Coverage Pointers - Volume XXI, No. 17

Volume XXI, No. 17 (No. 556)
Friday, February 07, 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.  

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


Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

It has been a long week of travel.  On Tuesday, I took a Greyhound to Toronto to participate as a panelist on risk transfer at the 16th Annual Canadian Defence Counsel Insurance Symposium.  That program, to a sell-out audience, was on Wednesday and then, not letting the grass grown under my feet, I flew to NYC for an argument at the Second Circuit Court of Appeals for Thursday morning.  Then back home.

Nice to be home, indeed.  Lots of great stuff in this week’s issue.

For our newer subscribers, understand that this is the cover letter (which some enjoy more than the issue).  The newsletter is attached as a .pdf and 21 years of past issues are available on our firm website.

We cover every appellate coverage case decided in New York, in the two weeks before the issue, along with selected lower courts cases, decision from New Jersey and Connecticut, the US Circuit Courts of Appeal and the New York federal district courts.   We also have columns on property insurance, no fault, serious injury threshold, and Coverage “B” (personal and advertising injury).  We also cover New York State regulatory and legislative matters along with a variety of other topics that are near and dear to your heart.  The cover letter contains messages from our various editors with a preview of what you might find in their columns.

Today’s most troublesome case comes from the Washington federal district courts and allows a carrier’s coverage lawyer to be deposed!  Read about it in John Ewell’s column.

If you are LinkedIn fan and follow my postings there, we have, for the past several months, created something called “Coverage Pointers Advance”. If there is a significant or interesting case that comes down between issues of CP, we post it there and it often generates an interesting and lively discussion among lawyers and claims professionals.  The Washington case did.

We have a guest columnist today, Michael Young of the Hepler Broom firm, who offers us an interesting case out of the federal courts in Illinois.  You’ll find his offering in Agnes Wilewicz’ column (she reviews the Circuit Courts of Appeal.


For and By Our Friends Up North:


AZ FLAG Canada Flag 2' x 3' - Canadian Flags 60 x 90 cm - Banner 2x3 ft

We also introduce another new column which will appear in our next issue.  There is a great deal of cross-border commerce and accordingly, cross-border claims between the US and Canada.

Cara Cox, one of the newest members of our coverage team, will author a column on Canadian insurance law, entitled Cara’s Canadian Cross-Border ConnectionsBecause Cara isn’t admitted to practice in the provinces, we invited my good friend Heather Sanderson the principal at Sanderson Law in Alberta to partner with Cara on this column.  Heather has over 30 years of experience providing legal advice and direction on the investigation, defence and prosecution of commercial and personal lines claims and litigation. You’ll find out a little more about her in Cara’s introductory letter below.

History of Valentine’s Day and its Relationship to Goats

Usually Peiper reminds me to tell the story of the History of Valentine’s Day – he did not this year.  This, from our 2008 Valentine’s Day issue:

How do you celebrate Valentine's Day?  Do you do it the modern way and send cards, candy, flowers and gifts?  I would hope not. I thought a little history of the holiday would help you recreate a more traditional approach, steeped in history.

During the third century in Rome, Emperor Claudius II who was only emperor for two short years, by the way (August 268 to January 270) was preparing to fight the Goths.  [Editor's note:  who wouldn't fight the Goths, given the opportunity?]  Anyway, he decided that single men would be better soldiers than married ones, so he outlawed marriage for young men.  However, one young priest, Valentine, believing that the Emperor's decree was unjust, continued to perform weddings.  Rumor had it that he had a financial interest in a chapel and later moved to Vegas.   Claudius learned of Valentine's defiance and had him imprisoned.  While in jail, he fell in love with the jailer's daughter and it is said that before his death, he wrote her a love letter, which he signed "From your Valentine." 

Valentine's feast day was set to commemorate his death in February 270, and that was also used to make it into a Christian holiday, the pagan Lupercalia Festival, which also celebrated the beginning of spring.  That Festival involved the sacrifice of a goat for fertility and a dog for purification.  The goat hide would be sliced into strips, dipped in sacrificial blood, and taken to the streets by young men who would slap women with the strips, apparently making the women more fertile.  Pope Gelasius, seeking to end the pagan holiday but continue the tradition, declared February 14 as St. Valentine's Day around 496 A.D.  So, there you go.  Forget the card, forget the candy, and forget the flowers.  Chase your sweetheart around the room and slap him or her with dried goat strips dipped in blood, and you'll be celebrating the holiday the right way.

Just don't tell the PETA people.

Presidential Biography List – 2020 Version

Presidents’ Day is coming up.

Those who know me best (or those who are regular readers of CP) know that my secret passion is U.S. Presidential history.  Some years ago, I decided to read presidential biographies in order and tried to find the best of the best read.  I published that list after my reading was complete.

Each year, in the issue just before Presidents’ Day, I publish an update on my reading and do so below.  The highlighted titles below are books I’ve read since Presidents’ Day, 2019. I added eight this year. I do read other genres as well.  Currently, I’m reading the recent biography of Thomas Edison by Edmund Morris.  This month, my book club chose Strangers in Their Own Land  by Arlie Russell Hochschild.


I welcome comments and recommendations of other titles.  Numbers represent the Presidents, of course.

P.S. Some of the books (e.g. The Quartet, War of the Roosevelts, Impeachment) focus on more than one president but are only listed once.

  1. His Excellency, George Washington (Ellis); First Entrepreneur, How George Washington Built His and the Nation’s Prosperity (Lengel), The First Conspiracy – The Secret Plan to Kill George Washington (Meltzer)

  2. John Adams (McCullough)

  3. Thomas Jefferson, the Art of Power (Meachem); Thomas Jefferson and the Tripoli Pirates: The Forgotten War That Changed American History (Kilmead); America’s Jefferson (Fenster), Thomas Jefferson’s Education, (Taylor)

  4. James Madison: A Biography (Ketcham); The Quartet (Ellis), The Price of Greatness – Alexander Hamilton, James Madison and the Creation of American Oligarchy, (Cost)

  5. The Last Founding Father: James Monroe and a Nation's Call to Greatness (Unger)

  6. John Quincy Adams (Unger)

  7. Andrew Jackson-- American Lion (Meacham); Andrew Jackson – Miracle of New Orleans, (Kilmead), Avenging the People, Andrew Jackson, The Rule of Law and the American Nation (Opal);

  8. Martin Van Buren (Widmer)

  9. William Henry Harrison (Collins)

  10. John Tyler (May), The Accidental Presidents (Cohen)

  11. A Country of Vast Designs – James Polk (Merry)

  12. Zachary Taylor (John S.D. Eisenhower)

  13. Millard Fillmore (Finkelman)

  14. The Expatriation of Franklin Pierce (Boulard)

  15. James Buchanan (Baker); Worst. President. Ever (Strauss)

  16. Team of Rivals (Goodwin); The Impeachment of Abraham Lincoln (Carter);  Killing Lincoln (O'Reilly), Lincoln and the Abolitionists (Kaplan), Six Encounters with Lincoln (Pryor), Becoming Abraham Lincoln – The Coming of Age of Our Greatest President (Kigel), Lincoln’s Last Trial – the Murder Case that Propelled Him to the Presidency (Abrams)

  17. History of the Impeachment of Andrew Johnson (Ross); The Impeachers (Wineapple), Impeachment, (Meachem, et al)

  18. Ulysses S. Grant in War and Peace (Brands); American Ulysses (White), The Presidency of Ulysses S. Grant,  (Kahan)

  19. Fraud of the Century: Rutherford B. Hayes, Samuel Tilden, and the Stolen Election of 1876 (Morris), Grant (Chernow)

  20. Destiny of the Republic: A Tale of Madness, Medicine and the Murder of a President -- Garfield (Millard)

  21. Chester Alan Arthur (Karabell), The Unexpected President – The Life and Times of Chester A. Arthur (Greenberger)

  22. Grover Cleveland (Graff)

  23. A Compilation of Messages and Papers of the President - Benjamin Harrison

  24. Grover Cleveland (Graff)

  25. The President and the Assassin: McKinley, Terror, and Empire at the Dawn of the American Century (Miller); President McKinley, Architect of the American Century (Merry)

  26. Theodore Rex (Morris), Theodore Roosevelt (Autobiography), The Bully Pulpit (Goodwin), Bully Pulpit (Goodwin), The River of Doubt: Theodore Roosevelt's Darkest Journey (Millard), Forging a President – How the Wild West Created Teddy Roosevelt (Hazelgrove), The War of the Roosevelts (Mann), Theodore Roosevelt for the Defense (Abrams)

  27. The Tea Party President by William Howard Taft; Charles Stanfield Davis

  28. Woodrow Wilson (Brands), The Moralist – Woodrow Wilson and the World He Made, (O’Toole); Mr. President, How Long Must We Wait – Woodrow Wilson and the Fight for the Right to Vote (Cassidy)

  29. Warren Harding (Dean); The President’s Daughter (Britton)

  30. Calvin Coolidge, Man from Vermont (Fuess)

  31. Herbert Hoover (Leuchtenburg); Herbert Hoover in the White House (Rappleyea)

  32. Traitor to His Class -- FDR (Brands); War of the Roosevelts (Mann); His Final Battle (Lelyveld); Commander in Chief (Hamilton); The Last 100 Days – FDR at War and Peace (Woolner), No Ordinary Time (Goodwin); The Washington War (Lacey)

  33. Citizen Soldier -- Harry Truman (Donald); The General and the President (Brands)

  34. Eisenhower: Soldier and President (Ambrose); Eisenhower, In War and Peace (Smith), Ike and McCarthy (Nichols); The Age of Eisenhower, America and the World in the 1950s (Hitchcock); Ike’Bluff – President Eisenhower’s Secret Plan to Save the World (Thomas)

  35. Kennedy (Sorensen)

  36. Johnson: The Path to Power -- LBJ (Caro), The Passage of Power (Caro); Building the Great Society – Inside Lyndon Johnson’s White House (Zeitz)

  37. The Conviction of Richard Nixon (Reston), Nixon, the Triumph of a Politician (Ambrose) Nixon, the Education of a Politician (Ambrose)

  38. Write It When I'm Gone -- Ford  (DeFrank)

  39. Jimmy Carter (Zelizer), President Carter – the White House Years (Eizenstat)

  40. Dutch - Reagan (Morris; Ronald Reagan (Sutherland); Reagan, An American Journey (Spitz)

  41. George Herbert Walker Bush (Wicker); Destiny and Power (Meachem)

  42. First in His Class (Bill Clinton); My Life (Autobiography)

  43. Decision Points -- George W. Bush (Autobiography)

  44. The Bridge – Barack Obama (Remnick)

Understanding Trump (Gengrich), Fire and Fury – Inside the Trump White House (Wolff), Everything Trump Touches, Dies (Wilson)


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

  1. 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

  2. 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.

  3. 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.


[Introducing….] Cara’s Cross-Border Connections (with Heather Sanderson):

Hello subscribers,

My name is Cara Cox and I recently joined Hurwitz & Fine as an Associate working with the Insurance Coverage Practice group. Although I do not have a column for you today, I wanted to introduce myself. I grew up in Syracuse, New York (“upstate”) and started living in Buffalo when I began my undergraduate degree at the University at Buffalo. After graduating from the University at Buffalo Law School, I decided to stay and enjoy all the Queen City has to offer! I enjoy exploring state and national parks, traveling, and craft beer. I look forward to soon being able to contribute to Coverage Pointers.

I am delighted to partner with our Canadian cross-border colleague, Heather Sanderson.  Heather has been a good friend for over a decade and we decided to ask her to lend Canadian assistance to our Cara Cox on her new Coverage Pointers column, Cara’s Cross-Border Connections.  I asked Heather to give you a little background on her interests, etc.

Heather A. Sanderson
Calgary, Alberta, Canada
email [email protected]
tel. 403-837-2508

Heather, the principal of Sanderson Law, is a nationally recognized coverage counsel who regularly provides advice and assistance to P&C insurers across Canada and the United States on Canadian coverage exposures. She is the author of two texts on Commercial General Liability insurance and several published articles. In addition to her academic contributions, she runs a full practise, appearing as counsel in all levels of the courts of Alberta as well as the Supreme Court of Canada.  Heather is a director of Canadian Defence Lawyers as well as DRI, a member of the FDCC and the American College of Coverage Counsel, as well as being a proud Armadillo.  Heather takes full advantage of her proximity to Banff National Park where she retreats to hike and ski, but she also likes to escape winter now and then. Last month, while in Hawaii for a week, she obtained her PADI Open Water Certification and can add scuba diving to her list of adventures.

