “legitimate employment” and “contributed to his motive to participate in the fraudulent scheme” against GEICO (and other insurers).

GEICO asserts claims of unjust enrichment, common law fraud, violations of the Racketeer Influenced and Corrupt Organizations Act, and violations of the New Jersey Insurance Fraud Prevention Act. The District Judge ruled that GEICO’s causes of actions were sufficiently pled, giving GEICO the green light to continue forward in the litigation.

While these are allegations, and not proven to date, it was certainly an interesting read. I’ll leave out the boring parts like CPT codes and HCFA forms. Not surprised a nearly 200-page complaint pled sufficient facts. I am interested to see the outcome of the case. GEICO, in my view, is making a point that it will aggressively fight back against fraud perpetrated against the no-fault system, and particularly, against it.

John

John R. Ewell

[email protected]

Lazy Farmers Entitled to Insurance?

Dunkirk Evening Observer

Dunkirk, New York

15 Nov 1919

FARMERS WOULD PAY

Though Exempt from Aid Farmers Would Pay Insurance for Lazy Workers.

Among the hardest workers and heaviest taxpayers in the state are the farmers, yet they are exempted from any of the alleged benefits of the so-called Compulsory Health Insurance bill.

The farmer however will be called upon to pay his heavy share of the cost should the bill become a law, because the entire cost would be shifted to the consumer and the High Cost of Living would soar higher.

The employee and the employer would contribute equally to the fund—from $15.00 to $18.00 a year for every person coming under its provisions.  In the case of a company employing, say 10,000 men, the men would contribute $180,000 a year and the company a like amount.

In view of the present labor demands it follows that the men would force the employer to raise wages to cover that $180,000; isn’t it also fair to assume that the employers would add that additional cost, as well as his own share, to the cost of the wars he made?  He would and the taxpayer would have to pick up the whole burden; in other words, John Jones would pay Bill Smith’s insurance.

And if Bill was lazy and shiftless and intemperate, he’d be sick just as long as some easy-going political doctor would allow him to be that way.

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

The weather may be cold, but Connecticut law is hot! This past Tuesday was a tumultuous day for Connecticut. The Connecticut Supreme Court, almost a year following oral argument, finally released its decision on the crumbling concrete crisis impacting 35,000 homeowners across the state. And, if that wasn’t enough for one day in our little state, then the U.S. Supreme Court declined to rule on the Sandy Hook victims’ case against gunmaker, Remington.

The Connecticut Supreme Court unanimously concluded that there is no first-party property insurance coverage available for Connecticut homeowners’ crumbling concrete claims. The Court, addressing certified questions and a direct appeal, held that policies that don’t specifically require an actual falling down of a home in the definition of collapse instead require a showing of “substantial impairment of structural integrity” by proof that the home is in imminent danger of falling down, in order to trigger coverage. This construction leaves thousands of Connecticut homeowners without help from their insurers in making repairs to a state-wide epidemic of defective concrete foundations.

In a case of far-reaching national import, the United States Supreme Court denied Remington’s petition for review, leaving in place a ruling by the Connecticut Supreme Court permitting a lawsuit to proceed against the gun manufacturer for the Sandy Hook massacre. The Justices let stand the Connecticut ruling that a federal law protecting firearm manufacturers and dealers from liability for the “criminal or lawful misuse” of their products does not preempt the state’s consumer protection laws.

You can read more about these important decisions in our Firm blog by clicking these links: Crumbling Concrete Crisis  Sandy Hook.

Lee

Lee S. Siegel

[email protected]

Headlines from this week’s issue, attached:

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

• Accident that Occurred in Stairwell between Floors of Restaurant Arose out of “Maintenance and Use” of the Rental Premises so Additional Insured Coverage was Triggered

• Life Insurance Policy Rescinded for Material Misrepresentation

• Where Company President receives Notice of Threatened Suit and Fails to Timely Notify the Liability Carrier, Late Notice is Imputed to Company.  Late Notice Disclaimer Sent 29 Days after Notice of Claim was Timely

 

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

• Failure to Assert Statute of Limitations Defense at Trial Court Waives any Argument Raised for the First Time on Appeal

 

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

• Second Circuit taking a siesta.

 

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

• Trial Court Finds Auto Carrier Has the Primary Obligation to Defend in Loading and Unloading Case

 

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

• Zero Evidence of Bad Faith where Insurer Evaluated Claim, Participated in Appraisal, and Paid Appraisal Award

 

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

• New Jersey Federal Court Allows GEICO’s $5 Million Lawsuit Alleging Fraud and Racketeering Against PIP Medical Providers to Proceed

 

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

• Connecticut Carriers Cleared in Collapse of Crumbling Concrete Claims

 

OFF THE MARK
Brian F. Mark
[email protected]

• On trial this week.

 

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

• West Virginia’s High Court Affirms Summary Judgment to Insurance Broker; West Virginia Does Not Recognize any Duty by Broker to Advise and Does Not Recognize Special Relationship Exception

 

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

• Master Arbitrator Exceeded His Authority by Overturning Initial Arbitrator’s Decision

 

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

The Legislative List

• Clarifies Statute of Limitations for Public and Wholesale Water Suppliers to Sue for Contamination of Water Supply Source

From the Filings Cabinet

• DFS Advises that a Decreasing Deductible Should Not Eliminate an Insured’s Participation in a Loss

 

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

• Plaintiff’s Own Testimony Provides Grounds for Summary Judgment

• Failure to Explore Plaintiff’s Post-Accident Activities Prevented Defendant from Meeting Prima Facie Burden

 

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

• Insured Prevails on Storm Damage; Repairs Must “Match” Undamaged Property

 

Thanks for your loyalty and friendship.

 

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

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

 

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

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]

 

11/14/19       Public Service Mutual Ins. Co. v. Nova Casualty Insurance
Appellate Division, First Department
Accident that Occurred in Stairwell between Floors of Restaurant Arose out of “Maintenance and Use” of the Rental Premises so Additional Insured Coverage was Triggered

Underlying plaintiff alleges that she sustained injuries when she was walking on the stairs from the second floor restaurant to the ground floor.  The issue is whether the stairwell area is covered under the additional insured clause procured by the tenant for the landlord.  The tenant was insured by Nova, the landlord by Public Service Mutual.

The court hold that coverage exists because the underlying claim arose out of the "maintenance or use" of the leased premises within the meaning of the additional insured clause. The accident occurred in the course of an activity incidental to the operation of the leased space and in an area of the premises that was used for access in and out of the leased space covered under the policy.

The tenant’s carrier argued that the stairwell from the ground floor to the second floor was not part of the leased premises.  The court rejected that argument even though there was a finding in the underlying personal injury action that the accident did not occur in the demised premises.

Nova provides primary coverage, Public Service Mutual excess.

