Coverage Pointers - Volume XXI, No. 22

Volume XXI, No. 22 (No. 561)
Friday, April 17, 2020

A Biweekly Electronic Newsletter  


As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York, New Jersey, and Connecticut appellate courts and Canadian 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:

This isn’t our favorite situation, but we still love situations.

We hope you and your families are healthy and strong.  We are remaining active and busy, both with COVID-19 coverage issues and more traditional fare.

If you need to reach me, my cell is 716.445.2258 or you can contact me by email, Zoom conference or through Microsoft Teams at [email protected]. Call to chat, if you want to talk coverage, claims, health, or just shoot the breeze.  That’s ok.  We are here for you.

We’re busy here, that hasn’t changed, but it’s not quite the same.  That’s not a complaint, mind you. There  are lots of efficiencies.  We’re fortunate to have a robust document management system so all file materials have been readily available as we’ve moved to a paperless office.  Whole bunch of Zoom conference calls, Skype Business, Meetings, whatever works.  And it has worked very efficiently.

New York courts have cracked the doors open.  Now we’re handling motions by Skype Business, depositions are ongoing with Zoom and similar programs and litigation is marching on.  We have been encouraging lawyers and insurers, alike, to try to close files.  It is the perfect time to do so.

Our coverage team meets weekly by Zoom conference call to keep track of each other, to make sure everyone’s supported and busy (and they are).  That’s worked out well.

If you’ve followed me on LinkedIn, we post almost every day, on file closing philosophy, on the importance of understanding our client’s business interests and on issues of substantive law.  Lots of COVID-19 resources.  We posted links to all the pending state legislative initiative on business interruption and on all the pending lawsuits of which we are aware, attacking Business Interruption coverage decisions.

We are working with national carriers to make certain that they do what they always strive to do, approach the claims process in good faith.  I am delighted to report that I’ve seen the clients I work with approach these claims on an individual basis, in good faith, juxtaposing the insured’s claim information with the policy forms in place. Nothing wrong with that, in fact, everything right.

We have posted two very important resources on our website, and you’ll hear more about them later.  Ryan Maxwell is charged with keeping track of legislative offerings on both the state and national level and Lee Siegel has taken up the laboring oar in watching the judicial challenges to coverage denials relative to Coronavirus claims.

Our transactional attorneys are preparing and posting really important and well considered articles about regulatory, employment, and other related COVID-19 issues (that, thankfully, have nothing to do with coverage).

Our COVID-19 resources are available here and do we have resources.

  • PS – there’s a fabulous piece in the newsletter about Coverage for COVID-19 Economic Losses Under Canadian Loss of Business Earnings Forms from our good friend Heather Sanderson.



We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:

  • Employment & Business Pointers aims to provide our clients and subscribers with timely information and practical, business-oriented solutions to the latest employment and general business law developments.  Contact Joseph S. Brown [email protected] to subscribe.

  • Premises Pointers:  This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!).  Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.

  • Labor Law Pointers:  Hurwitz & Fine, P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.

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


Every Strike has its Ups and Down – 100 Year Ago:

The New York Times
New York, New York

17 Apr 1920


Tenants and Office Workers Forced to Walk When Operators Quit.


Girls Take Places of Men in Downtown Skyscrapers and Run Cars.

            Thousands of persons were forced yesterday to climb to offices in skyscrapers and other buildings after a reported total of 17,000 elevator starters and operators went on strike at 9 A. M. The walkout was ordered by Elevator Starters and Operators' Union, Local No. 16,-429, at a meeting in Arlington Hall just before midnight Thursday. The strike is supported by 900 women operators.

Many of the principal buildings in the financial district and in the loft section above Canal Street were without adequate elevator service. Most of the elevator men reported for work, but quit at the time set for the walkout. Others failed to show up at all.

In many buildings the tenants, aided by firemen and engineers of the buildings, ran the cars on hourly shifts. The tie-up in the financial and loft districts was estimated at only 50 per cent, by W. T. Ropes, Chairman of the Employees Committee of the Building Managers and Owners' Association. He said the strike would be broken today through the willingness of the public to furnish their own service.


Peiper on Property and Potpourri:

In perhaps a harbinger of things to come, we review a business interruption decision out of the Third Department.  That case involved a very specific grant of coverage arising from equipment breakdown.  It was not a typical policy, and the result was also not typical.  In that case, the language for business interruption triggered where the insured could establish a net loss of profits.  That’s it.  It was not tied to sales, to production, or to activities at the location.

Nope. All the insured had to do was establish that it would have produced “X” had there been no shutdown, and then compare “X” with what was actually produced.  The Third Department went on to state that while there may have been a question as to damages mitigation, the fact that the insured made up the production it lost did not automatically preclude recovery.  That is to say that even though the insured eventually made and sold what it would have made/sold had there been no breakdown, the lost production time (and therefore profit) was a compensable loss.  

Is this a gamechanger on the business income front?  Perhaps.  It is troubling, no doubt, that the Appellate Division seems to be limiting a carrier’s ability to define the equitable scope of damages.  If a business shuts down, but doesn’t sustain a dip in income is there a loss?  This case seems to suggest it’s possible.