Cara A. Cox

[email protected]


Continuing our Year-Long Review Surrounding the Adoption of the 19th Amendment:

The New York Age
New York, New York

07 Feb 1920


The issue of votes for women is having hard sledding most of the Southern States.  This is largely because the demagogic politicians of that section have tried to inject the race issue into the question and put the privilege of voting as a social function, in which the white women of the South should not meet with her colored cooks on an equal footing at the ballot box.  And these politicians put forth this plea as a solid argument worthy of consideration.

In Virginia last week the Senate Committee on Elections rejected the woman suffrage amendment to the Federal Constitution by a vote of 7 to 3.  The House voted to refer the amendment to a vote of the people, but as the Senate failed to concur, it was of no effect.  Thus was the old Dominion saved by its chivalrous lawmakers from forcing the burden of the ballot on the weak shoulders of its gentle women.

In Mississippi the Legislature failed to reconsider the Whitworth bill in the lower house but passed the buck on the question of the ratification of the Federal amendment, which will be submitted to the voters in November.  The lower house of the South Carolina legislature also rejected the amendment.

All in all the chances for woman suffrage do not appear to be extra bright in the South, but it will probably come through the approval of the Federal amendment by the other States.

Whether the Southern politicians like it or not, the women are probably going to get the ballot all over the country.  What changes it may work in the rotten conditions of Southern oligarchies remain to be seen. 


Peiper on Property and Potpourri:

We highlight this issue with a decision from the Appellate Division, Fourth Department which affirms the traditional rule that appraisal is not appropriate while there is an ongoing coverage issue in dispute.  In the 425 West Main case reviewed below, the insured sought to establish the measure of damages for a commercial roof through the appraisal process. Then, it was argued, the parties could litigate issues of coverage in a Declaratory Judgment action. The court’s affirmance of the trial court affirmatively states that coverage issues must be decided before the appraisal process can be triggered.  Had the court ruled the other way, it would have opened to door for policyholders to use the appraisal process as an end run around coverage defenses and litigation.    Precedent, and the carrier’s right to assert coverages defenses, remain protected.

A note, too, about the decision reviewed by John this week addressing issues of privilege.  The decision focuses on the often-overlooked attorney work product doctrine.  In reliance upon this protection, the Court suggests that work performed by an attorney, as an attorney, should be subject to disclosure.  While we surely don’t take issue with that, it is noted that the Court appears to Order the disclosure of various drafts of a disclaimer letter.

If the objection to the product of the drafts was based upon work-product considerations, we could appreciate why the court would direct the disclosure.  However, drafts of denials are categorically exempt from disclosure by operation of the material prepared in anticipation of litigation doctrine.  Recall that the Landmark Ins. Co. v Beau Rivage case holds that a discovery exemption for claims materials triggers as soon as a carrier reaches a decision to deny coverage.  One would not draft a denial letter without first reaching the decision to disclaim.  As such, by logical extension, drafts of a denial letter should not be discoverable.

That’s all from us this week.  Happy Valentine’s Day to all.

Steven E. Peiper

[email protected]


Women Were Taking Their Place at the Political Table, 100 Years Ago:

Daily News
New York, New York

07 Feb 1920



            Washington, D.C., Feb. 6.—Presidential candidates and potential candidates welcome women into the 1920 political campaign.  This was shown by a canvass completed today by the National Women’s party.

            The likelihood that 28,000,000 women will be eligible to vote in the 1920 presidential election has not been overlooked in any of the political camps, suffrage workers said. 


Wilewicz’ Wide-World of Coverage:

As the weather really turns into winter around here, I’m now seriously looking forward to the Phoenix sun in a couple of weeks. Last year around this time it was snowing in Scottsdale and a rainy 55 degrees in Phoenix, so I’m really hoping things turn around this year. At this point, though, pretty much anything beats 28 degrees and snow in New York.

In a decision short on facts but long on potential scope, the Circuit Court held in favor carrier, but mostly because the insured was unable to fit the facts into the policy language. The write-up, with a link to the decision, are attached in this week’s edition.

We also bring you a guest column from Michael L. Young out of Missouri, sharing a Seventh Circuit case. Michael is a partner in the St. Louis office of HeplerBroom, LLC, with a primary emphasis in the practice of insurance coverage and bad faith. He represents insurers in complex insurance coverage matters at all stages of the claims process in Missouri and Illinois. You can follow him on LinkedIn, listen to his daily insurance podcast, or subscribe to his insurance e-newsletter by emailing him at [email protected]. In this edition, he brings you a case out of Illinois dealing with an interesting excess policy issue and whether extrinsic evidence could be used to the carrier’s benefits. Take a look at the attached issue for the full write-up.

Until next time!

Agnes A. Wilewicz

[email protected]


Prohibition Takes Hold:

Buffalo Morning Express and Illustrated

Buffalo Express

Buffalo, New York
07 Feb 1920

Hundred gallons of potential cocktails melt New York’s snow

New York, Feb. 6.—Thousands of potential cocktails were poured into the snow today by prohibition agents while crowds of thirsty folk looked on mournfully.

This first destruction by prohibition agents of alcoholic liquor in this city, was duly recorded for history by motion picture machines.  A manufacturer of cordials and flavoring extracts had asked that prohibition agents destroy every liquid in his office that contained more than one-half of 1 per cent of alcohol.  As a result, 100 gallons, including six gallons of vermouth and a quantity of kummel and other liquors, helped melt the snow. 


Barnas on Bad Faith:

Hello again:

This has been a very mild winter by Buffalo standards (*knocks on wood*), but I would be lying if I said I wasn’t looking forward to being on the golf course in Tampa by the time our next issue is published.  Those short getaways to warm weather can really help you get through the winter.  My golf swing is probably a disaster, but a bad day of golf in the Florida sun beats a good day in the office in the winter in Buffalo any day.

We’re less than two months from DRI’s Insurance Coverage and Claims Institute in Chicago.  Our Jen Ehman is the Program Chair and we have two amazing Program Vice Chairs in Jessica Foscolo and Jeff Van Volkenburg.  Steve Peiper will be presenting on how to manage complex business interruption and extra-expense claims.  You won’t want to miss that.  If you register by March 3, you can save $100 off the cost of registration.  It should be a great program, and I hope to see you all there.

I have two cases in my column today.  In Smith, the Eleventh Circuit rejected the insured’s bad faith failure to settle claim.  The carrier offered to settle for the policy limits and the plaintiff accepted.  How did this turn into a failure to settle claim you ask?  The plaintiff’s SUM carrier would not give consent to settle, and the case proceeded to an excess verdict.  The Eleventh Circuit concluded that the refusal to settle claim failed because the lack of a settlement was not attributable to the insured’s carrier.  I also have a New York case where the appellate court dismissed a prima facie tort claim against a no-fault carrier as inadequately plead.

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

Brian D. Barnas

[email protected]


But Drink Leads to Divorce:

Buffalo Evening News
Buffalo, New York

07 Feb 1920


Home Brew Makes Her Husband Wild Asks for Divorce

WASHINGTON, Feb. 7.—(United News).—Mrs. Anna J. Campbell asked for a divorce because her husband drinks “home brew.”

“Since prohibition came into effect he concocts some sort of a drink which literally makes him wild.” She said in her petition. 


Off the Mark:

I’m on the road attending the DRI Product Liability Conference in New Orleans.

Brian F. Mark

[email protected]


Safety in Bread Sales?


New York Herald
New York, New York

07 Feb 1920




Would Bread Cost More If It Had to Be Wrapped Up for Delivery?

TO THE SUN AND NEW YORK HERALD:  The sanitary wrapping of bread, suggested by your correspondent as an antidote to the spread of disease through this medium, would undoubtedly lead in time to a monopoly of this staple of food by large distributors under regulations laid down by health officials.

This is what has already happened to a great extent in the supply of meat and milk to the public.  The monopolists of the milk supply in this city have reached a point under Health Department regulation which has threatened its general use as an article of diet.

The evil of a withdrawal of this form of food would be far greater than any danger that could be proved against it as a carrier of disease in the days when its supply was uninspected.


NEW YORK, February 6.


Boron’s Benchmarks:

I hope you all enjoyed watching last Sunday’s Super Bowl, and hope you cashed in your Super Bowl pool(s).  Even if you experienced none of the above, I suspect there was a Super Bowl commercial or two that you enjoyed during the game.  I liked a lot of the commercials this year.  One of my favorites was the “wicked smaht” Hyundai smart park commercial with John Krasinski and a host of other New England bred celebs, plus a cameo from Boston Red Sox legend David Ortiz.

Alas, I didn’t cash in my Super Bowl pool.  Still, I got my money’s worth of fun just from checking my numbers with all the score changes.  And, my goodness, the Kansas City scores came fast and furious over the last 8 minutes of the game, didn’t they?  All in all, a much more exciting game to watch than last year’s snooze-fest of a Super Bowl that had a 3-3 score going into the fourth quarter! 

In this edition’s Boron’s Benchmarks column, I offer for your consideration a decision issued by the Supreme Court of Delaware interpreting a USAA homeowner’s policy in a DJ action whereby it determined the policy provided no coverage for liability for a victim's death as result of an intentional assault.  Sad background facts.  But excellent analysis by the court in finding the assault was not a covered occurrence because it was not an accident, and also in determining the applicability of the policy’s intentional act exclusion to negate coverage.  Labeling an intentional assault an accident improperly disregards the ordinary, everyday meaning of “accident”, held the Delaware Supreme Court.

Have a great two weeks, folks.

Eric T. Boron

[email protected]


Now its Marijuana, Then Booze:

Times Herald
Olean, New York

07 Feb 1920



Albany, N.Y., Feb. 7. – Pharmacists who dispense liquor upon a physician’s prescription must take out a state liquor tax certificate in addition to their federal permit, State Commissioner of Excise Herbert S. Sisson announced today.

“The liquor tax law is still in full force and effect, notwithstanding the enactment of the Volstead law by the federal congress and no person had a right in the state of New York to sell liquor as a pharmacist who does not hold a state certificate,” said Mr. Sisson.

“All pharmacists disregarding the state law are subject to criminal prosecution and to actions for penalties.” 


Barci’s Basics (On No Fault):

Hello Subscribers!

We are over a month into the new year, which just feels crazy. January flew by – but also felt like the longest month? It’s just that time of year I guess. With the second weekend of February rapidly approaching, we are only a few days away from my team’s first mock trial competition this year. It has been about 7 weeks of preparation leading up to the first competition, and I hope I have good news to report on next issue about the outcome! Until then, we’ll be debating cryptocurrency and criminality (the theme of this year’s case).

On the no-fault front, I have a Fourth Department case to report that touches on the unfair settlement practice statute (N.Y. Insurance Law § 2601), the requirements of a provider when alleging such practices in a complaint, and why these types of complaints keep getting dismissed. It is a relatively short decision, but an important one as the same players continue to bring these actions and the Court continues to dismiss them.

That’s all folks,

Marina A. Barci

[email protected]


Fire Safety – 100 Years Ago:

New York Herald
New York, New York

07 Feb 1920



Suggestions for Private Houses as Well as Other Buildings.

TO THE SUN AND NEW YORK HERALD:  Recent fires in New York and elsewhere suggest the following:

No building with persons sleeping above the third floor should be built without an enclosed fireproof staircase from the lowest basement floor.

All old buildings so occupied should have the stairways fireproofed and enclosed.  This applies to hotels, lodging houses, apartments and tenements.  It can be done gradually, but all should be so equipped by a specified time.

No fire escapes should be placed where flames or smoke from windows render them useless when most needed.

Factories where employees are working above the third floor should also have enclosed fireproof exits; if above the fifth floor the building should be fireproof.  The same rule as to fire escapes should also apply.

The average fire escape is a tragic irony.  They should be built in front of the party wall, not in front of the windows.  To insist on one for each building is foolish; the size and the location are more important than the number.

Automatic fire alarms are inexpensive and should be placed wherever life is at risk from fire, even in private houses.

NEW YORK, February 6.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

This past weekend, the Maxwell’s hosted their annual Super Bowl party, and, if I must say, it was a resounding success once again. Not only were the champions wearing helmets that were not silver in color, but the family and friendships were flowing, among other things.

This week, the Legislative List outlines a number of bills reported out of the Senate Standing Committee on Insurance. The Regulatory Wrap-up reminds you that the public comment period for DFS’ proposed amendment to its adjudicatory processes is closing within a month. Finally, From the Filings Cabinet outlines DFS’ thoughts on cybersecurity coverage for identity recovery services.         

Until next time.

Ryan P. Maxwell

[email protected]

It’s All in the Numbers – Now, Saved by Alexa:

Press and Sun-Bulletin
Binghamton, New York

07 Feb 1920



Multiple 15 by 15 and repeat the operation just 15 times, appear simple to do.  But it would require 475 billion figures and 28 years to work out.  The final answer to the 15 products multiplied by themselves would contain 38,589 figures.  It is easier, more practical and quicker by 27 years, 23 hours and 55 minutes to write an Ad for The Press Classified Columns!

