Coverage Pointers - Volume XXI, No. 16

Volume XXI, No. 16 (No. 555)
Friday, January 24, 2020

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.

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.


Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.  For our new subscribers, remember that the actual newsletter is attached.  This is the cover note, which is chock-full of news, highlights about the issue, historical trivia from a century ago, and messages from each of our editors. We continue reporting on the debates surrounding the Suffrage Amendment, the 19th which, 100 years ago this year, gave women the right to vote. Enjoy.

Happy birthday to my sweet first-born, my daughter Karie Coffey, whose age will be our secret.  Thank you for sharing your life with your old man.

I am back from a much-needed vacation in Scottsdale, I returned with added vigor.  Coverage opinions are flying out the door and situations are getting delightfully resolved.  All kinds of great CLE and CE programs are on the agenda as you will read about below.

This issue has the usual array of interesting cases, including a case discussing what it really means to be occupying a motor vehicle.  There’s also a First Department case where a construction company lost coverage on a construction accident because of a construction exclusion.  I reported on that one earlier on LinkedIn, in my column entitled:  Coverage Pointers Advance.

Thousands Flee (from the Second Department):

Regular readers know that when we find a case completely off the tracks, we dub it a “thousands flee” case. We have one in this week’s issue.

There is one case, your author, considers absolutely in error, and that is a Second Department decision involving a person who tosses a cup of liquid out of a moving car intending to douse a pedestrian.  The cup strikes the pedestrian and he sues for his injuries, alleging (only) intentional conduct.  He then argues that this was really an accident for coverage purposes and the Second Department finds that there is an issue of fact.

Introducing ….

We are delighted to introduce the 15th, 16th and 17th members of our Coverage Team, Ryan P. Maxwell, C.J. Englert and Cara A. Cox.  Ryan and Maxwell have been with us for some time, but now are admitted to practice in the State of New York.  Cara has been practicing elsewhere, but we are delighted to have her with us as well.  I asked each of them to give you a little background on their interests, etc.

  • Ryan P. Maxwell

    A University at Buffalo School of Law magna cum laude grad, Ryan worked at H&F as a law clerk during this time for two years, before joining our Coverage team. Ryan concentrates his practice in insurance coverage litigation and coverage analysis in New York. After spending five years working following his undergraduate studies, Ryan returned to school and found the legal practice. A former collegiate volleyball player,

    Ryan is the current play-by-play voice for the Daemen College NCAA Div-II Men’s and Women’s Volleyball teams and can be found in that capacity streaming online on the ECC Network. Ryan and his wife, Lorraine, live in the Western New York area with their two beautiful young boys and dog, Colby.

  • C.J. Englert III

An associate in our Coverage and Child Victims Act defense groups, C.J. is experienced in preparing coverage opinions and analysis concerning complex issues, along with drafting papers for all stages of litigation. He received his J.D. from the University at Buffalo School of Law and attended Marietta College for his undergrad.

Outside of the office CJ enjoys spending time with his wife Elizabeth and their dog Marshal. They attempt to make the most of Buffalo’s four seasons, snow-skiing in the winter and spring while enjoying everything the Great Lakes have to offer during the summer and fall.

  • Cara A. Cox

Our most recent hire brings with her several years of experience working for a national insurance carrier where she defended commercial and individual policyholders against tort actions involving premises liability and motor vehicle accidents. Also a graduate of the University at Buffalo School of Law, with a concentration on cross-border legal studies, Cara competed in various arbitration competitions, including being a member of the first team to be sent to Vienna, Austria to compete in the Willem C. Vis International Commercial Arbitration Moot.

Cara enjoys traveling and had the privilege of visiting places such as Peru, Morocco, Myanmar, and Spain. Having grown up in Syracuse, New York and spent a lot of time in the Adirondacks with her family, Cara is now looking to explore as many National Parks as possible. Most recently, she spent time taking in stunning vistas at Yosemite, Sequoia, and Joshua Tree.

FDCC Insurance Coverage Training Academy:  CGL Boot Camp

I am excited to be part of the planning committee and faculty of the inaugural program of the FDCC Insurance Coverage Training Academy: CGL Boot Camp, which will be held in Scottsdale, AZ, on March 3, 2020. The program is designed for insurance adjusters and coverage attorneys with 1-5 years of experience, and also experienced defense attorneys who want to learn CGL coverage protocols. The substantive program will be one day, March 3rd, from 8 am – 5 pm, with a welcome reception on March 2nd and a closing reception after the program on March 3rd. The receptions will be part of the FDCC winter conference and will combine several groups for networking.

The program is built around a construction project fact pattern, with property damage and bodily injury, multiple claimants, multiple insureds, and risk transfer issues among the defendants. The day will include six substantive lectures, three interactive breakout sessions with faculty members, and three recap/lessons learned panels. The six lectures are:  Coverage 101 Introduction to Coverage - Issue Spotting – Substantive Topics - Duty to Defend Considerations - Risk Transfer – Additional Insured and Contractual Indemnity Issues - Good Faith Claim Handling – Extracontractual Considerations - Considerations for Coverage Litigation.  Registration is complimentary for in-house insurance/corporate attendees, and the hotel rate is $199 for industry attendees. To reserve a spot, please contact Danielle Scott at the FDCC office at (610) 992-0022, [email protected]. I am happy to answer any questions you might have about the program, or please feel free to reach out to the program chair, Lauren Curtis of the Traub Lieberman firm, at [email protected], (727) 388-4039.

If you want a copy of the brochure, just holler.

Canadian Defence Lawyers:

CDL standard logo

The 16th Annual Insurance Coverage Symposium

February 5, 2020 | One King West Hotel, 1 King St W, Toronto

I was honored to be invited to participate as a panelist at the Canadian Defence Lawyer’s 16th Annual Insurance Coverage Symposium in Toronto.  I will be joined by:

Marcus Snowden, Partner, Snowden Law, Toronto, ON and Gregory J. Tucker, QC, Shareholder, Owen Bird LC, Vancouver, BC, on a panel discussing additional insured and risk transfer issues.  Of the 16 Annual Symposia, this is my fifth invitation to speak.

Other topics on the agenda:

  • Construction & Builder’s Risk Coverage 
  • Limitation Periods on Insurance Claims
  • Managing Complex Coverage Claims
  • Opioid Litigation in the United States: Status of the MDL
  • Insurance Coverage and Insured Privacy Issues          
  • Cross Jurisdictional Insurance Issues

Click here for more information

PLRB Claims Conference:

Joined by my good friend, John Hanlon, from Selective Insurance, we’ll be speaking on Contractual Liability, Additional Insured and Risk Transfer issues at the annual Claims Conference and Insurance Services Expo at the Gaylord in Washington, DC, from March 8 – 11. To find out more, click here


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:  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.


Only 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York

24 Jan 1920


(Chicago Tribune Service for THE BUFFALO ENQUIRER.)

Chicago, Jan. 24.—Pupils in the Altgeld school staged a miniature strike today when their regular teacher became ill and the school board sent in a negress as a substitute.  The matter was amicably adjusted later when the teacher was sent to another school and a white woman given the place.  Two of the rebellious pupils were suspended but one, a girl, who simply went home, was reinstated.

The other, a youth, with decided race prejudices, and who caused all the trouble, is still under the suspension ban.

Principal Brooks belittled the publicity given the affair.  He said it narrowed down to one boy who was trying to incite a strike and denied the negress teach had been removed because of the trouble.  The board is woefully short of teachers and must do the best it can with the material at hand. 


Jen’s Gems:


Hope everyone is having a nice week.  For those that haven’t heard, registration is now open for this year’s DRI Insurance Coverage and Claims Institute (ICCI).  ICCI will take place April 1-3, 2020, at the Swissôtel Chicago.  As the program chair, I strongly encourage you to attend.   We have a great lineup of faculty and topics.  This year’s ICCI will feature “hot” topics such as the impact of newly extended statutes of limitation on sexual abuse claims and the impact of climate change on the insurance industry.

The program also includes a new component on Wednesday afternoon – Essential Business Development Skills for Leading Your Firm into the Future, which will focus on successfully developing business contacts and understanding individual value proposition while also cultivating soft skills like executive presence.   Space for this session is limited and it requires a separate fee from the regular ICCI registration fee (see brochure for details).

ICCI will also include two breakout sessions on Friday, April 3, 2020; each geared towards various skill levels and areas of expertise.  The first session includes five presentations addressing the fundamentals of insurance coverage including protecting privilege and deciphering when the duty to defend is triggered.  The second track, taking place at the same time, includes five separate presentations addressing various components of bad faith and extracontractual claims, including the latest developments policyholder counsel have utilized to obtain non-traditional damages.


Register for seminar:

Book your hotel:

Also, if you register by March 3, 2020, you save $100.00.  Hope to see you there!

Jennifer A. Ehman

[email protected]


Flu Season, Tips to Avoid:

Daily News
New York, New York

24 Jan 1920

Copeland’s Advice to Prevent Influenza

DR. ROYAL S. COPELAND, Health Commissioner, has issued the following advice in an effort to check the spread of influenza.

Keep the face and hands clean.

Wash the face and hands and nostrils with soap and water when returning from work.

Eat simple food, get plenty of fresh air and plenty of exercise.

Some doctors believe that salt and water snuffed up the nostrils at intervals is a good preventive.

If the disease should be contracted, put the patient to bed and isolate him.

Boil all eating and other utensils used by the patient.

Keep the patient in bed for at least two days after the fever has disappeared. 


Peiper on Property and Potpourri:

We take a moment to express our concern over the decision by the Second Department reviewed in Dan’s column this week.  In that case, two separate carriers (Harleysville and Philadelphia) were engaged in a Declaratory Judgment Action over who was responsible for paying a loss involving the two carrier’s mutual insured.  There was not a question of whether coverage existed, but rather under who’s policy term the loss in question actually fell.   Both maintained that the loss was payable under the other’s policy.   The dispute remained ongoing throughout the underlying action while both parties continued to assert their rights to equitable subrogation in a companion Declaratory Judgment Action.

In a classic “classic pay and chase,” Harleysville agreed to settle the plaintiff’s claim against the carriers’ mutual assured, and continue to assert its equitable rights in the pending DJ Action.  Philadelphia moved to dismiss Harleysville’s affirmative declaratory judgment claims on the basis of the voluntary payer doctrine.  The voluntary payer doctrine, for those unfamiliar, provides that a carrier who pays a loss outside the scope of its policy may not seek recovery of that payment from any other entity.  Essentially, it was argued that by agreeing to pay a loss that a carrier had previously disclaimed, the same carrier was prohibited from seeking recovery of that same loss.  The Court agreed, and by applying the voluntary payer doctrine to this loss ruled that carriers who pay disputed claims cannot assert their coverage arguments in companion coverage actions.

Pay and chase, resultingly, is now a thing of the past in New York.  No longer can a carrier agree to resolve a tort case, while reserving its rights to later litigate the DJ.  Voluntary Payer is not a waiver issue in the sense that a carrier needs to preserve its rights.  Indeed, if a carrier would reserve its rights that it was paying a loss it knew it did not have to pay, it would be conceding the very essence of the voluntary payer doctrine.  Thus, in order to insure that a carrier paying a tort loss has the right to press its independent rights, one must now obtain a stipulation from the potential target in an equitable subrogation action acknowledging that the voluntary payer defense will not be raised.  In essence, in order to agree to a “pay and chase” under NY law, one must get the consent of the party it intends to sue for recovery in equitable subrogation.   This will make it far more difficult to resolve underlying tort claims where coverage remains at issue.

This is the first decision of its kind in New York, and we would submit creates fundamental problems  moving forward.  Without the ability to unilaterally protect its insured, the carrier now must weigh whether settling a case at mediation is worth discarding its right and ability to challenge another insurer’s coverage position.  Be warned, and be ready at your next mediation.

Steven E. Peiper

[email protected]


Headlights, a Bit Different:

Poughkeepsie Eagle-News
Poughkeepsie, New York

24 Jan 1920

Proves He Complied With Auto Light Law

John B. Ball, Justice of the Peace of Milton, rendered a decision Thursday night exonerating Frederick W. Vail the “Apple King” of Ulster County from the charge of violation of the law in driving his car without the use of what is known as a “legal lens.”

Mr. Vail was arrested by the state police and it was charged he violated the law in not having a proper light on his car and that he couldn’t use a spotlight on the auto unless it had a legal lens.

Vail showed to the court that his light corresponded in every way with what the law called for.

