Coverage Pointers - Volume XXI, No. 2

Volume XX1, No. 2 (No. 541)
Friday, July 12, 2019

A Biweekly Electronic Newsletter  


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

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

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

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


Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations. 

Introducing: Coverage Pointers Advance

Coverage Pointers is proud to be in its 21st year of continuous publication.  On alternating Fridays, since our first issue, 20 years ago yesterday, July 8, 1999, we have brought you summaries of every coverage opinion emanating from the Court of Appeals (our state’s highest court), the four middle-level appellate Departments and select cases from other New York lower courts.  In addition, we have spread our wings to New Jersey and Connecticut and bring you some of the more important or unique cases from around the country.

Almost every day, we get a new subscriber or two, and the cost of a subscription remains the same, nothing (other than the non-mandatory, occasional email from you telling us that you enjoy or find worthwhile what we do).

Thinking about CP, as I often do (face it, I don’t have much of a life), I was wondering how we can improve upon what we do, so we can provide even a more useful service to our loyal subscribers.  I figured out and now introduce Coverage Pointers Advance.

So what’s that?

I have an active LinkedIn account,  What I started doing over the last 10 days or so – a beta test sort of thing – is posting, in advance of our bi-weekly issue, summaries of cases that will either appear in our issue or are otherwise worth a report (for example, a lower court decision that may not be covered in Coverage Pointers)The response to Coverage Pointers Advance has been nothing less than extraordinary, with each posting generating over 1,000 post views and often, some interesting interactive discussions about the decision or the area of law.

So, if bi-weekly isn’t quick enough, stop over to LinkedIn for a visit, and join in the discussion.  By the way, every so often, my postings may stray from coverage.  For example, this one was about blue martinis.  This one was about coverage mediation. And more to follow.

On behalf of the New York State Bar Association, I am presenting a webinar on the Child Victim’s Act (with a focus on insurance issues) next week:


Generic Event Image

Date: Wednesday, July 24, 2019

Time: 12:00 PM - 1:00 PM Eastern Daylight Time
This Program is a Webinar

To Register click here.

Special NYSBA Member Pricing: $50
Non-Member: $150

Recently Adopted Child Victims Act: Insurance Issues

Program Description

On February 14, the Governor signed the Child Victims Act into law.  It makes three major changes to the existing law: 

  • It extends the New York statute of limitation for criminal charges against child sexual abusers until the victims become 28 years of age, up five years from the current 23;
  • Permits child abuse victims to bring civil lawsuits against any sex abuser or any institution responsible for that abuse until the victim turns 55 years of age;
  • Creates a one-year window to allow victims to bring civil actions, commencing August 14, no matter when the abuse occurred. 

Religious and educational institutions, scout troops and leader and even individuals are subject to these new changes. Insurance companies are facing challenges in finding long-forgotten insurance policies and timely responding to notice of occurrence, claim and lawsuit. This presentation, focuses on practice issues from a practical point-of-view, will speak to the substance of the act and provide a review of the unique and somewhat unprecedented insurance challenges facing liability insurers who need to respond to claims.  

Dan D. Kohane, Esq., Hurwitz & Fine, PC | Buffalo

Wednesday, July 24
12:00 p.m. – 1:00 p.m.
This Program is a Webinar

1.0 MCLE Credit | 1.0 Areas of Professional Practice

If you are unable to participate in the webinar on July 24th or miss this program, all registrants will have access to the program archive.  You will be able to pose questions in real time to the speaker on July 24th by participating in the webinar.

Eric Boron, the Recipient of a “Major” Award:

Most of our practice is down in the New York metropolitan area and many of our lawyers regularly commute there on JetBlue.  That airline has one upgraded status, Mosaic, and one can achieve Mosaic status if she or he has 30 flight legs in a year.  

In the calendar year 2018, eight of our coverage team achieved that honored (?) status.  Three years ago, we decided to award the Hurwitz & Fine Mosaic Trophy to the individual who first achieved in a calendar year for the following year.  This year, that recipient was the well-traveled Eric Boron.  Being last year’s recipient (and caretaker of the trophy until this presentation), I was the one who passed the trophy over to him (with engraved plaque, of course) at a recently concluded award ceremony.

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In the background, is Buffalo’s iconic Goldome, former home of Buffalo Savings Bank.

She is No More – 100 Years Ago:

Oakland Tribune
Oakland, California

12 Jul 1919

          LONDON, July 12.—The unhappy latter years of the life of Mrs. Arthur Eliot, better known as “Nanie” Atherson, that led the once famous beauty to blow out her brains in her luxurious apartment early Wednesday, were revealed at the coroner’s inquest over her body.

          Mrs. Eliot, the evidence showed, tried in vain to win back the love of her husband after she had participated in sensational divorce and breach of promise suits.  She asked Peer Wells, Eliot’s brother, to intercede in her behalf, but he was expelled from the house where the husband was living with his step-daughter.

          Earl F. March, who received one of the letters written by Mrs. Eliot before she killed herself, testified from an invalid’s chair that she had been unhappy since her marriage.  On her honeymoon, she declared to March, she had found her husband guilty of infidelity with his step-daughter.

          Dr. Furber, one of the witnesses, testified that he had never before heard of a woman shooting herself with a shotgun.  He said the wound was plainly self-inflicted.  Fashionable women clamored for admission at the inquest.

Jen’s Gems:

I write this note while sitting at John F. Kennedy Airport waiting for my flight back to Buffalo (which is currently five hours delayed).  On the upside, Dan is suffering from the same delay so at least I have good company to hang out with.  I was in New York (actually Garden City) today and yesterday for a deposition, and I am just hoping that the weather cooperates from now on.

I report on two interesting decisions this week that are worth a read.  The first involves insureds who obtained a Homeowners’ policy for property they owned.  Per the underwriting guidelines, Homeowners’ policies would only be issued for owner occupied one and two-family properties; however, the insurer’s investigation following the fire revealed that it was actually be used as a Single Room Occupancy residence.  The other decisions involves a claim arising from mold exposure and other defects in a condo unit.

Until next issue…

Jennifer A. Ehman

[email protected]

Teachers Not Overpaid a Century Ago:

Chicago Tribune
Chicago, Illinois

12 Jul 1919



          Salary increased amounting to $1,100 a year and dating from Jan. 1, 1919, were recommended for teachers in Chicago’s public schools yesterday by the board of education finance committee.

          The increase was voted by the committee upon recommendation of President Edwin Davis, who declared that a minimum salary of $1,000 a year is the least that justice can prescribe for the hard working specialists of the school system.

          The increased schedule, included in the list of emergency financial measures worked out by the committee, will be presented to the entire board for approval next Wednesday.  If approved, warrants will be drawn at once to enable Chicago teachers to collect the voluntary bonus that will be theirs for services from January to date.

          The schedule gives all primary teachers $1,000 annually instead of the old minimum of $775.  Teachers in the grammar grades will receive $1,030 instead of $800.  It also includes a graduated increase in salaries of $25 per year after the first and including the fifth year of service.

John’s Jersey Journal:

I hope all of you enjoyed the Fourth. Erin and I spent the long weekend in the Adirondacks with friends. We took our hound, Donald. We rented an Airbnb in Tupper Lake that was right on the lake, complete with kayaks and canoes. I admit I don’t know much about canoeing, but for some reason I thought it would be a good idea to take Donald out, not realizing that canoes don’t self-balance like a kayak. Donald ran up and down the canoe, and side to side, nearly flipping it. Needless to say, our canoeing adventure was short-lived.

We hiked Mt. Arab, Mt. Baker, and Mt. Goodman. Donald was an expert hiker. He scaled rocks even when he didn’t have to and was usually the first one to the summit. He is a natural-born tracker and hiker. On Saturday, we found a local craft brewery with pretty decent brews and great food. We got there around 8:30 p.m. and to our surprise, they kicked us out at 9 p.m. because they were closing. Unfortunately, the ice cream stand also closed at 9 p.m. Nightlife was limited to the sounds of frogs croaking and crickets chirping around the lake.

Unlike me, the New Jersey courts were apparently not on vacation. Yesterday, the Appellate Division ruled a purported additional insured was not an insured for its own negligence. The AI endorsement at issue afforded coverage “only with respect to” the Named Insured’s work. In the underlying action, the jury determined the purported AI was directly negligent in causing plaintiff’s injuries. The Appellate Division ruled it was not an additional insured for its own negligence. If you’d like to read on, the case is discussed in further detail in the attached issue. Just click the attached PDF.

Lastly, I would like to congratulate Eric Boron on being the 2019 Hurwitz & Fine Mosaic Award winner.

N.B. the AI endorsement did not include “arising out of language” language.

John R. Ewell

[email protected]

Demand for 18 ½% Raise:

The Brooklyn Citizen
Brooklyn, New York

12 July 1919


Employees of Chicago Elevated Lines Make Strike Threat

          Chicago, July 12.—Eighty-seven cents an hour, an increase of 77 percent, was demanded by street car men there to-day.  Employees of elevated lines joined in a strike threat, demanded 37 cent raises to 87 cents for motormen and 82 cents for conductors.

          Employers said granting these requests would mean fare of 9 to 10 cents.

Peiper on Property and Potpourri:

Greetings from Asheville, North Carolina, where I’m attending the IADC annual conference.  Lots learned, and lots met this week.    Actually, by the time most of you read this, I’ll be starting the trek back north with only a stop at the northern most Bojangles as the sole distraction between my windshield and home.

Coverage Pointers, like justice, never stops.  Courts that administer justice (and feed this publication) do.  From now to September, times get pretty lean around here for the Coverage Pointers staff. This issue, insofar as this author is concerned, marks the start of the Summer Slowdown.  Below, we review a single, solitary Allstate case.  It is a good one, and one which should be kept in an easily accessible place.  

Insurance puts you in the same place you would have been prior to the loss.  That is the overarching goal of insurance.  You can, and most do, purchase enhanced coverage that protects the gap from “value” on the date of loss and the cost to actually replace the damage.  The latter being the Replacement Cost (RC), and the former being the Actual Cash Value (ACV).  The difference between is called the recoverable depreciation, or as it is colloquially referred to the “hold back.”

To practitioners, the concept that ACV is the exclusive remedy until repair/replacement occurs is universally understood.  To policyholders and judges, however, this concept can be difficult to grasp.  Indeed, I’ve been asked if the concept of a “hold back” means that insurance is only for rich people.  Insurance means the policy pays for everything, right?  While an RC policy surely provides coverage for the replacement of damaged materials, said replacement is only for items of like kind, quality and character.  This case upholds the long standing rule that if you want RC of like kind, quality and character you need to actually replace it.

That’s it for now, but before I go a shout out to the CP readership.  As part of the conference, I had the opportunity to go white water rafting.  As we’re sloshing down the French Broad River with increasing lack of control, a voice from behind me says “hey, is this going to make Coverage Pointers.”   At that moment, my first thought was “if we survive.”   We did, and even made it to print on time.  

Later in the week, someone else proposed a CP special on what kinds of risks/coverages are appropriate for river guides.  We’re contemplating that report.  Continue to watch this space.  Coverage Pointers, indeed, never stops!