11/13/19       Neiditch v. William Penn Life Ins. Co. of New York
Appellate Division, Second Department
Life Insurance Policy Rescinded for Material Misrepresentation

This was an action for damages for breach of a life insurance. The plaintiff was the named beneficiary of a life insurance policy in the amount of $1 million, as procured by the decedent. The subject policy was issued on June 8, 2012, and the decedent died on November 23, 2012, after suffering an anaphylactic reaction to a food allergen. The plaintiff, as beneficiary, sought to recover the proceeds of the subject policy, which the defendant denied because the application for this policy contained a material misrepresentation.

To establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation.  To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practice, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application.

The insurer defendant established that the decedent made a misrepresentation in the application for the subject policy that was material by submitting affidavits of its medical director and a senior underwriting consultant, as well as relevant portions of its underwriting manual, which showed that the decedent did not disclose the correct information pertaining to the decedent's prior hospitalizations for anaphylactic reactions, and that the defendant would not have issued the same policy, had the correct information been disclosed. That the decedent was issued a policy at a premium rate despite the disclosure of one previous hospitalization does not negate the decedent's misrepresentations, nor does it change their materiality.

Editor’s Note:  Same rules apply to other policies (except for auto liability policies which cannot be retroactively rescinded).

11/13/19       Plotkin v. Republic-Franklin Ins. Co.
Appellate Division, Second Department
Where Company President receives Notice of Threatened Suit and Fails to Timely Notify the Liability Carrier, Late Notice is Imputed to Company.  Late Notice Disclaimer Sent 29 Days after Notice of Claim was Timely
This was a direct action lawsuit.  Plotkin (“plaintiff”) was employed American Pack, owned by Braun.  She was terminated on February 10, 2008, and alleges that Braun sexually assaulted her on February 17 and 18, 2008.  American Pack was insured under a business protection policy issued by Republic-Franklin.

By letter dated October 31, 2008, the plaintiff's counsel sent Braun a copy of a summons and complaint against him and American Pack based on the conduct allegedly perpetrated against the plaintiff. The plaintiff’s counsel gave Braun an opportunity to seek to resolve the matter before the summons and complaint were filed and served.

In January 2009, the plaintiff commenced an action entitled Plotkin v Braun in the Supreme Court, Kings County (the underlying action). The plaintiff asserted nine causes of action sounding in, inter alia, assault, battery, false imprisonment, and sexual misconduct against Braun, and negligent hiring, supervision, and training against American Pack. The plaintiff also alleged that American Pack was vicariously liable for Braun's actions.

On February 12, 2009, Republic-Franklin received its first notice regarding the plaintiff's allegations against Braun and American Pack. On Friday, March 13, 2009, following an investigation, the insurers issued disclaimer letters, which were faxed to American Pack’s counsel, and mailed to Braun's and the plaintiff's counsel, on Monday, March 16, 2009.

Thereafter, in December 2010, Braun and American Pack settled the underlying action with the plaintiff for $3,250,000. A judgment was entered on December 22, 2010.

By the filing of a summons and complaint on February 14, 2011, plaintiff commenced this action against the insurers to recover the $3.25 million judgment. The insurers served an answer dated March 16, 2011, in which they asserted 14 affirmative defenses.

Where an insurance policy requires that notice of an occurrence be given “as soon as practicable,” notice must be given within a reasonable time in view of all of the facts and circumstances. The insured's failure to satisfy the notice requirement constitutes a failure to comply with a condition precedent which, as a matter of law, vitiates the contract.

The insured contends that notice was timely given to the insurers after American Pack received the summons and complaint on January 29, 2009, and that Braun's knowledge of the pre-action claim letter could not be imputed to American Pack under the circumstances. Braun had received a pre-suit letter in October 2008, which was not turned over to Republic.

A principal is bound by notice to or knowledge of his or her agent in all matters within the scope of the agency, notwithstanding the fact that such information is never actually communicated to the principal.  The principal is bound by knowledge acquired by an agent acting within the scope of his or her agency even if the agent acts less than admirably, exhibits poor business judgment, or commits fraud. An exception to the rule of imputed knowledge—often referred to as the "adverse interest" exception—"occurs when the agent has abandoned his or her principal's interests and is acting entirely for his or her own or another's purposes.”

Braun's receipt of the October 31, 2008, letter with the summons and complaint was within the scope of his employment as an officer of American Pack, and, as an insured under the policies, he had a duty to notify the insurers of the claim.

However, under Insurance Law § 3420(d), an insurance carrier is required to provide the insured with timely notice of its disclaimer or denial of coverage on the basis of a policy exclusion and will be estopped from disclaiming liability or denying coverage if it fails to do so.

An insurer's delay is measured from the point at which it has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage. Here, the insurers timely disclaimed coverage following a thorough and diligent investigation. Contrary to the plaintiff's contention, the insurers did not have all the information they needed to disclaim coverage on February 12, 2009, and they properly commenced an investigation to determine the specifics surrounding the incident and to verify when American Pack first acquired knowledge of the claim. Issuance of the disclaimers 29 days after the insurers' receipt of notice was therefore reasonable as a matter of law under the circumstances.

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

11/08/19       Morrow v. Metlife Invest. Ins. Co.
Appellate Division, Fourth Department
Failure to Assert Statute of Limitations Defense at Trial Court Waives any Argument Raised for the First Time on Appeal

The decision is a bit light on facts, but what we can tell from the opinion is that plaintiff commenced a lawsuit against Metlife wherein he alleged several theories of recovery comprising at least nine separate and distinct Causes of Action.  Defendant moved to dismiss a number of those claims, and its motion was denied by the trial court.  The instant appeal followed.

With regard to defendant’s Statute of Limitations claim, the Court noted that it was not raised at the trial court level and, accordingly, could not be raised to the Appellate Division for the first time.  However, with regard to the plaintiff’s claims sounding in negligence and gross negligence, the Court overruled the trial court by granting Metlife’s application.  Apparently, the Complaint did not allege unintentional/negligent conduct, and purely intentional conduct cannot give rise to a claim for negligence. 

The Appellate Division also overruled the trial court when it dismissed plaintiff’s Sixth Cause of Action for Conversion.  To successfully plead a claim for conversion, the plaintiff needed to assert that defendant assumed control over property that did not belong to them.  Because the pleaded allegations did not show any control over property, plaintiff’s cause of action was not properly put before the Court.

Finally, the Court also dismissed plaintiff’s claims for fraud where the pleading failed to assert the elements of that cause of action.  Plaintiff needed to plead the existence of a material misrepresentation, knowledge of the falsity, an intent to induce reliance upon the falsity and reliance by the damaged party.  Here, plaintiff failed to allege a misrepresentation, knowledge of the misrepresentation by Metlife, or any reliance by plaintiff. 

 

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

Second Circuit taking a siesta.
 