Wilewicz’ Wide-World of Coverage:

Finally, winter is here, and alas, I can stop saying “Winter is Coming” (though I still say it anyway). As my second favorite time of the year, I have been looking forward to being able to use the excuse that we simply can’t get out of the house due to weather. It has yet to happen this season, but I can’t wait for that child-like glee that comes with a genuine snow day. Granted, with the advent of technology and the ability to readily work from home, a “snow day” doesn’t quite have that same mystique anymore. Nevertheless, there is something indisputably pleasant with being able to sleep in on a weekday and not having to put on pants.

In any event, if the snow and cold aren’t your cup of tea (which is ideal for such a day, mind you!), here’s another reminder that the ABA TIPS ICLC Midyear Conference is just around the corner. Starting on February 20th in sunny, warm Phoenix, it is the perfect timing to warm up right in the middle of winter.

Hope to see many of you there and then!

Agnes A. Wilewicz

[email protected]


Oh, THAT Old Excuse :

The Buffalo Enquirer
Buffalo, New York

24 Jan 1920


(By the International News Service.)

White Plains, Jan. 24.—An echo of the “wet days” came out in the supreme court here when Mrs. Blanche Sheridan, twenty, who is suing her husband for separation, testified that she had drank so many cocktails before the ceremony she did not remember anything about it.  The husband, a British army officer, did not defend the suit and no officiating clergyman can be found to testify.

Barnas on Bad Faith:

Hello again:

We’re heading towards the end of the football season, as the Chiefs and 49ers will meet for Super Bowl LIV in a little over a week.  I don’t have strong feelings about either team, but I’m really excited to see how these two teams match up.  The contrast in styles is interesting.  The Chiefs have the best quarterback in the league and one of the most explosive passing offenses, and the 49ers have a great defense and running game.  It was incredible to watch the 49ers dismantle the Packers and score 37 points throwing the ball only eight times in the NFC Championship.  I think I’m rooting for the Chiefs, but I’m a bit of a football purist, so I wouldn’t mind seeing the team that runs the ball and plays defense take home the Lombardi Trophy.

Normally we’d have plenty of options left on the winter sports calendar, but it doesn’t look like the Sabres or Syracuse will reach the postseason this year.  The Raptors’ success has been remarkable without Kawhi, but I’d still be surprised if they have enough for a deep playoff run, especially with how good the Bucks are this year.  I guess I’ll turn my attention to the warmth of spring, as the Blue Jays’ first spring training game is somehow only one month away.

I have an interesting bad faith case from the Tenth Circuit in my column today.  The court applied Colorado law and concluded that the underlying plaintiff had waived her right to pursue a failure to settle theory on appeal by including only a bad faith breach of contract theory in the Final Pretrial Order.

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

Brian D. Barnas

[email protected]


A Horse is a Horse, but a Truck?

Buffalo Evening News
Buffalo, New York

24 Jan 1920



Farmer Says He Can Haul More Loads to Market.

            Wayne A. Robinson, a farmer, living outside of Marshalltown, Iowa, has sent to the Republic Motor Truck company incorporated, of Alma, Mich., some seven or eight pages of facts and figures to who show efficient and economical has been the performance of the model 11 Republic, which was purchased last August.

            Robinson has driving the truck more than 2500 miles and reports a gasoline mileage averaging as high as 15 miles, and never under nine miles.  The average daily cost for gasoline and oil has been $2.75, and the only repair item has been one new fan belt.

            Comparison of the truck’s work with that of a team of horses is all in the truck’s favor.  For instance, Robinson hauls eight loads a day from his farm to the elevator, as against two with a team.  The truck’s average load is 80 bushels of shelled corn, as against 60 bushels with a team.  This means more than five times as much work in a day with a truck as against a team of horses. 


Off the Mark:

Dear Readers,

The weather on Long Island has been a bit chilly lately and the wind makes it feel much worse.  At least I haven’t had to shovel any snow yet.  I have no cases to report on this edition as I continue to prepare for a trial scheduled to begin next week.

As you may be aware, we recently published our first issue of Products Liability Pointers.  If you are interested in becoming a subscriber to our newest newsletter, please drop me a line at [email protected].

Until next time …

Brian F. Mark

[email protected]


Suffrage Amendment – the Mississippi Rejection:

The Greenwood Commonwealth
Greenwood, Mississippi

24 Jan 1920


The members of the lower house of the Mississippi Legislature gave the Susan B. Anthony Woman’s Suffrage Amendment a solar plexus blow—a 106 to 25 knockout!  Woman’s suffrage is certain to come within a short time, but the large majority of Mississippians are not going to be responsible for it.

Editor’s Note:  On March 22, 1984, the Mississippi legislature voted to ratify the 19th Amendment, acknowledging that women had been fully enfranchised citizens for sixty-four years.

Boron’s Benchmarks:

I hope all is well with you. I’m doing “OK”.  Usually, I am great.  At least in my own mind.  But, unfortunately, I have been struggling for many weeks to completely fight off a heavy cold.  Seems I start feeling good, and start my workout program up again, and then the next day – boom…or more accurately…ah-choo, cough, cough - and…I’m feeling under the weather again.  Ever gone through something like this yourself?  I hope not.

Even if I am bit under the weather, I nonetheless take solace in the fact that I work with the best coverage attorneys I know.  What makes working here great is the sharing with each other of expertise and experience.  Thank you, colleagues for that!

For our newest subscribers, I write a column entitled “Boron’s Benchmarks” for each issue of Coverage Pointers.   Boron’s Benchmarks covers the latest insurance coverage opinions issued by the high courts of the 49 states not named New York.  In this edition, I cover a decision issued last week by the Supreme Court of Ohio ruling a discharged law firm seeking to enforce its charging lien against its former client’s settlement with an insurer must pursue such a claim directly against the former client and cannot hold the insurer who had paid the entire settlement amount – $13,044 to be exact – directly to the plaintiff accountable for the discharged law firm not being a named payee on the settlement check.

Until next time, in two weeks, when I will be great again…at least in my own mind.

Eric T. Boron

[email protected]


Baseball Salaries to Increase:

Sioux Falls, South Dakota

24 Jan 1920



New York, N.Y., Jan. 24.—All players of the New York National league baseball club are to receive substantial increases because of the high cost of living and the enormous price paid for “Babe” Ruth, it was announced by Charles A. Stoneham, president of the club.

Even players under holdover contracts must receive more money, he said.

Ruth was purchased by the New York Americans from the Boston Americans at a figure said to be more than $100,000.


Barci’s Basics (On No Fault):

Hello Subscribers!

I wish I had something fun to report, but these last few weeks have been super busy. I have lots going on at the office and the rest of my time is spent helping the mock trial team I coach prep for their first competition on February 1st. Every year it feels like the students have less and less time to prepare, but alas, it is all supposed to be in good fun and can’t stress too much about it (even though there were eight new pieces of evidence added as an addendum last week…).

On the no-fault front, I have two cases to report – both from lower courts today. The first comes from the Second Department’s Appellate Term and discusses the standard for a master arbitration review. The second case comes from the City of New York Civil Court, New York County, and is another that alludes to the need for an acupuncture fee schedule, which luckily for us is set to be implemented in October. Until then, I am sure we’ll see a few more cases that work on the issue of using the chiropractic fee schedule for rate assessment for licensed acupuncturists.

That’s all folks,

Marina A. Barci


Now That’s a Crock (of a Different Sort):

The New York Times
New York, New York

24 Jan 1920


Judge Grants Separation to Victim Of Crockery Barrage

Special to The New York Times.          

WHITE PLAINS, N. Y., Jan. 23.—In granting a judgment of separation today to William G. Palmer from his wife Florence Acker Palmer of Port Chester, upon the ground that she had been cruel when she hurled crockery at his heed.  Justice Morschauser laid down some rules for the guidance of married couples.

Mrs. Palmer also sued for a separation, alleging that her husband had deceived her, but Justice Morschauser denied her petition.

Mr. Palmer testified that his wife had hurled cups of hot coffee and tea at his head and that some of the contents were spilled on his clothing.  He also said she had made false accusations against him.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

You’re up 8-4 in the race to 10. Although four suited, you take solace in the fact that the dealer to your left is stuck deciding his fate. Then, breaking an eerie silence, the dealer declares “spades, alone.” You get that sinking feeling knowing you’re without the stopper. But as the saying goes, sometimes you have to trust your partner. Second trick in, the dealer delivers a blow in the form of the right bower. Again, a sinking feeling deflates you as your partner reveals the left, ending a fleeting hope that his hand held two trump instead of one. Then, truth be told, he did. Misplayed. All tied up, just to lose the match the next hand, 8-10. A respectable loss; surely not the type of loss that keeps a euchre player from the final table. Pool play ends and the scores are tabulated. TIED FOR SECOND! Yes, but…it’s a four-way tie. The tie-breaker? Record. The rub? On the outside looking in at four and two. Moral of the story? Tie-breakers are the Woooooorrrrrrrrrrssssssssst. At least Mr. Barnas was able to join me in missing out. There’s always next year.

This edition, we have several interesting pieces for your palate. The Legislative List includes several proposal presented by Governor Cuomo’s budget bill released on Tuesday, including a call for a change to interest rates charged upon civil judgments, other bills seeking to amend the Workers’ Compensation law and SIF to protect small business policyholders, the creation of a new pure captive insurance company for NYPA, as well as updates on several other bills from the Legislature that reported out of the Senate Standing Committee on Insurance. The Regulator Wrap-Up includes the first DFS Circular of 2020, which establishes ground rules for property/casualty insurers to avoid unlawful discriminatory practices in light of New York’s Green Light Law. Finally, From the Filings Cabinet returns to explore the bounds of nuclear exclusions under the watchful eye of DFS. 

Until next time.

Ryan P. Maxwell

[email protected]


National Suffrage Movement:

The Evening Journal
Wilmington, Delaware

24 Jan 1920


Through announcements made by Mrs. Mabel L. Ridgely, present of the Delaware Equal Suffrage Association, and others, many Delawareans already know that the greatest woman suffrage convention ever held in the world will assemble in Chicago on February 12 and continued in session until February 18.

In behalf of the suffragists it is asserted jointly by Miss Rose Young, national press chairman, and Mrs. Ridgely that the convention is not only to be the greatest; presumably it will be the last.  It will close the affairs of an association that has had a convention every year for 51 years.  It will, moreover, had on the woman’s banner to the League of Women Voters, the child of the National American Woman Suffrage Association.

Convention headquarters will be at the Congress Hotel.  The convention proper opens on the afternoon of Friday, February 13.  As the convention is also to celebrate the centenary of Sana B. Anthony, there will be occasion for a program of lively contract between the woman of one hundred years ago and the woman of today.


CJ on CVA and USDC(NY):

Hello all,

It’s hard to believe that we are already almost a full month into 2020. Winter in Buffalo has finally arrived, and my wife and I have finally been able to hit the slopes a few times. Hopefully, we can avoid any warmer weather in Western New York until spring officially arrives.

This traditionally would be the week to discuss the goings on in the District Courts across New York State, but it seems that the new year has yet to bring any insurance decisions. Instead I’ve broken down Roman Catholic Diocese of Brooklyn et al. v. National Union Fire Insurance Company of Pittsburgh, Pa. This Court of Appeals decision from 2013 will become increasingly important to any CVA litigation, as it cements the use of the “unfortunate event” test to determine if an alleged bodily injury is part of one occurrence or can constitute multiple occurrences for purposes of coverage.

Happy Reading!

Charles J. Englert, III

South Carolina Rejects Suffrage Amendment:

The Gaffney Ledger
Gaffney, South Carolina

24 Jan 1920


To Permanently Dispose of Question Is Its Purpose.

Columbia, Jan. 22.—William R. Bradford, of York, today introduced in the House of Representatives a resolution rejecting the Susan B. Anthony amendment to the national constitution providing for equal suffrage.  The resolution went over for consideration until tomorrow.

Constitutional lawyers say that if this resolution is adopted by two-thirds of the members of the General Assembly it will forever prevent the amendment coming up for a vote.  Otherwise it could come up at the General Assembly until it is passed.

It is probably that this parliamentary maneuver will be made by other States; the opponents of woman suffrage being of the opinion that by this method they can defeat forever the federal government controlling the suffrage of the sexes.

Editor’s Note:  On January 28, 1920, South Carolina voted to reject the 19th Amendment. But by August of 1920, 36 states approved the Amendment, making women’s suffrage legal all across the country – even in South Carolina. On July 1, 1969, South Carolina showed its support for women’s suffrage by officially ratifying the 19th Amendment.   They beat Mississippi by a decade and a half.


Dishing Out Serious Injury Threshold:

Dear Readers,

So, the first month of 2020 is nearly over and with that its already too far into the year to wish people “Happy New Year”. How did this happen? The entire month of January has flown by and the Super Bowl is already right around the corner. Enjoy all the time you can because at the rate this year is going Spring will be here before you know it.