Editor’s note:  I asked Alexa how much 15 was to the 15 power.  She told me it was 437,900 trillion.  It didn’t take her 28 years to figure it out.  She was “rounding” though.


CJ on CVA and USDC(NY):

Hello all,

I hope this column finds you well, and that everyone has recovered from Super Bowl Sunday. I’ve recently decided to try and eat a little healthier, the feast of chili and chicken wing dip presented during the game was a true test of my resolve. Luckily the weather in Western New York has been cooperating, and the snow is sticking to the slopes in ski county, however the report of Punxsutawney Phil not seeing his shadow have me fearful that this year’s already abbreviated winter will be even shorter.

In this week’s column I have broken down a memorandum of law filed in support of a motion to dismiss claims against the Diocese of Rockville Centre on the basis that the “look-back” period of the CVA violates the New York State Constitution. It is important to note that this was filed on behalf of the Diocese, and no opposition papers have been filed to date. Parties in this case are scheduled to appear on this motion on February 25, 2020, and I will certainly be watching for a decision on this motion. While the Diocese makes some very compelling arguments, I do not believe this motion has a strong potential for success. While courts are intended to be impartial, the public support surrounding the CVA may sway a jurist’s opinion. Additionally, there is only one supporting case cited where the cause of action was similar to a CVA cause of action and distinguishing that case from a CVA case does not appear to be difficult.

Happy Reading!

Charles J. Englert, III

[email protected]


Lazy, Hazy, Crazy Days of Winter:

The Buffalo Enquirer
Buffalo, New York

07 Feb 1920




No Breeze in Windy City Caused Clouds of Smoke to Hang Over City,  Shutting Out Sunlight.


(Chicago Tribune Service for THE BUFFALO ENQUIRER.)


Chicago, Feb. 7.—Chicago had no “cold gray dawn” yesterday.  There wasn’t any dawn at all.  One could not perceive where night left off and day began.  So Chicagoans groped their way about in darkness.

The city presented a spectacular aspect, especially in the loop district where display windows and electric lights from the thousands of office buildings windows blazed out, even at noon.

Street cars with glaring headlights charged their way through throngs of midday business hours.  Taxicabs and all manner of motor vehicles traveled with all their lights aglow.  In railroad yard switchmen signaled with lanterns and school children did their studies beneath electric lights.


Dishing Out Serious Injury Threshold:

Dear Readers,

As this year continues to fly by, I hope everyone had a great weekend and enjoyed the Super Bowl. Before you know it, Valentine’s Day will be here so you better start thinking something for your significant other. My suggestion, events or outings are more enjoyable and memorable than gifts any day. Good luck.

As January has already blown past, it’s been a slow couple weeks for decisions coming out of the Appellate Division for Serious Injury Threshold related cases. Nonetheless, I have two cases to discuss today. Both happen to pertain to plaintiff’s counsel failing to present medical evidence sufficient to raise a question of fact with regard to a pre-existing condition. This has been prevalent in caselaw recently that, even when plaintiff presents medical expert findings of limitation, plaintiff’s failure to have their expert specifically rebut claims of pre-existing or degenerative conditions are fatal to plaintiff’s claims.


Michael J. Dischley
[email protected]  


Here it is: The Curse of the Bambino: Babe Ruth Sold to the Yankees

The Times-Herald
Burns, Oregon

07 Feb 1920

A new baseball star has flashed across the horizon eclipsing the publicity which the great Ty Cobb has dominated so long.  It is Babe Ruth, home run hitting king, pitcher-outfielder, who has just been sold by the Boston Americans to the New York Americans for $125,000—the record price of all time in baseball deals. 


Bucci on “B” :

Hello Everyone:

How are you on this fine winter’s day with its bleak gray sky and damp chill in the air.  I hate winter.  I ask myself why I stay here in Connecticut and then remember it’s the other three seasons.  

So, what do I do?  I attend the ABA TIPS ICLC Midyear Conference in Phoenix, Arizona.  I attend cutting edge CLE classes, enjoy the relationships I’ve made over the years, and soak in the sun.  Well, I can’t guarantee sun, but I can promise there won’t be any snow.  The conference starts on February 20th, just in time to keep me from going crazy.

No big happenings in the Coverage B arena.  I found one case where the insurer was required to defend its insured against a potential disparagement claim. State Auto Prop. & Cas. Ins. Co. v. Ward Kraft, Inc., No. 18-2671-JWL, 2020 WL 377010, at *1 (D. Kan. Jan. 23, 2020).  I guess I’ll just have to enjoy my weekend without reading Coverage B cases.  I’ll pick up a good book instead.  Any suggestions?

It should be a fun weekend.  For one thing, I’m going to a doggie birthday party.  I’ve never been to one before and I can’t wait to see how my adorable, furry little terrorist of a dog reacts to all of those other doggies getting attention.

Diane L. Bucci
[email protected]



Daily News
New York, New York

07 Feb 1920



After a picture of her bungalow at Miami, Fla., showing a ladder leading to her bedroom window, had been offered in evidence, and after a former housekeeper had testified as to the purpose of the ladder, Mrs. Otto H. Oppenheimer, wife of a wealthy leather manufacturer, yesterday abandoned her defense to her husband’s suit for divorce.

Nicholas W. Bindsell, special master in chancery, before whom hearings in the suit were held, has recommended a decree for the husband.

Mrs. Edit F. Alley, former housekeeper for the Oppenheimers, testified that Mrs. Oppenheimer was very frank with her in telling of her relations with a Wade J. Harley, named as co-respondent.

Mrs. Alley testified that Harley visited the house when Oppenheimer was at the golf links, and that when Mr. Oppenheimer went North on business, Harley practically lived at the house.

Asked concerning the photograph offered by the husband showing the ladder against the side of the house, Mrs. Alley testified it was customary for Mrs. Oppenheimer to go to her room early, lock her door and after her husband had gone to his room she would wait until Harley flashed a light on her window from his automobile.  She would then join him on the beach. 


John’s Jersey Journal:

Cautionary Tale. Where Disclaimer is Issued on Coverage Counsel’s Letterhead, It Can Open the Door to Coverage Counsel Being Deposed

As with any other business, insurance companies often retain attorneys for legal advice. In recent years, we have seen courts across the country single out insurers and rule that, unlike other businesses, insurers are not entitled to the same protections of attorney-client privilege, litigation materials, and work product protection other businesses enjoy. Washington State is at the forefront, chipping away at an insurer’s right to assert privilege. Dan and I have written and presented on the topic extensively (here for example).

A recent Washington federal court decision further chips away at privilege. In Canyon Estates v. Atain Specialty Ins. Co. et al, Great Lakes Insurance retained coverage counsel to advise it of its policy and legal defenses. Great Lakes consciously chose to have its adjuster handle the factual investigation. When the factual investigation was complete, Great Lakes sent its claims file and investigation materials to outside coverage counsel to render a coverage opinion. What did coverage counsel do? Coverage counsel provided the insurer legal advice and prepared a disclaimer letter that would comply with state law.

Both the Magistrate and District Judge both found that preparing the disclaimer constituted ordinary claims handling and invalidated any claim of privilege regarding the attorney’s “analysis and recommendations to the insurer regarding liability generally or coverage in particular…” The Court ordered the deposition of the coverage attorney.

Scary stuff.

This is nuts. A corporation hires an attorney to provide legal advice under Washington law and to prepare a disclaimer that complies with state law. The attorney’s role was entirely of a legal character, not fact investigation. Yet no attorney-client privilege attaches? The attorney can be deposed on his knowledge?

It’s wrong. Image a tech company has questions regarding its contract with a vendor. Tech company retains an attorney to review the contract and advise the company on its rights and defenses under the contract. Let’s say the attorney prepares a letter citing the vendor’s obligations under the contract and asserts various defenses tech company has under the contract. The attorney’s entire role is providing legal advice. Should the vendor be permitted to depose tech company’s attorney? Not at all. So why should it be different for insurance companies? Industry is the only difference.

The court left it to the parties to work out which questions seek information that remains privileged. We are certain this case will be back to the Court for review of the transcript and rulings on the questions.

When I, and others at our Firm, prepare a disclaimer on behalf of insurers. We prepare them to be issued on the adjuster’s letterhead. Issuing letters on coverage counsel’s letterhead can open the door for coverage counsel’s deposition and a hotly contested fight over privilege.


New Jersey Trial Court Extends Appreciable Prejudice Standard to Voluntary Payer Defense. Thousands Flee.

Imagine this: Insured is sued and hires its own counsel to defend. Months later and after $100,000 in defense costs, insured notifies its carrier. Three days later, the case settles. Insured asks carrier to reimburse the defense costs. Should the carrier be required to reimburse the insured, who declined to notify its insurer, and instead chose to control and voluntarily paid its own defense? A New Jersey trial court says, YES, unless the carrier shows appreciable prejudice.

The court also rejected the insurer’s argument that it was not responsible for pre-tender costs. The insurer also argued that it was only required to pay “reasonable and necessary” defense costs and that the law firm’s hourly rate, as high as $625 an hour, was unreasonable. That argument was rejected as well. Thousands Flee.

I expect New Jersey courts to be policyholder friendly. Finding insurance money is public policy in New Jersey. This decision, though, takes the cake. Here’s why. Appreciable prejudice is the standard that New Jersey applies to test whether an insured’s failure to give notice “as soon as practicable” voids coverage. Where the insured’s late notice has caused the insurer to lose a substantial right and the insurer could have obtained a better outcome, the insured has caused its insurer appreciable prejudice.

Appreciable prejudice should not apply to the separate and distinct,  voluntary payer defense. New Jersey’s highest court, interpreting a voluntary assumption provision, once said: “A violation of [a voluntary assumption provision] relieves the insurer from policy liability, regardless of whether actual prejudice has ensued therefrom.” Kindervater, 120 N.J.L. 373, 376 (1938). In other words, the breach alone is enough without a showing of prejudice. The Court expressly held that actual prejudice was not relevant. Notably, no New Jersey appellate court has ever ruled Kindervater no longer sound law.

It is also troubling that the Court ruled the insurer was responsible for a defense the insured exclusively controlled. The insured did not have to notify its insurer, it was well-within its right to hire its own counsel and control the litigation. The consequence of such action, however, is that the insurer should not be later called upon to pay for that defense.

It has been well-settled in New Jersey that “carriers contract for control” (Eggleston, 37 N.J. 114 [1962]) and insureds are not entitled to reimbursement of defense costs where the insurer had no opportunity to control. S.L. Industries, 128 N.J. 188 (1992). As such, an insurer is only liable for defense costs incurred after the carrier receives notice. Id. So why should this insurer have to pay for a defense that it never consented to and was only aware of for three days?

What makes the decision even more absurd is that it was not disputed the insurer did not have to reimburse the insured for the settlement it voluntarily paid. Logic, apparently, got lost in the fray.

This is one I will be monitoring to see if it is appealed. Both cases discussed further in the attached PDF.

John R. Ewell

[email protected]


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Have you ever driven around Connecticut? Of course, you have, I mean there’s no other way to get places. Don’t get me started on CT Rail and CT Express, they are not real mass transit systems. Well, all around the state we have roads and byways named Grasso. Did us Constitution state folks forget how to spell “grass”? No, the streets and state facilities are named for Ella Grasso, the first female governor of the State of Connecticut. In fact, Grasso was the first elected female governor in the United States who was not the spouse or widow of a former governor. Grasso received one of the highest honors in Connecticut when a statue of her was placed in the Capitol building. Few Nutmeggers are so honored and Grasso was the first woman to receive this distinction. So, as we jump full steam into this presidential primary season, and you contemplate the candidacies of Elizabeth Warren and Amy Klobuchar, think about the trails blazed by Ella Grasso (and, if you know me, you know that the pun is intended).

Lee S. Siegel

[email protected]


Dampening the Spirits of the City Council Prez:

Los Angeles Evening Express
Los Angeles, California

07 Feb 1920


Hurls Water on Autoists As They Pass

Deputy Sheriffs today are search for a man who doused Bert Farmer, president of the City Council, with a bucket of water while he was driving his automobile along the county highway near Compton.  According to Farmer, other automobilists were treated with baths.

In the councilman’s report to the sheriff’s office he says he was driving slowly along the road toward Los Angeles when a man stepped from behind a cluster of brush, poised a large bucket above his head and then hurled the contents into the car and over the occupant.

Farmer was alone at the time.  He said he did not stop to investigate, believing the man might be insane or dangerous.  