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

10/29/19       First Mercury Ins. Co. v. State Farm Mut. Auto. Ins. Co.
Supreme Court, New York County
Hon. Gerald Lebovits
Trial Court Finds Auto Carrier Has the Primary Obligation to Defend in Loading and Unloading Case

This decision arises out of an injury on a construction site.  Joaquim DaSilva (“DaSilva”) was working in the course of his employment for Europa Constr. Corp. (“Europa”) when he sustained injury while attempting to unload pallets of cement from a flatbed truck owed by Europa.  DaSilva commenced a lawsuit naming the project’s owner and general contractor and alleging violations of New York Labor Law §§ 200, 240 and 241(6).  DaSilva later testified at his deposition that while he was standing on the flatbed of a truck attempting to unload pallets, he tripped on a pallet and then slipped on cement mixed with stones that had accumulated on the floor of the truck.

At the time of the incident, Europa was insured by both First Mercury and State Farm.  First Mercury issued the general liability coverage, and State Farm issued the auto coverage.

The owner and general contractor filed separate third-party actions against Europa.  First Mercury assumed the defense of Europa and then sought contribution from State Farm.  State Farm did not address the request until many months later when it issued a denial letter to Europa. First Mercury then commenced this action.

Pursuant to the First Mercury policy, an "insured" was defined as the entity named on the declarations page of the policy—here, Europa.  The policy also provided that an additional insured included any person or organization for whom" Europa agreed in writing in a contract or agreement to name.  The provision then limited additional-insured coverage to "liability for 'bodily injury' . . . caused, in whole or in part, by the acts or omissions of those acting on [Europa's] behalf . . . in the performance of [Europa's] ongoing operations for the additional insured."

The First Mercury policy further contained other insurance language providing that if First Mercury's insured has other available insurance for a loss covered by First Mercury and the loss arises out of the maintenance or use of an "auto" and is not subject to the auto exclusion, First Mercury's insurance is excess over the coverage provided by the insured's other policy or policies.  We note that, for some reason, First Mercury elected not to address the applicability of the automobile exclusion in this motion.

With regard to the State Farm policy, it afforded coverage for "damages an insured becomes legally liable to pay because of . . . bodily injury to others caused by an accident that involves a vehicle from which that insured is provided liability coverage by this policy."  An "insured" was defined, in relevant part, as Europa for the "ownership, maintenance, or use" of a Europa vehicle and “any other person or organization vicariously liable for the use of a vehicle" by an insured, "but only for such vicarious liability.”

The question presented to the court was whether the scope of the State Farm policy included the accident at issue in the underlying action.  Specifically, the court looked at whether it “involve[d] a vehicle from which that insured is provided liability coverage.”  While the parties disputed whether “involved” was equivaled to “used,” or broader, the court found that it did not matter, because the loss arose from the used of an insured auto.  This was because insurance coverage for injuries suffered as a result of "the use of a motor vehicle" encompasses "bodily injury suffered during the loading or unloading of the vehicle."  With that said, it is not enough merely for the injury to have occurred within the time period in which unloading occurred.  Instead, there must be a "causal relationship between the accident and the movement of the goods to or from the vehicle."

Here, DaSilva's complaint and verified bill of particulars in the underlying action alleged (a) that the accident at issue occurred at the construction site's loading dock; (b) that the defendants negligently failed to provide for the use of proper methods of unloading cement pallets from trucks; and (c) that the defendants negligently failed both to ensure that work areas were free from slipping and tripping hazards and to correct those hazards once they had arisen.  These allegations, in the court’s view, plainly described acts and omissions related to the unloading process and identified a causal relationship between the accident and the movement of goods from Europa's truck to the construction site.

State Farm argued in response that DaSilva's testimony at a deposition in the underlying action (and in a related workers-compensation proceeding) ruled out a causal connection between the injury and negligence on Europa's part; and therefore that liability for any injury DaSilva suffered is outside the scope of coverage of State Farm's auto policy.

The court considered this argument and held that the State Farm auto policy covers damages that Europa "becomes legally liable to pay because of . . . bodily injury to others . . . caused by an accident" involving a covered vehicle.  Under the allegations in DaSilva's bill of particulars, fault could conceivably flow from Europa's requiring DaSilva physically to unload pallets from the Europa truck himself, rather than providing a safer hoisting mechanism for unloading the truck; or it could flow from Europa's failing to ensure that the bed of the truck was free, and kept free, of potential tripping or slipping hazards in the unloading process. In either case, Europa's damages would necessarily stem from negligent acts or omissions related to the process of unloading Europa's truck—i.e., from the use of the truck. Those damages are therefore necessarily within the scope of the policy.

Accordingly, the court found that First Mercury established that Europa's potential damages for indemnification and contribution were within the scope of coverage provided by State Farm's auto policy—whether measured by the allegations of DaSilva's pleadings or by the facts that DaSilva may be able to establish at trial.  As a result, unless Europa's damages are subject to a policy exclusion, State Farm owed a duty as a matter of law both to defend and indemnify Europa on these claims.

The court then turned to the question of the applicability of a contractual liability exclusion in the State Farm policy.  Again, in this case, the claim against Europa was based upon contractual indemnification.  The court held that it did not need to consider the exclusion’s applicability since State Farm failed to raise the exclusion in a timely manner as required by section 3420(d).  With that said, it did find there was no coverage for the failure to procure claims because the exclusion would apply, and a timely denial is not required.

Next, the court considered the claim by the general contractor and owner for additional insured status.  In the underlying action, DaSilva brought claims against the owner and general contractor under, among other provisions, Labor Law §§ 240 and 241 (6).  These provisions can each impose vicarious liability on an owner and general contractor for injuries resulting solely from the conduct of their subcontractors. The allegations in the complaint and VBOP raise a reasonable possibility that DaSilva was injured while using a covered vehicle and that he is seeking to hold the owner and general contractor vicariously liable for the negligence of the named insured, Europa—and thus that they are covered as additional insureds under the State Farm policy. Thus, State Farm owed a duty to defend the owner and general contractor in the underlying action as additional insureds.  Any duty of State Farm to indemnify, on the other hand, would apply only if the owner and general contractor are ultimately found liable to DaSilva in the underlying action, and only to the extent that such liability is vicarious.  The court further held that since State Farm and Europa’s interests may conflict, Europa is entitled to be defended by counsel of its choosing, with State Farm responsible for Europa's reasonable counsel fees.

Lastly, the court held that State Farm had the primary duty to defend, with First Mercury covering only excess liability for which it is responsible after the limit of the State Farm auto policy has been reached.

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

11/08/19       Villas at Winding Ridge v. State Farm Fire and Cas. Co.
United States Court of Appeals, Seventh Circuit
Zero Evidence of Bad Faith where Insurer Evaluated Claim, Participated in Appraisal, and Paid Appraisal Award

In June 2013, a storm passed over Villas at Winding Ridge (“Winding Ridge”), a condominium complex located in Indiana, causing some minor damage from hail.  Winding Ridge did not discover the damage until almost a year later when a contractor inspected the property to estimate the cost of replacing its aging roofs.  The contractor identified hail damage to the roofs of seven or eight buildings.  Winding Ridge submitted a claim to State Farm around April 18, 2014 claiming a loss date of June 13, 2013.