Cheers, and thanks for reading.

Steven E. Peiper

[email protected]

Occupational Disease Not Recoverable, 100 Years Ago, in Comp Proceeding:

The Semi-Weekly New Era
Lancaster, Pennsylvania

12 Jul 1919


Referee Cummings Sustained by Chairman Houck In a Harrisburg Decision

          It was announced to-day through Chairman Paul W. Hauck, that the State Workmen’s Compensation Board has sustained the decision of Referee Chester W. Cummings against the claimant in the case of Anna C. Pleam, of Harrisburg, whose husband was employed by the Commonwealth of Pennsylvania as a stenographer and clerk at the State arsenal in Harrisburg.  Part of his duty was to check supplies to the various hospitals for the treatment of epidemic cases during the epidemic scourge last year.  It was established that he was employed as stated above on November 29.  On December 1 he become ill and died on December 9, the cause of death being bronchial pneumonia following influenza.

          Referee Cummings disallowed compensation, and has been sustained by the Board, on the ground that the disease did not result from violence to the physical structure of the body, as interpreted in the Act.  The explanation states that there is no way of telling whether the deceased contracted his illness while performing his duties to the Commonwealth or at some other time and place.  His employer, the Commonwealth, was, therefore, exonerated.

Hewitt’s Highlights: 

Dear Subscribers:

We had a great Independence Day down here on Long Island. My family and I took a boat ride to Jones Beach to watch the fireworks show put on by Jones Beach and watched the Fourth of July Parade earlier in the day. Meanwhile, my sons are in their camp and doing many library programs and enjoying the summer.  My mother is also in town for my sister’s “sprinkle” which is apparently a small baby shower for a second baby. The boys are enjoying having grandma around.

In this edition, we have three cases. In the first one a plaintiff tried to vacate a decision granting summary judgment on default, by arguing the expert was unavailable. The motion was denied when the plaintiff did not even identify the expert at issue. In the second case, plaintiff’s own medical records showed full range of motion and that any injury was degenerative. In the third, plaintiff’s medical records showed contemporaneous medical treatment which supported their claims of serious injury.

Until next issue,

Robert E.B. Hewitt III

[email protected]

Mrs. Hill Still Searching (Four Issues in a Row):

Independence Daily Reporter
Independence, Kansas

12 Jul 1919

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

Wilewicz’ Wide-World of Coverage:

Dear Readers,

This week’s missive will be necessarily short as the rains in New York City have canceled and delayed so many flights, that I am now driving back upstate in order to make appearances and assignments tomorrow. Such is the life of a frequent traveler I suppose. (Congrats Eric Boron!)

Now, even at the risk of my column turning into one that’s all about dogs, I will update you on the latest addition to our household, mostly in order to solicit suggestions. So, our five-year-old rescue dog has integrated into our lives fairly well, but each week seems to bring new challenges. Between excessive barking, or not eating for days, to leash aggression to then over-enthusiastic cuddles and refusing to leave our sides throughout the house, let’s just say it’s been nothing short of an adventure. I understand that the transition of an older rescue dog may be as long as a few months, but if any one has any suggestions or tips on how to acclimate a new dog, particularly into a household with a shy rescue scaredy-cat, I’m all ears.

In the meantime, the circuit courts have been relatively quiet, enjoying the summer heat as it were. So for next time, I’ll be sure to scour further afield to see if courts nationwide are enjoying the summer weather as much as us northerners.

Until then,

Agnes A. Wilewicz

[email protected]

For All You Golfers:

The New York Times

New York, New York

12 Jul 1919

Golfer Walks Forty Miles, Averages 80 for 10 Rounds

          PHILADELPHIA, July 11.—Edward Styles of the Old York Road Country Club broke all American marathon golf records today by playing ten rounds over the eighteen-hole course of his home course, making an average of 79 3-5 strokes a round.  He started out to break the record of eight rounds for an average of a fraction less than 85 made recently by Fred Knight over the course of the Whitemarsh Valley Country Club.

          Styles teed off for the first round at 5:53 A.M. and finished at 8:32 o’clock tonight.  Taking out the time for three stops for refreshments and to change shoes three times, his actual playing time was 13 hours and 10 minutes.  He walked nearly forty miles and was in good condition when he finished.

Barnas on Bad Faith:

Hello again:

I only had a couple weeks to bask in the glow of the Raptors title before Kawhi decided to leave us and return to Southern California.  It’s hard to blame him for wanting to return home, but I sure do wish he would have stuck around for another year or two to try and run it back with the same group in a league that hasn’t been this wide open since Lebron went to Miami.

Unlike NBA free agency, courts have been a little quiet as we roll into summertime.  However, I have a failure to settle case from Georgia and a case on the hot topic of appraisal from the Supreme Court of Texas for you this week.

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

Brian D. Barnas

[email protected]

Ford Had a Better Idea:

New-York Tribune

New York, New York

12 Jul 1919

Ford Secures Full Control of Auto Plant

Manufacturer and Son Take Over 89 Per Cent of Stock in Company; $75,000,000 Loan for the Deal

Dodge Brothers Are Out Couzens Is Only Minority Stockholder

To Remain; Profit Sharing Planned

          DETROIT, July 11.—Through reorganization of the Ford Motor Company, now under way, Edsel Ford, president, and his father, Henry Ford, will come into possession of 89 per cent of the stock of the corporation, according to an announcement made here to-day by Frank L. Klingensmith, vice-president and general manager.

          By the transaction the Fords secure the stock held by all minority holders, including the Dodge brothers, except one, James Couzens, millionaire Mayor of Detroit, who refused to sell his 11 per cent of stock at any price.

          The Chase Securities Corporation, the Old Colony Trust Company of Boston and the commercial paper firm of Bond & Goodwin have agreed to advance $75,000,000 to aid in acquiring the holdings of the minority stockholders.  The total purchase price, it is understood, is approximately $100,000,000, and the remaining $25,000,000, according to report, will be advanced by Henry Ford.

Editor’s note:  $100,000,000 in 1919 is worth about $1.5 billion in 2019

          “The purchase of the minority holdings,” said the younger Ford, “is for the purpose of reorganization, although there is not to be any change in the personnel of the officers or in the policy of the company at this time.”

          Mr. Couzens, who will retain his holdings in the company, left the Ford organization early in the war because of Henry Ford’s views on preparedness and pacifism.  Up to almost the end of 1915 Mr. Couzens had been general manager and treasurer of the Ford company.  He will continue as a director.

Off the Mark:

Dear Readers,

School is out and the kids are enjoying summer camp.  With the wife away this week and next week, it’s a guys-only house.  I just have to remember to clean up the night before she gets home.  I hope everyone had an enjoyable Independence Day.

This edition of “Off the Mark” discusses a recent construction defect case from the US District Court for the District of Montana, Missoula Division.  In Atl. Cas. Ins. Co. v. Quinn, the US District Court examined the carrier’s duty to defend and indemnify its insured relative to claims of faulty workmanship, liquidated damages, breach of contract, breach of warranties, violation of a Consumer Protection Act, unjust enrichment, and emotional distress related to the construction of a home.  The Court relied on a two-part test to determine whether an act constitutes an “occurrence.”  Nothing groundbreaking here, but an interesting look at how the US District Court of Montana, Missoula Division, viewed faulty workmanship as a possible occurrence.

Until next time …

Brian F. Mark

[email protected]

Oui Oui, Monsieur:

The Boston Globe

Boston, Massachusetts

12 Jul 1919


          NEWPORT NEWS, Va. July 11—Eighty-nine of 3353 troops who arrived on the transport Huron today were accompanied by brides they married in France.

Wandering Waters:

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

The NBA Offseason is living up to the drama it was billed to be.  After weeks of experts predicting Kawhi Leonard would either return to the Raptors or leave for the Lakers, Kawhi shocked the NBA universe by signing a deal with the Clippers.  In addition, the Clippers pulled off one of the more surprising trades in recent memory.  The Clippers obtained Paul George from the OKC Thunder.  Not only has the Clippers retained the services of the top free agent in the 2019 NBA Offseason, the Clippers also obtained a second superstar to bolster their team to title favorites.  In my short life, I would never have imagined the Clippers would be favorites to win a NBA championship.

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

Larry E. Waters

[email protected]

If You Want a Divorce, Asking Ain’t Enough:

The Buffalo Times

Buffalo, New York

12 Jul 1919

Divorce in New York State.

Editor People’s Column:

          Please tell me how long you have to live in Buffalo, N. Y., before you can get a divorce if American citizen, and oblige, G.P.D.

          An actual residence of two years in the state of New York is required before a divorce can be applied for.  The city or town in which you live has no bearing on the time required.  You must have been in the state two years.  The only reason for divorce in New York State is adultery.

Boron’s Benchmarks:

Dear Subscribers:

For those of you new to Coverage Pointers, my Boron’s Benchmarks column covers reported decisions of the High Courts of the 49 states not named New York.  Today’s column focuses on the recent Supreme Court of Vermont decision issued in Parker’s Classic Auto Works Ltd. v Nationwide Mutual Insurance Company.   The decision likely leaves the insurer wondering how to determine the appropriate premium to charge for providing collision insurance coverage in Vermont when, under the particular facts of the Parker’s ruling, it was held by the Vermont Supreme Court on appeal that the value of a collision insurance claim in Vermont may not be determined by the insurer’s appraiser, but rather, is in effect determined by the arbitrary amount of a final bill issued by the collision repair shop which repaired the insured, collision-damaged vehicle to pre-accident condition.

In recent years, there has been a concerted effort by collision repair shops to increase their bottom line, at the expense of auto insurers.  In 2014, approximately two dozen cases were filed by collision repair shops around the country, in various federal district courts as well as state courts, alleging the major auto insurers, including Nationwide, were violating the federal Sherman Antitrust Act and various state laws by conspiring to suppress amounts auto insurers were obligated to pay on collision damage claims under collision coverage afforded by auto insurance policies.  Many of these lawsuits further alleged the insurers were conspiring to enforce compliance with the so-called “pre-set” labor hour rates of the insurers on collision damage claims by steering policyholders to “captive” collision repair shops under contract with the insurers and/or to other repair shops agreeable to the insurer’s terms, thereby boycotting collision repair shops refusing to agree to the insurers’ valuation of the collision damage loss. These lawsuits also alleged insurers were conspiring to force the collision repair shops to use sub-standard repair parts in repairing collision damage to vehicles carrying collision damage coverage.  A number of such cases were consolidated for pretrial purposes in multidistrict litigation in the U.S. District Court, Middle District of Florida, Orlando Division.  During the ensuing years, there were multiple rounds of the auto insurers moving to dismiss the cases on the basis of improper and/or otherwise dismissible pleading by the collision repair shops, and having such dismissal motions granted, and then the collision repair shops presenting amended complaints, many of which were also dismissed for failure to have been properly pled.  Appeals of the dismissals on the pleadings have been pursued by the collision repair shop plaintiffs. To this writer’s knowledge, none of these cases has ever been tried to verdict.