Headlines from this week’s issue, attached:

Dan D. Kohane

[email protected]

  • Another Cooperation Case Bites the Dust – Inaction isn’t Enough
  • Where Trade Contract Calls for Contractor to Provide Coverage to “Protect It and the Owner”, that Provision Calls for Additional Insured Coverage
  • More Fights over Privileged Documents in the Insurance Context.  Attorney-Client Material Protected and Some Work Product, as Well
  • Oral Settlement at Mediation, Not Documented or Placed on the Record, is Not Enforceable
  • When a Carrier Says that its Policy is Primary and Non-Contributory and Will Not Seek Contribution, the Courts will Take Insurer at its Word
  • Good Primer on Rescission Based on Material Misrepresentation


Steven E. Peiper
[email protected]

  • Appraisal MUST Await Determination of Coverage Issues Litigated in a Plenary Action
  • Trial Court Cannot Alter, Waive or Limit Workers’ Compensation Lien


Michael J. Dischley

[email protected]

  • Plaintiff Fails to Provide Objective Medical Evidence Relevant to Distinguishing his Preexisting Condition
  • Plaintiff Failed to Raise a Triable Issue of Fact Pertaining to Plaintiff’s Preexisting Conditions


Agnes A. Wilewicz

[email protected]

  • Second Circuit Finds for Carrier in All Risks Marine Cargo Insurance Coverage Case, Where Insured Cannot Establish Shipping “Yard” Was a “Port”
  • Excess Insurer’s Policy Held Ambiguous, Yet Extrinsic Evidence Proves the Insurer’s Interpretation Correct (Illinois Law)


Jennifer A. Ehman

[email protected]

  • Court Upholds Denial Based Upon Designated Ongoing Operations Exclusion


Brian D. Barnas

[email protected]

  • Insurer Did Not Fail to Settle Claim Against its Insured in Bad Faith where Settlement was Rejected by Plaintiff’s SUM Carrier
  • Prima Facie Tort Cause of Action Against Insurer Did Not State a Cause of Action


John R. Ewell

[email protected]

  • New Jersey Trial Court Extends Appreciable Prejudice Standard to Voluntary Payer Defense. Thousands Flee.
  • Washington Federal Court Rules Coverage Counsel, who Issued Disclaimer on His Firm Letterhead, acted as a Claims Adjuster and therefore, Can
    Be Deposed.


Lee S. Siegel

[email protected]

  • Carrier’s Cancellation for Non-Cooperation Upheld


Brian F. Mark
[email protected]

  • Attending DRI Product Liability Conference in New Orleans.


Eric T. Boron

[email protected]

  • Delaware’s High Court Rules Whether Assault is an “Accident” is Determined by the Intent of the Insured, Not the Victim’s Viewpoint


Marina A. Barci

[email protected]

  • Provider Action for Punitive Damages Against Insurer Thrown Out


Ryan P. Maxwell

[email protected]

Legislative List

  • In Unanimous Votes, Several Bills Reported to Senate After Referral to Insurance Committee


Regulatory Wrap-Up

  • Public Comment Period for New Rules Governing the Procedures for Adjudicatory Proceedings Before the Department of Financial Services Expires March 2, 2020


From the Filings Cabinet

  • DFS Rejects Cybersecurity Filing Proposing Identity Recovery Coverage Requiring the Use of a Pre-determined Identity Recovery Agency


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

[email protected]

  • In Motion to Dismiss, Diocese Argues the CVA’s Revival of Formerly Time-Barred Civil Actions Violates the New York State Constitution. Decision Pending.


Diane L. Bucci

[email protected]

  • Insurer Has Duty to Defend Comparison Claim as Disparagement


Earl K. Cantwell

[email protected]

  • Does Failure to Fulfill Post-Loss Obligations Forfeit Coverage? 


Happy Valentine’s Day.  Happy Presidents’ Day.

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.

Dan D. Kohane

[email protected]

Agnes A. Wilewicz

[email protected]

John R. Ewell

[email protected]


Dan D. Kohane, Chair
[email protected]

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

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Lee S. Siegel

Brian 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
[email protected]

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]

02/06/20       Kensington Insurance Co. v. Ramales
Appellate Division, First Department
Another Cooperation Case Bites the Dust – Inaction isn’t Enough

Carrier took a default judgment in a non-cooperation declaratory judgment action.  Then, there was an application to open the default based on law office failure.  The court found that in its discretion, to open the default.

To do so, it had to find that there was a meritorious defense to the claim. The insured's lack of cooperation had not been established as a matter of law to preclude defendant from asserting it as an improper basis for denial of coverage, as “mere inaction by the insured is not a sufficient basis for a disclaimer.

05]). The court also found that the insurer had not established conclusively that the insured did not reside at the premises, and without the policy before it, the issue of whether the insured lived at the premises was not dispositive of whether defendant had a defense to the action

02/05/20       Northside Tower Realty, LLC v. Admiral Ins. Co.
Appellate Division, Second Department
Where Trade Contract Calls for Contractor to Provide Coverage to “Protect It and the Owner”, that Provision Calls for Additional Insured Coverage

Northside Tower Realty (“Northside”) commenced this action for a judgment declaring that, pursuant to a commercial general liability (CGL) policy issued by Admiral) to nonparty Scorcia, Admiral is obligated to defend and indemnify Northside in an underlying action and to reimburse Northside for all legal fees and expenses already incurred defending that action.

Northside demonstrated that it qualified for additional insured status under the policy Admiral issued to Scorcia. When determining whether a third party is an additional insured under an insurance policy, a court must ascertain the intention of the parties to the policy, as determined from within the four corners of the policy itself.

Here, the additional insured endorsement in the subject policy extended coverage to any person or organization Scorcia had agreed by written contract to name as an additional insured on the subject policy. A written contract between Northside and Scorcia provided that "prior to the commencement of any of the Work, [Scorcia] shall purchase and maintain, at its own expense, the following insurances as will protect it and [Northside]" and lists CGL insurance as one of the types of insurance that Scorcia must procure and maintain.

The natural and intended meaning of the phrase "as will protect it and [Northside]" is that Scorcia and Northside were both intended to enjoy the coverage specified in the contract. Furthermore, the intent and meaning of the phrase "as will protect it and [Northside]" becomes clear when juxtaposed with the language of another provision of the contract that references "Additional Insureds" under the subject policy. If Northside and Scorcia did not intend to confer additional insured status on Northside, the provision referencing "Additional Insureds" would be rendered meaningless or superfluous. This is especially so when the trade contract refers to “additional insureds”.

Editor’s Note:  Tough to disagree with that decision.

02/04/20                  Venture v. Preferred Mutual Ins. Co.
Appellate Division, First Department
More Fights over Privileged Documents in the Insurance Context.  Attorney-Client Material Protected and Some Work Product, as Well

Attorney work product is not discoverable.  But that rule  "applies only to documents prepared by counsel acting as such, and to materials uniquely the product of a lawyer's learning and professional skills, such as those reflecting an attorney's legal research, analysis, conclusions, legal theory or strategy".

Since the policyholder retained counsel and did not allow Preferred's cause and origin expert to take a written or recorded statement from him, Preferred retained Attorney Dodge to schedule an examination under oath based on his professional skills with SIU investigations, particularly, Dodge's knowledge of National Fire Protection Association (NFPA) guidelines, which pertained to fire science and fire investigation, and had a foundation of questions to ask in a case that involved a suspicious fire. Attorney Dodge's involvement was only part of the process and was as an attorney, not a claims investigator.

Nevertheless, the emails between the client and the attorney that appear in email chains forwarding nonprivileged messages between McGuire and witnesses or government employees pertaining to the investigation should be redacted to obscure only communications between McGuire and Dodge, and the entire documents must be produced in redacted form. The remainder of each of these email chains, which include forwarded emails between McGuire and other parties, contain nonprivileged communications regarding defendant's investigation.

The court then went through scores of documents and compelled a good deal of them to be released, except for attorney-client communications.

Pleadings, communication with opposing counsel, and communications solely between investigators, should be produced without redactions, since they do not contain legal advice, a request for legal advice, attorney work product, or any other category of privileged information

Given that Dodge and the Dodge firm were acting as counsel, and were not primarily responsible for investigating this matter, they need not be disqualified from representing defendant, since Dodge is not likely to be called as a witness. Disqualification will not be granted where evidence from the attorney would be cumulative.


02/04/20       Greenway Mews Realty, L.L.C. v. Liberty Ins. Underwriters
Appellate Division, First Department
Oral Settlement at Mediation, Not Documented or Placed on the Record, is Not Enforceable

There was an oral settlement agreement, agreed to before the court, during a mediation session.  Liberty Insurance Underwriters (“LIU”) brought an action to enforce it. Although the record reflects that the parties agreed to various settlement terms, including the amount to be paid by LIU, the oral agreement has no binding effect under CPLR 2104, because it and its terms were not sufficiently documented, recorded, or memorialized. Further, there is a dispute between the parties as to a material term of the settlement, whether the funds paid by LIU and Illinois National Insurance Company (“INIC”) were to be held in escrow pending resolution of the dispute between Seneca  Insurance Company and Federal Insurance Company.

While the alleged oral settlement is not enforceable, under the facts of this case, LIU's and INIC's obligations to pay post-judgment interest ceased on May 25, 2018, when the insurers made a good faith offer to satisfy the judgment. We note that counsel for both LIU and INIC represent that their clients have placed the funds in their respective attorney's escrow accounts.

This was an interpleader action which will continue as there is a fight over which of several carrier is entitled to the funds.

01/30/20       Endurance Amer. Spec. In. Co. v. Harleysville Worc’ter Ins. Co.
Appellate Division, First Department
When a Carrier Says that its Policy is Primary and Non-Contributory and Will Not Seek Contribution, the Courts will Take Insurer at its Word

Endurance's policy provides primary coverage, by its plain terms, under its "Primary Non-Contributory Endorsement" to the NYC Housing Authority, an additional insured on a policy issued to Women Work Construction Corp.'s (“WWC”). It further specifically provides that it will not seek contribution from any other insurance available to NYCHA. As such, Endurance has waived any contribution from Harleysville.

Furthermore, the Harleysville policy, by its terms, provides excess coverage to NYCHA, and the underlying contract between WWC and Harleysville did not "specifically" require the Harleysville policy to be primary. The parties are therefore not co-primary insurers.

Editor’s Note:   The lower court held otherwise.

01/29/20       Friedman v. Otsego Mutual Fire Ins. Co.
Appellate Division, Second Department
Good Primer on Rescission Based on Material Misrepresentation

Otsego Mutual Fire Insurance Company (“Otsego”) issued to Friedman a homeowners' insurance policy for the period of November 17, 2009 to November 17, 2012, and a renewal policy for the period of November 17, 2012 to November 17, 2015. In March 2014, the plaintiff's home sustained severe water damage. After receiving notice of the loss, Otsego determined that the plaintiff had misrepresented material facts in her application for insurance, and declared that the contract of insurance was null and void ab initio.

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

Here, Otsego made a prima facie showing of its entitlement to judgment as a matter of law by submitting evidence of its past practices, demonstrating that it would not have issued the same policy to the plaintiff if the correct information had been disclosed in the plaintiff's application.

Editor’s Note:  Kudos to Attorney Kenneth R. Feit, from Tell, Cheser & Breitbart, Garden City, who successfully handled this matter for Otsego.  We were curious about the misrepresentation made that led to the rescission.  The policyholder answered “no” to a question “4” on the application:  Any other residences owned, occupied or rented.  In fact, she owned property located in Kentucky.  She had not been at the insured residence, on Long Island, for a “few weeks” and when she returned to it, after receiving a call from the water company advising her of a surge in water usage, she found that a pipe had burst in the attic and the house was destroyed, floors were buckled, mold had grown and the house was a total loss.  Otsego only insured, on this program, owner-occupied homes or modifies the policy to annex a “Capped Mold Endorsement” and/or a stated peril policy.


Steven E. Peiper

[email protected]

03/31/20       425 West Main Associates LP v. Selective Ins. Co. of S.C.
Appellate Division, Fourth Department
Appraisal MUST Await Determination of Coverage Issues Litigated in a Plenary Action

The decision succinctly incorporates the written decision of the trial court.  Nevertheless, its impact is important so we offer a few comments.  This case arises out of disputed damage to plaintiff’s roof after a wind event.  The carrier acknowledged a discrete area where the roof was damaged by wind, but disclaimed the insured’s broader claim of damage throughout the roof.  In response, the insured assert its right to appraisal under the terms of the policy, and Selective promptly objected. 

Plaintiff, in its Petition to Compel appraisal, argued that it was entitled to proceed because Selective had acknowledged a portion of the claimed loss was covered.  As such, plaintiff reasoned that the remaining claim was an issue of the “scope of the damage” and thusly within the parameters of the appraisal process.  Selective argued, however, that its denial was premised upon a coverage interpretation, and underly prevailing NY law appraisal was premature until all issues of coverage had been resolved.  In affirming the trial court, the Appellate Division agreed that all issues of coverage must resolved prior to appraisal rights ripening.  As such, the Petition to Compel Appraisal was properly dismissed without prejudice. 