State Farm inspected and did observe some minimal hail damage.  Damage from other causes and that took place after the policy had been cancelled was also identified.  State Farm prepared an estimate for the hail damage loss of $65,713.54.  State Farm paid the amount of the estimate minus depreciation.  Winding Ridge disagreed with the estimate and hired a public adjuster.  The PA concluded that all 33 buildings at the complex were damaged by hail and estimated a replacement cost of $1,975,264.

State Farm agreed to reinspect.  It also hired an engineer to perform an inspection.  The engineer concluded that State Farm’s estimate included the full scope of damages covered by the appraisal policy.  The insured demanded appraisal.  Both parties complied with the policy’s appraisal provision. State Farm and Winding Ridge each hired independent appraisers Michael Scott and Garrett Kurtt, respectively, and they re-inspected the buildings. Scott estimated $79,921.80 for repairs to all 33 buildings, but his estimate did not include full shingle replacement on any building. Kurtt estimated $676,824.07 for repairs including full shingle replacement on 13 buildings. Kurtt did not claim full shingle replacement for any of the remaining buildings.

An independent umpire was selected by the appraisers.  The proposed award totaled $154,391.77.  State Farm eventually issued payment. Winding Ridge filed suit against State Farm in Indiana State Court, and State Farm removed the suit to federal court.  The complaint alleged claims for breach of contract, bad faith, and promissory estoppel. At some point after Winding Ridge tendered the claim to State Farm, Winding Ridge independently took out a $1.5 million loan to replace the shingles on all 33 buildings. Winding Ridge sought damages for approximately $1.5 million plus the interest on the loan ($97 per day) and prejudgment interest.

The breach of contract claim was dismissed on summary judgment.  The court rejected the argument the appraiser mistakenly determined the scope of the loss as opposed to the value of the loss.  The appraiser resolved the dispute relative to the amount of hail damage to the roofing shingles on 13 buildings and to other portions of the property.  The court also held that the mere presence of coverage disputes (like matching shingles) in addition to the amount of the loss dispute did not negate the appraisal award.

The court also rejected the Winding Ridge’s argument that there were material issues of fact on the breach of contract claim.  The court observed that Winding Ridge’s own appraiser found no hail damage to roofing shingles on 20 buildings.  The decision to replace the shingles on all 33 buildings while the claim was pending did not obligate State Farm to pay for that damage.  The appraisal award resolved the entire claim and the breach of contract action was dismissed.

The court also concluded that State Farm did not act in bad faith.  State Farm disputed the claim in good faith.  Winding Ridge submitted a claim for hail damage to State Farm. State Farm investigated the claim, prepared a claim estimate, and issued payment to Winding Ridge.  Winding Ridge disputed the claim estimate and demanded an appraisal under the policy terms.  State Farm cooperated in the appraisal process by re-inspecting the property and presenting a claim estimate to the umpire and Winding Ridge’s appraiser. The umpire reached an award, which State Farm’s appraiser signed. State Farm subsequently paid Winding Ridge what it owed under the binding award. Winding Ridge did not show any evidence, let alone clear and convincing evidence, that State Farm acted in bad faith.

There was also no evidence that State Farm acted with a culpable state of mind. The mere fact that State Farm’s initial estimate was less than the award does not suggest culpability. At best, it may suggest that State Farm’s first inspection was inadequate. But this alone does not constitute bad faith.

Winding Ridge also argued that State Farm’s claims adjuster engaged in deceitful ignorance of hail damage to Winding Ridge’s roofs in retaliation for another claim called Briarstone.  Briarstone was another condominium complex that tendered a claim for hail damage to State Farm. State Farm evaluated the claim and found no hail damage. The parties agreed to arbitrate the claim, but eventually settled the claim. Winding Ridge believed that State Farm was upset with the Briarstone settlement and that experience negatively influenced State Farm’s initial estimate of the Winding Ridge claim. However, State Farm’s claims adjuster provided an initial estimate and submitted payment to Winding Ridge before Briarstone tendered its claim to State Farm on June 19, 2014.  State Farm’s initial estimate therefore could not have been influenced by the Briarstone claim.

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

10/29/19       GEICO v. Ningning He, M.D., et al.
United States District Court, District of New Jersey
New Jersey Federal Court Allows GEICO’s $5 Million Lawsuit Alleging Fraud and Racketeering Against PIP Medical Providers to Proceed

Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company, and GEICO Casualty Co. (“GEICO”) allege that defendants submitted or caused to be submitted hundreds of fraudulent claims for reimbursement of medical expenses. GEICO seeks to recover $5,298,000 that it paid to defendants. GEICO asserts eleven counts, including unjust enrichment, common law fraud, violations of the Racketeer Influenced and Corrupt Organizations Act, and violations of the New Jersey Insurance Fraud Prevention Act.

Defendants John Li, M.D., Anthony Surace, M.D., and Timothy Finley, M.D. are all anesthesiologists licensed to practice medicine in New Jersey and moved to dismiss the complaint under Rule 12(b)(6). They are alleged to have performed the relevant medical services while working at co-defendant Apex Anesthesia Associates, L.C.C. (“Apex”). Apex is a New Jersey medical professional limited liability company through which defendants allegedly provided medical services and then requested and received reimbursement from GEICO. Defendant Advanced Pain Care is another New Jersey medical professional limited liability company through which many of the fraudulent services were provided and billed to insurance companies, including GEICO.

GEICO alleges that defendant Doctors Li, Surace, and Finley submitted, and caused to be submitted, hundreds of fraudulent no-fault insurance charges for services that were unjustified, medically unnecessary, and designed only to enrich defendants. These services were claimed to have been provided to Insureds involved in automobile accidents who were eligible for coverage under no-fault insurance policies (“PIP”) issued by GEICO.

GEICO alleges that its payments to defendants were fraudulently obtained for several reasons. Defendants allegedly billed for medically unnecessary treatments, or for treatments that did not occur at all. Treatments were allegedly provided to insureds who had only minor accidents. In those cases, defendants followed predetermined protocols that invented diagnoses and billed for medically unnecessary treatments. In many cases the billing codes for services misrepresented and exaggerated the level of service provided.

GEICO seeks to recover more than $5,298,000 that it paid in reliance on defendants’ allegedly fraudulent billing. GEICO’s complaint asserts eleven causes of action. Of these, seven are relevant to this motion to dismiss:

• Count 2 alleges violations of the New Jersey Insurance Fraud Prevention Act (“NJIFPA”);

• Counts 4 and 9 allege violations of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”);

• Count 5 alleges aiding and abetting common law fraud;

• Count 10 alleges common law fraud; and

• Counts 7 and 11 allege unjust enrichment.

Defendants moved to dismiss the complaint pursuant to Rule 12(b)(6).