In 2017, a three-judge panel for the U.S. Court of Appeals for the Eleventh Circuit presented the insurers their first defeat in the multidistrict litigation on the issue of the adequacy of the collision repair shop pleadings, ruling on appeal some of the shops’ amended complaints could move forward.  However, on March 4 of this year, the en banc panel of the Eleventh Circuit Court of Appeals overturned the 2017 ruling of its three-judge panel, determining that the facts alleged in the repair shops’ amended complaints didn’t rise to the level of price-fixing and group-boycotting under the Sherman Antitrust Act, thus agreeing with the trial judge who had initially dismissed such actions in 2016 for failure to state a claim. See Quality Auto Painting Ctr. of Roselle, Inc. v State Farm Indem. Co., 917 F.3d 1249 [11th Cir 2019] (noting, for example, that the allegation in the collision repair shop complaints that non-State Farm Insurance companies had advised the collision repair shop plaintiffs that the other insurance company defendants will pay no more than co-defendant State Farm pays, reflected “mere price leadership” and was perfectly acceptable). 

Notably, the Parker’s case decided on appeal by the Vermont Supreme Court on June 28, 2019, should neither be confused nor lumped in with the aforementioned antitrust/antisteering litigation pursued by other collision repair shops against the major auto insurers.  While Parker’s Classic Auto Works, Ltd., is also a collision repair shop, its suit against Nationwide alleged only breach of the auto insurance contract.  There was never any allegation made by Parker’s that Nationwide or any other insurer conspired to suppress amounts auto insurers were obligated to pay on collision damage claims, or steered policyholders away from using certain collision repair shops.

There’s much more analysis of the Parker’s case in my write-up of it, which you can access elsewhere in this electronic newsletter.  I hope you have a great next two weeks, and feel free to contact us with questions and/or comments about the Parker’s decision recently issued by the Vermont Supreme Court.

Eric T. Boron

[email protected]

The Case for Auto Insurance – a Century Ago:

The Seattle Star
Seattle, Washington

12 Jul 1919

Insurance Is One of Most Vital Needs for Auto Owner

          “There is no more important question relating to the ownership of a motor car than that of insurance,” according to a well-known automobile authority.  And then he continues:  “There are few subjects on which the ordinary car owner is more abysmally ignorant.  The average car owner has little conception of what he should protect himself against by means of insurance.  He usually leaves the matter to his broker and not infrequently the broker, in order to make a rate that will give him the business, does not provide the car owner with exactly the insurance he ought to have.”

          In his article this authority takes up in detail the five classifications under which automobile insurance falls—liability, property damage, collision, fire and theft.  First place in the matter of relative importance is liability, which protects the car owner against claims for damages by persons injured, of alleged to have been injured, by his car.

          “The principal question that arises in taking liability insurance is that the amount of coverage shall be sufficient.  What is generally known as the ‘standard’ policy is the $3,000 and $10,000 coverage.  This pays $3,000 for one person injured and $10,000 for two persons in a single accident.  Now, it is not impossible that heavier damages than these may be awarded in an accident case; in fact, they have been in many recent cases.  And so, in deciding on a liability policy, the car owner should remember that he can get larger amounts of coverage at a far less relative cost.  For instance, a liability policy carrying $100,000 single and $300,000 double insurance costs just 52 per cent more than the ordinary $5,000 and $10,000 policy.  Lesser amount may be had on proportionate terms.” 

Barci’s Basics (On No Fault):

Hello Subscribers!

July is underway and it is my favorite month of the year! Stay tuned for the reason next issue…

On the no-fault front I have three cases out of the Second Department’s Appellate Term for you. First, a case that provides a quick reminder about the medical necessity standard related to recovering no-fault benefits. Then a case that discusses the application of a declaratory judgment order to assigned benefits. And finally, the last case reaffirms that an insurer is not required to disclose any reason for requesting an EUO. Until next time…

Marina A. Barci

[email protected]

The Fight Over Daylight Savings Time is Not a New One:

Middletown Times-Press

Middletown, New York

12 Jul 1919


(By Associated Press)

          Washington July 12—President Wilson has vetoed the Agricultural bill because of its provision repealing the daylight saving law.  He also vetoed the sundry civil bill because it limits the beneficial work of restoring crippled soldiers to useful and contented lives.  In the agricultural veto the President said the daylight repeal “would be of very great inconvenience to the country.  It would involve serious economic loss,” he said, and “declared the law resulted from careful study and from observation of the happy and beneficial consequence of similar legislation in other countries.”  He said it had resulted in great economies of fuel and substantial saving of human energy.

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Earlier this week, the City of New York feted the US Women’s National Soccer Team with a parade down the Canyon of Heroes, celebrating the team’s World Cup triumph. In this edition of Lee’s Connecticut Chronicles, we recognize Mary Hall, the first woman admitted to the Connecticut bar. And, it took an appeal to the Connecticut Supreme Court (then the Supreme Court of Errors) for it to happen. In re Hall, 50 Conn. 131 (1882). Hall was not a prominent attorney in her time – she limited herself to office work, believing that it would offend common sensibilities for a woman to be seen arguing in court. However, the decision admitting her to the bar laid the ground work for later decisions recognizing the equal protection of women under the law.

Chief Justice Park, writing for the majority, reasoned: “We are not to forget that all statutes are to be construed, as far as possible, in favor of equality of rights. All restrictions upon human liberty, all claims for special privileges, are to be regarded as having the presumption of law against them, and as standing upon their defense, and can be sustained, if at all by valid legislation, only by the clear expression or clear implication of the law.” Id. at 136 (emphasis added).

The Court rejected the argument that the Connecticut legislature, when it passed the forerunner of the statute governing admission to the bar in 1750, did not contemplate women as “persons” and, therefore, it was not the role of the judiciary to precede political action by the legislative branch – an argument that has persisted throughout various iterations of civil rights litigation.

The Indiana Supreme Court, only a few years later, citing Hall, ably rejected this very argument, reasoning: “If we hold that the construction of the statute is to be determined by the admitted fact that its application to women was not in the minds of the legislators when it was passed, where shall we draw the line? All progress in social matters is gradual. We pass almost imperceptibly from a state of public opinion that utterly condemns some course of action to one that strongly approves it.” In re Leach, 134 Ind. 665 (1893). Mary Hall, our Connecticut hero.

It's been another quiet couple of weeks for Connecticut insurance law, so this edition we’ll look at the attorney-client privilege under Connecticut law.

Lee S. Siegel

[email protected]

Headlines of the cases discussed in the attached issue:

Dan D. Kohane
[email protected]

  • Insurance Policy Properly Canceled, Despite Cries of Policyholder to Contrary

  • Once Again, Court’s Enforce “Action Over” Exclusion

  • Workers Comp Determination on Employment Trumps Pay Checks


Robert E.B. Hewitt III

[email protected]

  • Plaintiff Could Not Vacate Default of Summary Judgment Motion When It Failed to Even Identify the Expert It Claimed Was Unavailable to Provide Affidavit

  • Plaintiff’s Own Medical Reports Showed Full Range of Motion and that Any Injury Was Degenerative

  • Plaintiff’s Medical Reports Provided Evidence of Contemporaneous Treatment Supporting Plaintiff’s Claim of Serious Injury


Steven E. Peiper

[email protected]

  • Delay of More than Two Year in Making Repairs Results in Loss of RC Hold Back


Agnes A. Wilewicz

[email protected]

  • Nothing this week.

Jennifer A. Ehman

[email protected]

  • Court Denies Motion for Summary Judgment Finding that Plaintiffs Had Not Established When the Mold Exposure Began and Whether it was During the Insurers’ Policy Period

  • Trial Court Upholds Carrier’s Decision to Void Policy Following Fire Where Premises Was Used as a Single Room Occupancy Residence


Brian D. Barnas

[email protected]

  • Insurer did not Fail to Settle Claim against its Insured in Bad Faith

  • Insured’s Bad Faith Claims Dismissed after Insurer Paid Appraisal Award


John R. Ewell
[email protected]

  • Purported Additional Insured Not Insured for Its Own Negligence

  • (Policy provided AI coverage “only with respect to” Named Insured’s work)


Lee S. Siegel

[email protected]

  • Connecticut and the Attorney-Client Privilege

Brian F. Mark
[email protected]

  • US District Court Examines Duty to Defend and Indemnify and Holds that Faulty Workmanship can be an Occurrence if the Consequences were not Objectively Intended or Expected by the Insured, Notwithstanding that the Work was Intentional


Larry E. Waters

[email protected]

  • Court Grants Plaintiff’s Motion for Default Judgment because the Allegations against the Insured Took Place Outside the Policy Period

  • Court Granted Plaintiff’s Motion for Default Judgment as Plaintiff was Entitled to Declaratory Judgment as the Policy’s Action Over Exclusion Barred Coverage under the Policy. 

Eric T. Boron

[email protected]

  • Post-Trial Judgment for Insurer as a Matter of Law Reversed – Collision Insurance Coverage – Insurer May Not Unilaterally Determine the Value of an Insured’s Collision Damage Claim

Marina A. Barci

[email protected]

  • The Presumption of Medical Necessity Can Be Overcome By Testimony of An Expert Doctor

  • Declaration That Assignor is Not Entitled to Benefits Applies to All Providers Assigned Benefits

  • Insurer is Not Required to Explain Reasoning Behind EUO Request.


Earl K. Cantwell
[email protected]

  • Sparky the Squirrel Leads Coverage Case to Iowa Supreme Court


Remember Coverage Pointers Advance on LinkedIn.

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

Dan D. Kohane

[email protected]

Agnes A. Wilewicz

[email protected]

Jennifer A. Ehman

[email protected]

Dan D. Kohane, Chair
[email protected]

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

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Lee S. Siegel

Brian D. Barnas

Brian F. Mark

John R. Ewell

Larry E. Waters

Eric T. Boron

Marina A. Barci

Diane F. Bosse

Joel R. Appelbaum

Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Eric T. Boron

Brian D. Barnas

Larry E. Waters

Jennifer A. Ehman, Team Leader
[email protected]

Marina A. Barci

Jody E. Briandi, Team Leader
[email protected]

Diane F. Bosse

Topical Index

Kohane’ Coverage Corner

Hewitt’s Highlights on Serious Injury

Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

John’s Jersey Journal

Lee’s Connecticut Chronicles

Off the Mark

Wandering Waters

Boron’s Benchmarks

Barci’s Basics (on No Fault)

Earl’s Pearls

Dan D. Kohane
[email protected]

07/11/19       Maki v. Northland Insurance Company
Appellate Division, Third Department
Insurance Policy Properly Canceled, Despite Cries of Policyholder to Contrary

Pursuant to an arrangement in which Maki agreed to lease his truck to and work for a transportation company as an independent contractor, he was obliged to obtain a commercial automobile liability insurance policy. He did so, through Mang Insurance Agency, LLC.,  buying  a policy issued by Northland for the period August 7, 2008 to August 7, 2009.