Despite the year flying by, it’s been a slow couple weeks for decisions coming out of the Appellate Division for Serious Injury Threshold cases. But, despite the limited amount of cases, we do have two quality cases to discuss today, both out of the First Department. The first, pertains to plaintiff’s expert failing to specifically address issues of causation in light of preexisting injuries identified in plaintiff’s own medical records. The second, pertains to findings of limited range of motion not precluding a finding that plaintiff did not sustain a serious injury.


Michael J. Dischley



Radicals Face Trial:

The South Bend Tribune
South Bend, Indiana

24 Jan 1920


Every Radical Advocate of Prominence Scheduled to Face Trial.

By Associated Press.

CHICAGO, Jan. 24.—Virtually every radical advocate of prominence in the United States to-day was scheduled to face trial in Chicago indictments against 85 alleged leaders of the communist party yesterday followed quickly indictments of 40 men and women charged with being high in the councils of the communist labor party.  The special grand jury which has been investigating red activities to-day was expected to assume the third phase of its work with an inquiry into the Industrial Workers of the World organization.

Extradition papers were being prepared to-day for those under indictment who are residents of other states.


Bucci on “B” :

Hi all, it’s Diane Bucci here.  It’s my first time up at bat for Coverage Pointers’ Coverage B Column.  In fact, it’s my first time up at bat for Coverage Pointers, since I’m brand new here.  Coverage B can be fun…no, really!

In this week’s CP, I look at a case where the insured argues that the personal injury of malicious prosecution in the Coverage B insuring agreement covers claims against it for prosecuting fraudulent patents before the United States Patent and Trademark Office.  This is called a Walker Process claim.  The claim itself wasn’t at issue in the coverage case but it is an interesting claim.  It allows a cause of action for fraudulently obtaining a patent for purposes of monopolizing an industry.  The Walker Process claim was ultimately dismissed.  Xitronix Corp. v. KLA-Tencor Corp., No. A-14-CA-01113-SS, 2016 WL 7626575 (W.D. Tex. Aug. 26, 2016), aff’d Rule 36, No. 16-2746 (Fed. Cir. May 23, 2019).

I hope to bring you some new and interesting Coverage B decisions throughout 2020.  Don’t forget to call with questions, or “situations.” I am looking forward to it.

Diane L. Bucci


Women Can Vote in Texas, but Not for Free:

The Odessa Herald
Odessa, Texas

24 Jan 1920


Just one more week in which to pay your poll tax, ladies and gentlemen.  And it’s never a wise plan to put off any necessary duty until the last minute.

The women of Texas will have, in all probability, their first chance to vote for president in 1920.  That is those of them who pay their poll tax and thus enfranchise themselves.  Ratification of the Federal amendment is entirely probable—almost certain with the ratification comes full suffrage.

The opponents of equal suffrage contend that women will not pay money for the privilege of voting but if they do not  it will be because they do not understand the situation fully.  Quite a few people, men as well as women, got the idea that the privilege of voting in 1918’s primaries was but an emergency measure, pending the anticipation of full suffrage, and that, full suffrage failing to pass, the women could not vote in the coming primaries.

Then some of them will be deterred from paying their poll tax when told that efforts are being made to get an injunction, restraining the women from voting next July.  Those most familiar with conditions are not afraid that this will be done.  But anyway, there is a good sporting chance and the money goes to worthy objects, every poll tax swelling our school fund by one dollar, and this is a time when Texas schools need every available penny.

It is up to every woman who thinks she should have a chance to have her say as to the kind of government under which she lives and raises her children to pay her poll tax and then to find just where every man for whom she is to vote, from constable to senator, stands on the important questions—including the very important one of equal suffrage for the fathers and the mothers of America. 


John’s Jersey Journal:

Dear Subscribers:

New Jersey’s Child Victims Act went into effect last month. Right out of the gate, there have been a number of these lawsuits filed. You may be seeing them come across your desk. It has been our pleasure to assist our clients with the coverage analysis and preparing the reservation of rights letter. We love working through the issues with you. If you have a New Jersey CVA claim come across your desk, we can help! Feel free to send us an email or give us a call.

Bill Requiring NJ Auto Insurers to Disclose Policy Limits Within 30 days VETOED!

This week Governor Phil Murphy signed 153 bills into law, but this isn’t one. We’ve reported on the bill, S2429, several times, here and here. Had it had been enacted, it would have required all insurers who write personal auto insurance in New Jersey to provide an email address to the New Jersey Department of Banking and Insurance. Plaintiffs’ attorneys would then be able to email the insured’s name and the police report to the insurer, who would be required to disclose their policy limits within 30 days. It passed the Senate in March 2019 and the Assembly on January 13, 2020.

It landed on Governor Murphy’s desk and he declined to sign it, allowing the bill to expire before it became law; also, known as a “pocket veto”. Governor Murphy apparently read it and did not think it was worth his signature. This is great news for insurers. Why should an insurer have to disclose this information pre-suit?

New Year. New Legislative Session. New Attempts to Pass Same Bills.

The minimum amount of uninsured (UM) and underinsured motorist (UIM) coverage under a standard policy is $15,000 per person and $30,000 per accident and $5,000 for property damage. On January 14, 2020, Nicholas Scutari, a state senator and personal injury attorney, introduced S-781. This bill, if enacted, would require New Jersey motorists to maintain uninsured and underinsured motorists coverage at limits equal to their liability coverage. The bill is available here.

This is the same bill Mr. Scutari introduced in the Senate last April. However, the bill never gained any traction and did not move. Will this be the year? We will keep monitoring and keep you informed.

New York passed a similar law in December 2017, requiring all New York motorists to maintain uninsured and underinsured motorists coverage at limits equal to their liability coverage (available here). New York law, however, gave the insured the option to opt-out and maintain lower coverage limits.

Third Circuit Declines to Uphold Dismissal Where Insured Skipped Trial Citing Flight Delay due to Plane Crash on Other Side of the World

Even with all the legislative happenings, we did not forget to monitor the court dockets. Today’s case, discussed in the attached issue, is somewhat comical. The pro se insured sued his insurer for damages after Hurricanes Irene and Sandy. On the eve of trial, he faxed a note to the court saying he would not be attending due to weather. Later, he argued that his flight out of Arizona was delayed due to a plane crash in Ethiopia. When the insured failed to appear for trial, the judge tried to call the insured who allegedly blocked the court’s phone number; a claim the insured did not dispute. The trial court dismissed his lawsuit due to failure to prosecute. On appeal, the Third Circuit declined to enforce the trial court’s dismissal. The Third Circuit said that the trial court did not apply the factor test required for a dismissal and remanded for the trial court to do so. I.e., the Court simply has to write-up its decision citing the factors and how they are met for the dismissal to stand.

Lots of legislative happenings and even an interesting case!

John R. Ewell


Insurance Broker Faces Criminal Charges:

The Brooklyn Daily Times
Brooklyn, New York

24 Jan 1920


Richard T. Kelsh, of Springfield Road, Springfield, an insurance broker, was charged in the Jamaica Police Court yesterday with petit larceny by Mrs. Evangeline Josiah, of Merrick road, Springfield.  She alleges that he failed to turn over to an insurance company a check for $44.20 which, she alleges, she gave Kelsh as a premium on a policy of compensation insurance.  She claims the matter was brought to her attention by notification, after she had given Kelsh the check, that her policy would be cancelled if the premium was not forthcoming.

Kelsh pleaded not guilty and was held for examination on Monday by Magistrate Miller.

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Well, the Connecticut courts were quiet these past few weeks, at least on the insurance front. But that leaves us time for our next Connecticut history lesson. Yes, school is back in session. Now, to all you scholars out there, by a show of hands, who has heard of the Court of Appeals in Cases of Capture? Be honest. This was the very first federal court established in the United States, under the Articles of Confederation. And, Connecticut’s own Titus Hosmer was one of the first judges appointed to the court. Hosmer, born in what is now West Hartford, Connecticut (it seceded from Hartford in 1854), attended Yale, read for the law, and practiced in Middletown, Connecticut. Elected to the Connecticut State Assembly and Senate, he was one of Connecticut’s delegates to Continental Congress, and later a member of Congress.

Let’s turn back to this Court of Capture. This federal court, the first federal court, was not a criminal court, it was not a civil court, but it was a court of Prizes. Prize law? No, not sweepstakes. Prize is an admiralty law term referring to equipment, vehicles, vessels, and cargo captured during armed conflict – as in ‘Prize of War.’ Nations often granted letters of marque that would entitle private parties to capture enemy ships. Once the ship was secured on friendly territory, she would be made the subject of a “prize case,” an in rem proceeding in which the court determined the status of the condemned property and the manner in which the property was to be disposed. The Court of Capture had a short run, as it’s docket was assumed by Article III courts following ratification of the Constitution.

Lee S. Siegel

[email protected]       


Mrs. Hill Rides Tries Again:

Vancouver Daily World
Vancouver, British Columbia, Canada

24 Jan 1920

LONELY BACHELOR GIRL, WORTH $300,000, wishes to hear from honorable gentlemen under 60; object matrimony.  Write Mrs. Hill, 14 East 6th Street, Jacksonville, Fla. 


Headlines from this week’s issue, attached:

Dan D. Kohane

[email protected]

  • Coverage Available for Vicarious Insured Liability, even with Employee Exclusion
  • What is an “Accident,” Anyway?  When a Cup with Liquid is Tossed Out of Car Window, with the Intention of Dousing a Pedestrian, it May be an Accident if the Pedestrian is Hit by the Cup.  Thousands Flee.
    Voluntary Payment by Carrier to Settle Case Bars Claim for Equitable Subrogation
  • Construction Exclusion in Policy Issued to Construction Company Properly Excludes Construction-Related Injuries
    One Foot On, One Foot Off, is “Occupying” a Vehicle for Purposes of SUM Coverage


Steven E. Peiper

[email protected]

  • Foreign Insurer Ordered to Post Seven Figure Bond Before It Could Assert Affirmative Litigation Defenses


Michael J. Dischley

  • Plaintiff Failed to Address Issue of Causation Presented by Preexisting Conditions Documented in his own Medical Records
  • Defense Experts’ Findings of Reduced Range of Motion Do Not Preclude Finding that Plaintiff Did Not Sustain Serious Injury


Agnes A. Wilewicz

[email protected]

  • Nothing coverage-related in the Second Circuit this week.


Jennifer A. Ehman

  • Tenant’s Carrier Must Provide a Defense to the Property Owner
  • Trial Court Finds Underlying Complaint Does Not Allege Property Damage During Insurer’s Policy Period


Brian D. Barnas

[email protected]

  • Failure to Include Claim for Bad Faith Failure to Settle in Pretrial Order Resulted in Waiver for Purposes of Appeal even where Bad Faith Breach of Contract Claim was Included


John R. Ewell

  • Third Circuit Declines to Uphold Dismissal Where Insured Skipped Trial Citing Flight Delay due to Plane Crash on Other Side of the World


Lee S. Siegel

[email protected]

  • Nothing from the Nutmeg State for this issue.


Brian F. Mark
[email protected]

  • No cases this week but do read Products Liability Pointers!


Eric T. Boron

[email protected]

  • Discharged Law Firm Fired by Plaintiff Cannot Enforce its Charging Lien Against Tortfeasor’s Insurer; Insurer Has No Duty to Protect Plaintiff Attorneys’ Charging Lien


Marina A. Barci

  • Master Arbitration Award Vacated because Master Arbitrator Exceeded Authority
  • RVU-8 Applies to Multiple Procedures of the Same Type Performed on the Same Day; Chiropractic and Acupuncture Treatment are Distinct Treatments


Ryan P. Maxwell

[email protected]

Legislative List

  • FY 2021 New York State Executive Budget Article VII Legislation Proposes Variable Market-Based Interest Rate on Court Judgments and Accrued Claims Paid by Public and Private Entities
  • FY 2021 New York State Executive Budget Article VII Legislation Proposes Private Cause of Action Against Businesses Discriminating Against Certain Genders in the Pricing of Similar Goods and Services
  • FY 2021 New York State Executive Budget Article VII Legislation Proposes A Pair of Bills Aimed at Reducing Costs for Responsible SIF Policyholders
  • FY 2021 New York State Executive Budget Article VII Legislation Proposes New Pure Captive Insurance Company for New York Power Authority
  • In Unanimous Votes, Several Bills Reported to Senate After Referral to Insurance Committee

Regulatory Wrap-Up

  • DFS Expects Property/Casualty Insurers to Fully Cooperate with the Intent of the Driver’s License Access and Privacy Act (Green Light Law)

From the Filings Cabinet

  • DFS Disapproves Professional Liability Form Filing for Exceeding Permissible Scope of Industry Standard Nuclear Exclusion


CJ on CVA and USDC(NY)
Charles J. Englert III

  • The “Unfortunate Event” Test Should Be Used to Determine How Occurrences are Categorized for Insurance Coverage Purposes


Diane L. Bucci

  • Prosecutions before the United States Patent and Trademark Office Not Malicious Prosecution within the meaning of Personal Injury Coverage
    Trade Dress Infringement Not Covered under Coverage B Because Violations Occurred After Policy Cancelled

Earl K. Cantwell

  • Fraud Claim Does Not Forestall Appraisal


We are so happy to have you with us.