Common Law Fraud

In Counts 5 and 10, GEICO asserts claims of common law fraud and aiding and abetting fraud. GEICO alleges two main theories of common law fraud. First, GEICO alleges that defendants submitted false claims—i.e., billed for services that were not medically necessary, or that were not actually provided at all. Second, GEICO claims that defendants artificially inflated their bills by “unbundling” their billing, i.e., separately billing the subparts of a single procedure, in violation of New Jersey law and regulations. The Court found that GEICO adequately pled the elements of common law fraud.

New Jersey Insurance Fraud Prevention Act

In Count 2, GEICO asserts a claim pursuant to the NJIFPA to recover PIP benefits paid to defendants. Count 2 alleges that defendants obtained the benefits through the fraudulent submission of false and misleading claim forms and treatment reports. Defendants moved to dismiss, asserting that GEICO failed to plead with particularity any fraudulent claims for anesthesia and has not alleged that defendants were responsible for medical coding and/or billing.

The NJIFPA sweeps more broadly than common law fraud; it prohibits the submission of insurance reimbursement claims when a party knows that the claim contains false or misleading information concerning any fact or thing material to the claim and prohibits concealment or knowing failure to disclose an event that affects the eligibility for reimbursement or the amount of the reimbursement.

GEICO’s complaint sufficiently alleged that defendants provided medically unnecessary treatment and that defendants routinely submitted claims for reimbursement that unbundled the injection of the anesthetics necessary for the anesthesia services allegedly provided. Accordingly, Defendants’ motions to dismiss Count 2, the NJIFPA claim, was denied.

RICO

GEICO alleges in Counts 4 and 9 that defendants’ alleged conduct violates the federal RICO statute. The RICO enterprises are alleged to be Advanced Pain Care (Count 4) and Apex Anesthesia (Count 9), medical practices with which these defendants are affiliated.

Defendants argued that GEICO fails to state a claim for RICO violations and that the RICO allegations are not sufficiently particularized. The Court rejected those arguments. First, GEICO alleged facts supporting predicate acts of racketeering—i.e., mail fraud in the submission of knowingly false PIP claims. Second, GEICO pleaded the RICO claims with the requisite specificity. GEICO asserted its RICO claim in relation to its false claims and bundling theories of fraud. An attachment to the complaint listed the specific PIP claims that allegedly constitute mail fraud, the predicate act alleged under RICO. The frauds are alleged to have been both interrelated and continuous since at least 2014.

These allegations, the Court said, put defendants sufficiently on notice of the activities with which they are accused. Defendants’ motions to dismiss Counts 4 and 9, GEICO’s federal RICO claims, were denied.

Unjust Enrichment

Defendants moved to dismiss GEICO’s claims for unjust enrichment, Counts 7 and 11. Defendants argued that GEICO’s claims for unjust enrichment fail because GEICO had not identified whether it was paid for each claim referenced in the complaint and has failed to establish that defendants directly benefitted from the alleged scheme.

The complaint asserts that (1) GEICO paid approximately $5 million in fraudulent claims; (2) that were submitted by defendants; and (3) that the claims were paid to the defendants for services that were duplicative, medically unnecessary, or not performed at all. The Court found that GEICO’s unjust enrichment claims were sufficiently alleged and denied Defendants’ motions to dismiss Counts 7 and 11.

Since all of the causes of action were sufficiently pleaded, the Court did not dismiss any of GEICO’s claims. The case will proceed forward.

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

11/12/19       Karas v. Liberty Ins. Corp., Vera v. Liberty Mut. Fire Ins. Co., and Jemiola v. Hartford Cas. Ins. Co.
Connecticut Supreme Court
Connecticut Carriers Cleared in Collapse of Crumbling Concrete Claims

The Connecticut Supreme Court unanimously concluded that there is no first-party property insurance coverage available for Connecticut homeowners’ crumbling concrete claims. Addressing certified questions from the United States District Court for the District of Connecticut and a direct appeal, the Court reached three critical holdings:

1. When “collapse” is undefined in a homeowner’s insurance policy, it is sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of an insured’s home;

2. The ‘substantial impairment of structural integrity’ standard requires proof that the home is in imminent danger of falling down; and

3. The term “foundation” unambiguously includes a home’s basement walls.

Reaching these determinations necessarily lead the Court to conclude that insurers are not obligated to repair crumbling concrete foundations under homeowners’ first-party property policies where the buildings remain upright and are safe to be occupied.

Some 35,000 homes in northeastern Connecticut face the potential for failed foundations due to significant amounts of pyrrhotite in their concrete. Pyrrhotite is a ferrous mineral that oxidizes in the presence of water and oxygen, forming expansive secondary minerals that crack and destabilize the concrete, resulting in premature deterioration. The cracking starts small and takes 10 to 30 years to appear. Horizontal cracks or cracks that splinter out like a web are common. As the concrete deteriorates, it becomes structurally unsound. The damage is irreversible, requiring a new pyrrhotite-free foundation. The concrete at issue originated from a quarry owned by the now defunct J.J. Mottes Concrete Company, mined from 1983 to at least 2010. The state’s investigation found that the quarry lies on a vein of rock “that contains significant amounts of pyrrhotite.” See Connecticut Department of Housing.

Impacted Connecticut homeowners have tried numerous unsuccessful approaches to get their insurers to replace their foundations. See, e.g., Mazzarella v. Amica Mut. Ins. Co., 774 Fed.Appx. 14 (2d Cir. 2019)(reported in Coverage Pointers May 30, 2019); see also England v. Amica Mut. Ins. Co., 2017 WL 3996394 (D. Conn. September 11, 2017); and Sirois v. USAA Cas. Ins. Co., 342 F.Supp.3d 235 (D. Conn 2018)(collecting cases).

In this trio of matters, the Court dealt with two different policy definitions of collapse but reached the same outcome. In Karas and Vera, the Court addressed an older policy version, which included the following “collapse” coverage:

‘Collapse. We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following: a. [Certain perils identified elsewhere in the policy, including fire, lightning, windstorm, hail, explosion, riot, civil commotion and volcanic eruption]; b. [h]idden decay; c. [h]idden insect or vermin damage; d. [w]eight of contents, equipment, animals or people; e. [w]eight of rain which collects on a roof; or f. [u]se of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation. Loss to an awning, fence, patio, pavement, swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall, bulkhead, pier, wharf or dock is not included under items b., c., d., e., and f. unless the loss is a direct result of the collapse of a building. Collapse does not include settling, cracking, shrinking, bulging or expansion.’

In Jemiola, post-2005 policies issued by Hartford Casualty defined "collapse" as requiring an actual falling down or caving in of the home, so as to render it uninhabitable. Collapse requires "an abrupt falling down or caving in of a building or any part of a building" such that it "cannot be occupied for its current intended purpose.” The homeowner’s pre-2005 policies employed substantially the same terms as in Karas and Vera.

The evidence showed that the Karas’ home suffered severe bowing and cracking, requiring shoring of the basement walls. The Karas’ expert testified that he did not think he could ‘‘say within a reasonable degree of engineering certainty’’ that the walls will fall down ‘‘within the next 100 years.’’ The expert added, however, that is likely that the basement walls will collapse at some point, as portions are already crumbling and falling to the floor. In Veras and Jemiola, the evidence was essentially the same and experts testified that the basement walls will need to be replaced but could not predict when, or even if, they would collapse.