Maki was issued proof of insurance, which allowed him to enter into the lease agreement, and he was instructed to provide Mang with a complete copy of the lease agreement and his vehicle registration. Although Maki  alleges that he gave a full copy of the lease to Mang on several occasions, Northland never received the complete copy and subsequently canceled the policy and refunded plaintiff's premium. Thereafter, Maki was involved in an accident that left him injured and his truck damaged. When he attempted to file an insurance claim and he was informed that the policy had been canceled.

The party disclaiming coverage bears the initial burden of proving that the policy was validly canceled. Once such burden has been met, the burden shifts to the party contesting the cancellation to prove that the insurer failed to conform with strict statutory cancellation requirements.

The evidence offered by Northland, which included a copy of the cancellation notice and a certificate of mailing maintained in the regular course of its business, shows that it mailed plaintiff a notice of cancellation on September 18, 2008 stating that the policy was canceled effective October 11, 2008, 23 days later. Inasmuch as the cancellation was effectuated within the first 60 days of the policy and written notice was sent more than 20 days before such cancellation would become effective, it met its burden of showing that the cancellation of plaintiff's policy was valid.

Maki argued that Northland did not meet its burden because it attempted to obtain a full copy of the lease agreement, which waived the right to cancel the contract. However, such argument is without merit because the doctrine of waiver is inapplicable to the issue of whether coverage exists.  Nor did the court find merit to the contention that Northland’s attempts to obtain a complete copy of the lease agreement constituted an effort to renegotiate the insurance contract.

07/08/19       United Specialty v.  All State 12 General Contracting Corp.
United States District Court, Eastern District of New York

Once Again, Court’s Enforce “Action Over” Exclusion

While this matter was resolved against the insured by way of default, under the federal rules, the party moving for default must demonstrate merit. Here, United Specialty established that an exclusion that removed coverage for an addition insured under an “action over exclusion” was valid and enforceable  The exclusion precluded coverage for “bodily injury … to an {a] employee of the named insured arising out of and in the course of employment by the named insured … or performing duties related to conduct of the named insured’s business”.  The injured party answered the complaint, so the matter isn’t quite resolved.

Editor’s Note: For a copy of the decision, contact my friend, Chris Bradley,

Marshall, Conway & Bradley, P.C., the successful attorney in the matter:  [email protected],

07/02/19       Samper v. 352 Broadway LLC
Appellate Division, First Department
Workers Comp Determination on Employment Trumps Pay Checks

Samper sued A-Z Apartment Building Supply Corp. (“A-Z”) for a work-related accident.  Following the accident, he applied for and received Workers Compensation (“WC”) benefits under A-Z’s WC policy.  The WC Board found that A-Z was his employer, implicitly, by authorizing the payments under the A-Z policy.

In response to a motion to dismiss the lawsuit based on the exclusivity of the WC law, Samper submitted pay checks showing that 325 Broadway LLC payed his salary.  Those checks are insufficient to show that A-Z was not his employer, in light of the evidence that he filed for and obtained WC payments through the A-Z policy.

Robert E.B. Hewitt III

[email protected]

07/10/19       Harrison v. Toyloy
Appellate Division, Second Department
Plaintiff Could Not Vacate Default of Summary Judgment Motion When It Failed to Even Identify the Expert It Claimed Was Unavailable to Provide Affidavit

Plaintiff failed to oppose defendant’s motion for summary judgment and sought to vacate the default order. The Appellate Division held plaintiff's attorney's affirmation in support of the motion contained conclusory and unsubstantiated allegations regarding his proffered excuse that he was unable to obtain a signed affidavit from the plaintiff and his additional excuse of expert unavailability. The plaintiff's attorney failed to identify the expert by name, did not provide any details concerning his purported "reasonable efforts" to contact the expert, and failed to submit the affidavit of the expert in support of the plaintiff's motion to vacate. In addition, the court properly declined to consider the plaintiff's affidavit, which was improperly submitted for the first time in reply. Therefore, the application was denied.

06/28/19       Smith v. Hamasaki
Appellate Division, Fourth Department

Plaintiff’s Own Medical Reports Showed Full Range of Motion and that Any Injury Was Degenerative

Plaintiff’s motion for summary judgment must be denied plaintiff's own submissions raise triable issues of fact whether, as a result of a motor vehicle accident, she sustained a serious injury to her cervical spine under the categories of permanent consequential limitation of use and significant limitation of use. Although plaintiff's expert opined that plaintiff had limitations in range of motion that were causally related to the accident, some reports on which he relied included treatment records stating that plaintiff had a full range of motion and stating that any injuries were caused by degenerative disease. Plaintiff's expert provided no explanation for those statements in plaintiff's own treatment records. In any event, even assuming, arguendo, that plaintiff met her initial burden on her motion, the Appellate Division concluded that defendants raised an issue of fact in opposition by submitting the affidavit of their own expert, who opined that two years after the traffic accident there was no objective evidence of an orthopedic condition. Giving defendants, as the non-moving party, the benefit of every reasonable inference, the court concluded that their expert's opinion raised an issue of fact whether plaintiff's injuries, although reflected in the MRIs and medical records generated shortly after the accident, had resolved during the following two years.

06/27/19       Pouchie v. Pichardo
Appellate Division, First Department

Plaintiff’s Medical Reports Provided Evidence of Contemporaneous Treatment Supporting Plaintiff’s Claim of Serious Injury

Defendants failed to meet their prima facie burden as to plaintiff's claim that she sustained post-traumatic stress disorder and panic attacks as a result of the accident, since they submitted no evidence in connection with those claims nor otherwise challenged them. Accordingly, the burden did not shift to plaintiff on that issue. However, defendants established prima facie that plaintiff did not sustain permanent or significant injuries to her cervical spine, lumbar spine, or right shoulder through the reports of their expert orthopedist and neurologist, who found negative clinical test results and normal range of motion in both sections of the spine, and in the right shoulder. As to the claimed cervical spine and right shoulder injuries, defendants also established prima facie that the injuries were not causally related to the accident through the report of their radiologist, who opined that plaintiff's MRIs showed conditions that were longstanding, chronic and degenerative in nature.

In opposition, plaintiff raised an issue of fact as to causation of her cervical spine and right shoulder injuries by submitting an earlier report prepared by defendant's expert orthopedist, in which she concluded, based on her review of plaintiff's medical records and examination of plaintiff, that these injuries were causally related to the accident. This opinion, which contradicts both her later conclusion and the opinion of defendant's radiologist, raises an issue of fact as to causation. Concerning her right shoulder claim, plaintiff raised an issue of fact through the report of her treating orthopedic surgeon who documented limitations in range of motion, recounted his direct observations of plaintiff's injuries during surgery, and causally related them to the accident, disagreeing with defendant's radiologist. Concerning her cervical spine claim, plaintiff submitted the report of her treating physiatrist, who also documented limitations in range of motion and, while acknowledging the existence of arthritis and degeneration, opined that the accident exacerbated and aggravated the condition. Plaintiff's medical records, including MRI reports prepared about three months after the accident, provide evidence of contemporaneous treatment, supporting plaintiff's claim of serious injury within the meaning of the statute.

Finally, defendants established their entitlement to dismissal of plaintiff's 90/180-day claim by relying on her deposition testimony, in which she admitted that she was not confined to home immediately following the accident. In opposition, plaintiff did not submit any medical or other documentary proof in support of her claim that she could not return to work and was confined to home following the accident.

Steven E. Peiper
[email protected]

06/28/19       Cushing v. Allstate Fire and Casualty Ins. Co.
Appellate Division, Fourth Department
Delay of More than Two Year in Making Repairs Results in Loss of RC Hold Back

Plaintiff commenced this action after a dispute arose over her claim for Replacement Cost coverage.  We are advised in the opinion that plaintiff and Allstate reached an agreed settlement, and that Allstate issued payment for the undisputed Actual Cash Value without incident.  Allstate retained the recoverable depreciation (hold back) until after proof of the repairs to the premises were submitted.

The policy at issue contained a condition that any such repair/replacement must be concluded within two years of the date of loss.  Here, however, because plaintiff did not repair and/or replace the roof within the two-year time period, she was estopped from recovery of the hold back.

Plaintiff tried to avoid the clear policy language through an estoppel argument.  The Court quickly dispatched of that claim by noting “plaintiff did not identify any conduct by defendant that discouraged her” from effectuating repairs.


Agnes A. Wilewicz

[email protected]

Nothing this week.

Jennifer A. Ehman
[email protected]

06/27/19       Greater N.Y. Mut. Ins. Co. v. Harleysville Worcester Ins. Co.
Supreme Court, New York County
Hon. Kathryn E. Freed
Court Denies Motion for Summary Judgment Finding that Plaintiffs Had Not Established When the Mold Exposure Began and Whether it was During the Insurers’ Policy Period

This decision arises out of a claim by nonparty, Albert Davydov (“Davydov”).  Davydov was the owner of two residential units, the penthouse unit and unit 11B, in a condominium building owned by the Board of Managers of the Forestal Condominium (“Forestal”).

In or about 2015, Davydov commenced a lawsuit against Forestal and its property manager claiming that both units were uninhabitable due to noxious odors, water leaks and property damage.  Davydov sought recovery for breach of the implied warranty of habitability and violation of the Condo Offering Plan, the Multiple Dwellings Law and the New York City Building code along with recovery of electricity bills and monthly maintenance fees and an order directing remedial work and correction of the electrical meter.  Lastly, Davydov claimed damages due to personal injury from exposure to toxin producing mold.

Forestal was insured under a series of policies.  For purposes of this decision, it was insured by Harleysville from 2003 through 2006, and Greater New York Insurance Company (“GNY”) from 2015 through 2016.  Harleysville denied coverage for the claim on the basis that Davydov’s claim did not arise from an “occurrence” as defined in the policy and because Davydov’s alleged damages may have occurred outside the period during which Harleysville’s policy was in effect.

GNY commenced this lawsuit against Harleysville and other insurers seeking a declaration that they were obligated to defend and indemnify Forestal and the property manager for Davydov’s claim and that any exclusion cited in defendants’ policies did not apply.  GNY also sought reimbursement for defendants’ proportionate share of the defense costs.  This decision arises from a partial motion for summary judgment filed by Harleysville only.

The court began its discussion of the motion by noting that CGL policies generally do not insure against faulty workmanship in the work product itself but rather faulty workmanship in the work product which creates a legal liability by causing bodily injury or property damage to something other than the work product.  It then reviewed the allegations in the underlying complaint stating that a few of the alleged defects identified in the complaint implicated faulty construction which did not constitute an “occurrence.”  Specifically, she identified Davydov’s claim that the central ventilation shafts for the entire building terminated in the interior of unit 11B, that the roof fans that were meant to vent the kitchen and the bathroom in unit 11B were missing, that water dripped or leaked from the ceiling, and that the owner and manager refused to remediate four moisture spots on the ceiling.

Nonetheless, the court continued that these conditions created an environment where toxin-producing molds infested 11B, and that testing yielded positive result for the presence of T-2 toxin trichothecene in Davydov’s urine.  The court also noted that in the eighth cause of action it alleges that Davydov sustained personal injury due to the mold infestation.  Thus, the court concluded that those damages fell squarely within the damages contemplated by the policy.