01/31/20       Carcione v Essex Homes of WNY, Inc.
Appellate Division, Fourth Department
Trial Court Cannot Alter, Waive or Limit Workers’ Compensation Lien

Plaintiff commenced the instant action after sustaining injury on November 4, 2018 while in the course of his employment.  Prior to the lawsuit, however, plaintiff applied for, and was granted, benefits from his employer’s workers’ compensation policy.  When suit was filed, the carrier (Hartford) asserted a lien for recovery of any amount it paid in benefits related to the November 4th incident.

After a settlement was apparently reached, plaintiff appears to have asked the court for reduction of the lien on the basis that some of the benefits were related to injuries the plaintiff had sustained prior to the date of the incident giving rise to the current lawsuit.  The trial court agreed, and reduced Hartford’s lien accordingly.  

The Fourth Department overruled the trial court therein holding that Section 29 of the Workers’ Compensation Law provides the paying worker’ compensation with a right for reimbursement of payment “whenever recovery is obtained in tort for the same injury that was a predicate for the payment of compensation benefits.” Here, there was no dispute that plaintiff filed only one claim for workers’ compensation benefits (ie., the November 4th incident).   As such, upon payment of any benefits, Hartford’s lien became enforceable as against any recovery obtained in a tort action seeking recovery for the same incident.  Moreover, once a lien right attached the Appellate Division noted that the trial court did not have authority to “strike, waive or reduce any portion” of it “beyond its share of the litigation expenses, including attorney's fees, so that plaintiff could recover more.”


Michael J. Dischley
[email protected]

01/02/20       Ni v. O'Brien et al.
Appellate Division, Third Department
Plaintiff Fails to Provide Objective Medical Evidence Relevant to Distinguishing his Preexisting Condition

Plaintiff appealed from a Supreme Court decision which granted defendants' motion for summary judgment. The initial motion was granted after Defendants successfully asserted that plaintiff had a preexisting condition caused by an earlier car accident in 2010, which resulted in a diagnosis of both lumbar and cervical strains.

Here, plaintiff's medical evidence failed to address the 2010 accident or his preexisting medical conditions. In support, plaintiff submitted three reports provided by medical examiners. The first report was prepared by physician Paul Jones, who examined plaintiff in 2015 and 2017. On both occasions, Jones diagnosed lumbar injuries, and concluded that the injuries were causally related to the 2015 accident. However, each of these reports noted that no medical records were reviewed, that there were no preexisting injuries affecting plaintiff's recovery, and that plaintiff denied existing medical problems. A third examination was conducted by physician Adam Soyer, who reviewed some of plaintiff's medical records as part of the examination. Soyer concluded that the injury and accident were causally related but found no orthopedic disability. This expert similarly noted that plaintiff denied any prior motor vehicle injuries. Thus, plaintiff's reports failed to address the 2010 accident, and Jones' reports did not include a review of plaintiff's medical records. Plaintiff therefore failed to provide "objective medical evidence relevant to distinguishing his preexisting condition" from the injuries allegedly sustained in the 2015 accident.

Accordingly, the Appellate Division found that the Supreme Court properly granted defendant's motion for summary judgment dismissing the complaint. The lack of enough proof on causation was dispositive of all three of the serious injury categories asserted by plaintiff.


01/23/20       Rosario v. Gonzalez et al.
Appellate Division, First Department
Plaintiff Failed to Raise a Triable Issue of Fact Pertaining to Plaintiff’s Preexisting Conditions

Plaintiff appealed from a Supreme Court decision which granted defendants' motions for summary judgment dismissing the complaint due to plaintiff's inability to demonstrate that she sustained a serious injury to her right knee within the meaning of Insurance Law § 5102(d).

Defendants satisfied their prima facie burden of showing that plaintiff did not sustain a serious injury to her right knee by submitting the report of their orthopedic surgeon, who found that she had normal range of motion in her right knee, and opined that plaintiff's emergency room records were inconsistent with her claimed right knee injury. Defendants also demonstrated that the claimed knee injury was not causally related to the accident by submitting the report of their radiologist, who found that the MRI of plaintiff's right knee showed degenerative conditions not related to the accident. Defendants also submitted the operative report of plaintiff's orthopedic surgeon, which included findings of degenerative conditions and noted that plaintiff ceased treating about eight months after the accident.

In opposition, plaintiff failed to raise an issue of fact. Although her orthopedic surgeon found recent limitations in range of motion of her right knee that could be considered significant, he provided only a conclusory opinion that her osteoarthritis was caused by the accident. He did not address the degenerative conditions he found during surgery or explain why plaintiff's current symptoms were not related to preexisting conditions.

Accordingly, the Appellate Division found that the Supreme Court properly granted defendant's motion for summary judgment dismissing the complaint.


Agnes A. Wilewicz

[email protected]

02/03/20       Clones Investment v. The People’s Insurance. Co. of China
United States Court of Appeals, Second Circuit
Second Circuit Finds for Carrier in All Risks Marine Cargo Insurance Coverage Case, Where Insured Cannot Establish Shipping “Yard” Was a “Port”

The Peoples Insurance Company of China Property and Casualty Company Limited (“PICC”) issued an “all risks” marine cargo insurance policy to Clones Investment, LLC (“Clones”), covering a period that included August 2014. Around that time, shipping containers were delivered to Tianjin Sinuoda Yard (“the Yard”), which was not part of the Xingang Port (the “Port”). When a claim arose, at issue was whether the claim attached upon delivery, when the policy required delivery at a “port”. Upon the insured’s submitted documents and testimony, the court found that the Clones had not offered any admissible evidence that the Yard was in fact a part of the Port. Thus, they failed to meet their burden of proof, particularly since the carrier was able to establish instead that the Port and the Yard were indeed separate locations. Since coverage did not begin until Port delivery, there was no coverage for the claim.


01/27/20       Lexington Ins. Co. et al v. RLI Ins. Co.
United States Court of Appeals, Seventh Circuit

Excess Insurer’s Policy Held Ambiguous, Yet Extrinsic Evidence Proves the Insurer’s Interpretation Correct (Illinois Law)

New Prime, Inc., a trucking company, was involved in two separate motor vehicle fatal accidents with Samuel and Katherine Herrera and Daniel Montini that resulted in settlements of $20 million and $16 million, respectively. New Prime had an excess liability policy with RLI Insurance Company that provided a per occurrence limit of $2 million with a self-insured retention of $3 million. New Prime also had a $5 million excess liability policy with Lexington Insurance Company that sat above RLI’s layer and a $25 million umbrella liability policy with Union Fire Insurance Company that sat above Lexington’s layer (Lexington and Union Fire are both AIG companies).

New Prime’s excess policy with RLI, however, featured an Aggregate Corridor Deductible (“ACD”) of $2.5 million. An endorsement to the policy described the function of the ACD:

The insured shall respond to, investigate, adjust, defend, and dispose of by payment or otherwise all losses and claims for losses covered by the Policy for which the total claim is greater than the $3,000,000 Self Insured Retention (SIR) until the Aggregate Corridor Deductible of $2,500,000 has been satisfied. Once the Aggregate Corridor Deductible has been exhausted by payment for one or more losses and “costs”, the Insured is only responsible for losses and “costs” up to [the] Per Occurrence Self Insured Retention.

The endorsement required New Prime to pay an additional $2.5 million in the aggregate above its $3 million SIR in the RLI policy before RLI would begin to pay. RLI and the AIG insurers, however, disagreed as to whether the $2.5 million Aggregate Corridor Deductible would sit within RLI’s $2 million layer of coverage or below RLI’s layer. If the ACD sat within RLI’s layer, then RLI would owe nothing for the Herrera settlement and would owe only $500,000 for the Montini settlement. If the ACD sat below RLI’s layer, then RLI would pay its full $2 million limit for each of the settlements.

The Seventh Circuit, applying Illinois law, ultimately agreed with RLI that the ACD sat within RLI’s layer of coverage. The circuit court first reviewed whether the ACD actually qualified as a deductible or a self-insured retention, noting the industry practice that a deductible would erode policy limits. The court found this analysis to be “inconclusive,” as the ACD here had elements of both a deductible (particularly the term’s name) and a self-insured retention (claims-processing duties for the insured).

The appellate court also rejected the insurers’ various textual arguments for interpreting the meaning of the ACD. According the Seventh Circuit, the RLI policy “left the key term in this dispute undefined, and both sides’ proffered interpretations of the ACD would in effect nullify some language in the contract, which is ordinarily a result to be avoided in legal textual analysis.” The court held that the RLI policy was ambiguous on this point and then turned to extrinsic evidence to resolve the dispute.

The “[u]ndisputed evidence of the negotiations between New Prime and RLI, and between New Prime and AIG,” according to the court, “resolves in the ambiguity in RLI’s favor.” In particular, the court noted that during the renewal process for the RLI policy term at issue, New Prime had concerns that RLI would force New Prime to settle claims “using our SIR dollars” and actually had requested a “$2 M. annual aggregate deductible” so that the “combination of SIR plus the annual aggregate deductible equals the $5 M. per occurrence limit.” As a result, RLI prepared a proposal for New Prime that said that the Aggregate Corridor Deductible was “in Layer above $3,000,000 SIR” and that it “applies to the $2,000,000 Limit” (emphasis added). Communications between New Prime and the AIG insurers during the application process for those insurers’ excess policies apparently also acknowledged a $5 million per occurrence threshold before the Lexington policy would apply.

The Seventh Circuit held that this extrinsic evidence resolved the RLI policy’s ambiguity and concluded that the ACD applied within the RLI’s policy $2 million layer of coverage.

Editor Note: Thanks again to Michael L. Young for the write-up of this case. Michael is a partner in the St. Louis office of HeplerBroom, LLC, with a primary emphasis in the practice of insurance coverage and bad faith. He represents insurers in complex insurance coverage matters at all stages of the claims process in Missouri and Illinois. You can follow him on LinkedIn, listen to his daily insurance podcast, or subscribe to his insurance e-newsletter by emailing him at [email protected].


Jennifer A. Ehman

[email protected]

01/23/20       Sea Breeze Holdings, LLC v. Endurance Am. Specialty Ins. Co.
Supreme Court, New York County

Hon. Gerald Lebovits
Court Upholds Denial Based Upon Designated Ongoing Operations Exclusion

Defendant issued a CGL policy to Sea Breeze Holdings (“Sea Breeze”) who owned property located in Bronx, New York.  The policy included a Designated Ongoing Operations provision which removed coverage for “bodily injury” to “persons while performing or operating in the capacity of an independent contractor or an employee of a contract[or]… and such ‘bodily injury’…arises out of and in the course of the Designated Ongoing Operation(s) described in this endorsement, regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.”  The Designated Ongoing Operations were described as “Any/All Construction Operations performed by or on behalf of the ‘Insured’.  Construction Operations include but are not limited to interior and exterior renovations, interior and exterior structural improvements, structural alterations, demolition, and additions to the existing structure.”

On April 15, 2008, an ACORD form was forwarded to Endurance, which indicated that on January 11, 2008, the underlying plaintiff, Concepcion Guzman, was working for Rubin Cabrera Contracting at the insured location when he was hit in the face with a pipe.  Upon receipt, Endurance hired a company to investigate the claim.  The investigator reported that Sea Breeze had retained a general contractor, Explorer New York Contracting, and neither Explorer nor its subcontractors had never heard of Rubin Cabrera Contracting or this incident.  Explorer’s owner believed Guzman was injured performing plumbing work at a neighboring property.  The investigator then reached out to Guzman’s counsel for more information and received no response.  Endurance ultimately denied the claim because it was unable to confirm the incident had occurred on the premises at the date provided.

A few years later, on January 17, 2011, another ACORD form was forwarded to Endurance along with a summons and complaint.  This notice indicated that Guzman had tripped at the construction site on January 8, 2008, and that he was injured removing a boiler at the premises.  An amended complaint then changed the date of loss to January 11, 2008.  In response to this notice, by letter dated February 16, 2011, Endurance’s TPA disclaimed coverage citing the Ongoing Operations Exclusion and/or two other exclusions.  This declaratory judgment action was then filed, and both sides moved for summary judgment.

The court began by considering the application of the Ongoing Operations provision.  Sea Breeze argued that it was ambiguous pointing to inconsistency between the endorsement number and title, and what was listed on the schedule of endorsements appearing on the declarations page.  Sea Breeze also submitted that the complaint contained no facts identifying Guzman as Sea Breeze’s employee, contractor or independent contractor.  Sea Breeze lastly submitted that Endurance failed to raise these exclusions in a timely manner in compliance with New York insurance law.