The insurers argued that the testimony failed to show that the homes were in imminent danger of falling down and, moreover, that the plaintiffs’ claims fell within an express exclusion for loss caused by collapse of the home’s foundation. The Court agreed.

Ambiguity of “Collapse”

The Court determined that despite expansive policy language dealing with collapse, that the pre-2005 policies were nonetheless ambiguous. Relying on its holding in Beach v. Middlesex Mut. Assurance. Co., 205 Conn. 246, 532 A.2d 1297 (1987), the Court found that the policy remained unclear that it intended to exclude from coverage collapse that ensues from unexceptional cracking but “later developed into a far more serious structural infirmity culminating in an actual or imminent collapse.” Accordingly, the Court found that the ambiguity permits coverage for settling or cracking that results in substantial impairment of a home’s structural integrity. (Citing, Agosti v. Merrimack Mut. Fire Ins. Co., 279 F. Supp. 3d 370, 376 (D. Conn. 2017) (‘‘the term collapse standing alone, is sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of a building’’); Schray v. Fireman’s Fund Ins. Co., 402 F. Supp. 2d 1212, 1218 (D. Or. 2005) (‘‘the modern trend [is to] apply the collapse coverage if any part of the building sustained substantial impairment to its structural integrity’’)).

The Court rejected the carriers’ argument that collapse coverage is limited to only a sudden and catastrophic event. In fact, the Court traced coverage litigation over “collapse” prior to 1960. “Particularly with this much warning, the insurer is capable of unambiguously limiting collapse coverage [to a building reduced to a flattened form or rubble, namely, an actual collapse] if it wishes to do so.”

However, in construing the post-2005 Hartford policy, the Court, employing standard rules of policy interpretation, found that the more modern definition of collapse was clear and unambiguous. The Court wrote that Hartford succeeded where earlier policy’s failed, in that the post-2005 policies “leave no doubt that coverage for a collapse is triggered only by an abrupt falling down or caving in of the insured premises.”

Substantial Impairment Standard

The Supreme Court determined that the substantial impairment standard requires, not that the home be in shatters along the ground, but in imminent danger of collapse and be unsafe for its intended purpose. This requirement avoids the absurdity of requiring an insured to wait for an unsafe structure to actually fall, while not extending coverage beyond the terms of the policy. (Citing, among others, Doheny West Homeowners’ Assn. v. American Guarantee & Liability Ins. Co., 60 Cal. App. 4th 400, 406 (1997) (‘‘since any of the excluded causes could result in collapse if the initial damage was neglected for a long enough period, an [imminence] limitation is logically necessary if we are to avoid converting this insurance policy into a maintenance agreement,’’ and ‘‘[t]his construction of the policy . . . is consistent with the policy language and the reasonable expectations of the insured’’).

The policyholders argued that the substantial impairment standard should be satisfied by proof that the structure will eventually fall down, even in the absence of a present danger; and that the imminent danger construct renders the coverage illusory. The carriers argued that a process that spans years and decades is not a collapse. They wrote that, “[a] gradual process that may (or may not) result in a structure falling down at some indeterminate date decades from now is not a ‘collapse’ today.” Agreeing with the carriers, the Court reasoned that the policyholders’ position would strip ‘‘collapse’’ of its natural and ordinary meaning.

To meet the substantial impairment standard under Connecticut law, an insured whose home has not actually collapsed must present evidence demonstrating that the home is in imminent danger of collapse.

Under the post-2005 definition, Jemiola’s arguments notwithstanding, the Court found “that there is no plausible construction of the phrase ‘abrupt falling down or caving in . . . with the result that the building . . . cannot be occupied for its current intended purpose’ that reasonably encompasses a home, such as the plaintiff’s, that is still standing and capable of being safely lived in for many years—if not decades—to come.”

Foundation Includes Basement Walls

In a decision of first impression under Connecticut law, the Court rejected lower court and federal rulings that basement walls are not part of a foundation, as defined in a homeowner’s insurance policy’s exclusion for collapse of a foundation. The Court determined that Connecticut building codes and building professionals deem basement walls as part of a building’s foundation. The Court also found support in various dictionary definitions. And, finally, it found persuasive that Connecticut has used the term “foundation wall” when referring to a basement wall for over a century. The Court concluded:

the term ‘‘foundation’’ in the plaintiffs’ homeowners insurance policy unambiguously includes the plaintiffs’ basement walls and that the collapse provision in that policy applies to any foundation located on the plaintiffs’ property, including the one beneath the plaintiffs’ house.

Conclusion

These long-awaited decisions from the Supreme Court give critical guidance to the trial courts, carriers, and policyholders as Connecticut continues to face a crumbling concrete crisis. It appears now that the cost of repairs will not be borne by the carriers but rather by individual insureds; or help will have to come from the Legislature in Hartford (which, of course, is just another form of shared risk which will come from tax revenues instead of premium payments).

 

OFF THE MARK
Brian F. Mark

[email protected]

On trial this week.

 

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

11/04/19       Mine Temp, LLC v. Wells Fargo Ins. Services of West Virginia

Supreme Court of Appeals of West Virginia

West Virginia’s High Court Affirms Summary Judgment to Insurance Broker; West Virginia Does Not Recognize any Duty by Broker to Advise and Does Not Recognize Special Relationship Exception

West Virginia’s highest court, the Supreme Court of Appeals, unanimously affirmed a 2018 Circuit Court ruling which granted the broker Wells Fargo Insurance Services of West Virginia, Inc. (“Wells Fargo”) summary judgment dismissing Mine Temp, LLC’s (“Mine Temp”) claim for negligent procurement of appropriate insurance.  The Memorandum Decision of the West Virginia Supreme Court states, “The Court finds no substantial question of law and no prejudicial error” in the lower court rulings in the case.

Mine Temp was party to an independent contractor agreement it entered into in 2007 that provided apprentice miners to a coal mine operated by ICG/Wolf Run Mining (“Wolf Run”).  The independent contractor agreement required Mine Temp to obtain CGL insurance, and further required Mine Temp to indemnify, defend and save harmless Wolf Run from claims relating to its work, as that term is defined in the agreement.  Importantly, the independent contractor agreement expired by its terms on April 30, 2008.

Mine Temp purchased a CGL policy from Chubb which included two relevant exclusions, an “Employer’s Liability Exclusion” and an “Employer’s Liability, Total Exclusion”. On May 30, 2008, a month after the expiration of the independent contractor agreement, a Mine Temp employee named Adam Lanham was fatally injured when a Wolf Run employee backed over him with an end loader while the worker was working at a mine owned and operated by Wolf Run. Mr. Lanham’s estate filed a workers’ comp claim against Mine Temp and a civil action against Mine Temp and Wolf Run in state court in connection with the accident.