However, the court concluded that the motion was still premature as plaintiffs had not established that Davydov sustained damages within the policy period.  The court highlighted that Davydoy’s complaint did not allege when he first learned of the mold condition or when he first began feeling the effects of same.

05/20/19       Canale v. Castlepoint Ins. Co.
Supreme Court, Bronx County
Hon. George J. Silver
Trial Court Upholds Carrier’s Decision to Void Policy Following Fire Where Premises Was Used as a Single Room Occupancy Residence

On January 10, 2014, a fire occurred at a property located at 4451 Matilda Avenue in the Bronx, New York.  That same day plaintiffs notified their homeowner’s insurer, Castlepoint Ins. Co., of the fire.

At the time of the incident, the property was insured under a Homeowners policy issued to the couple.  In the application for the policy, plaintiffs had indicated that the property would be used as their primary dwelling, that it was occupied by the owner, and that the property consisted of two families and eleven (11) rooms.  Following the fire, an investigator retained by Castlepoint determined that the property was being sued as a Single Room Occupancy (“SRO”) residence.  He observed eleven doors outfitted with single cylinder key-operated deadbolts, rooms identified by number, and personal effects such as prescription medicine belonging to a number of different tenants.  Similarly, the fire investigation reported by FDNY identified the property as a “429 – Multifamily dwelling” and noted that the building was “illegally divided into single room occupancies.”  The Department of Buildings had also issued a violation following the fire, and a previous violation six years earlier on the basis that the occupancy was contrary to that allowed by the Certificate of Occupancy was also identified.

Based upon this information, Castlepoint denied coverage for the fire and voided the policy.  Plaintiffs then commenced this declaratory judgment action, and defendant moved for summary judgment.  In support, defendant relied upon an affidavit of its investigator along with photographs of the property.  It also relied upon an affidavit from an Underwriting Manager employed by the company who averred that the company would not have issued the policy had it known the premises’ actual use since the Homeowner’s program only issued polices for premises that were owner occupied, one or two-family dwellings that are the insured’s primary residence. The manner in which the premises was used on the date of loss would have been an unacceptable risk.

Castlepoint also relied upon depositions taken of tenants who confirmed that the premises was an SRO, and that plaintiffs did not live at the premises, but instead lived down the block.  Plaintiffs’ tax returns were also submitted which listed the premises as a rental real estate income property and stated that neither they nor any family member used the property for personal purposes.

In opposition, plaintiffs relied upon their own testimony that they had lived at the premises for a time.  However, in response to questions concerning the layout of the premises, they only testified they could not remember the logistics of the premises and that to their knowledge it was not used as an SRO.

In light of the photographs, investigation and FDNY report, the court granted defendant’s motion and dismissed the complaint.

Brian D. Barnas
[email protected]

07/08/19       Kemper v. Equity Insurance Company
United States District Court, Northern District of Georgia
Insurer did not Fail to Settle Claim against its Insured in Bad Faith

In March 2012, Christopher Brown drove his vehicle across a road’s center line into oncoming traffic and struck Ms. Kemper, who was riding her motorcycle.  Mr. Brown was drunk.  Ms. Kemper was injured and airlifted to a hospital.  Brown had an automobile liability insurance policy with Equity that provided $25,000 per person in bodily injury liability coverage.  Equity retained Statewide Claims Service to adjust Ms. Kemper’s claims against Mr. Brown.

Early in the claim process, Statewide concluded that Ms. Kemper’s medical bills would exceed the policy limit.  Attorney Michael Werner helped Ms. Kemper draft a demand letter.  In it, Ms. Kemper offered to sign a limited release in exchange for the liability policy’s limit.  She stated the release must not have any language about her paying Mr. Brown’s or Equity’s “incurred costs” and that Equity must deliver the check to her before June 8, 2012.  Ms. Kemper also wrote “PLEASE DO Not contact me, or my Friends as this Demand is very simple [sic].”  Statewide received the letter, evaluated Ms. Kemper’s claims, and concluded her medical bills exceeded the insurance policy’s limits

It is undisputed that Statewide (acting for Equity) had knowledge of clear liability and special damages exceeding the policy limits.  Equity’s agent Statewide thus had a duty to respond to Ms. Kemper’s time-limited demand letter.

Ms. Kemper’s demand was not Statewide’s only legitimate concern, however. Statewide also worried about Equity’s potential liability from liens.  In Georgia, hospital liens essentially become part of an injured party’s claim against an insurer.

When Statewide received Ms. Kemper’s demand letter it was facing a dilemma. On the one hand, it knew the Georgia Supreme Court’s decision in Holt required its client, Equity, to respond to that demand. It also feared Equity might face a bad faith failure to settle claim if it did not pay Ms. Kemper the full policy amount. At the very least, Equity would have faced a jury question on bad faith.  On the other hand, Statewide (as Equity’s administrator) feared medical liens. It knew Ms. Kemper had extensive medical bills that exceeded the policy limits.  Under both Georgia’s statutes and its common law, Equity had an obligation to look out for any claims or liens hospitals, physicians, or other medical service providers may have filed upon Ms. Kemper’s claims against Mr. Brown, including her claim for the insurance policy limits.

Ms. Kemper’s demand letter also prohibited Statewide and Equity from contacting her. This is particularly important because a lien holder would have had to give Ms. Kemper actual notice of its potential claim, while it would only have to notify an insurance company like Equity that it knew might be liable to Ms. Kemper.  Ms. Kemper’s instruction that Equity not contact her prevented Equity or Statewide from simply asking her whether her insurance company had paid all of her medical bills or whether any liens had been filed. It barred Statewide and Equity from an easy solution to their dilemma.

However, Georgia law has a safe harbor that protects insurance companies facing these conflicting statutory and common law duties.  Georgia law protects an insurer from liability under if (1) the insurer promptly acts to settle a case involving clear liability and special damages in excess of the applicable policy limits, and (2) the sole reason for the parties’ inability to reach a settlement is the plaintiff’s unreasonable refusal to assure the satisfaction of any outstanding hospital liens from the proceeds of the settlement.

The Court concluded that Equity was entitled to the safe harbor.  The undisputed evidence showed that Statewide promptly acted to settle Ms. Kemper’s case, which involved clear liability and special damages above the applicable policy limits. It tried to give Ms. Kemper the $25,000 policy limits on June 5, 2012, three days before the June 8th deadline Ms. Kemper set in her demand letter.  Statewide demanded that Kemper place settlement funds into an escrow account for the purpose of protecting the interests of any pending liens.  This demand complies with Georgia case law, which suggests that an insurance company may tender its policy limits to the plaintiff, subject to a reasonably and narrowly tailored provision assuring that the plaintiff will satisfy any hospital liens from the proceeds of such settlement payment.

Here, the sole reason for the parties’ inability to reach a settlement was Ms. Kemper’s unreasonable refusal to assure the satisfaction of any outstanding hospital liens from the proceeds of the settlement.  Ms. Kemper construed Statewide’s response on Equity’s behalf as a counteroffer, which she rejected because she found the demand that she place her money in an escrow account unacceptable as she needed the money to live.  Ms. Kemper could have allowed Statewide or Equity to contact her to discuss any outstanding liens, informed them that there were no liens, or signed the affidavit in the limited release Statewide provided.  Ms. Kemper did none of these.  Instead, she disavowed her obligation to satisfy any potential outstanding liens because she had over one million dollars of medical bills and needed the money to live.

06/28/19       Ortiz v. State Farm Lloyds
Supreme Court of Texas
Insured’s Bad Faith Claims Dismissed after Insurer Paid Appraisal Award

Oscar Ortiz had a homeowner’s policy with State Farm Lloyds and submitted a policy claim to State Farm for wind and hail damage to his home.  State Farm sent an adjuster to inspect the property, and the adjuster estimated the amount of the damage caused by wind or hail to be $732.53, which was below the policy’s $1,000 deductible.  The adjuster observed additional damage that he concluded was not caused by hail and thus was not covered by the policy.  In response to State Farm’s request that Ortiz forward any estimates related to this loss that exceed your deductible, Ortiz sent State Farm an estimate he received from a public adjuster valuing the loss at $23,525.99. State Farm conducted a second inspection with the public adjuster present and revised the damage estimate to $973.94, again concluding the damage amount did not exceed the deductible.

Approximately six weeks after being notified of the results of the second inspection, Ortiz sued State Farm for breach of contract, violations of the Prompt Payment Act, and statutory and common law bad faith insurance practices. State Farm answered and, approximately two months later, demanded an appraisal pursuant to the insurance policy.

Ortiz objected, arguing that State Farm had waived its right to appraisal by waiting too long to demand it.  State Farm filed a motion to compel appraisal, which the trial court granted.  The appraisal award set the replacement cost of the loss at $9,447.52 and the actual cash value at $5,243.93.  State Farm paid the award, minus the deductible, approximately seven business days after receiving it.  State Farm then moved for summary judgment, arguing that its payment of the appraisal award resolved and disposed of all claims in the lawsuit

First, the court concluded that State Farm was entitled to dismissal of a breach of contract claim.  An insurer does not breach a policy simply because an appraisal award is higher than the amount an insurer offered.  Here, State Farm invoked the agreed procedure for determining the amount of loss and paid the binding amount.  In doing so it complied with its policy obligations, and the insured failed to identify any other breach.

The insured’s bad faith claim was also dismissed.  Other than the amount that has already been paid, Ortiz did not seek to recover any actual damages he claims were caused by State Farm’s Insurance Code violations.  For example, he did not claim the delay in payment resulting from State Farm’s allegedly unreasonable investigation caused additional property damage to his home, nor did he seek either appraisal costs or sums related to pre-appraisal damage assessments.  Because Ortiz sought no actual damages other than the policy benefits paid in accordance with the policy’s appraisal provision, he could not maintain a bad faith claim under either the common law or chapter 541.

However, the court held that the insurer’s payment of the appraisal award did not, as a matter of law, bar the insured’s claim under the Texas Prompt Payment of Claims Act.

John R. Ewell
[email protected]


07/10/19       Comcast v. Hanover Ins. Co. & JNET Communications
New Jersey Superior Court, Appellate Division
Purported Additional Insured Not Insured for Its Own Negligence
(Policy provided AI coverage “only with respect to” Named Insured’s work)

The Hanover Insurance Company (“Hanover”) issued a CGL policy to JNET. JNET had a contract with Comcast agreeing to procure insurance coverage.

Richard Endres filed a complaint alleging he sustained injuries due to the negligence of JNET and Comcast when he tripped over a temporary above-ground cable JNET installed while performing work as Comcast's contractor. Comcast tendered its defense to Hanover under the CGL policy it issued to JNET as the insured. Hanover initially accepted the defense and assigned counsel to Comcast and JNET. Comcast was dismissed from the litigation based on JNET's admission that it placed a temporary cable on the property.

The claim against Comcast was subsequently reinstated on Endres's motion after deposition testimony suggested that a Comcast technician placed or replaced the temporary cable after the JNET employee first placed the cable on the property where Endres fell. Hanover tendered the defense back to Comcast, claiming the alleged loss "did not arise out of [JNET's] work" and therefore Comcast was not owed a defense under the policy. At the trial on Endres's claim, the jury found Comcast 60% liable and JNET 40% liable and awarded damages.