Dan D. Kohane
[email protected]

Agnes A. Wilewicz
[email protected]

John R. Ewell


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 F. Mark

Diane L. Bucci

Brian D. Barnas

John R. Ewell

Eric T. Boron

Marina A. Barci

Ryan P. Maxwell

Charles J. Englert

Cara A. Cox

Diane F. Bosse

Joel R. Appelbaum


Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Eric T. Boron

Brian D. Barnas


Jennifer A. Ehman, Team Leader
Marina A. Barci

Jody E. Briandi, Team Leader
[email protected]

Diane F. Bosse

Topical Index

Kohane’s Coverage Corner
Peiper on Property and Potpourri

Dishing out Serious Injury Threshold
Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

John’s Jersey Journal

Lee’s Connecticut Chronicles

Off the
Boron’s Benchmarks

Barci’s Basics (on No Fault)

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

Bucci On “B”

Earl’s Pearls


Dan D. Kohane
[email protected]


01/21/20       Zurich American Ins. Co. v. ACE American Ins. Co.
Appellate Division, First Department
Coverage Available for Vicarious Insured Liability, even with Employee Exclusion

Pursuant to its plain language, the "Any Auto Legal Liability" endorsement of the Drive NJ policy extended the definition of "insured auto" to include "any auto, if you are a partnership, corporation, or any other entity," which included the trailer driven by its additional insureds. Although liability has yet to be determined in this case, based on the allegations of the underlying complaint, which alleged injuries sustained while loading and unloading rebar cages constructed by Drive NJ's insured, the tractor-trailer owned by the Zurich insureds was covered under the Drive NJ policy, and Drive NJ's obligation to defend was triggered.

Nevertheless, the "Employer's Liability" exclusion which excludes bodily injury to an employee of any insured arising out of or within the course of: (i) that employee's employment by any insured; or (ii) Performing duties related to the conduct of any insured's business unambiguously referred to any entity insured under the policy, whether as the named insured or as an additional insured. Even if this language precludes coverage for lawsuits against B & R by B & R employees (the Quinn action) and lawsuits against the Zurich insureds by their employees , such language would not preclude Drive NJ's defense obligations to the Zurich insureds for vicarious liability imposed as a result of its named insured's action.


01/20/20       Unitrin Auto and Home Ins. Co. v. Sullivan
Appellate Division, Second Department
What is an “Accident,” Anyway?  When a Cup with Liquid is Tossed Out of Car Window, with the Intention of Dousing a Pedestrian, it May be an Accident if the Pedestrian is Hit by the Cup.  Thousands Flee.

Ciminello sued Sullivan and others for personal injuries, when he was struck by a cup tossed out a car window operated by Sullivan.

Sullivan was insured under a combination homeowners and automobile policy issued by Unitrin. The homeowners personal liability part of the policy provided that Unitrin would indemnify the insured for a bodily injury damage claim caused by an "occurrence," which was defined by the policy as "an accident." The automobile liability part of the policy provided that Unitrin would pay damages for bodily injury for which any insured becomes legally responsible because of an automobile accident. The policy also contained a personal catastrophe liability endorsement which provided that Unitrin would pay that portion of the damages for bodily injury for which a covered person is legally responsible which exceeds the retained limit.

Unitrin established its prima facie entitlement to judgment as a matter of law, and was entitled to judgment declaring that there was no coverage under the homeowners personal liability and automobile liability sections of the policy by submitting evidence demonstrating that the claim did not arise out of an accident but was the result of Sullivan's intentional act. In opposition, however, Ciminello raised a triable issue of fact as to whether the harm was inherent in the intentional act committed.

Ciminello submitted evidence that, although Sullivan and his passenger intended to douse Ciminello with the liquid contained in the cup, there was no intent to throw the cup and strike Ciminello with it. As the instant case did not fall within the narrow class of cases in which the intentional act exclusion applied regardless of the insured's subjective intent, there was a triable issue of fact as to whether the event qualified as an "accident," as defined by the policy.

Editor’s Note: So, let me get this straight. If I throw a trash can full of cotton balls from my room, aiming at a passing wayfarer, intending to hit him with the cotton balls, but he is hit by the trashcan as well, that could be an accident?

Note, it was the victim of the accident alleging that this was an accident.

Here is the language from the lower court decision (with citations omitted) and you may understand, even better, why I think the App Div decision is wrongly decided:

Here, the only surviving cause of action the second amended complaint sounds in intentional tort, premised on the claim that the incident took place "due to the willful, wanton, and intentional acts" of Brian C. Sullivan and Robert Harford, constituting "intentional harm."

Assuming, for purposes of determining coverage, that what is alleged actually happened, such an intentional assault by Brian C. Sullivan cannot be construed as an accident covered by the policy.

Although Ciminello now argues, contrary to his pleading, that the injuries he sustained were the unexpected result of an intentional act and, therefore, within the coverage of the court finds his argument without merit. Where, as here, the harm to a victim flows directly from and is inherent in the nature of the act allegedly committed by the insured, the harm will be deemed to have been intentionally caused.

Since physical harm to Ciminello was inherent in the nature of the conduct alleged, whatever physical injuries resulted from that conduct were intentional, irrespective of the insured's subjective intent and notwithstanding that the actual injuries may have been more extensive than he anticipated.


01/22/20       Philadelphia Ind. Ins. Co. v. Harleysville Preferred Ins. Co.
Appellate Division, Second Department
Voluntary Payment by Carrier to Settle Case Bars Claim for Equitable Subrogation

The plaintiff, Philadelphia Indemnity Insurance Company (“PIIC”), commenced this action against the defendant, Harleysville, for a judgment declaring certain coverage obligations in an underlying personal injury action entitled Blake v Nashopa House Crystal Run Village, Inc. The Blake action involved allegations that Ernest W. Blake, Jr., was injured on three separate occasions as a result of two falls that took place in May 2012 and one fall that occurred in March 2013, while he was a resident of a group home operated by the defendant in that action, Nashopa House.

PIIC had issued a CGL policy effective January 1, 2012, through January 1, 2013 to Crystal Run Village, Inc., and Harleysville had issued a commercial general liability policy effective January 1, 2013, through January 1, 2014. Harleysville disclaimed coverage in the Blake action, taking the position that Philadelphia was responsible for coverage related to the third fall.

After the commencement of this action, the Blake action was settled, with Harleysville contributing $300,000 toward the settlement proceeds. Philadelphia moved for summary judgment dismissing Harleysville's counterclaims and for leave to voluntarily discontinue this action on the basis that there was no longer a justiciable controversy in light of the settlement in the Blake action. Harleysville cross-moved for leave to serve a second amended answer asserting a proposed additional counterclaim, seeking reimbursement from Philadelphia of the $300,000 Harleysville contributed to the settlement, under the doctrine of equitable subrogation.

Harleysville's proposed additional counterclaim is devoid of merit because, as it is barred by Harleysville's voluntary payment toward the Blake action settlement.

Editor’s Note:  Please see Steve Peiper’s cover note for analysis.


01/16/20       Castlepoint Ins. Co. v. Southside Manhattan View LLC
Appellate Division, First Department
Construction Exclusion in Policy Issued to Construction Company Properly Excludes Construction-Related Injuries

Castlepoint issued an insurance policy to Southside, which contains a construction exclusion for bodily injury arising out of the "[c]hange, alteration, or modification of the size of any building or structure"; "[m]ovement of any building or structure"; "[c]onstruction or erection of any new building or structure"; "[d]emolition of any building or structure"; or "[c]onstruction, demolition, movement of any load-bearing wall or any modification to the structure of any load[-]bearing wall."

The exclusion expressly provides that it "applies to any work performed as part of or in connection with any of the foregoing [enumerated operations]," and "applies regardless of whether the described operations are ongoing, completed or in any other stage when the loss occurs."

DiSimone alleged in that working on sprinklers at the subject premises as part of a renovation project, he fell off a ladder after coming in contact with live, uninsulated electrical wires. Castlepoint disclaimed any duty to defend or indemnify Southside in the underlying action, citing the construction exclusion in the policy.

An insurance policy, as with any written contract, must be accorded [its] plain and ordinary meaning. Policy exclusions are subject to strict construction and must be read narrowly, and any ambiguities in the insurance policy are to be construed against the insurer. However, unambiguous provisions of insurance contracts will be given their plain and ordinary meaning.

When an insurer seeks to disclaim coverage on the ... basis of an exclusion, ... the insurer will be required to provide a defense unless it can demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation. By this standard, Castlepoint has met its prima facie burden of demonstrating that DiSimone's work installing or repairing sprinklers was "in connection" with the operations enumerated in the construction exclusion.


01/15/20       Utica Mutual Assurance Co. v. Steward
Appellate Division, Second Department
One Foot On, One Foot Off, is “Occupying” a Vehicle for Purposes of SUM Coverage

On August 24, 2016, Steward drove a tractor-trailer owned by his employer and insured by Utica to a construction job site in Brooklyn. Upon arrival at the job site, Steward unloaded the trailer, parked the vehicle approximately one block away from the site, and then returned to the job site to work for the day as a construction laborer.

At the end of the workday, Steward was instructed to retrieve the tractor-trailer so that it could be reloaded for return transport. In preparation, Steward proceeded to the rear of the trailer to retrieve certain items that he and another employee had stored on the flatbed of the trailer during the day. Steward stood with his right leg on a Moffett ramp which was attached to the tractor-trailer and reached into the trailer bed to retrieve such items. As he was stepping down from the ramp with his left leg, a minivan drove past the construction flag men and struck Steward from behind, injuring him.

The minivan that hit Steward had minimal insurance coverage, and Steward filed a Request for SUM Arbitration seeking coverage under the New York Supplementary Uninsured/Underinsured Motorists ("SUM") Endorsement of his employer's Utica Mutual commercial automobile liability insurance policy. The question for the court, in the petition to stay arbitration, is whether the Steward was an “occupant” of the vehicle.

The SUM endorsement in the petitioner's policy, consistent with the statutory requirement, defines "occupying" as "in, upon, entering into, or exiting from a motor vehicle".  The court found that he was “upon” the tractor-trailer and therefore, an occupant.

Steward's testimony established that at the time of the accident, he had stepped upon the Moffet ramp which was attached to the tractor-trailer, and that he was struck by the minivan while his right leg was still on the ramp, and while he was stepping down with his left leg. Thus, although Steward had been away from the tractor-trailer during the workday, his testimony established that at the time of the accident, he was in physical contact with the vehicle, such that he was "occupying" it. 


Steven E. Peiper
[email protected]

01/16/20       Chao Jiang v. Ping An Insurance
Appellate Division, First Department
Foreign Insurer Ordered to Post Seven Figure Bond Before It Could Assert Affirmative Litigation Defenses

Defendant Huatai moved to dismiss this insurance coverage matter on the basis that the court did not possess personal jurisdiction over it.  Plaintiff opposed the motion, and also cross-moved under Insurance Law § 1213(c) to compel the defendant Huatai to post a bond as an alien insurer before Huatai could file any pleading in the instant lawsuit. The trial court denied Huatai’s motion and granted the motion to compel as filed by plaintiff.

In denying the motion to dismiss, the Court noted that Huatai’s decision to seek pro hac vice admission was akin to an appearance in the matter.  Even if not, however, Huatai’s pre-Answer motion to dismiss was untimely as a matter of law.

The Court also affirmed plaintiff’s demand that Huatai file a $2.5 million bond before any additional litigation could be introduced by the defendant.


Michael J. Dischley


01/07/20       Grate v. Rodrigues, et al.
Appellate Division, First Department
Plaintiff Failed to Address Issue of Causation Presented by Preexisting Conditions Documented in his own Medical Records

Plaintiff appealed from a Supreme Court decision which granted defendants' motion for summary judgment dismissing the complaint based on plaintiff's inability to establish that he suffered a serious injury within the meaning of Insurance Law § 5102(d).