Endurance then argued in response that a certified copy of the policy and underwriting file confirmed the provision was part of the policy.  It then directed the court’s attention to that part of the complaint wherein Guzman submitted that “he was injured in the course of his employment while performing construction work at the Premises.”  Endurance also submitted that the denial was timely since it went out less than a month after it received the complaint.  And, it could not have issued the denial after the initial claim since its investigation did not trigger such a duty.  The duty was only triggered based upon the additional details contained in the complaint.  Lastly, Endurance cited to a workers’ compensation transcript which found an employer/employee relationship between the Guzman and Explorer.

Ultimately, the court concluded granted Endurance’s motion for summary judgment finding that it was under no obligation to defend or indemnify Sea Breeze relative to the Guzman action.  The court rejected the argument that Endurance was under an obligation to disclaim coverage in 2008.  The court found that the statement in the 2008 ACORD that Guzman was injured working for a contractor at the premises did not, in and of itself, implicate a policy exclusion.  In turn, Endurance properly and promptly retained an investigator.  The investigation completed within two months of receiving the ACORD, revealed that Guzman was not an employee of either Sea Breeze or Explorer.  Thus, Endurance demonstrated that it was not aware until 2011, that the Ongoing Operations Exclusion applied.  A denial was then issued within 30 days from receipt.  The court noted that even though the Workers Comp. Board ultimately concluded that an employer/employee relationship existed between Guzman and Explorer, Endurance was entitled to rely on representations made in 2008 that Guzman was not an employee or contractor.

The court further concluded that Endurance demonstrated the incident fit squarely within the Ongoing Operations exclusion as it unambiguously excluded from coverage any and all construction operations including demolition, performed by or on behalf of Sea Breeze whether those operations were conducted for Sea breeze or for others.  Also, the court deemed it irrelevant that Guzman had testified he was actually self-employed since the exclusion applied to independent contractors as well as employees and contractors.   


Brian D. Barnas
[email protected]

02/04/20       Smith v. Nationwide Mutual Ins. Co.
United States Court of Appeals, Eleventh Circuit
Insurer Did Not Fail to Settle Claim Against its Insured in Bad Faith where Settlement was Rejected by Plaintiff’s SUM Carrier

Donna Smith was driving, speeding, and talking on her phone on July 30, 2013, when she crossed into the opposite lane and hit Voss, who was biking, head on.  Voss suffered facial fractures, skull fractures, and a traumatic brain injury.  He spent nearly a month in the hospital and two weeks in inpatient rehab, but his brain function will never fully recover.  By the time this case began, Voss had incurred more than $725,000 in medical bills.

Smith was insured by Nationwide under a policy with $25,000 liability coverage.  Voss was covered by four State Farm policies that collectively provided $100,000 in “underinsured motorist coverage.”  Shortly after the accident, Nationwide and Smith offered to settle for the policy limits $25,000. Voss agreed. But State Farm, Voss’ insurer, did not. It blocked the settlement agreement.

Voss had notified State Farm that he wanted to settle with Smith and Nationwide for the maximum amount of Smith’s Nationwide policy: $25,000.  State Farm investigated the claim, spoke with Voss and his parents (who did not witness the accident), and rejected the settlement.  It fronted $25,000, which is the settlement amount that Voss could receive from Nationwide, and forced Voss to go to trial against Smith and Nationwide to prove that Smith was actually liable and that Voss’ damages exceeded the $25,000 available to him under Smith’s Nationwide policy, which it was entitled to do under Alabama law.

After a three-day trial, the jury returned a $1,900,000 verdict against Smith.  State Farm paid the remainder of the coverage amount under the underinsured motorist policy, and Nationwide paid out its policy maximum.  Smith was left liable for $1,775,000 in damages and the interest on that amount.

Smith filed suit against State Farm and Nationwide.  Against State Farm she claimed negligent and wanton failure to settle, bad faith failure to settle, and abuse of process. Against Nationwide she alleged negligent and wanton failure to settle, bad faith failure to settle, and breach of contract.  All of the claims were dismissed on a motion to dismiss at the court below.

Smith appealed the dismissal of the abuse of process claim against State Farm and the failure to settle claim against Nationwide.  The abuse of process claim was dismissed because State Farm did not do anything in furtherance of its alleged improper decision to front the $25,000.  It simply did nothing and let the case go to trial, which was insufficient for the abuse of process claim.

The failure to settle claim was also dismissed.  It was undisputed that the failure to settle was not because of Nationwide.  It was due to State Farm’s rejection of the settlement.  Indeed, Nationwide had offered the policy limits shortly after the accident and Voss accepted.

01/31/20       Spine Surgery of Buffalo v. Geico Cas. Co.
Appellate Division, Fourth Department
Prima Facie Tort Cause of Action Against Insurer Did Not State a Cause of Action

Plaintiff, as the assignee of certain claims for no-fault benefits, commenced this action asserting a single cause of action for prima facie tort and seeking punitive damages.  Defendant moved to dismiss the complaint.  Dismissal was granted without prejudice.  The prima facie tort cause of action failed because it did not allege that defendant's sole motivation was disinterested malevolence.  In addition, the complaint failed to allege special damages as required.


John R. Ewell
[email protected]

01/13/20       Lewis Clinic v. Philadelphia Indem. Ins. Co. et al.
Superior Court of New Jersey
(Judge Robert Lougy)
New Jersey Trial Court Extends Appreciable Prejudice Standard to Voluntary Payer Defense. Thousands Flee.

In the underlying action, The Lewis School of Princeton (“Lewis School”), a college preparatory school, was sued by another school claiming trademark infringement. It was claimed that Lewis School stole the other school’s motto: “Where Students Who Learn Differently Thrive.” Lewis School retained McCarter & English (“law firm”) to defend against the suit. The law firm was retained in late February of 2018. The case settled three months later in June, and the law firm charged the school $150,000 in legal fees.

One month earlier, in May 2018, Lewis School notified its liability insurer, Philadelphia Indemnity Insurance Company (“PIIC”) of the lawsuit. PIIC did not learn until June 2018 that Plaintiff had already retained counsel. The case settled three days after PIIC learned the insured had already retained its own counsel. Lewis School then requested that PIIC reimburse it for already-paid legal fees. The Commercial General Liability insurance policy contained a notice of claim provision, requiring Lewis School to provide notice to PIIC “as soon as practicable,” and a voluntary payment provision that states: “No insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.” (emphasis added).

PIIC contended that it did not know that Plaintiff had retained McCarter & English in defense of the litigation until June 2018 nor did it consent to the firm’s retention or defense or any payments to the firm. Subsequently, PIIC refused to pay the fees incurred prior to May 9, 2018, the date the Notice of Claim was provided, asserting that those were voluntary payments.

Lewis School commenced this action against PIIC alleging breach of insurance contract. Lewis School moved for summary judgment, asking the court to find that PIIC is liable for the attorneys’ fees. On reply, Lewis School amended the relief sought to be on liability only, leaving damages for trial. Plaintiff argued that PIIC must demonstrate appreciable prejudice in order to deny coverage, and that PIIC had not done so. Lewis School further alleged that PIIC cannot establish that the late notice constitutes prejudice, given that the underlying action settled. Therefore, Lewis School argued that PIIC is liable for the attorneys’ fees and costs incurred.

In response, PIIC argued that Lewis School is not entitled to any costs that arose before PIIC received notice of the litigation. PIIC countered that Lewis School incorrectly asserts that PIIC must establish appreciable prejudice, arguing that the appreciable prejudice standard only applies when the insurer refuses to indemnify the insured because of late notice and that no such requirement exists under voluntary payment provisions.

Although PIIC argued that the appreciable prejudice standard did not apply, the trial court ruled PIIC must still demonstrate appreciable prejudice in order to avoid coverage. In the trial court’s opinion, the appreciable prejudice standard applies to timely notice of a claim, the requirement that the insured forward all relevant documents, and the requirement that the policyholder cooperate with the insurance company and not make any voluntary payments.

PIIC asserted that it lost the opportunity to control the defense and never consented to McCarter’s representation. However, the trial judge was unpersuaded, ruling that “Other than stating PIIC appointed other counsel at a lower hourly rate, the insurer does not demonstrate what action it would have taken that cannot now be accomplished.” The trial judge ruled that “lack of control of the litigation is not, by itself, enough to meet the standard.” Therefore, the Court granted Lewis School’s motion for summary judgment, ruling that there was no material fact dispute whether the insurer suffered appreciable prejudice. Trial on damages to be scheduled.

Note: I’m with the carrier on this one. Appreciable prejudice is required for a late notice denial. Voluntary payment is a separate and distinct policy defense. If the insured makes a payment without the carrier’s consent, the insured’s payment is at “the insured’s own cost”. This decision fails to enforce the plain and unambiguous terms of the policy. If you would like a copy of the court’s decision, please send me an email and I will share a copy with you.

01/22/20       Canyon Estates v. Atain Specialty Ins. Co. et al.
United States District Court, Western District of Washington

Washington Federal Court Rules Coverage Counsel, who Issued Disclaimer on His Firm Letterhead, acted as a Claims Adjuster and therefore, Can
Be Deposed.

This matter came before the District Court after Great Lakes Insurance, SE (“Great Lakes”) objected to the magistrate’s discovery order adjudicating a dispute over whether certain documents within Great Lakes’ claim file were privileged or subject to disclosure.

Great Lakes retained outside counsel, Michael Hooks, to provide legal analysis of policy and legal defenses available to it under Washington State law. After Hooks rendered his coverage opinion, he prepared a disclaimer to comply with Washington State law at the request of the insurer.

Great Lakes asserted that it “consciously chose to keep [Michael] Hooks, its outside counsel, separate from the claim investigation, and he did not participate in the investigation or otherwise perform claim handling functions.” After reviewing the documents in dispute, the Court declared Hooks’ role to be “pure amphigory” and that “Hooks clearly—and arguably, knowingly—engaged in at least some quasi-fiduciary activities, including the authoring of draft letters signed by Great Lakes and sent to the [insured] related to coverage and claims processing.”

Under Washington law, “[A]ssisting an adjustor in writing a denial letter is not a privileged task.” Bagley v. Travelers Home & Marine Ins. Co., No. C16-706-JCC, 2016 WL 4494463, at *2 (W.D. Wash. Aug. 25, 2016). Additionally, where the insurer’s attorney is involved in both quasi-fiduciary and coverage or liability capacities, waiver of the attorney-client privilege is likely since “counsel’s legal analysis and recommendations to the insurer regarding liability generally or coverage in particular will very likely implicate the work performed and information obtained in his or her quasi-fiduciary capacity.” Palmer v. Sentinel Ins. Co. Ltd., No. 12–5444 BHS, 2013 WL 3448128, at *2 (W.D. Wash. 2013). Ultimately, the Court found that very few of the documents at issue are covered by attorney-client privilege given Cedell.

Finally, the Court was convinced after the in-camera review that Hooks has discoverable information related to the drafting of those letters, relevant to the Association’s claims, and that his deposition is permitted under Cedell. Determining which questions seek information that remains privileged is an issue the Court left to the parties to work out at deposition.

Note: If you would like a copy of the court’s decision, please send me an email and I will share a copy with you.


Lee S. Siegel

[email protected]

01/28/20         Advanced Welding, LLC v. LM Insurance Corp.
United States District Court, District of Connecticut
Carrier’s Cancellation for Non-Cooperation Upheld

The District Court sustained the insurer’s cancellation of the insured’s workers compensation insurance for its non-cooperation with an audit. Further, while questioning whether Connecticut even recognizes a cause of action for equitable estoppel, it found that under the uncontested facts, the carrier was not estopped from refusing to reinstate coverage.

Connecticut participates in the National Council on Compensation Insurance (“NCCI”), which is licensed by Connecticut and designated as the plan administrator of the state’s workers’ compensation assigned risk program. This program makes workers’ compensation insurance available to insureds who cannot obtain coverage through the private market. Here, Advanced, a welding company, applied for coverage and was assigned to Massachusetts-based LM Insurance. LM issued coverage but then initiated an audit of the insured to review classifications of employees and payroll records. Advanced failed to cooperate with the audit and after lengthy efforts, LM cancelled the policy. “In the Notice of Cancellation, LM Insurance stated that Advanced Welding’s policy was cancelled effective November 11, 2015 “due to your failure to comply with Plan underwriting rules and your failure to respond to our requests for additional information.…. [Y]ou are not eligible for reinstatement or replacement coverage through the Plan until all eligibility requirements, including the requirements set forth above, have been satisfied,” the court wrote.