We also might suggest taking note of an additional point.  The language of the policy dictates the scope of the coverage.  That should not be a controversial statement, but it is worth highlighting there are slight (and, at times, significant) differences on several business interruption policies that are responding to the challenging times of today.  What is the Period of Restoration?   What does the policy say about what is actually covered?  Is it net profits?  Sales? Something else?

We have been hearing a lot about how to evaluate coverage, and those questions are obviously very important.  Answering whether there has been a Covered Cause of Loss, a necessary interruption, and whether the definition of suspension includes a “slowdown” are vital.

This case, however, reminds us to not just stop there.  A full evaluation includes how damages are actually defined, as well.

That’s it for now.  Get well, be well, stay well.   

Steven E. Peiper

[email protected]


Epidemic X 2 – 100 Years Ago:

The Dispatch
Moline, Illinois

17 Apr 1920


Case of Smallpox Discovered In John Deere Building; Two Others Ill.

Dispatch Special Service.


            East Moline, April 17.—Dr. Walton Tackett, city health Commissioner, this morning intimated that the John Deere school building at Ninth street and Seventeenth avenue would be closed for fumigation as result of the illness of Douglas Tressel, 2129 Eighteenth street, with smallpox.

            Douglas is a pupil at the John Deere building, and Dr. Tackett said that he would conduct an investigation, and if it was discovered that other pupils have been exposed Monday’s classes would be suspended.  The john Deere School is the only one which has not already felt the effects of the smallpox epidemic.


Wilewicz’ Wide-World of Coverage:

Dear Readers,

This week in the Wide World of Coverage, though the New York Courts are closed and quiet, other courts around the country keep on trucking. As long as the 13 United States Circuit Courts continue to hear and decide coverage cases, we will keep reporting them for you. Indeed, see Diane Bucci’s column this week for the latest from the Second Circuit.

Then, here from the Seventh Circuit Court of Appeals (Indiana) we bring you Market Insurance v. Lillian Rau, an unfortunate ambulance accident case. In that case, an ambulance owned by United Emergency Medical Services was involved in a crash that fatally injured another driver. The ambulance at issue had been removed from United’s coverage months prior due to a transmission issue that had rendered it inoperable. Quite unfortunately indeed, United later put the vehicle back in service without formally adding it back to the policy in writing. Since on the face of the policy, which only insured “covered autos” expressly listed, did not have that particular ambulance on it, there was no coverage for the fatal accident. Not a particularly happy decision, but a just one.

Until next time,

Agnes A. Wilewicz

[email protected]


Third Epidemic Concerns – 100 Years Ago:

The Vancouver Sun
Vancouver, British Columbia, Canada

17 Apr 1920








What Will You Give to Keep the Enemy Out of Canada?


Dr. Henry Plotz, discoverer of the typhus bacillus, is now speeding to Poland, supported by Jewish Relief funds, bent upon fighting, with his science, the dread disease.




Barnas on Bad Faith:

Hello again:


We’re starting to get some positive news on when sports are going to come back, but it all still seems so far away.  If everything is back on track by late summer/early fall then the fall sports calendar is going to be one for the ages.  I particularly missed The Masters this past weekend.  I always love when the final round falls on Easter Sunday and I get to watch with my family.  Hopefully we get some major golf tournaments, tennis, and horse racing to enjoy alongside our normal course of football this fall.


To pass the time, I’ve been doing a couple of different things.  On the music front, I’ve been taking some time to listen to some bands I’ve always wanted to dive into but haven’t had time for.  Recently, that has been The Smiths and The Stone Roses.  I’m a big Oasis fan, and you can definitely hear the influence those bands had on them, along with The Beatles, of course.  I also recently finished watching Man in the High Castle on Amazon Prime.  I would definitely recommend that if you’re interested in World War II or alternative history.  Rufus Sewell’s performance as American-turned-Nazi John Smith is particularly good.  I recently just started The Wire, which I’ve heard nothing but great things about, so I’m looking forward to diving deeper into that one.

It’s a little light on the bad faith front, but I have a good case in my column from the Eastern District of Pennsylvania.  Plaintiffs made a claim in 2016, which was partially denied.  A subsequent claim was filed in 2018 and the insurer performed a second investigation before issuing a denial.  The court rejected Plaintiffs’ argument that the insurer denied the second claim in bad faith by relying on the reasoning for the first denial.  The case is a good example of how to handle and deal with subsequent claims by the same policyholder and the court got it exactly right.

That’s all for now.  Stay healthy and stay safe.

Brian D. Barnas

[email protected]


More Epidemic News – a Century Ago:

Pittsburgh Daily Post
Pittsburgh, Pennsylvania

17 Apr 1920




            The measles epidemic now afflicting the city presents a curious phenomenon, in the extraordinarily low death rate, for which an explanation would be interesting. But apparently it is inexplicable. When one notes that out of thousands of cases reported this year less than three-fifths of one per cent have resulted fatally, while the mortality rate last year exceeded 9 per cent, the average is given by an authority at 6 per cent, and in New York it has been known to run as high as 30 per cent, the layman is tempted to suspect that the disease now prevalent is not measles. One would not be to presumptuous as to contradict the physicians. But let them explain.