Defendants established prima facie that plaintiff, aged 53, did not sustain a serious injury to his cervical spine, lumbar spine or right knee as a result of the accident. They submitted the report of an orthopedic surgeon, who found that plaintiff had full range of motion and negative test results in his cervical spine, lumbar spine, and right knee. The orthopedic surgeon also opined that plaintiff's MRI reports documented preexisting degenerative conditions, and defendant's radiologist reviewed the underlying MRI films and opined that they revealed chronic degenerative conditions, including spondylosis in the spine and osteoarthritis in the knee, unrelated to trauma. Defendants also presented evidence, notably plaintiff's deposition testimony, that plaintiff sought no further medical treatment for the claimed conditions after undergoing an arthroscopic procedure in July 2016 and had no future medical treatment scheduled, which the Appellate Division found supports the conclusion that he did not sustain a serious injury to his spine or knee.

In opposition, plaintiff failed to address the issue of causation presented by the evidence of preexisting conditions documented in his own medical records. Plaintiff submitted MRI reports which show herniated and bulging discs in the spine and meniscal tears in the knee, but they also reflect degenerative conditions, as noted by defendant's orthopedist. Plaintiff's doctors acknowledged that degeneration was likely in a person of plaintiff's age, but they provided only conclusory opinions that the accident caused or aggravated the preexisting conditions, without addressing the particular conditions identified in plaintiff's own records. Moreover, they offered no objective basis—only the history provided by plaintiff—for concluding that those conditions were not the cause of the claimed injuries.  Therefore, the First Department unanimously affirmed the trial court’s decision.


01/16/20       Oliveras v. New York City Transit Authority, et al
Appellate Division, First Department

Defense Experts’ Findings of Reduced Range of Motion Do Not Preclude Finding that Plaintiff Did Not Sustain Serious Injury

Plaintiff appealed from a Supreme Court decision which denied plaintiff's motion for partial summary judgment on the issue of liability, and granted defendants' cross motion for summary judgment dismissing the complaint, based upon plaintiff's inability to meet the serious injury threshold of Insurance Law § 5102(d),

The Appellate Division found that defendants met their prima facie burden of establishing that plaintiff did not sustain a serious injury to her lumbar spine by submitting affirmed medical reports from an orthopedist, Dr. Robert Pick, and neurologist, Dr. Marianne Golden, noting largely negative findings in plaintiff's physical examinations. Defendants' radiologist also noted that plaintiff's MRI films showed degenerative disease in her lumbar spine.

The Court reasoned that though the defense experts did not address plaintiff's diagnostic tests, "the failure of a defendant's medical expert to discuss diagnostic tests indicating bulging or herniated discs will not, by itself, require denial of a defense summary judgment motion". Moreover, Dr. Pick's observation that plaintiff had mild reductions in her range of motion does not undermine his conclusion that she did not sustain a disabling injury in the accident, where his examination findings were otherwise normal, and he noted that any decrease in range of motion was inconsistent with her diagnoses.

The Court further found that plaintiff failed to raise a triable issue of fact, as her claim of a lumbar spine injury is inconsistent with her reports of injury to her right knee and forearm to EMS personnel and hospital staff immediately after the accident. Moreover, the Court opined that her medical experts' reports and affirmations were too speculative to establish a causal connection between the accident and her lumbar injury. Therefore, First Department unanimously affirmed the trial court’s decision.


Agnes A. Wilewicz
[email protected]

Nothing coverage-related in the Second Circuit this week.


Jennifer A. Ehman


01/03/20       Greater N.Y. Mut. Ins. Co. v. Utica First Ins. Co.
Supreme Court, New York County
Hon. Louis L. Nock
Tenant’s Carrier Must Provide a Defense to the Property Owner

Greater New York Mutual (“GNY”) commenced this action seeking a declaration that defendant Utica First must defend and indemnify its insured, 1393 Rockaway Parkway, LLC, in connection with a trip-and-fall personal injury lawsuit commenced against 1393 Rockaway (the property owner) and the tenant, Tasty Delicious Restaurant, Inc.  The restaurant was insured by Utica First under a business liability policy.  1393 Rockaway appears to have been scheduled as an additional insured on the Utica First policy but only in connection with liability for bodily injury to which the restaurant is “legally liable” “and caused, in whole or in part, by [the restaurant’s] acts or omissions…in connection with that part of the premises…that is leased to [the restaurant] from the” additional insured.

GNY moved for partial summary judgment on the duty to defend.  The court began by noting that for GNY to succeed on a motion for summary judgment as to indemnification it would have to demonstrate that acts or omissions of the restaurant were, in whole or in part, the proximate cause of plaintiff’s injuries.  It then states that GNY concedes additional evidentiary development is necessary before that can be determined.  Thus, GNY only moved on defense.

The Court then states while the Court of Appeals in Burlington made no express distinction between coverage for defense and coverage as to indemnification, the Appellate Division, First Department, in a case decided subsequent to Burlington, and citing Burlington, has.  That case is Vargas v City of NY (158 AD3d 523 [1st Dept 2018]).  In Vargas, the relevant policy also contained an additional insured endorsement that employed causation verbiage.  Yet, in the court’s view, the First Department held that that linguistic limitation did "not vitiate [the defendant insurer's] duty to defend" because the complaint in the underlying lawsuit "alleges that all defendants ... operated, maintained, managed, and controlled the ... site" and that "all defendants were negligent and failed to provide a safe ... site.”

The court then takes a position that, admittedly, I struggle with here.  Even though it appears Utica First’s named insured is a direct defendant in the underlying litigation (and appears to have been the basis for the finding in Vargas), the court holds:

It is indisputable that the Property Owner is identified as an additional insured in defendant's policy.  Although that policy limits coverage to bodily injuries proximately caused by Property Tenant, that limitation, per Vargas, and even post-Burlington, will only mandate a deferral of determination as to the duty to indemnify; but not as to the duty to defend, which depends solely upon the allegations of the underlying personal injury complaint directed at Property Owner as a negligent party defendant.

Accordingly, the court then concludes that the duty to defend has been triggered, and indemnity will have to wait noting that “per Burlington, we would need to know that Mr. Simon’s injuries were proximately caused by [the restaurant] before the policy’s causation language will allow for indemnification for the property owner.”

Note:  In reviewing this decision, it seems as if the court is applying the same policy language for the duty to defend and the duty to indemnify.  Specifically, the court finds that for indemnity we need to know whether the tenant was a proximate cause of the loss, but for defense the court tells us that we can just look at the allegations against the property owner because it is an additional insured.  It almost seems as if the court, for defense purposes, is treating the property owner equivalent to a named insured and wholly ignoring the limiting language on the additional insured coverage. 


01/06/20       American States Ins. Co. v. Graphic Arts Mut. Ins. Co.
Supreme Court, New York County

Hon. Debra A. James
Trial Court Finds Underlying Complaint Does Not Allege Property Damage During Insurer’s Policy Period

This decision arises from a lawsuit filed by the County of Nassau.  The County alleges that while washing out its concrete mixing trucks on or near its facility, Commercial Concrete created a mixture of concrete and water that flowed into a nearby street and, through catch basins owned and maintained by the Town of North Hempstead, entered a pipe that is part of the County’s water drainage system.  The County claims that, as a result of these illegal dumping activities over a period of time, solid concrete deposits formed in the County’s drainage pipe and created a blockage that, in August 2015, led to flooding conditions in the area.  This then required an emergency project to clean the blockage which began in September 2015 and was completed in or about March 2016.  The County seeks damages of more than $4,800,000 for costs and fees related to the work as well as injunctive relief to prevent similar future events.  The County also alleges that it will incur additional damages for a second phase of rehabilitation work to be done in the future.

Navigators issued a commercial automobile liability policy to Commercial Concrete, which was in effect from September 30, 2016 through September 30, 2017.  The policy applied to various vehicles owned by Commercial Concrete and provided coverage for the named insured and “[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow.”

In the underlying litigation, Commercial Concrete commenced a third-party action against Ready Mix alleging any damages sustained by the County were caused by its negligence. This resulted in the County moving to amend its complaint to add Ready Mix as a direct defendant.  The carriers in this action tendered the defense of Ready Mix to Navigators who denied the tender asserting that no coverage was available.

Upon the filing of this declaratory judgment action, Navigators moved to dismiss asserting that irrespective of whether Ready Mix qualifies as an insured, there was no accident or loss which occurred during its policy period.  Navigators asserted that the accident occurred on or before August 2015, and all claimed damages occurred by March 2016, when the repair work was done.  In opposition, plaintiffs argued that the Navigators policy applied because the County alleged in the complaint that it continues to spend money to remediate the blockage and it will incur future damages for a second phase.

Ultimately, the court agreed with Navigators finding that contrary to plaintiffs’ arguments that the underlying action is not clear when the damage occurred, the complaint alleges the accident (the clogged drain and subsequent flooding) occurred in August 2015 and as the repairs were completed by March 2016, that does not suggest any reasonable possibility that property damage occurred during the policy period.

And, although the Complaint alleges the County will incur additional damages for future remediation work, it does not allege what work will be required or when such work will occur.  Thus, the court concluded there was no allegation of additional damages occurring during the policy period, and irrespective of the request for injunctive relief, there was no claim that illegal dumping had continued.  Navigators motion to dismiss was in turn granted. 


Brian D. Barnas
[email protected]

01/07/20       Murphy-Sims v. Owners Ins. Co.
United States Court of Appeals, Tenth Circuit
Failure to Include Claim for Bad Faith Failure to Settle in Pretrial Order Resulted in Waiver for Purposes of Appeal even where Bad Faith Breach of Contract Claim was Included

On March 27, 2013, Mr. Switzer and Ms. Murphy-Sims were involved in a car accident in which Mr. Switzer was at fault.  Mr. Switzer was insured by Owners under an automobile policy that provided liability coverage of $100,000.

Ms. Murphy-Sims maintained that she suffered extensive injuries, and consequently incurred significant medical costs, as a result of the accident.  In February 2014, she sent Owners a letter demanding settlement claiming $41,000 in medical expenses.  Owners timely replied with a request for more information.  When Ms. Murphy-Sims failed to reply, Owners sent two additional follow-up requests.  Finally, in June 2014, Ms. Murphy-Sims provided Owners with some of the requested information. It did not offer a settlement payment in response.

In July 2014, Ms. Murphy-Sims sued Mr. Switzer.  The issue of damages was submitted to binding arbitration. The arbitrator awarded Ms. Murphy-Sims approximately $1.3 million and judgment was entered against Mr. Switzer.  Pursuant to an agreement, Ms. Murphy-Sims did not execute on the judgment, but rather she filed a lawsuit directly against Owners.  She claimed that Owners had breached its contract with Mr. Switzer and had done so in bad faith.

Owners removed the suit to federal court and the case proceeded to trial.  A jury ultimately found that Owners did not breach its contract with Mr. Switzer, thereby declining to award $1.3 million in damages to Ms. Murphy-Sims.  The jury did not reach the bad faith claim having been instructed that it need not be reached in the absence of a breach of contract.

Ms. Murphy-Sims argued that the district court erred in instructing the jury that it need not reach her bad faith claim if it found no breach of contract.  She contended that Owners acted in bad faith by failing to settle her claim against Mr. Switzer.  However, the failure to settle theory was not raised in the Final Pretrial Order, which only included theories for breach of contract and bad faith breach of contract by failing to tender the policy limits in a timely matter.  The failure to include the failure to settle claim in the Final Pretrial Order amounted to waiver.  Thus, the court concluded that the trial court properly instructed the jury that the bad faith claim was contingent upon a finding of breach of contract under Colorado law.


John R. Ewell

01/14/20       Jacobsen v. Hartford Ins. Co.
United States Court of Appeals, Third Circuit
Third Circuit Declines to Uphold Dismissal Where Insured Skipped Trial Citing Flight Delay due to Plane Crash on Other Side of the World

Jacobsen owned a house in Brick Township, New Jersey. As relevant here, Jacobsen maintained homeowners insurance on the property through Hartford. Jacobsen’s property sustained damage during Hurricane Irene in 2011 and then again during Superstorm Sandy in 2012. As a result, Jacobsen submitted claims for non-flood damage to Hartford. Hartford paid Jacobsen approximately $3,800 for damage related to Hurricane Irene, but it denied his claim for damage related to Superstorm Sandy on the ground that the non-flood damage caused by that specific storm did not exceed his deducible. Jacobsen sued Hartford and moved for summary judgment. Hartford did not seek summary judgment itself and instead conceded that Jacobsen’s claim raised genuine issues for trial. The District Court denied Jacobsen’s motion and agreed with Hartford there were genuine issues of material fact, necessitating a trial.