Comcast sued Hanover and JNET seeking a declaratory judgment that Hanover was obligated to defend and indemnify Comcast because Comcast was an additional insured under the policy. Comcast also asserted a claim against JNET alleging that if Comcast was not covered under the policy, JNET breached its contract with Comcast by failing to obtain the insurance required by the contract.

The trial court granted Comcast's motion for summary judgment finding Comcast was an additional insured entitled to a defense and indemnification under the policy, awarded Comcast $350,000 in defense costs and fees, and denied Hanover's motion for summary judgment dismissal of the complaint. The trial court also denied Comcast's summary judgment motion on its breach of contract claim against JNET, determining JNET had, in fact, obtained the required insurance coverage.

By granting summary judgment to Comcast, the trial court ruled Comcast was an additional insured entitled to coverage under the JNET policy for its own negligence. All parties appealed. The central issue on appeal was whether Comcast is an additional insured for its own negligent acts under the policy.

The material facts were not in dispute. In the underlying personal injury trial, the jury determined JNET was 40% liable for Endres's injuries based on its negligence and Comcast was 60% liable based on its negligence. JNET is the named insured under the policy. Comcast is entitled to a defense and indemnification from Hanover under the policy only if Comcast qualifies as an additional insured for its own negligence.

Comcast's claim it was an additional insured rested upon the following policy provisions:

1. Additional Insured by Contract, Agreement or Permit

. . . .

5.a. Any person or organization with whom you agreed, because of a written contract, written agreement or permit to provide insurance, is an insured, but only with respect to:

(1) "Your work" for the additional insured(s) at the location designated in the contract, agreement or permit


The policy defines "Your Work" as:

(1) Work or operations performed by you or on your behalf; and

(2) Materials, parts or equipment furnished in connection with such work or operations.


Hanover argued that under the circumstances presented here Comcast is not an additional insured for its own negligent acts under the plain language of the policy. More particularly, Hanover noted the policy provides Comcast is an additional insured but "only with respect to" JNET's work. Hanover contended Comcast is not an additional insured for its own negligence because the jury based its finding of Comcast's liability on Comcast's direct negligence unrelated to JNET's work and not vicarious liability based on JNET work. Hanover contended that Comcast is not an additional insured "with respect to" the work for which the jury found it directly liable, and that Comcast's contentions to the contrary ignore the policy's plain and unambiguous language and the jury's verdict. The Appellate Division agreed.

In the first instance, to qualify as an additional insured under the policy, Comcast must be a party for whom JNET, as the named insured, agreed to provide insurance. That condition was satisfied here; JNET agreed to provide insurance under its contract with Comcast. However, Comcast's status as a party to whom JNET contractually agreed to provide insurance does not, by itself, render Comcast an additional insured entitled to coverage.

The policy expressly and unambiguously limits those who satisfy the first requirement for qualification as an additional insured. Thus, those parties to whom JNET agreed to provide insurance are additional insureds but "only with respect to . . . Your Work." The policy defines "Your Work" as JNET's "[w]ork or operations" or "[m]aterials, parts or equipment furnished in connection with such work or operations." Thus, under the policy's plain language, Comcast is an additional insured solely and exclusively in reference and relation to JNET's work.

Comcast made no showing that its liability for Endres's injuries was based on JNET's work or that the jury found it vicariously liable for JNET's negligence in the performance of JNET's work. Instead, the jury apportioned liability based on JNET's and Comcast's separate and distinct negligence. The Appellate Division determined that the policy provides that Comcast is an additional insured "only with respect to" JNET's work; it does not provide that Comcast is an additional insured with respect to its own work or negligence.

Since the jury found Comcast separately liable based on its own negligence and with reference and relation to its own work, the Appellate Division ruled that Comcast was not an additional insured for its own negligence under the circumstances presented.

The Appellate Division reversed the order granting Comcast summary judgment on its claim for coverage under the policy and denying Hanover's summary judgment motion dismissing Comcast's coverage claim.

Since Comcast was not entitled to coverage under the policy, the factual premise underlying the trial court's dismissal of Comcast's breach of contract claim against JNET was no longer extant. The record on appeal did not otherwise permit a disposition of the motion because the record was incomplete. The Appellate Division vacated the order denying Comcast's motion for summary judgment on its breach of contract claim against JNET and remanded for the trial court to address the motion on the merits.

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


Lee S. Siegel

[email protected]

06/25/19       Raspberry Junction Properties v. Edwards Family Partnership
United States District Court for Connecticut
Connecticut and the Attorney-Client Privilege

Connecticut has been a little light on coverage decisions of late, but this quiet gives us the opportunity to take a look at Connecticut’s approach to the attorney-client privilege—an oft-raised discovery objection in the coverage and bad faith arena. Generally, in Connecticut, the attorney-client privilege protects both the confidential giving of professional advice by an attorney acting in the capacity of a legal advisor to those who can act on it, as well as the giving of information to the lawyer to enable counsel to give informed advice. In order to invoke the attorney-client privilege, Connecticut imposes a four-part test. First, the attorney must be acting in a professional capacity; second, the communication must be between attorney and client; third, the communication must be related to legal advice sought by the client; and fourth, the communication must be made in confidence. The burden of proving each element of the privilege rests with the party claiming the privilege.

Here, the district court found that most of the documents the defendants sought to withhold failed to satisfy the third element of the privilege test – that the communication relates to legal advice. The court concluded that documents involving business discussions about market conditions, escrow arrangements, fee arrangements, and representation agreements did not constitute legal advice subject to the protection of the attorney-client privilege doctrine.

While it is not improper for a commercial attorney to proffer business advice, such conversations do not come within the privilege. See Vidal v. Metro-North Commuter Ry. Co., 2014 WL 413952, at *4 (D. Conn. Feb. 4, 2014) (“The lawyer must not only be functioning as an advisor, but the advice given must be predominantly legal, as opposed to business, in nature.”). Additionally, client identity and fee arrangements do not fall within the attorney-client privilege because they are not the kinds of disclosures that would not have been made absent the privilege and their disclosure does not incapacitate the attorney from rendering legal advice.


Brian F. Mark
[email protected]


06/20/19       Atl. Cas. Ins. Co. v. Quinn

US District Court for the District of Montana, Missoula Division
US District Court Examines Duty to Defend and Indemnify and Holds that Faulty Workmanship can be an Occurrence if the Consequences were not Objectively Intended or Expected by the Insured, Notwithstanding that the Work was intentional

This declaratory-judgment action arises out of an underlying construction defects action related to the construction of a custom home.  Atlantic Casualty Insurance Company (“Atlantic”) sought a declaration that it had no duty to defend or indemnify its insured, Brunner Homes and Construction (“Brunner”) in the underlying action commenced by homeowners Peggy and Kevin Quinn.

On June 29, 2015, the Quinns entered into a contract with Brunner to construct a custom home.  The contract required Brunner to complete the home no later than 300 days after the work began – May 24, 2016 (“the Completion Date”).  The Completion Date was permissibly subject to delays resulting from any change orders the Quinns issued during the construction.  Barring any change orders, Brunner agreed to complete construction no later than the Completion date or else be responsible for .5% of the contract price for every day beyond that date that the home remained unfinished.

On September 25, 2017, the Quinns sued Brunner for negligence, breach of contract, and construction default.  The Quinns alleged that the home was not satisfactory for habitation by the Completion Date.  As such, they sought damages for the delay that the home remained substandard.

At all relevant times, Brunner was insured by Atlantic.  Brunner notified Atlantic of the lawsuit and was advised that Atlantic would defend under a complete reservation of rights.  Thereafter, Atlantic commenced suit seeking a declaration that it had no duty to defend or indemnify Brunner in the underlying suit.  Atlantic filed summary judgment motions on the duty to defend and indemnify and Brunner cross-moved on the duty to defend.

The Court analyzed the Montana law regarding the duty to defend and stated that to prevail on its motions, Atlantic must demonstrate that none of the Quinns’ claims against Brunner are or could be covered by the Atlantic policy.  The Court found that Atlantic had sufficiently shown that the Quinns’ claims for liquidated damages, breach of warranty, violations of the Montana Consumer Protection Act, and emotional distress were not covered under the Atlantic policy.  Issues of fact were found, which precluded summary judgment on the remaining claims.  However, because the possibility of coverage exists as to at least some of the claims, the Court held that Atlantic had a duty to defend.

The underlying complaint alleged Brunner was negligent in constructing the home (faulty workmanship).  Atlantic argued that the alleged negligence is not covered because faulty workmanship is not an “occurrence” and even if it was, exclusion 2(j)(6) excludes any resulting property damage and the Products-completed operations hazard exemption, which could restore coverage, did not apply.

Atlantic argued that because faulty workmanship is not a fortuitous event, it is not a covered occurrence.  The Atlantic policy covers property damage and bodily injury caused by an occurrence.  “Occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  Accident is not defined.  The Court looked to Montana case law, which established a two-part test to determine whether an act is an occurrence.  The test asks 1) whether the act itself was intentional, and 2) if so, whether the consequence or resulting harm stemming from the act was intended or expected from the actor’s standpoint.  If the answer to either is no, the act is an occurrence.  The Court noted that faulty workmanship can be an occurrence if the consequences were not objectively intended or expected by the insured, notwithstanding that the work was intentional.

The record regarding Brunner’s alleged faulty workmanship was not sufficiently detailed.  The underlying complaint only contained general allegations that the issues with the roof, concrete, the decks, drywall, plumbing, framing, trim work, paint, windows, doors, tile, venting, leaking, and cracking resulted in water damage, water stains, destruction of personal property, stained floors, damage to a range hood, and other damage to tangible personal property.  Atlantic failed to submit any evidence that a contractor in Brunner’s position would have intended or expected such damages.  As such, the Court held that additional facts were needed to determine whether Brunner’s alleged faulty workmanship was a covered occurrence.

Atlantic further argued that even if the alleged faulty workmanship was an occurrence, the resulting property damage is not covered as Exclusion 2(j)(6) removes from coverage “property damage” to property “that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”  The Products-completed operations hazard restores coverage for property damage that occurs after the work is completed.  “Completed” was defined to mean all work called for in the contract is finished or the site has been “put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.”

Atlantic argued that the Products-completed operations hazard was not applicable as the home was not completed.  However, the record indicates that the Quinns took occupancy of the home, putting it to its intended use.  The Court found that as such, the Products-completed operations hazard provided coverage for property damage that occurred after the home was completed.  However, Exclusion 2(j)(6) excluded property damage that occurred during Brunner’s work.

The Court noted that the record was unclear as to when the alleged property damaged occurred.  Accordingly, the Court held that additional facts were needed to determine whether the alleged property damage was excluded under 2(j)(6) or covered under the Products-completed operations hazard.  As such, the duty to indemnify was found to be premature.  Because coverage was a possibility, the Court held that Atlantic owed a duty to defend Brunner against the negligence claims and the mixed-action rule required Atlantic to defend against the other claims in the underlying complaint.