Chubb denied Mine Temp coverage for the state court action on the basis of its policy’s “Employer’s Liability, Total Exclusion.”  Mine Temp sued Chubb and Wells Fargo in the declaratory judgment action at issue asserting entitlement to coverage.  In the DJ action, Mine Temp contended Wells Fargo had a duty “to act with reasonable care and prudence in obtaining the appropriate insurance” for Mine Temp.  Chubb’s motion for summary judgment in Mine Temp’s DJ action was granted in 2011, because the Employer’s Liability, Total Exclusion excludes coverage for the claims of Mr. Lanham’s estate.  The grant of summary judgment to Chubb was never appealed.

In the underlying civil action brought by Mr. Lanham’s estate against Mine Temp and Wolf Run on negligence grounds, the state court determined that the independent contractor agreement between Mine Temp and Wolf Run had expired on April 30, 2008, before the accident, “and that there was no evidence showing the parties had agreed to continue with the agreement after it expires.”  This ruling also was never appealed.

In the declaratory judgment matter at hand, Wells Fargo filed a motion for summary judgment against Mine Temp on Mine Temp’s negligence charge, asserting that, given that (1) the independent contractor agreement between Wolf Run and Mine Temp was found, in the state court civil action of Mr. Lanham’s Estate, to have expired prior to the accident that killed Mr. Lanham and (2) any duty Mine Temp had to indemnify Wolf Run was extinguished by the expiration of that agreement, then any alleged negligent failure of Wells Fargo to place coverage for the indemnity contained in the expired agreement must also fail as a matter of law. Alternatively, Wells Fargo argued that (as an “agent” for Chubb in placing the coverage) it is immune from suit in tort or contract by the insured, Mine Temp, under existing West Virginia law.  In its response to Wells Fargo’s motion for summary judgment, Mine Temp argued that it had a special relationship with Wells Fargo under which Wells Fargo represented to Mine Temp that it had procured the proper insurance required by the indemnity provision in Mine Temp’s independent contractor agreement with Wolf Run.

The West Virginia Supreme Court held that because the independent contractor agreement had expired before Mr. Lanham’s accident, “Mine Temp’s claim that Wells Fargo was negligent in its procurement of insurance coverage for an expired ‘insured contract’ is moot.”  Further, Supreme Court stated that the “special relationship” exception “has not ‘been expressly established under West Virginia law’”, and “this Court has never recognized an insurance agent’s ‘duty to advise’…nor the ‘special relationship’ exception that would trigger such a duty.”

 

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

11/08/19       Fishkin a/a/o Hodge v. Allstate Ins. Co.
Appellate Division, Fourth Department
Master Arbitrator Exceeded His Authority by Overturning Initial Arbitrator’s Decision

Mr. Hodge, the assignor, was injured while riding his bicycle when a motorcycle hit him. Mr. Hodge went to see Dr. Fishkin, who ultimately ended up performing surgery on Mr. Hodge. At some point, Mr. Hodge assigned his no-fault insurance claims to Dr. Fishkin. Dr. Fishkin then made a claim to Mr. Hodge’s no-fault carrier, Allstate, for the cost of the surgery. Allstate denied Dr. Fishkin’s claims for no-fault reimbursement on the ground that the surgery was not medically necessary as a result of a peer review report.

Dr. Fishkin then brought an arbitration over the bill dispute. The original arbitrator found in favor of Dr. Fishkin that the surgical bills should be paid because the peer review that Allstate submitted in support of its petition was conclusory, failed to set forth appropriate medical standards, and failed to address the specifics issues of this assignor’s case, meaning Allstate did not meet its burden in setting forth a sufficient medical rational for denying the claim. Allstate then submitted the arbitration decision to a master arbitrator. The master arbitrator vacated the initial arbitrator’s decision and instead issued an award to Allstate (essentially denying Dr. Fishkin payment of the surgical bills).

Thereafter, Dr. Fishkin petitioned the Court to vacate the master arbitrator’s award and reinstate the original arbitrator’s decision. Allstate opposed and cross-petitioned to have the master arbitrator’s award confirmed. The Court found that the initial arbitration award should have been affirmed by the master arbitrator in favor of Dr. Fishkin and denied Allstate’s cross-petition. Allstate then appealed to the Fourth Department. The Fourth Department reiterated that the role of the master arbitrator is to review the determinations of an arbitrator to assure that the arbitrator reached his or her decision in a rational manner and that the decision was not arbitrary and capricious, incorrect as a matter of law, in excess of the policy limits, or in conflict with other no-fault arbitration proceedings. Here, the court found that the master arbitrator impermissibly performed a de novo review of the medical evidence when he concluded that the peer review report submitted by Allstate appeared rational. This was clearly in excess of the master arbitrator’s power and thus the Fourth Department affirmed the lower court’s decision vacating the master arbitrator’s award.

 

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

The Legislative List

11/04/19       Three-Year Statute of Limitations For Certain Water Suppliers for Property Damage
New York State Legislature
Clarifies Statute of Limitations for Public and Wholesale Water Suppliers to Sue for Contamination of Water Supply Source

On November 4, 2019, Governor Cuomo signed Senate Bill Number S3337-C into law. Chapter 442 of the Laws of 2019 amends the New York CPLR to include a new Section 214-h providing clarification that the statute of limitations for public and wholesale water suppliers to recover damages for injury to property owned, managed, or operated by a public water supplier or a wholesale water supplier resulting from the presence of a contaminant in a source of water supply shall be commenced within three years.

Assemblyman Edward P. Ra explained his vote in the affirmative for this particular bill back in June as a way to better combat new contaminants confronted by water suppliers.

In many places throughout this State, and particularly on Long Island, we're struggling to find ways to address new contaminants that are being found in our water supplies, and this is something that many of our local water districts have been asking for so that as they try to find ways to remediate and new technologies come about to remediate these contaminants in our water supply, they can hold the polluters responsible, rather than our taxpayers on Long Island.

The newly enacted law creates a new section to the CPLR, § 214-h, which provides that

any civil claim or cause of action brought by a public water supplier or wholesale water supplier against any person to recover damages for injury to property owned, managed or operated by a public water supplier or a wholesale water supplier resulting from the presence of a contaminant in a source of water supply shall be commenced within three years . . . .

That three-year period applies separately to each well, plant intake, and contaminant, (CPLR § 214-h(3)), and begins as of the latest of (a) the detection of the contaminant; (b) the last wrongful act by any person contributing to the presence of a contaminant; or (c) the date the contaminant is last detected. (CPLR § 214-h(2)). The bill also contains a disclaimer in §214-h(4) indicating that “nothing in this section shall abridge or limit a public water supplier's or a wholesale water supplier's right to bring an action to abate an imminent threat of contamination of any well or plant intake or to recover as damages the costs of such abatement.”

The law took effect immediately.