The District Court ultimately scheduled trial for March 11, 2019. At 11:19 p.m. the night before, Jacobsen faxed a letter to the District Court stating that he was “unable to fly out this day” (from Phoenix, Arizona, where he was living) because of “weather problems.” Jacobsen also “suggested” that the District Court reschedule trial for the following week. On the morning of March 11—with a jury having been called, with Hartford’s counsel present, and with Hartford’s witnesses either present or readily available—Jacobsen did not appear. In response, the District Court first ascertained that the flight on which Jacobsen claimed to have been scheduled in fact departed and arrived on March 10 roughly on time. The District Court then called Jacobsen. Per Hartford’s counsel, the District Court heard a tone that it recognized as Jacobsen having blocked the District Court’s number. Jacobsen did not dispute this.

Hartford orally moved for dismissal under Fed. R. Civ. P. 41(b) for failure to prosecute. The District Court granted that motion without explaining its basis for concluding that such judgment was warranted.

Thereafter, Jacobsen filed a motion for reconsideration. Jacobsen claimed that he was unable to be seated on his scheduled flight and that his alleged inability to fly out on May 10 resulted in part from the crash of a Boeing 737 MAX earlier that day (Note: That plane crash was in Ethiopia). Jacobsen also asserted that he still wanted to go to trial. The District Court denied Jacobsen’s motion for reconsideration. Jacobsen appealed.

The dismissal of claims is a drastic measure that should be used only as a sanction of last resort. Before dismissing an action as a sanction, District Courts in the Third Circuit, generally must balance six factors: (1) the extent of the party’s personal responsibility; (2) the prejudice to the adversary caused by the failure to meet scheduling orders and respond to discovery; (3) a history of dilatoriness; (4) whether the conduct of the party or the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which entails an analysis of alternative sanctions; and (6) the meritoriousness of the claim or defense.

The Third Circuit found that the District Court did not consider these factors before entering judgment. The Third Circuit noted that some of the facts weighed in factor of dismissal while others could conceivably weigh against it. Accordingly, the Third Circuit vacated the District Court’s order of dismissal and remanded the case for the District Court to consider whether the above factors were met, warranting dismissal.

Note: This is a “Not Presential” opinion meaning that per court rules, this decision is not binding precedent.


Lee S. Siegel
[email protected]

Nothing from the Nutmeg State for this issue.


Brian F. Mark
[email protected]

No cases this week but do read Products Liability Pointers!


Eric T. Boron
[email protected]

01/16/20       Kisling, Nestico & Redick LLC v. Progressive Max Ins. Co
Supreme Court of Ohio
Discharged Law Firm Fired by Plaintiff Cannot Enforce its Charging Lien Against Tortfeasor’s Insurer; Insurer Has No Duty to Protect Plaintiff Attorneys’ Charging Lien

In a unanimous decision the Ohio Supreme Court recently reversed summary judgment awards issued by the trial court and the court of appeals to the plaintiff law firm and remanded the case to the trial court for further proceedings.  Under Ohio law, an insurer who has settled a bodily injury case directly with a plaintiff who had discharged his attorneys before a lawsuit is filed is under no obligation to distribute a portion of the settlement proceeds to the discharged attorneys for their prior work on behalf of that plaintiff, notwithstanding the existence of a charging lien.  Instead, the discharged lawyers must pursue their former client to collect on the charging lien.

Mr. Thomas was injured in an automobile accident and hired a law firm, Kisling, Nestico & Redick, L.L.C. (“KNR”) to represent him. Mr. Thornton was the alleged tortfeasor whose negligence caused the accident; his insurer was Progressive.  Mr. Thomas and KNR entered into a contingent-fee retainer agreement that is said to have given KNR a charging lien on the proceeds of any insurance settlement, judgment, verdict award, or property obtained on Thomas's behalf. The retainer provides:

The Attorneys shall receive as a fee for their services, one-quarter (1/4) of the total gross amount of recovery of any and all amounts recovered, and Client hereby assigns said amount to Attorneys and authorizes Attorneys to deduct said amount from the proceeds recovered. Attorney[s] shall have a charging lien upon the proceeds of any insurance proceeds, settlement, judgment, verdict award or property obtained on your behalf.

During settlement negotiations with KNR, Progressive offered to settle the matter for $12,500. Mr. Thomas subsequently discharged KNR, which informed Progressive it had been discharged by Thomas and that it was claiming a lien against any settlement funds paid to Thomas by Progressive.

However, no agreement existed between Progressive and KNR that Progressive would protect any lien. Mr. Thomas eventually settled his claims himself for $13,044, and Progressive paid the full settlement amount to Mr. Thomas. Mr. Thomas did not pay KNR the attorney fees and expenses that KNR claims he owes for its work on the settlement prior to KNR's discharge.

KNR sued Mr. Thomas and the tortfeasor Mr. Thornton and Progressive to recover its charging lien.  The trial court entered a default judgment against Mr. Thomas for attorney fees and expenses. The claims against the tortfeasor Mr. Thornton were dismissed at KNR's request.  As to Progressive, KNR claimed that it had failed to protect KNR's charging lien, and the trial court agreed, granting summary judgment in favor of KNR against Progressive. The trial court found that Progressive had been negotiating Mr. Thomas's claim with KNR and that when Mr. Thomas discharged KNR, Progressive received notice from KNR that it was asserting a lien against any settlement funds. The court held that under those facts Progressive “had a duty to protect [KNR's] interest in the settlement proceeds” and was “liable for the quantum meruit value of [KNR's] legal services which include litigation expense[s].” The parties stipulated that KNR's fees and expenses totaled $3,411.48.

On appeal, the Court of Appeals affirmed, ruling “Progressive had knowledge of KNR's charging lien before it settled Thomas's claim and, despite this knowledge, distributed the settlement proceeds to Thomas solely.” The appellate court then held that under Ohio law, a charging lien becomes binding on a third-party when the party has notice of the lien.

The Ohio Supreme Court acknowledged the validity and enforceability of a charging lien in general.  But it reversed the two lower court rulings, holding that an action based upon a charging lien is an “in rem” proceeding against a particular fund – here the $3,411.48 – and, under these facts, with the settlement paid and the release issued, there is no basis for the discharged firm KNR to enforce the $3,411.48 charging lien against Progressive, and must instead enforce it against its former client Mr. Thomas.  


Marina A. Barci

01/02/20       Metro Pain Specialist, P.C. v. Country-Wide Ins. Co.
Appellate Term, Second Department
Master Arbitration Award Vacated because Master Arbitrator Exceeded Authority

Insurer denied payments for assigned no-fault benefits to the provider based upon the providers failure to cooperate at an EUO, and upon improper kickbacks, improper fee splitting, improper fee scheduling, and billing for services not rendered. Since the provider’s bills were denied, they were submitted for arbitration. After a hearing, the arbitrator found for the provider, awarding the provider the amount they sought. The insurer appealed to a master arbitrator, who vacated the award and remitted the matter for further hearing before a new arbitration. The provider then petitioned the court to vacate the master arbitrator’s decision, and the insurer opposed, asking the award be confirmed.

The scope of judicial review of a master arbitrator's award is limited to whether the master arbitrator exceeded his power. The role of a master arbitrator "is to review the arbitrator's determination to assure that it was reached in a rational manner and that the decision was not arbitrary and capricious. It does not include the power to review, de novo, the matter originally presented to the arbitrator." A master arbitrator exceeds his statutory power by making factual determinations, by reviewing factual and procedural errors committed at the original arbitration hearing, by weighing the evidence, or by resolving issues of credibility.

Here, the master arbitrator vacated the arbitrator's award based on the “rational and what appears to be insufficient evidence presented," which necessarily involves a review of the facts by the master arbitrator. After a review of the record, the court found that there was a rational basis for the original arbitrator's award and that the master arbitrator exceeded his authority by reviewing, de novo, factual issues already determined by the original arbitrator. Thus, the court vacated the master arbitrator’s decision and reinstated the original arbitrator’s award, as well as awarded attorney’s fees to the provider.


01/07/20       Ancient & Modern Acupuncture, P.C. v. MVAIC
New York City Civil Court, New York County
RVU-8 Applies to Multiple Procedures of the Same Type Performed on the Same Day; Chiropractic and Acupuncture Treatment are Distinct Treatments

The provider commenced this action to recover assigned first-party no-fault benefits totaling $1509.28, plus costs and attorneys' fees. The insurer had denied payment of benefits on the grounds that the amounts sought exceeded the fee schedule and that the treatment was not medically necessary. The insurer moved for summary judgment and the motion was granted in part, which held that certain codes were paid properly under the fee schedule, but that the insurer failed to establish proof of 8 units/concurrent care for the rest, so the case proceed to trial for $792.86 with the sole issue being the fee schedule.

At trial, the parties stipulated to the facts and essentially agreed that the sole issue before the court was whether the reductions based on the 8 Unit Rule of the Chiropractic Workers' Compensation Fee Schedule were properly applied to the cupping services performed by a licensed acupuncturist. However, there is no authority or case law that authorizes carriers to apply the ground rules of the Chiropractic Fee Schedule to licensed acupuncturists.

While carriers are permitted to refer to the chiropractic fee schedule for the rates of reimbursement for licensed acupuncturists, the First Department has held that “such holdings do not foreclose the use of the physician fee schedule in all cases” (Global Liberty Insurance Co. Of New York v North Shore Family Chiropractic, PC, 2019 NY Slip Op. 08942). The authority allowing for the chiropractic fee schedule to be used exists because the superintendent has not adopted a fee schedule applicable to licensed acupuncturists, not because the services performed by the professional are the same or overlap. *

The parties here stipulated that the amount at issue for the 15 remaining bills was $77.10, which was the total amount of the differences between the maximum chiropractic rate allowable ($16.70) and the rate actually paid by MVIAC ($11.56) after applying Ground Rule 3, the 8-unit maximum per day rule. Ground Rule 3, also known as the 8-Unit Rule, is found within the Physical Medicine section of the Chiropractic Fee Schedule, entitled "Multiple Physical Medicine Procedures and Modalities" and provides that, when multiple physical medicine procedures and/or modalities are performed on the same day, reimbursement is limited to eight units or the amount billed, whichever is less. The purpose of Ground Rule 3 is to limit the number of the same type of procedures that are reimbursable to a patient on the same day. However, this rationale does not necessarily limit the patient's rights to receive acupuncture treatment on the same day the patient receives chiropractic treatment. Acupuncture has been recognized as a separate and distinct modality from chiropractic treatment.

Based on the forgoing, the court found that the provider was entitled to a judgment in the amount of $77.10, plus costs and interest from the date of filing.

Note: New York is implementing a fee schedule for licensed acupuncturists, scheduled to be released and in effect by October 1, 2020.


Ryan P. Maxwell
[email protected]

Legislative List

01/21/20       Budget Bill Seeks Variable Market-Based Interest Rate
New York State Governor’s Office
FY 2021 New York State Executive Budget Article VII Legislation Proposes Variable Market-Based Interest Rate on Court Judgments and Accrued Claims Paid by Public and Private Entities

Governor Cuomo’s Executive Budget bills and supporting memoranda were released Tuesday evening. Among a litany of appropriations and Article VII bills, Governor Cuomo included, as Part T of the Public Protection and General Government Bill, a proposed bill to provide a variable market-based interest rate on court judgments and accrued claims paid by public and private entities.

This year, the Governor, confronting a more than $6B deficit, noted in the supporting memorandum that “[t]his bill would reduce the amount of interest paid by the State on court judgments and accrued claims by roughly $6 million annually.”  Although the purpose of the bill is to lower State taxpayer costs and provide mandate relief to local governments, it would additionally serve to provide fiscal relief to private litigants and businesses.

Currently under CPLR § 5004, the interest rate is generally fixed at 9 percent per year on judgments and accrued claims and “was established at a time when interest rates were at 12 percent as a way to protect taxpayers from excessive judgment costs.” Should the bill pass, “[t]he variable market-based interest rate would be the weekly average one-year constant maturity treasury yield, which is the same rate utilized by the Federal court system.” (Memorandum in Support). This scheme would ensure that neither party to a lawsuit is disadvantaged by an interest rate unrepresentative of market earnings while cases are adjudicated.

As relevant to the property and casualty insurance market, the passage of such legislation would result in vast changes to litigation and settlement strategies. For example, pursuant to CPLR § 5001(b), interest is

“computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.”

Applying the above to the insurance context, a finding that an insurer breached its duty to defend accrues interest from an intermediate date between disclaimer (or lapse) and settlement or judgment in the underlying claim. Given the length of time that litigation can span, interest in all likelihood will span numerous years in every case. It is beyond dispute that a 9% interest rate under CPLR § 5004 applied over a span of several years stings worse than a variable market-rate interest rate based upon the weekly average one-year constant maturity treasury yield that today sits around 1.5%. The ramifications of such a change are obvious and extensive.