Next, Atlantic argued that the breach of contract claims were not covered occurrences under the policy and that the liquidated damages were not covered property damages.  To determine whether the alleged breach of contract was an occurrence, the Court focused on whether the conduct underlying the breach was an occurrence.  The Court found that the record was unclear as to Brunner’s conduct, which made applying the two-part test referenced above difficult.  Although Brunner claimed that the failure to abide by the Completion Date was unintentional as the delay was the result of the Quinns’ change orders, it failed to offer any change orders or other evidence to support its claim.  Again, the Court found the record to be insufficient to permit a ruling on whether the conduct underlying Brunner’s alleged breach of contract constituted an occurrence.

Atlantic argued that even if the failure to meet the Completion Date was an occurrence, the resulting liquidated damages were not covered property damages.  The Atlantic policy defines “property damage” as “physical injury to tangible property, including all resulting loss of use of that property” and the “loss of use of tangible property that is not physically injured.”  “Property damage” does not include breach of contract, breach of any express or implied warranty, deceptive trade practices or violation of any consumer protection laws.”

Brunner and the Quinns argued that the liquidated damages reflect loss of use of the home due to the delay.  However, the Court noted that liquidated damages could also be viewed as a penalty.  As Atlantic argued, the liquidated damages are purely economic.  The liquidated damages language in the contract does not indicate that such damages are compensation for loss of use resulting from the delay.  The Court noted that the “usual, common-sense meaning” of the policy’s exclusion for breach of contract from the definition of “property damage” is that purely contractual damages are not covered.  As such, the Court held that the liquidated damages were not covered under the policy and Atlantic had no duty to indemnify Brunner for those damages.  The Court was unable to determine whether Atlantic had a duty to indemnify Brunner for the remaining breach of contract and implied warranty claims.

Based on the policy definition of “property damage” referenced above, the Court determined that Atlantic had no duty to indemnify Brunner for the allegations in the underlying complaint that Brunner breached an express warranty and the implied warranty of habitability and violated the Consumer Protection Act.

The underlying complaint alleged that Brunner negligently misrepresented material facts regarding the quality of construction, the Completion Date, and repairing deficiencies.  The complaint also alleged that Brunner engaged in constructive fraud by representing it would repair defects on the home and subsequently failing to do so.  Atlantic argued that these claims are based on the same conduct underlying the breach of contract claims, and therefore do not allege covered occurrences.  The record is unclear as to the content and circumstances of Brunner's alleged misrepresentations and fraudulent statements.  Accordingly, whether they constitute occurrences could not be determined as a matter of law.

With regard to the underlying claim of emotional distress, Atlantic argued that this is not covered "bodily injury" because the policy excludes "costs or expense arising out of emotional distress . . . unless it arises out of physical injury that occurs to that person."  The Quinns conceded that this claim is not covered.  THough the Quinns alleged physical symptoms of Peggy Quinn's emotional distress, they did not allege that her emotional distress arose out of a physical injury caused by Brunner, as required by the policy.  Accordingly, the Court held that Peggy Quinn's emotional distress was not covered and Atlantic had no duty to indemnify Brunner for emotional distress damages awarded in the underlying suit.

The underlying complaint alleged that Brunner was unjustly enriched by its retention of payment despite defects in construction.  Atlantic argued that equitable relief is not covered under the policy.  Neither the Quinns nor Brunner disputed this contention.  Accordingly, the Court held that Atlantic has no duty to indemnify Brunner for the Quinns' unjust enrichment claim.

In light of the above, the Court concluded that Atlantic owed a duty to defend Brunner against all claims in the underlying action.  Furthermore, the Court held that Atlantic did not have a duty to indemnify Brunner for the liquidated damages, the breach of warranty claims, the alleged violations of the Consumer Protection Act, the emotional distress claims, or the unjust enrichment claims in the underlying complaint.


Larry E. Waters
[email protected]


07/08/19       Scottsdale Insurance Company v. POPS & Son Construction
District Court, Eastern District of New York
Court Grants Plaintiff’s Motion for Default Judgment because the Allegations against the Insured Took Place Outside the Policy Period

Scottsdale, via Western Heritage Insurance Company, issued a Policy of insurance to defendant, Pops & Son Constriction, Inc., for the period of December 9, 2014 to December 9, 2015. In part, the Policy provided that it “applies to ‘bodily injury’ and ‘property damage’ only if . . . . .[t]he ‘bodily injury’ or ‘property damage’ occurs during the policy period. . . .”

After the Policy was issue, it is alleged that Eva Brock owned the premises and that prior to July 5, 2016, Stocke 1, LLC contracted with defendant to perform electrical work. Subsequently, it is alleged that a fire occurred on July 5, 2016, which the parties in the underlying Subrogation Action allege was caused by defendant’s negligent work.

Plaintiff commenced this action and served Defendant with the summons and complaint in this action through the New York Secretary on November 16, 2018. Following Defendant’s failure to answer, the Clerk of Court entered a certificate of default on March 14, 2019. Thereafter, Plaintiff moved for default judgment on March 18, 2019.

In its motion for default judgment, Plaintiff argues that coverage under the Policy issued to Defendant ended seven months prior to the alleged property damage caused by Defendant’s negligent work. As such, Plaintiff contends that there is no coverage for Defendant for claims arising from the July 5, 2016 fire. 

In its analysis, the Court found Plaintiff properly served Defendant and Defendant failed to entirely to participate in the current action. Further, the Court concluded that Plaintiff was entitled to the relief is sought in the Complaint.  Specifically, the Court reasoned that Plaintiff was entitled to a declaratory judgment because the loss alleged did not occur during the policy period.  As such, there was no coverage for Defendant for the claims under the Policy.

07/08/19       United Specialty Ins. Co. v. All State 12 General Contracting
Court Granted Plaintiff’s Motion for Default Judgment as Plaintiff was Entitled to Declaratory Judgment as the Policy’s Action Over Exclusion Barred Coverage under the Policy

Plaintiff alleges that All State was the general contractor at the construction project and that it retained Sky Global as a subcontractor. The subcontract between All State and Sky Global required Sky Global to procure insurance coverage. In turn, Sky Global purchased a policy of insurance from United Specialty with effective dates of March 3, 2016 through March 3, 2017. The Policy contained an Action Over exclusion Endorsement which precludes coverage for “bodily injury . . . .to [a]n employee of the named insured arising out of an in the course of . . . . employment by the named insured . . .  or preforming duties related to the conduct of the named insured’s business.”

Following the procurement of insurance, it is alleged that on November 5, 2016 defendant Marlin Guity Garcia fell from at the construction/demolition project.

On March 28, 2019, United Specialty received a letter from All state tendering the defense and indemnity of All State in the Underlying Actions to United Specialty and seeking additional insured status for All State under the United Specialty Policy.  The tender letter stated that on November 5, 2016, Ms. Garcia was an employee of Sky Global and sustained work-related injuries in the course of her employment with Sky Global. On April 24, 2018, United Specialty sent All State a partial disclaimer citing the Action Over Exclusion Endorsement as an endorsement precluding coverage and agreeing provisionally to participate in the defense of All State.

Thereafter, United Specialty served All state with a summons and complaint for this action on July 19, 2018. After All State’s failure to appear or answer the complaint, the Clerk of Court entered a certificate of default on November 2, 2018. Subsequently, Plaintiff moved default judgment on January 30, 2019.

In its motion, Plaintiff argued that the Action Over Exclusion Endorsement precludes coverage to All State as an additional insured under the United Specialty Policy in connection with the Underlying Actions because Ms. Garcia was the named insured’s employee and she received bodily injury arising out of, and in the course of, her employment.

In its analysis, the Court found Plaintiff properly served All State. In addition, the Court found All State has failed entirely to participate in this action. Further, the Court found the Action Over Exclusion Endorsement applies to, and precludes, Ms. Garcia’s claim for bodily injury against All State as an additional insured.

However, the court found Plaintiff abandoned its claim against All State to recoup all the expenses it incurred in the defense of All State in the Underlying Actions.  In support the Court stated that “Plaintiff’s proposed default judgment order and its memorandum of law in support of its motion for default judgment did not address the claim for recoupment and did not provide any information about the value of those expenses to date.  


Eric T. Boron

[email protected]

06/28/19       Parker's Classic Auto Works v. Nationwide Mutual Ins. Co.
Supreme Court of Vermont
Post-Trial Judgment for Insurer as a Matter of Law Reversed – Collision Insurance Coverage – Insurer May Not Unilaterally Determine the Value of an Insured’s Collision Damage Claim

Background:  The plaintiff collision repair shop Parker’s Classic Auto Works, Ltd., of Rutland, Vermont (“Parker’s”), sued Nationwide Mutual Insurance Company (“Nationwide”) for breach of contract in Vermont state court.  Parker’s sued as assignee of approximately 70 different Nationwide policyholders, alleging Parker’s had repaired approximately 70 different collision-damaged policyholder vehicles to pre-accident condition between 2009 and 2014, but that in each instance Nationwide paid out less on the associated collision damage claims made by those policyholders than what Parker’s final bills had charged those policyholders for the completed repairs under the separate repair contract the policyholders had entered into with Parker’s for the repairs.  Parker’s as assignee of the policyholders refers to the difference between what Nationwide paid on the claims and what Parker’s charged for the repairs as “short pays”.  A jury trial of Parker’s breach of contract claims was conducted in the Vermont Superior Court, Rutland Unit, Civil Division.  The evidence presented to the jury included the fact that Parker’s repair contracts with the policyholders were completely independent of the insurance contracts between the policyholders and Nationwide, and moreover, that Nationwide was under no contractual obligation of any kind to pay anything directly to Parker’s.  However, Parker’s, through the assignments provided to it by the policyholders, asserted it therefore stood in the shoes of the policyholders to be paid the fair value of the damage/loss suffered by the collision-damaged, insured policyholder vehicles.  (The policyholders also signed directions to pay the claim proceeds directly to Parker’s, rather than the policyholders.)  The jury returned a verdict finding Nationwide liable to Parker’s for breach of the assigned collision damage claim rights of the policyholders, in the “short pay” amounts asserted by Parker’s, awarding Parker’s $41,737.89 in total on the approximately 70 short pay claims.  Nationwide moved post-trial for judgment as a matter of law, and the Superior Court judge who presided over the trial, the Hon. Helen M. Toor, granted Nationwide’s post-trial motion, awarding Nationwide judgment as a matter of law.  Parker’s then appealed the post-trial judgment for Nationwide to the Vermont Supreme Court.  Parker’s appeal was heard and considered by the entire Vermont Supreme Court en banc.

The decision is curious in numerous respects. This is a breach of contract case.  The Vermont Supreme Court’s decision reverses the lower court’s order which had granted defendant Nationwide post-trial judgment as a matter of law.  Yet, nowhere in the decision does the Vermont Supreme Court recite any Vermont case law describing what exactly a plaintiff’s burden of proof is in a breach of contract case being tried in Vermont.