Of course, following the cancellation an Advanced employee was severely injured on the job. Advanced tendered the claim which LM denied and Advanced brought this suit in federal court seeking coverage. LM argued that it properly cancelled the policy and that it was not obligated to reinstate it. Advanced alleged that LM improperly cancelled the policy but defended the motion solely on ground that LM should be equitably estopped from refusing to retroactively reinstate the policy.

The doctrine of “equitable estoppel is concerned with actions by one party that induce a faulty reliance by the other party.” Celentano v. Oaks Condo. Ass'n, 265 Conn. 579, 615 (2003). Under Connecticut law, to invoke the doctrine, two elements must be proved: (1) the opposing party “must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief,” and (2) the complaining party in reliance “must actually change his position or do some act to his injury which he otherwise would not have done.” Russo v. City of Waterbury, 304 Conn. 710, 735 (2012). In reviewing the record of post-cancellation communications between the parties, the court concluded that, “the record does not support the existence of a genuine fact issue to show that LM Insurance made any statement or engaged in any act that was intended to or calculated to induce Advanced Welding to believe that LM Insurance would reinstate the policy. This precludes Advanced Welding’s equitable estoppel claim.”

Accordingly, the court granted the carrier summary judgment, upholding its cancellation of coverage for non-cooperation.


Brian F. Mark
[email protected]

No cases this week.  Attending DRI Product Liability Conference in New Orleans.


Eric T. Boron

[email protected]

01/29/20       USAA Cas. Ins. Co. v. Trinity Carr        
Supreme Court of Delaware
Delaware’s High Court Rules Whether Assault is an “Accident” is Determined by the Intent of the Insured, Not the Victim’s Viewpoint

Last week the Delaware Supreme Court reversed summary judgment that had been granted to the insured in the lower court in USAA’s DJ action against its insured, ruling through the reversal that USAA is not obligated to defend or otherwise provide coverage for claims arising from an assault of a classmate in a high school bathroom, resulting, ultimately, in the assault victim’s death.  Supreme Court’s reversal reflected its determination that the bathroom attack did not constitute a covered “occurrence” under the policy, and, that application of the insured’s homeowner’s policy’s expected or intended exclusion barred liability coverage for the incident.

Per the background facts recited in the Delaware Supreme Court’s opinion, the non-party victim suffered sudden cardiac death after she was assaulted by defendant Carr in their high school bathroom. The victim’s autopsy revealed that she had a “large atrial septal defect and pulmonary hypertension,” which, in addition to the emotional and physical stress from the fight, caused her heart failure. The Court had previously analyzed the facts and video evidence related to Carr's criminal proceedings, finding that the assault, which consisted mostly of “awkward punches ... grappling[,] and kicking” on the floor, was a “contributing cause” of the victim’s death. 

After Ms. Carr's criminal prosecution, two civil lawsuits were filed in Delaware Superior Court by the victim’s estate and by her parents.  Ms. Carr demanded a defense and indemnification from USAA, which had issued a homeowner's insurance policy to Ms. Carr's mother potentially covering Ms. Carr as a resident relative.

In response to the demand for defense and indemnification, USAA sought a declaratory judgment that it had no obligation to defend or indemnify Ms. Carr.   USAA argued the victim’s bodily injury—death—was not caused by an “accident,” as required for coverage under the Coverage Clause of the Homeowner’s Policy (that is, the bodily injury was not caused by an “occurrence” to which this coverage applies).  “Occurrence” is defined in the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results ... in ... bodily injury…”.

Alternatively, USAA argued that, even if the victim’s death was caused by an “accident,” liability coverage is nevertheless not available due to the applicability of the policy’s expected or intended injury exclusion Clause (excluding liability coverage for bodily injury “which is reasonably expected or intended by an insured even if the resulting bodily injury ... is of a different kind, quality[,] or degree than initially expected or intended”). 

The Supreme Court of Delaware agreed with USAA that the victim’s bodily injury and death was not caused by an “accident”, and there was therefore no covered occurrence.  Moreover, the Supreme Court held that even if it could be shown the victim’s bodily injury and death was caused by an “accident”, liability coverage would nonetheless be excluded under the policy’s expected or intended injury exclusion.


Marina A. Barci

[email protected]

01/31/20       Spine Surgery of Buffalo Niagara v. GEICO Cas. Co.
Appellate Division, Fourth Department
Provider Action for Punitive Damages Against Insurer Thrown Out

Spine Surgery of Buffalo Niagara, as the assignee of certain claims for no-fault benefits, commenced this tort action against GEICO seeking punitive damages. Spine Surgery’s alleged that GEICO engaged in conduct violating the unfair claim settlement practices statute (N.Y. Insurance Law § 2601) and that GEICO acted maliciously and with disinterred malice. There is no private cause of action under Insurance Law § 2601 and in order to bring a claim it must be alleged that the insurer’s sole motivation is disinterested malice that is show through transactions or occurrences or a series of transactions or occurrences by the insurer (Greater Buffalo Acc. & Injury Chiropractic, P.C. v Geico Cas. Co., 175 AD3d 1100, 1101-1102 [4th Dept 2019]). Special damages must also be asserted. Here, Spine Surgery did not include any relevant facts in its complaint to support its claims, including the time period at issue, the number of forms that GEICO requested they resubmit, or the number of claims involved. Because Spine Surgery did not provide the requisite proof in their complaint, the Court found that Spine Surgery failed to state of a cause of action and dismissed the complaint without prejudice.


Ryan P. Maxwell
[email protected]

Legislative List

01/27/20       Senate Insurance Committee Report Numerous 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 no. S769A, relates to permitting certain insurance coverage to be placed by licensed excess line brokers with excess line insurers without regard to the diligent effort requirement. Originally passing the Senate on May 30, 2019, the bill died in the Assembly and was returned to the Senate. On January 8, 2020, it was referred to the Senate’s Standing Committee on Insurance.

S769A attempts to exempt wholesale insurance brokers placing commercial lines insurance from the diligent effort requirement held of excess lines, to streamline the excess line affidavit regarding declinations filed by insurance brokers when placing excess lines insurance.

As indicated in the bill’s Sponsor Memorandum, “[t]he excess line market exists to insure risks which New York admitted insurers choose not to underwrite because the risks are distressed, unique, volatile, or involve new

businesses or coverages without loss history” and “is of vital importance to New York.”  Believing it a disservice to consumers that rely upon the excess lines market, the memorandum notes that “nimble processing is essential to effectively serve consumer needs.” By relieving wholesale excess lines brokers from the required filing of declination information with ELANY, it is believed that the entire process can be more efficient for consumers in the future.

Sticking with the theme of required declination filings in excess line markets, the Senate Insurance Committee also reported S1603, which attempts to repeal the requirement that excess line brokers must obtain a declination from the medical malpractice insurance pool before the broker can place primary malpractice insurance in the excess line market. Originally passing the Senate on May 22, 2019, the bill died in the Assembly and was returned to the Senate. On January 8, 2020, it was referred to the Senate’s Standing Committee on Insurance.

In New York’s medical malpractice insurance marketplace, 80% of the entire market is placed with four insurers, with the fourth insurer, Medical Malpractice Insurance Pool ("MMIP"), acting as the residual market and existing to underwrite all medical malpractice risks rejected by licensed insurers.

As of today, New York Insurance Law § 2118(e)(2)(A)(ii) requires excess line brokers obtain a declination from the residual market carrier, MMIP, prior to placing primary malpractice insurance in the excess line market. However, MMIP rarely declines such risks, and thus acts as a constructive bar on the excess line market underwriting these risks in New York. Therefore, removing this requirement of declination by MMIP would allow doctors, dentists, and general hospitals more products, terms and conditions to choose from, in order to best suit their needs from highly rated insurers. An insured professional would thus be permitted to obtain coverage from an excess line insurer with terms and conditions it may deem superior to those offered by MMIP, ensuring the most secure coverage options are available.

On a separate topic, the Senate Insurance Committee reported bill no. S4081 to the Senate, which intends to clarify that assessment cooperative property and casualty insurance companies are authorized to write umbrella insurance policies and standalone liability coverage. Originally passing the Senate on March 14, 2019, the bill died in the Assembly and was returned to the Senate. On January 8, 2020, it was referred to the Senate’s Standing Committee on Insurance.

Assessment cooperatives are property and casualty insurance companies that have covered risks for thousands of homeowners, renters, small businesses and farms in Upstate New York for decades upon decades. However, current law restricts assessment cooperatives from underwriting umbrella policies for policyholders, which arguably places those cooperatives at a disadvantage in the insurance markets they serve, primarily rural and underserved areas of Upstate New York, and those underserved populations potentially face price increases due to limited options. The Sponsor Memorandum attempts to exemplify the problems faced by these underserved markets:

[T]housands of tenant and homeowner policies would be negatively impacted without any corresponding benefit. Similarly, small businesses who rely on the assessment cooperatives to write coverage in Manufacturers & Contractors policies would also be harmed, again without any corresponding benefit. In fact, assessment cooperatives and advance premium cooperatives in New York cove over 71,000 New York small businesses.

The bill proposes amendments to Insurance Law § 6605 to remove references restricting the underwriting authority of assessment cooperatives to that which is “solely in conjunction with fire insurance written under the same policy and covering the same premises,” and also add a new subsection (d) providing that:


Finally, as relevant for this column, the Senate Standing Committee on Insurance reported to the full Senate bill no. S5735, which would permit insurers to make available multiple rating programs for commercial insurance within the same company. Although this bill was referred to the Senate Insurance Committee originally on May 14, 2019, no action was taken on it at that time. It was referred again to the Committee on January 8 ,2020.

Since 2011, personal lines insurers have been statutorily authorized under New York Insurance Law § 2352 to make available multiple rating programs within the same company. That 2011 legislation corrected the cumbersome and expensive process personal lines insurers had to navigate in order to have more than one rating plan—a process that literally had required an insurance company to establish a separate subsidiary or affiliate company for the primary purpose of offering a new rating plan. Needless to say, costs were reduced.

Fast-forward to 2020, this bill would allow insurers to provide multiple rating plans for commercial lines insurance without forming subsidiary and/or affiliate companies. Justifying the change, the Sponsor Memorandum notes that:

To remain competitive, insurance companies, both commercial and personal lines companies, need to be able to continually develop new rating plans that introduce different rating elements that allow them to better segment and price business. This bill allows insurers on the commercial lines side to adopt these innovations in the most efficient and cost-effective way possible by authorizing the establishment of an additional rating plan within the same insurance company.

Notably, although this bill would provide cost-saving mechanisms to insurers, each new rating plan would require prior approval by the Superintendent of Financial Services and may only be offered to a carrier’s new insureds.


Regulatory Wrap-Up
03/02/20       Public Comment Period For Rules Governing DFS Adjudicatory Proceedings Will Expire After February
Department of Financial Services
Public Comment Period for New Rules Governing the Procedures for Adjudicatory Proceedings Before the Department of Financial Services Expires March 2, 2020

As was outlined in the Regulatory Wrap-Up from our December 27, 2019 edition of Coverage Pointers (Volume XXI, No. 14), DFS has proposed new amendments to unify DFS’ adjudicatory procedures among banking, insurance, and other financial services industries. For those with a finger on the pulse of DFS adjudications, it might be of interest that your window to provide insight is closing. The public comment period for those proposed changes is set to expire on March 2, 2020. Below, we have excerpted our report for your reading pleasure:


12/17/19         Procedures For Adjudicatory Proceedings Before DFS
Department of Financial Services
Proposed Amendment to Unify DFS’ Adjudicatory Procedures Among Banking, Insurance, and Other Financial Services Industries

In 2011, the New York Legislature consolidated the former New York State Banking and Insurance Departments into the Department of Financial Services (“DFS”), establishing one agency responsible for the regulation and oversight of banking, insurance, and other financial services industries. In the wake of this fundamental change, separate rules governing the adjudicatory proceedings for banking and insurance proceedings have coexisted. This proposed amendment would replace those coexisting rules with a new regulation, added to 23 NYCRR, that unifies the procedures for DFS adjudicatory proceedings.

Since 2011, the Superintendent of Financial Services was afforded with more expansive authority than that once held by the heads of the individual Banking and Insurance Departments. To that end, this proposed regulation repeals Supervisory Procedure G 111 of the Banking regulations (3 NYCRR) and Part 4 of the Insurance regulations (11 NYCRR), in favor of a new Part 2 to 23 NYCRR to encompass all persons who may be subject to a Department adjudicatory proceeding. New Part 2 to 23 NYCRR continues to uphold the public policy of expeditious and impartial adjudicatory proceedings and comply with the requirements of Executive Order No. 131 (December 4, 1989), which remains in effect pursuant to Executive Order No. 2 (January 1, 2011).