Maxwell’s Minute: This is not the first time that Governor Cuomo has proposed such an amendment to the interest rate, doing so in each of the past three years to no avail. (See FY 2018 PPGG Bill Memorandum in Support, Part R; FY 2019 PPGG Bill Memorandum in Support, Part BB; FY 2020 PPGG Bill Memorandum in Support, Part D) Given the Governor’s luck the past few years in this regard, I will not hold my breath.

I will note that interest accrued with respect to amounts awarded in equity under CPLR § 5001(a) are not, in fact, governed by the 9% fixed rate mandated for other damage amounts under CPLR § 5004. See In re Muller, 117 A.D.3d 133 (4th Dep’t 2014) (awarding post-judgment interest on remedy of restitution at a rate of 3% as a matter of judicial discretion). CPLR § 5001(a) provides that “in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the court’s discretion.” CPLR § 5004 allows for such discretion, by providing an exception to the 9% fixed rate per annum “where otherwise provided by statute.” Next time you find yourself on the wrong side of an equitable remedy—perhaps subrogation—be sure to keep the discretion afforded under CPLR § 5001(a) in mind.


01/21/20       Budget Bill Combats Discrimination in Consumer Pricing
New York State Governor’s Office

FY 2021 New York State Executive Budget Article VII Legislation Proposes Private Cause of Action Against Businesses Discriminating Against Certain Genders in the Pricing of Similar Goods and Services

Referred to as the Pink Tax, Part S of Governor Cuomo’s Transportation, Economic Development, and Environmental Conservation bill included with the FY2021 Executive Budget proposes a new private cause of action against any person or entity for selling substantially similar goods and services to different genders for different prices.

The proposed cause of action allows a private person

who has been injured by reason of any violation of this section may bring an action in such person's own name to enjoin such unlawful act or practice, an action to recover actual damages or fifty dollars, whichever is greater, or both such actions. The court may, in its discretion, increase the award of damages to an amount not to exceed three times the actual damages up to one thousand dollars, if the court finds the defendant willfully or knowingly violated this section. The court may award reasonable attorneys' fees to a prevailing plaintiff.

The bill would take effect one-hundred eighty days after enactment.


01/21/20       Budget Bill Would Amend SIF to Provide Small Business Relief
New York State Governor’s Office
FY 2021 New York State Executive Budget Article VII Legislation Proposes A Pair of Bills Aimed at Reducing Costs for Responsible SIF Policyholders

Governor Cuomo included as Part(s) HH and II of the Public Protection and General Government Bill a proposal to amend the New York State Insurance Fund (SIF) to provide small business relief.

Part HH expands the role of SIF in performing audits of policyholder payroll, which is used in setting Workers’ Compensation premiums. This allows not only proper rate setting, but also proper risk assessment presented by policyholder businesses. Where audits are unavailable, SIF must estimate payrolls, resulting in higher premiums for such policyholders that could result in missed payments and policy cancellation. Part HH, if enacted, would empower SIF to take it upon itself to cancel certain workers’ compensation policies where a policyholder fails to cooperate with SIF audit procedures on multiple occasions. The more compliance that can exist with audit procedures, the better the overall experience felt by policyholders overall.

Part II attempts to expand the reach of SIF to work outside NY. It would permit SIF to enter into agreements with private insurers to cover SIF policy holders performing work outside of New York State.

Currently, SIF cannot supply policyholders performing work outside New York with coverage. By amending the Workers’ Compensation Law to permit SIF to partner with private insurers to cover policyholders in situations outside New York, and other proposals (see Increased investment powers for SIF under Part GG) costs for approximately 100,000 businesses covered under SIF may be reduced to the tune of 5% in annual premiums.


01/21/20       Budget Bill Seeks to Authorize New York Power Authority Captive Insurance Company
New York State Governor’s Office

FY 2021 New York State Executive Budget Article VII Legislation Proposes New Pure Captive Insurance Company for New York Power Authority

Part CCC of Governor Cuomo’s Transportation, Economic Development and Environmental Conservation Bill included in the FY 2021 Executive Budget NY Power Authority Captive Insurance Company proposes authorization for the New York Power Authority (NYPA) to create a pure captive insurance company to manage risk and provide insurance coverage for risks not currently insured, insurable on the traditional market, or prohibitively expensive therein.

NYPA would experience cost savings by reducing the need for commercial insurance by resorting to what in essence would constitute self-insurance based efficient and effective claims handling. The new NYPA captive insurance company would be exempt from the payment of certain fees, taxes or assessments the same as those in place for the Metropolitan Transportation Authority and the City of New York.

Should it pass, the bill would take effect immediately.


01/13/20       Senate Insurance Committee Reports Several Bills
Senate Standing Committee on Insurance
In Unanimous Votes, Several Bills Reported to Senate After Referral to Insurance Committee

Several bills were reported out of the Senate Standing Committee on Insurance last week.

The first bill, S643, seeks to permit an insurer to rescind or retroactively cancel a policy in circumstance involving an accident staged to defraud an insurer. Originally passing the Senate on May 20, 2019, the bill died in the Assembly and was returned to the Senate. On January 21, 2020, the bill once again passed the Senate and was delivered to the Assembly. It has been referred to the Assembly’s Insurance Committee.

The next bill, S3736, attempts to extend to an exemption to out-of-state businesses from filing requirements solely with respect to rates and policy forms. Originally passing the Senate on March 25, 2019, the bill died in the Assembly and was returned to the Senate on January 8, 2020, where it was referred to the Senate Standing Committee on Insurance. No further action has been taken.

In the life insurance context, bill S3159A attempts to prohibit life insurers from unfairly discriminating against individuals that use prescriptions to block the effects of opioids. Originally passing the Senate on May 6, 2019, the bill died in the Assembly and was returned to the Senate on January 8, 2020, where it was referred to the Senate Standing Committee on Insurance. No further action has been taken.

Finally, in a newly proposed bill, S6728 seeks to task the Department of Financial Services with studying the adequacy of insurance or other risk mitigation tools available in relation to third-party payroll service providers. The Sponsor Memorandum in this bill outlines a particularly heinous example of inadequacy in this area:

In September 2019, MyPayrollHR, a payroll service provider in upstate New York with clients across the state and nation, abruptly ceased operations and left thousands of employees and small employers without their pay or funds. Employees were left unable to pay bills and rent, and employers struggled to obtain enough funds for outstanding payroll expenses. 'Employees and employers alike were negatively impacted in escalating ways, with employers losing employees and business, and employees losing jobs, assets, and security.

Among other questions posed, the study would explore the “feasibility and advisability” of  “insurance, [] bonds, or utilize other risk management tools [available] to address potential situations in which payroll monies owed to employees on behalf of businesses are stolen, misappropriated, or otherwise rendered unavailable after being transmitted from an  employer to a payroll service provider or an affiliated entity.”


Regulatory Wrap-Up
01/16/20       DFS Urges Insurer Compliance with New Green Light Law
Department of Financial Services
DFS Expects Property/Casualty Insurers to Fully Cooperate with the Intent of the Driver’s License Access and Privacy Act (Green Light Law)

On June 17, 2019, Governor Cuomo signed New York’s Green Light Law as Chapter 37 of the Laws of 2019. That law amended Vehicle and Traffic Law § 502(1) to allow all New Yorkers 16-years-of-age and older to apply for a standard, not for federal purpose, non-commercial driver license or learner permit, regardless of their citizenship or lawful status in the United States. The bill’s sponsor had expressed that it served “the long-held need by undocumented immigrants and workers to secure driving privileges not only to get back and forth to work but to conduct tasks in their personal lives like going to doctor visits and taking their children to school.”

In Insurance Circular Letter No. 1 (2020), reminds property and casualty carriers of action taken in recent memory to prohibit unfair and discriminatory practices. For example, DFS announced in 2017 “a final regulation limiting insurers’ use of an individual’s occupational status or educational level attained as factors in setting motor vehicle rates” an prohibited insurers from “reject[in] a motor vehicle insurance applicant who possesses a New York driver’s license solely because the applicant has not owned or insured a vehicle during the prior 39 months.” As another example, DFS indicated that guidance in January 2019 curbed discrimination against protected classes from “insurers’ use of external data, algorithms, or predictive models for underwriting purposes.”

By way of this latest guidance, DFS continues the above trend and deems to have placed all authorized property/casualty insurers “on notice that holders of learner’s permits and licenses obtained under the Green Light Law (“Licensed Person”) should not be subjected to any unfairly discriminatory practices when they seek motor vehicle insurance.” In accordance with that directive, DFS notes that insurers should:

  • recognize that a Licensed Person may have a driving history in his or her place of origin that could be considered for underwriting purposes;

  • not deny, due to his or her citizenship or lawful status in the United States, a Licensed Person’s opportunity to participate in the many usage-based insurance or telematics programs that the Department has approved for insurers authorized in New York;

  • eliminate any bias, disparate impact or factor usage based on an insured’s citizenship or lawful status in the United States in any data sources, algorithms, or predictive models relied upon for underwriting or rating purposes or otherwise;

  • recognize that Insurance Law § 2802 prohibits any adverse underwriting or rating action for personal lines insurance due to a Licensed Person having an absence of credit information; and

  • recognize that Insurance Law § 2303 does not permit unfair discrimination in the making of rates.

Insurers were also reminded of other existing obligations including, “[f]or example, Insurance Law Article 26 [which] prohibits a motor vehicle insurer from refusing to issue, renew, or sell a policy because of the applicant’s or insured’s race, creed, color, national origin, disability, sex, marital status, or advanced age.” DFS encouraged insurers to do more than the minimum required to meet these obligations.

It is DFS’s expectation that no insurer “will undercut that purpose by abrogating its obligations under the Insurance Law, Vehicle and Traffic Law, or any other law.” In asserting its position, DFS warns that it “reserves the right to audit and examine an insurer’s underwriting criteria, programs, records, algorithms, and models, including within the scope of regular market conduct examinations, and to take disciplinary action, including fines, revocation and suspension of a license, and require the withdrawal and suspension of rates pursuant to Insurance Law § 2321.”


From the Filings Cabinet
01/21/20       Proposed Nuclear Exclusion Cannot Exceed Industry Standard
Department of Financial Services
DFS Disapproves Professional Liability Form Filing for Exceeding Permissible Scope of Industry Standard Nuclear Exclusion

On Tuesday, DFS disapproved a professional liability form filing for, among other reasons, exceeding the permissible scope of the industry standard nuclear exclusion allowed in New York State. And, frankly, how often do you get to write about nuclear exclusions? So, I figured, what the heck.

The carrier’s proposed professional liability claims-made coverage form included language attempting to exclude:

“Any liability based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving the hazardous properties, including radioactive, toxic or explosive properties, of any nuclear material. Nuclear material means any source material, special nuclear material, or by-product materials as those terms are defined under the Atomic Energy Act of 1954 or any amendments thereto.”

In disapproving the filing, DFS indicated that it “has not permitted any exclusion and/or limitation for nuclear losses that is broader than that of industry standard.” To ensure that the carrier could revise in accordance with the permissible scope of the industry standard, DFS noted that ISO Form IL 00 23 07 02 may be used as a guide. That form excludes:

  1. Under any Liability Coverage, to "bodily injury" or "property damage":

  2. With respect to which an "insured" under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters, Nuclear Insurance Association of Canada or any of their successors, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

  3. Resulting from the "hazardous properties" of "nuclear material" and with respect to which (a) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (b) the "insured" is, or had this policy not been issued would be, 'entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

  4. Under any Medical Payments coverage, to expenses incurred with respect to "bodily injury" resulting from the "hazardous properties" of "nuclear material" and arising out of the operation of a "nuclear facility" by any person or organization.

  5. Under any Liability Coverage, to "bodily injury" or "property damage" resulting from "hazardous properties" of "nuclear material", if:

  6. The "nuclear material" (a) is at any "nuclear facility" owned by, or operated by or on behalf of, an "insured" or (b) has been discharged or dispersed therefrom;

  7. The "nuclear material" is contained in "spent fuel" or "waste" at any time possessed, handled, used, processed, stored, transported or disposed of, by or on behalf of an "insured"; or

  8. The "bodily injury" or "property damage" arises out of the furnishing by an "insured" of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any "nuclear facility", but if such facility is located within the United States of America, its territories or possessions or Canada, this exclusion (3) applies only to "property damage" to such "nuclear facility" and any property thereat.

It would appear that by excluding “liability based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving”, the carrier had impermissibly exceed the qualifying language in ISO Form IL 00 23 07 02, which includes only variants of “arising out of” or “resulting from”, and entirely avoids broad labels such as “directly or indirectly resulting from” or blanket statements like “in any way involving”.