In addition, rather than explaining through its decision why the plaintiff-appellant Parker’s arguments and position on this appeal won the day, Supreme Court instead devotes virtually the entirety of its decision to rebutting and/or discounting the defendant-appellee Nationwide’s arguments presented in response to Parker’s appeal.  Supreme Court’s decision oddly refrains from advising the reader exactly what plaintiff Parker’s arguments were in support of its appeal.

The decision makes vague reference to a so-called “standard collision-insurance policy” without elucidating what the pertinent terms of this hypothetical “standard” policy are.  Further, the decision opts to merely summarize portions of the pertinent provisions of the Nationwide “Century II” auto insurance policies at issue, rather than set forth for the reader’s benefit the complete extent of the collision coverage provisions and the limit of liability provisions of the Nationwide policies at issue.

There is no specific reference in the decision to any specific testimony heard by the jury during the trial.  Rather, generalized summations of portions of testimony are merely alluded to[1].

At one point in the decision, Supreme Court references that “the actual issue” in this case is “whether plaintiff’s bills here were covered”.   This telling reference is indicative of Supreme Court’s flawed analysis of the plaintiff Parker’s appeal of Superior Court’s post-trial judgment as a matter of law in favor of Nationwide.  The testimony at trial coupled with the documentary evidence at trial indisputably established that nowhere in the policies at issue does it say Nationwide is obligated to pay invoices or bills generated by a collision repair shop or anyone else repairing a policyholder’s vehicle which is afforded collision damage coverage.

Rather, the actual issue in this case is whether plaintiff Parker’s met its burden under Vermont law at trial to prove all the elements of its breach of contract claims against defendant Nationwide.  A closely related issue in this case is whether the jury’s verdict for Parker’s is in conformity with the trial judge’s jury instruction that Parker’s had the burden of proving through the evidence presented that the assignors/policyholders had suffered some financial loss, a component of proving a breach of contract claim in Vermont.

If you have read this far, you’ve read the footnote indicating that yours truly tried this case to verdict and thereafter obtained post-trial judgment for Nationwide as a matter of law.  Here’s some information about the trial not set forth in the Vermont Supreme Court’s decision.  There was uncontroverted testimony from Parker’s representative that he had no knowledge of any policyholder having suffered any out-of-pocket financial loss, and all policyholder vehicles were repaired to pre-accident condition and returned to the policyholders/assignees without Parker’s ever asking the policyholders/assignees to pay Parker’s the short pay amounts.  With Supreme Court having opted not to indicate what the elements of a breach of contract claim are in Vermont, the reader is left to surmise for herself and himself what exactly the legal grounds for reversing the Superior Court’s post-trial ruling in favor of Nationwide are.

This author can attest to the following additional notable facts about the trial which the Supreme Court either ignored or in any event failed to reference in its decision:

  1. The trial testimony of Material Damage Claims Adjuster Alan Douse of Nationwide was uncontroverted as to the fact that he met with each insured at the time he prepared Nationwide’s repair estimate, reviewed his repair estimate line-by-line with the insureds, and got agreement from the insureds after doing so as to the amounts of his repair estimates.After getting agreement from the insureds as to the value of the claim Mr. Douse then issued claim payment checks directly to the insureds.As such, the decision’s assertion that Nationwide “unilaterally” determined the value of the insured’s claims is simply mistaken.The value of the claims was agreed to by each of the policyholders during their meetings with Mr. Douse.

  2. Parker’s lone witness at trial conceded on cross-examination that policyholders making a claim under the collision coverage of their auto insurance policies with Nationwide were under no obligation to actually get the collision-damaged vehicles repaired, but rather, could simply pocket the amounts of the claim check proceeds for themselves.

  3. On all claims, Parker’s was clearly informed in writing by Nationwide of the extent Nationwide was willing to pay on the claims.

  4. Not a single assignor/policyholder testified at the trial.

    Considering item #3 above, the Vermont Supreme Court’s supposed basis for distinguishing the Cascade Auto case discussed in the decision [Cascade Auto Glass, Inc. v Idaho Farm Bureau, Ins., 141 Idaho 660, 115 P.3d 751 (2005)] from the instant matter was supported by neither the trial transcript nor the documentary evidence making up the record on appeal.  The Nationwide policies in evidence at the trial reserved to Nationwide the right to inspect the collision-damaged vehicles, and then pay the insureds directly on the claim, and that is what in fact occurred according to the uncontroverted testimony of Mr. Douse at trial.  It is indisputable that the policies at issue create no obligation for anyone, including the policyholder, to repair the collision-damaged vehicles which the claims concerned.  The insured policyholder can simply pocket the claim proceeds. As such, there is no legitimate basis for Supreme Court to have determined, for the purpose of attempting to distinguish the Cascade Auto case from the instant matter, that “no policy language viewed ‘from the perspective of… a reasonably prudent person applying for insurance’ suggests that defendant [Nationwide] may unilaterally determine the value of a claim”.  Rather, the policy language in evidence coupled with the trial testimony and common-sense experience “suggests” people who purchase collision insurance coverage do so accepting the fact that it is the insurer - and not some third-party to the contract – that determines the value of the collision damage claim.

    So, how does Nationwide determine an appropriate amount to charge in premiums on collision insurance coverage in Vermont when the value of the collision damage/loss may be arbitrarily arrived at by for-profit, self-interested, non-parties to the auto insurance contract?


Marina A. Barci

[email protected]


06/28/19       JCC Med., P.C. v. Hereford Ins. Co.
Appellate Term, Second Department
The Presumption of Medical Necessity Can Be Overcome by Testimony of an Expert Doctor.

I highlight this case only to serve as the important, probably unnecessary, reminder that the standard for payment of no-fault benefits is that the services were medically necessary. Medical necessity is presumed and, generally speaking, requires that the services provided to the claimant be related in some way to injuries sustained and/or aggravated as a result of the motor vehicle accident.

In this case, a nonjury trial was held to determine whether the services provided by the plaintiff were medically necessary. Plaintiff did not call any witnesses at trial, while the defendant had their peer review doctor testify as an expert. The doctor testified that the services were not medically necessary, thus sufficiently rebutting the presumption since plaintiff failed to present any evidence to the contrary.

06/28/19       Valda Acupuncture, P.C. v. Nationwide Mut. Fire Ins. Co.
Appellate Term, Second Department
Declaration That Assignor is Not Entitled to Benefits Applies to All Providers Assigned Benefits.

In September 2011, the injured party (assignor) in a January 2011 motor vehicle accident assigned no-fault benefits to the plaintiff. In August 2011, Nationwide commenced a declaratory judgment action against the assignor and a number of other providers, not including plaintiff, seeking a declaration that the January 2011 accident was not a covered incident under the policy. In 2016, the court declared that Nationwide was not required to provide no-fault benefits to the assignor.

However, in 2015 plaintiff commenced this action to recover benefits arising from the January 2011 accident. Nationwide moved to dismiss this action, arguing that it was barred by the declaratory judgment decision. The court held that the declaration against the assignor applied to all providers that it had assigned no-fault benefits; thus, the plaintiff was not entitled to recover any benefits related to the 2011 accident.

06/28/19       Tillman v. State Farm Ins.
Appellate Term, Second Department
Insurer is Not Required to Explain Reasoning Behind EUO Request.

This is another case where the court has upheld the position that an insurer is not required to explain to the claimant why they are requesting an EUO. Submitting to an EUO is a policy condition that, if failed to comply with, can result in a policy breach, which can lead to a number of potential consequences. There is nothing in the no-fault regulations that requires an EUO notice to specify the reasoning behind it, nor is an insurer required to explain itself to an objecting claimant.

That analysis was applied here. Plaintiff-provider sought to recover benefits from State Farm and State Farm moved for summary judgment on the basis that the plaintiff-assignee (claimant) had failed to appear for scheduled EUO’s. The plaintiff had sent letters to State Farm stating that it refused to appear for any EUO unless it was given a reason for the request. The court held that State Farm is not required to provide a reason for its demand and dismissed the complaint.


Earl K. Cantwell

[email protected]


01/04/19       City of West Liberty, Iowa v. Employers Mutual Casualty Co.
Supreme Court of Iowa
Sparky the Squirrel Leads Coverage Case to Iowa Supreme Court

The City of West Liberty owns and operates an electrical power plant. An ill-fated intrusion by Sparky the Squirrel created a conductive path between high voltage and the ground, which resulted in significant electrical arcing. Poor Sparky met his demise, but the arcing caused over $200,000 worth of damage to the City’s transformer and electrical equipment. The City’s insurance policy contained an exclusion whereby the carrier would not pay for loss caused by arcing or electrical occurrence other than lightning, unless a fire resulted. The City filed a claim which was denied at the district court and initial appellate court levels, and those denials were affirmed on appeal.

The essential basis of the trial court’s ruling was that the only event that caused damage was the electrical arc, because the squirrel by himself did no damage to the insured’s property. In short, the electrical arcing caused all of the damage, and that was excluded. This decision and reasoning were essentially affirmed at the Supreme Court. The City did obtain review by the Supreme Court, and one member of the appellate court dissented and would have ruled in favor of the City.

The Supreme Court noted that insurance policy exclusions are strictly construed against the insurer, however unambiguous exclusions should be enforced and applied as written. The Court held that, if electrical arcing caused the loss, the loss was excluded unless it led to a fire. The City’s argument focused on the “efficient proximate cause doctrine” maintaining that the squirrel was the efficient proximate cause of the loss, and therefore the exclusion did not apply.

The “efficient proximate cause doctrine” can apply when two or more causes, at least one covered by an insurance policy and at least one excluded, contribute to a loss. However, the Supreme Court noted that this was not a case of two independent causes, one covered and one not covered, causing the loss, and the efficient proximate cause doctrine is only applicable where the causes are independent. The squirrel did not independently contribute to the electrical damage, and it was the arcing that was the immediate cause for the damage. The courts essentially ruled that the squirrel as squirrel caused no damage or loss to the equipment; the arcing caused the loss to the equipment. The arcing was the “sole cause” of the loss.

Ultimately, the Court noted that something like electrical arcing is always going to have some cause, and policy language excluding an event would be meaningless if an insured could always avoid the exclusion by simply pointing out that an arcing event itself had some initial precipitating cause. The Supreme Court also noted that, if the cause of any arcing could be the cause of the loss for coverage purposes, the “lightning” exclusion from the exclusion would be moot and unnecessary since there would have to be coverage for lightning – caused arcing.

At one point the City may have argued that the arcing indeed caused a “fire”, but that argument was apparently abandoned as the case progressed.

Therefore, the decisions of the lower courts were affirmed, the exclusion was deemed to apply, and there was no coverage for the City’s loss. We would like to thank poor Sparky the Squirrel for his sacrifice leading to this further learning experience in the annals of insurance law.  Sparky’s unfortunate mis-step sparked electricity into insurance jurisprudence and the Iowa court system.


[1] While associated with another law firm, your author tried this case to verdict in August 2017, and then prevailed on the post-trial motion for Nationwide.  Subsequently, I joined Hurwitz & Fine and was not therefore afforded the opportunity to present Nationwide’s oral argument on Parker’s appeal to the Vermont Supreme Court.

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