DFS contends that the coexistence of two separate, adjudicatory procedures limits the ability it has to meet present needs. Specifically, DFS has expressed an intent to hold hearings on investigations and enforcement activities that may have an impact upon both the Insurance and Banking authority of the Department, and others that may have an impact upon authority contained solely in the Financial Services Law.

This new 23 NYCRR 2, entitled “Rules Governing the Procedures for Adjudicatory Proceedings Before the Department of Financial Services” is scheduled to be published in the State Register on December 31, 2019, with public comment expiring on March 2, 2020.

From the Filings Cabinet

01/29/20       Proposed Identity Recovery Helpline Deemed Discriminatory
Department of Financial Services

DFS Rejects Cybersecurity Filing Proposing Identity Recovery Coverage Requiring the Use of a Pre-determined Identity Recovery Agency

Last Wednesday, DFS rejected a Cybersecurity Coverage form filing due to the filing carrier’s failure to adequately address DFS’ concern regarding why the carrier had restricted coverage for identity recovery services to a pre-determined vendor through a mandatory helpline, per the terms of the policy.

DFS initially raised a concern to the carrier that “forcing an insured to use your helpline as opposed to any other better or equally reputable and competent vendor providing these services appears to be discriminatory” and that “it is not clear why the services would not be covered if the insured can obtain identity recovery assistance from an agency of their choice.”

In response the carrier noted its belief that “providing a single source of case management services is [not] discriminatory in any way.” The carrier suggested a number of reasons that it disagreed:

  • First, that cyber security insurance is not mandatory.

  • Second, that the carrier had performed due diligence in selecting the most qualified and reputable vendor for the service.

  • Third, that a pre-vetted vendor who already anticipates such calls from policyholders provides efficiency in handling such identity recovery services for those insureds, saving the insureds time in conducting their own market research and refocusing that time towards solving the problem.

  • Fourth, given the contractual relationship, the carrier would be able to take control where performance of the vendor was lacking.

  • Finally, the carrier suggested that, as with public adjusters who are paid by the insured themselves, an insured that selects their own identity recovery service should do so at their own expense.

DFS was not interested. The moral of the story: although a carrier might suggest that its insured contact a certain vendor to provide identity recovery services under a cybersecurity policy, it appears impermissible to require the use of that vendor in order for an insured to benefit from the limits available under such the policy.


CJ on CVA and USDC(NY)
Charles J. Englert III
[email protected]

11/13/19       Mills v. Roman Catholic Diocese of Rockville Centre
New York Supreme Court, Nassau County
In Motion to Dismiss, Diocese Argues the CVA’s Revival of Formerly Time-Barred Civil Actions Violates the New York State Constitution. Decision Pending.

This is motion pending in New York Supreme Court, Nassau County, awaiting judicial decision. Reference to the “Due Process Clause” refers to the New York State Constitution unless otherwise noted.

The Diocese of Rockville filed an omnibus motion to dismiss arguing, inter alia, that section 3 of the CVA codified in CPLR § 214-g, providing for a one year revival of time-barred civil actions based on enumerated sexual offenses is in violation of the Due Process clause of the New York State Constitution. The argument centers on the tenet that a statute of limitations protects fundamental rights of both potential defendants and society at large.

While the Diocese admits that the United States Constitution would not find such a revival window violative of the Due Process Clause, the New York Constitution provides more stringent protections than federal law against legislative revival of time-barred claims. New York law regards these revival statutes as an “extreme exercise of legislative power.” Hopkins v. Lincoln Trust Co., 233 N.Y. 213, 215 (1922). The New York standard for claim revival employs “a more functionalist approach,” and “weighs the defendant’s interests in the availability of a statute of limitations defense with the need to correct an injustice.” Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig., 30 N.Y.3d 377, 394 (2017). The Diocese contends that the only reason a claim revival statute would comport with the Due Process Clause is when a plaintiff could not have brought any action in a timely manner. See Hymowitz v. Eli Lilly & Co., 73 N.Y.2d 487 (1989). The Diocese points out two instances where a claim revival statute has been upheld: first, in cases where action to recover for a latent injury, with symptoms not appearing until after the statute of limitations expired, was precluded by a statute of limitations (Hymowitz), and second, cases where an individual was residing in Axis-occupied territories during World War II (See Gallewski v. Hentz & Co., 301 N.Y. 164 (1950)).

The Diocese, citing to a prior case involving a large number of plaintiffs alleging to have been abused by clergy members, further contends that the plaintiffs could have asserted their claims in a timely manner. See Zumpano v. Quinn, 6 N.Y.3d 666 (2006). In Zupano the Court of Appeal’s held that the plaintiffs “failed to satisfy th[eir] burden” of “establish[ing] that subsequent and specific actions by defendants somehow kept them from timely bringing suit.” Id. at 674. The Diocese contends that where victims were “fully aware that they had been abused” they should not be afforded a new opportunity for their day in court. Id. at 676. In the absence of any proof that the plaintiffs were unduly barred from asserting these claims in a timely manner, the Diocese contends that Court of Appeals precedent precludes the institution of a revival statute. The Diocese further argues that the revival statute undermines the integrity of the judicial process and a defendant’s due process rights. Noting that the passage of time causing key witnesses to become unavailable puts the Diocese (and other similar defendants) in the untenable position of rebutting allegations where very little evidence surrounding these allegations exists.  

The almost century of precedent features prominently in the Diocese argument. The cite to In re World Trade Ctr., which notes that “for nearly 100 years” the Court of Appeals (New York) has imposed due process constraints on the legislature’s authority to revive formerly time-barred claims. The Diocese argues that if claims under the revival statute are allowed to proceed, they would go against nearly a century of decisions that hold a legislatures imposition of a revival statute is an improper extension of their authority. The Diocese closes its argument on this matter by pointing to Zumpano v. Quinn, where the Court of Appeals had the opportunity to change precedent with regard to childhood sexual abuse claims, but instead asserted that plaintiffs had the opportunity to being their claims in a timely manner, and were no subject to extreme circumstances, therefore they should not be given the opportunity to bring them beyond the applicable statute of limitations.

Note: If you would like a copy of the motion papers, please send me an email and I’ll be happy to pass them along.


Diane L. Bucci
[email protected]

01/23/20       State Auto Prop. & Cas. Ins. Co. v. Ward Kraft, Inc.
United States District Court, District of Kansas

Insurer Has Duty to Defend Comparison Claim as Disparagement

Zebra Technologies International, LLC et al. sued Ward Kraft alleging that Ward Kraft and Typenex manufactured and sold patient identification wristbands that infringed on Zebra’s rights with regards to its own product.  The claims included patent infringement, unfair competition, false designation of origin under the federal Lanham Act, 15 U.S.C. § 1125(a), unfair competition under common law, and deceptive trade practices for misleading statements of fact under the Lanham Act.

State Auto Property & Casualty Insurance Company insured Ward Kraft under a policy that included “personal and advertising injury” coverage. The issue before the court was whether State Auto had a duty to defend Ward Kraft against Zebra’s claims.

Ward argued that the covered offense for injury arising out of the use of another’s advertising idea in the insured’s advertisement provided coverage for Zebra’s claims.  The court disagreed because Ward Kraft had not identified any advertising of Zebra’s which Ward allegedly used.  Zebra did allege trade dress infringement, and while trade dress could be the use of another’s advertising idea, that was not the case before the court because Ward Kraft was not accused of using Zebra’s trade dress in the promotion of Ward Kraft’s product.  The court recognized that for this offense to be covered, a causal connection is required between the injury and advertisement and there was no such showing in this case. 

The court did find a duty to defend in connection with Provision D, “oral or written publication in any manner of material that slanders or libels a person or organization or disparages a person’s goods, products or services.”  According to the court, Zebra accused Ward of equating its own inferior products with Zebra’s superior products which, according to the court, could constitute disparagement.  State Auto argued that Zebra did not allege that Ward made a comparison between the two products.  The court found that Zebra’s complaint did allege such comparison.  The court noted that in connection with Provision D, no causal connection was required between the injury and the advertisement and therefore, State Auto had a duty to defend.  


Earl K. Cantwell

[email protected]

06/26/19       American Integrity Ins. Co. v. Estrada
Florida District Court of Appeal
Does Failure to Fulfill Post-Loss Obligations Forfeit Coverage? 

The insured’s residence was allegedly burgled resulting in personal property loss and vandalism.   American Integrity demanded various supporting documents to the insurance claim including a sworn proof of loss and an EUO.   American Integrity ultimately denied the claim for alleged failure to comply with these and other post-loss obligations under the policy. When the insured sued, American Integrity raised a number of affirmative defenses focusing on the failure to comply with the policy-imposed post-loss obligations.   American Integrity also alleged insurance fraud. 

The trial court struck the fraud defense, apparently arguing that it had been insufficiently pleaded.  At trial, the trial court then struck the other affirmative defenses with respect to the post-loss obligations citing Florida court decisions holding that an insurer must plead and prove that it was prejudiced by the insured’s non-compliance.   Accordingly, the jury returned a verdict on behalf of the insured, which was reversed on appeal.

The appellate court first ruled that the trial court improperly struck the affirmative defense with respect to fraud, as it should have allowed American Integrity leave to amend the defense if further or more specific pleading was required.

With respect to the affirmative defenses on failing to comply with post-loss obligations, the court then addressed prior Florida court decisions.  The insured’s counsel convinced the trial court that a Florida Supreme Court decision in an uninsured motorist (UM) case established that, in order to prevail on a valid coverage defense for an insured’s failure to comply with post-loss obligations, the insurer must plead and prove that it was prejudiced by the insured’s alleged non-compliance.   However, the appellate court distinguished the motor vehicle case on the basis that the obligations in that case were not conditions precedent to an insured’s entitlement to sue the insurer for breach of the policy, and therefore the insured did not forfeit coverage by failing to submit to a medical exam.  Other Florida courts had apparently split on this issue whether this Florida precedent (in a motor vehicle case) applied to other policies such as this homeowner’s policy.

The appellate court essentially held that the precedent did not apply outside the uninsured motorist coverage context, and therefore an insured’s post-loss obligations contained in a homeowner’s policy were conditions precedent to suit, and the trial court in this case therefore erred striking those affirmative defenses.

The appellate court then discussed issues of materiality and prejudice. It acknowledged that Florida case law on these issues was confusing and indeed divided.   Some courts had held that the insurer need not prove prejudice for the insurance company to have a valid coverage defense.   Other courts held that, to be relieved of the obligation to provide coverage, the insurer must be prejudiced by the insured’s non-compliance.   The appellate court held that the insurer must be prejudiced by the insured’s non-compliance with a post-loss obligation for the insured to forfeit coverage. 

The next question, however, is which party bears the burden of proof to demonstrate whether the insurer was prejudiced by a material failure to satisfy a post-loss policy provision.   In short, should the insurer have to prove it was prejudiced by the breach, or should a breaching insured have to prove his or her insurer suffered no prejudice? These questions also implicate policy considerations since the courts are disinclined to have an insured forfeit coverage, but the insurance company is entitled to compliance with the policy provisions. 

The appellate court held that, when an insurer has alleged as an affirmative defense to coverage and establishes that the insured failed to substantially comply with contractually mandated post-loss obligations, prejudice to the insurer from the insured’s material breach is presumed, and the burden then shifts to the insured to prove that any breach of post-loss requirements did not prejudice the insurer.  

Therefore, by the end of the opinion, the appellate court held that the trial court abused its discretion in striking the insurance company’s affirmative defense asserting insurance fraud. The appellate court then directed that American Integrity would be given leave to file amended affirmative defenses alleging failure to satisfy post-loss obligations.   If American Integrity established that the insured failed to satisfy contractually mandated post-loss obligations, then the burden would shift to Estrada to establish that American Integrity was not prejudiced by the breach.   The case was therefore reversed and remanded back to the trial court with those instructions. 

This case represents a situation where the Florida courts have been issuing different opinions on these issues leading to confusion and conflict, with the courts drawing separate and differing conclusions from the Florida Supreme Court decision rendered in an uninsured motorist case.  As illustrated here, however, it is often difficult to apply or compare requirements in an automobile or bodily injury policy to property damage claims such as this. 

Part of the conflict lies in the differing policies pressing on the courts.   The courts do not favor an insured forfeiting insurance coverage they paid for, but the courts also are not in favor of blatant failure and refusal to follow policy requirements with respect to proofs of loss and other post-loss obligations. Ultimately, the “prejudice” to the insurer is presumed from a material and significant breach of the insured’s post-loss policy obligations.   This assumption does not seem out of line since failure to provide a sworn proof of loss, submit to an examination under oath, etc. is inherently prejudicial to the carrier and its claim investigation.   However, under the analysis of this court, the insured would have the opportunity to establish that any failure to comply with the policy did not in fact prejudice the insurance company, its investigation, or claims determination.   

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