CJ on CVA and USDC(NY)
Charles J. Englert III

05/07/13       Roman Catholic Diocese of Brooklyn v. National Union Fire
New York Court of Appeals
The “Unfortunate Event” Test Should Be Used to Determine How Occurrences are Categorized for Insurance Coverage Purposes

National Union provided primary insurance to the Diocese and issued three consecutive one-year commercial general liability policies for August 31, 1995 to August 31, 1996; August 31, 1996 to August 31, 1997; and August 31, 1997 to August 31, 1998. The National Union policies provide coverage for damages resulting in bodily injury during the policy period and include a liability limitation of $750,000 and a $250,000 self-insured retention (SIR) applicable to each occurrence. In January 2009, the Diocese sought a declaratory judgment that National Union was required to indemnify the Diocese for the $2 million settlement and certain defense fees and costs, up to the liability limits of the 1995-1996 and 1996-1997 policies. National Union asserted two affirmative defenses relevant to this appeal. It claimed that "to the extent coverage exists for plaintiffs' claim, it is subject to multiple self-insured retentions under the Policies." The trial court agreed with National Union, however the Appellate Division reversed the order of Supreme Court, declaring that the alleged acts of sexual abuse constituted multiple occurrences, and that the settlement amount should be allocated on a pro rata basis over the seven policy periods, requiring the concomitant satisfaction of the SIR attendant to each implicated policy. The Diocese then appealed. The Court followed its reasoning in Appalachian Ins. Co. v General Elec. Co. (8 NY3d 162 [2007]) where it stated that absent policy language indicating an intent to aggregate separate incidents into a single occurrence, the unfortunate event test should be applied to determine how occurrences are categorized for insurance coverage purposes (see Appalachian, 8 NY3d at 173). The Court determined that the unfortunate event test requires consideration of "whether there is a close temporal and spatial relationship between the incidents giving rise to injury or loss, and whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors" (id. at 171-172).

The Court found that the alleged abuse constituted multiple occurrences. Applying the unfortunate event test the Court conclude that the incidents of sexual abuse within the underlying action constituted multiple occurrences. Clearly, incidents of sexual abuse that spanned a six-year period and transpired in multiple locations lack the requisite temporal and spatial closeness to join the incidents (see Johnson, 7 NY2d at 230 ["(W)e conclude that the collapses of separate walls, of separate buildings at separate times, were in fact separate disastrous events, and, thus, two different accidents within the meaning of the policy"]). While the incidents share an identity of actors, it cannot be said that an instance of sexual abuse that took place in the rectory of the church in 1996 shares the same temporal and spatial characteristics as one that occurred in 2002 in, for example, the priest's automobile (see Appalachian, 8 NY3d at 174 ["On this record, it appears that the incidents share few, if any, commonalities, differing in terms of when and where exposure occurred"]). Additionally, when discussing causation the Court opined, each incident involved a distinct act of sexual abuse perpetrated in unique locations and interspersed over an extended period of time, it cannot be said, like the uninterrupted, instantaneous collisions in Wesolowski, that these incidents were precipitated by a single causal continuum and should be grouped into one occurrence.

The Court then went on to refute the Diocese contention that the abuse was part of “continuous or repeated exposure to the substantially the same general harmful conditions,” as the definition of occurrence reads in the policies. The Court opined that in Continental Cas. Co. v Rapid-American Corp. (80 NY2d 640, 648 [1993]), we observed that the insurance industry had shifted from accident-based coverage "to occurrence-based coverage in 1966 to make clear that gradually occurring losses would be covered so long as they were not intentional." Consequently, a number of our occurrence-based insurance coverage cases have dealt with injuries caused by exposure to environmental, or other external, hazards. The Court addresses this argument by distinguishing sexual abuse form environmental hazards:

In our view, sexual abuse does not fit neatly into the policies' definition of "continuous or repeated exposure" to "conditions." This "sounds like language designed to deal with asbestos fibers in the air, or lead-based paint on the walls, rather than with priests and choirboys. A priest is not a 'condition' but a sentient being" (Lee v Interstate Fire & Cas. Co., 86 [*9]F3d 101, 104 [7th Cir 1996]; see also Champion Intl. Corp. v Continental Cas. Co., 546 F2d 502, 507-508 [2d Cir 1976, Newman, J., dissenting] [noting that an "exposure to conditions" involves physical exposure to "phenomenon such as heat, moisture, or radiation"]; ExxonMobil, 15 Misc 3d 1144[A], 2007 NY Slip Op 51138[U], *9 ["the purpose of a continuous exposure clause is to combine claims that occur 'when people or property are physically exposed to some injurious phenomenon such as heat, moisture, or radiation' "]).

This is the major distinction made by the Court which supports its argument that sexual abuse over a period of time equates multiple occurrences. Standing by the “unfortunate event” test the Court concludes that sexual abuse over a period of time constitutes multiple occurrences and will subject an insured to multiple self-insured retentions.

As an editorial note: I can imagine that this case will be cited continually in coverage litigation surrounding CVA claims. Many of these claims span multiple years and multiple incidents of abuse. This not only puts insureds with SIRs at risk by exposing them to multiple occurrences, but it also has the potential to increase the risk to insurers. For example: if a CGL policy issued to an insured has a per occurrence limit of $2,000,000 and an aggregate limit of $10,000,000 a carrier could potentially be exposed to paying up to $10,000,000 for claims of alleged abuse, brought by one claimant, which occurred during one policy period.


Diane L. Bucci

01/16/20       Travelers Property Cas. Co. of America v. KLA-Tencor
California Court of Appeal, Fifth District
Prosecutions before the United States Patent and Trademark Office Not Malicious Prosecution within the meaning of Personal Injury Coverage
Xitronix and KLA manufacture competing products in the “active dopant metrology market.” They had a history of legal disputes between them.  In one such dispute, Xitronix caused the Patent and Trademark Office (“PTO”) to invalidate for indefiniteness and obviousness certain patent claims of KLA's “441 patent.”

In 2014, Xitronix filed a federal antitrust action for damages against KLA in federal court alleging a single Walker Process claim against KLA for “attempted monopolization” in violation of the Sherman Act  and  the Clayton Act for allegedly attempting to prosecute  patent claims for parts of the 441 patent that were invalidated.  A Walker Process claim derives its name from Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. (1965) 382 U.S. 172, in which the United States Supreme Court recognized an antitrust cause of action under the Sherman Act and the Clayton Act for using a fraudulently procured patent to attempt to monopolize the market. (Id. at pp. 176-178.)

Xitronix alleged that from 2011 to 2014, KLA had “fraudulently prosecut[ed]” certain patent “260 patent” claims that had been invalidated with the 441 patent and that KLA knew had been ruled to be invalid with the intent to “monopolize and destroy competition.”

KLA’s argument was that the alleged fraudulent prosecution of the patent claims constituted a claim for malicious prosecution within the meaning of Coverage B “personal and advertising injury” coverage grant. KLA relied on Lunsford v. Am. Guarantee & Liab. Ins. Co., 18 F.3d 653 (9th Cir. 1994) where the court held “malicious prosecution” is ambiguous and construed it to apply to claims of abuse of process.

KLA argued that just like an abuse of process and malicious prosecution claims, a Walker Process claim requires affirmative abuse of the legal process with an ulterior motive.  The trial court held that KLA could not reasonably have expected that fraudulent behavior in a nonjudicial proceeding before the PTO to qualify as malicious prosecution, and that the term “malicious prosecution” was not ambiguous in this context. 

The appellate court agreed.  The court examined whether it was objectively reasonable for an insured to understand “malicious prosecution” as including a Walker Process claim which necessarily arises out of prosecutions before the PTO.   The court distinguished Lunsford, agreeing that while the term malicious prosecution was ambiguous in the context of an abuse of process claim, it was not ambiguous with respect to a Walker Process claim.  Travelers had no duty to defend or indemnify in connection with the Walker Process claim.

Note: This is an unpublished decision and should not be cited as precedent, per court rules.    


12/19/20       Liberty Mut. Fire Ins. Co. v. Ferrara Candy Co.
Appellate Court of Illinois, First District
Trade Dress Infringement Not Covered under Coverage B Because Violations Occurred After Policy Cancelled

For a number of years, Ferrara Pan provided candy production and manufacturing services for PIM’s candies, Sour Jacks and Welch's Fruit Snacks.  Ferrara merged with another company resulting in a company named “Ferrara Candy.”  Ferrara cancelled its policies with Liberty Mutual when the merger occurred.    

PIM, concerned about the additional people that would have access to its trade secrets, caused the parties to enter into a confidentiality agreement to protect the ingredients and other trade secrets about the candy. 

PIM alleged that Ferrara violated the agreement by with by using PIM’s secrets to make “Sour Buddies” and ‘Market Pantry Fruit Flavored Snacks” for sale in Target stores.  According to PIM, Ferrara was not able to meet the level of quality necessary to make the products successfully until it obtained PIM’s trade secrets.  Additionally, PIM alleged that Ferrara Candy's “Black Forest Juicy Burst” products also misappropriated and misused the Welch's Fruit Snack trade secrets. Lastly, PIM alleged that Sour Buddies infringed on PIM's Sour Jacks trade dress by using the configuration, outlines, and embossed details of a little boy” like Sour Jacks, and also used similar dimension, colors, overall shape and design.”

The question in the case was whether any covered offenses occurred in a Liberty Mutual policy period.   The court held that the violation of the confidentiality agreement upon which PIM’s complaint was based, necessarily occurred after the Liberty policies were terminated since those policies were cancelled because of the merger.   The court held that PIM’s allegations were against Ferrara Candy, which did not exist until the merger, after the policies were cancelled.  It was an easy answer for the court, there was no coverage for acts that occurred after the policies were terminated.

Normally, under Coverage B, trademark infringement is precluded from coverage by Coverage B’s intellectual property exclusion, unless the infringement involves the use of another's advertising idea in your "advertisement.”  Under Paragraph c. of the definition of advertising injury, which covers “misappropriation of advertising ideas or style of doing business,” several courts have found coverage for trade dress.  Thus, the trade dress claim may have been covered if the offense occurred in a policy period. 


Earl K. Cantwell

10/02/19       Waterford Condominium Assoc. v. Empire Indemnity Ins. Co.
Fraud Claim Does Not Forestall Appraisal
District Court, Middle District of Florida

Hurricane Irma damaged Waterford’s property in Naples, Florida in 2017.   There was a dispute with Empire Insurance concerning the amount of the damage.  Waterford moved to stay the litigation and compel appraisal under the insurance policy.   The District Court initially granted Waterford’s motion over the objection of Empire.  Empire then asked the court to “reconsider” the decision because it had discovered what it called some evidence of fraud.

The insurance policy allowed either party to demand appraisal if they disagreed on the value of the property or the amount of the loss.  Empire argued that the appraisal should be denied or stayed while Empire determined whether to assert a fraud defense, deny the claim, and potentially seek to void the policy.  However, the “mere possibility” that Empire might raise a fraud defense did not undermine or detract from the Court’s rationale for enforcing the appraisal provision. For example, even if Empire elected to reverse course and denied the claim, appraisal would still be appropriate to determine the amount of the loss because the fraud defense would address the separate issue of coverage.  In fact, the policy even contained a provision that, even if there was an appraisal, the insurance company could still retain the right to deny a claim.   In short, Empire’s consideration of a fraud defense was not a reason to stop or delay appraisal. 

Empire also argued that Florida law required the District Court to first resolve coverage disputes before compelling appraisal.   The Condominium argued that Empire’s legal authority was actually on the minority side of what appears to be a split among the Florida courts, with the majority view giving the court discretion over the relative timing of appraisal and coverage determinations.   In addition, the District Court noted that, although Empire might eventually seek to amend its answer and assert a fraud claim, it had not in fact done so at the time of the motion.  Empire’s motion to reconsider and stay the appraisal based on newly discovered evidence of “fraud” was denied. 

This case notes that appraisal provisions may apply even if there may be one or more underlying coverage disputes.   Courts frequently rely upon and order appraisal to settle the amount of a loss, while at some point in time they resolve any underlying legal coverage dispute.   As noted in the decision, courts can split on whether the coverage issues must be settled before the parties proceed to appraisal.   In fact, trial courts often “bifurcate” the issue and rely upon appraisal to determine the amount of loss while the coverage dispute is litigated and determined by the court. 

In this case, it was held that the “possibility” of a fraud defense was not sufficient to delay appraisal, which raises the interesting question what if Empire had moved to amend its pleadings and actually assert a fraud defense based upon available evidence?   At that point, the issue would not simply be one of amount of loss, and the fraud defense might presumably also relate to the alleged amount of the loss.   If there were legitimate issues concerning fraud with respect to the amount of the loss, it could be argued that those issues, strictly speaking, should be determined by the court and were not a pure appraisal question.   One lesson is to raise a fraud claim or defense at the earliest possible time, with the understanding that such evidence often develops later during the claim timeline.       


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