Maxwell’s Minute: Those handling matters involving pollution coverage or exclusions, take note. Contaminant is defined under the statute as “any physical, chemical, biological or radiological substance or matter in water and includes but is not limited to an emerging contaminant listed pursuant to section eleven hundred twelve of the public health law.” The overlap with the CG 00 01 is obvious, defining “pollutants” as any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Obviously, we’re talking about the same thing. And, notably, coverage for this type of thing must be procured, as its not covered under your standard CGL form by way of the pollution exclusion.

From the Filings Cabinet

11/07/19       Decreasing Deductible “Credit” Should Not Eliminate Deductible Entirely

New York Department of Financial Services
DFS Advises that a Decreasing Deductible Should Not Eliminate an Insured’s Participation in a Loss

On November 7, 2019, DFS issued a filing disapproval of a homeowners program containing several different forms, based upon, among other things, the inclusion of a Decreasing Deductible endorsement that contained a few key items worth discussion.

DFS noted that most homeowners’ policies contain a deductible of at least $500. However, this form proposed what appeared to be a “credit” system allowing for an insured to potentially eliminate any amount of deductible payable by the insured entirely, should enough “credit” accumulate over time. DFS advised that in its opinion, “an insured should participate in a loss” and noted that an established maximum “credit” preserving some amount of deductible may be sufficient.

Additionally, DFS suggested that the carrier consider changing the word “credit” in light of the inclusion of a $100 “credit” at the inception of the policy. DFS itself considered the word “reserve” to be more fitting for such an arrangement.

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

11/08/19       Baldauf v. Gambino
Appellate Division, Fourth Department
Plaintiff’s Own Testimony Provides Grounds for Summary Judgment

Defendants moved for summary judgment alleging that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) under the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories. The trial court denied the defendant’s motion, on appeal the Fourth Department modified the trial court order and granted the defendant’s motion with respect to the 90/180-day claim. In support of their claim that plaintiff did not sustain a qualifying injury under the 90/180-day category, defendant introduced the plaintiff’s own deposition testimony where plaintiff explained that he did not miss any work, his job duties did not change, and his doctors did not recommend stopping work. Plaintiff then failed to raise a triable issue of fact in response.

11/06/19       Ghaly v. Umhsfer
Appellate Division, Second Department
Failure to Explore Plaintiff’s Post-Accident Activities Prevented Defendant from Meeting Prima Facie Burden

Defendant moved for summary judgment arguing that plaintiff’s alleged injuries were not sufficient to qualify as a serious injury as defined by Insurance Law § 5102(d). Specifically, defendant argues that the plaintiff did not sustain a qualifying injury under the 90/180-day category. The Appellate Division, without much explanation, ruled that denial of the motion was proper as the defendant did not meet their prima facie case burden.

Editor’s Note: Due to the scant information in the opinion I looked at the motion paper to better understand the court’s decision. In his papers, defendant relies heavily on the deposition testimony of the plaintiff to prove plaintiff did not sustain an injury under the 90/180-day category. That testimony revealed that the plaintiff was able to be out and about in the first week after the accident, and that her husband did not have to take on any additional household duties after his wife’s accident. The deposition testimony defendant relies on does not prove that plaintiff was not limited, it proves that she was not confined to her bed. Had the defendant dug deeper into the activities that plaintiff was able to do, for example, asking if she could cook, clean, do laundry, independently care for her personal hygiene, attend appointments, etc., there would be a better argument that plaintiff did not meet the 90/180-day threshold.

 

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

08/07/19       Windridge of Naperville Condo. Assoc. v. Philadelphia Ind. Ins.
United States Court of Appeals, Seventh Circuit
Insured Prevails on Storm Damage; Repairs Must “Match” Undamaged Property

On May 20, 2014, a hail and wind storm damaged buildings owned by Windridge which were insured by Philadelphia Indemnity. The storm physically damaged siding on the South and West sides of the buildings. The core of this dispute is that Philadelphia Indemnity contended that it was required only to replace the siding on those “damaged” sides. Windridge argued that replacement siding to match the undamaged North and East elevations was no longer available, so Philadelphia Indemnity must replace the siding on all four sides of the buildings so that they match. The Trial Court granted summary judgment to Windridge on that coverage issue, and this was affirmed on appeal.

The facts indicate that the storm directly damaged the siding only on the south and west sides of the buildings. Philadelphia Indemnity already paid $2.1 Million to Windridge for that damage. Windridge, however sought additional money to replace the siding on the north and east sides because matching siding allegedly was no longer available for purchase. Windridge argued that it was entitled under the policy to have the buildings repaired so that, as before the storm, the siding matched on all sides.

The Trial Court initially ordered Philadelphia Indemnity to proceed to appraisal as to the damage that was undisputedly covered by the policy, but not as to the claimed damage over which there was a genuine coverage dispute. Windridge moved for summary judgment arguing that the matching siding is not available, and that as a result Philadelphia Indemnity had to replace the siding on all four sides of the buildings. The Trial Court, in an interesting ruling, held that it could not grant summary judgment to Windridge on the factual question whether matching siding was available in the market, but it submitted that question to the appraisal process. The Trial Court then proceeded to examine the legal question that, assuming that no matching siding was available, does the policy require Philadelphia Indemnity to replace or pay to replace the siding on all four elevations to insure “matching”.

The Trial Court determined that the matching was required because the policy should be interpreted as treating damage as having occurred to the building as a whole. If the siding did not match, it cannot be said that Windridge had been made whole, and it would be left with buildings clearly in an inferior state to that which existed before the loss.

On appeal, the Court noted that the interpretation of an insurance policy is generally a matter of state law. The Court further noted that the policy here at issue was a replacement cost policy. The two phrases in the coverage provisions that were relevant were “direct physical loss” and “covered property”.

The Appellate Court held that if the “unit” of covered property is considered as each building as a whole, the matching would be required, and at a minimum the policy provisions were ambiguous as applied to these facts so under Illinois law that would lead to a conclusion of coverage. Philadelphia Indemnity would be required to replace or pay to replace covered property that suffered a “direct physical loss”.  Philadelphia Indemnity argued that the unit of damage or covered property would be each individual side of the buildings, which the Court ruled would have unnatural and unusual results and interpretations.

The Appellate Court held that, at a minimum, the policy language was ambiguous and it made sense from the policy language and a loss perspective to view each building as a unit of covered property that suffered direct physical loss that must be brought back to “replacement” condition. The building as a whole, including all four sides, would have to be returned essentially to pre-storm status.

As stated, the key policy definitions and words at issue in this case were the definitions of a covered loss and covered property. From an overall perspective, the Court did note that the intent of a replacement cost policy is to make the insured whole following a loss.

Ultimately, the Court retreated to the standard interpretation that ambiguity is to be construed against the insurance company and in favor of coverage. As indicated, in an interesting legal twist, the factual issue of whether there was in fact matching siding available in the marketplace was referred to the appraisers as part of the appraisal process. The Court then considered the legal issue whether matching siding had to be applied to the undamaged elevations under the policy.

 

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