The mildness of the malady is some compensation for the great number of the persons who have caught it. We have had 3,795 cases already this year as against a total of 939 during the whole of last year. And the number of cases reported monthly shows a steady increase. There were 623 in January, 905 in February, 1,366 in March, and 901 so far in April. But there have been only 21 deaths, this year, while 87 of those stricken during 1919 died.

Let not the fact that it is not highly malignant dissuade people from taking precautions to avoid the disease or to check its spread. The saying that children are bound to have measles sooner or later and that they might as well have it while young and be over with it is false. If they are going to have it—although it is not agreed that they must—they will be better able to resist its ravages the nearer they are to maturity. It should not be overlooked that even when measles does no great direct harm it sometimes weakens the lungs and makes the patients vulnerable to bronchopneumonia and tuberculosis.

It is worthwhile, therefore, to go to some trouble to avoid measles. Patients should be isolated just as they would be if afflicted by more dreaded diseases, such as scarlet fever or diphtheria. Let us not spare any effort to end this epidemic.


Off the Mark:

Dear Readers,

As I noted in my Products Liability Pointers column, we are starting to see some of the Judges in the NYC Metro area schedule virtual conferences.  Many attorneys have already conducted depositions and mediations via videoconferences.  I’m sure many of you have participated in a virtual meeting of some sort by this point.  As the legal community gets more comfortable and familiar with the new technology, virtual conferences and proceedings are sure to become routine. 

Despite an exhaustive search, I did not come across any interesting construction defect decisions to report on this edition.   Unfortunately, COVID-19 continues to slow everything down.

Stay safe everyone …

Brian F. Mark

[email protected]


Mrs., Hill was Worth $300,000, a Couple of Weeks Ago, Poor Woman:

Austin American-Statesman
Austin, Texas

17 Apr 1920

LONELY WIDOW—age 30, worth $40,000, wishes to hear from honorable gentleman under 60.  Object, matrimony.  Write Mrs. Hill, 14 E. 6th, Jacksonville, Fla.

Boron’s Benchmarks:

I grew up watching Looney Tunes cartoons on Saturday mornings.  Sometimes you’d hear Sylvester the Cat or Yosemite Sam, or Daffy Duck exclaim, “Suffering Succotash!”  I wasn’t sure exactly what they meant by that phrase, but I gathered from the context of what I was watching that they were mad, frustrated and/or burdened by whatever was transpiring around them.

Will you indulge me in allowing me to say it right now?  Actually, to shout it. SUFFERING SUCCOTASH!  What we are all going through and have been for the past month and a half or more, is just awful, depressing, and for too many unfortunate souls, even worse than that.  I’m beginning to think that there is literally nothing anyone can say to make this experience more tolerable while we are going through it.  But, just maybe, when we emerge from this figurative crucible on its other side, we’ll be able to look back and see that our suffering produced perseverance, which in turn produced character, which in turn produced hope, which is what ultimately figuratively and literally lifted us up and carried us through to the other side.

Boron’s Benchmarks monitors and reports on insurance coverage decisions of the high courts of the 49 states not named New York.  This edition reports on a recent ruling of the Supreme Court of North Dakota addressing an insurer’s appeal of a declaratory judgment that ruled a CGL policy provided coverage for the insured’s alleged liability for bodily injuries suffered by claimants in a motor vehicle collision, including discussion and analysis of the concurrent cause doctrine.  A link to the opinion, plus my write-up of the case, may be found in our actual issue of Coverage Pointers.

Until next time, hang in there, stay healthy, hopeful, and talk with you in two weeks.

Eric T. Boron

[email protected]


A Century Ago, the Race of Automobile Accident Victims were in the Headlines:

Buffalo Courier
Buffalo, New York

17 Apr 1920


            Schenectady, April 16.—Seven Chinamen and three white men are under arrest here and in Hudson as the result of the breakdown of their automobile in which they traveled from Rouse’s point, trying to get to No. 25 Pell street, New York.


Barci’s Basics (On No Fault):

Hello Subscribers!

I can’t believe we’ve been working from home for over a month now. It feels like I’ve finally established a new normal and am settling into a good routine. I’ve been enjoying spending time thinking of conversation topics for you all! I hope you are enjoying them as well. My answers to last issues topics are as follows: 1) My camp name is Booie. Yes, spelled that way too. I grew up going to summer camp and worked at several, but I identify most with my time spent at 4H Camp Bristol Hills in Bristol, NY (close-ish to Rochester and most well-known for its ski resort, Bristol Mountain). Camp names are a tradition dating back several decades at this camp and are usually based on something about you as a person or on something embarrassing that you’ve done. I will leave you to ponder for which reason I may have gotten the name “Booie”; 2) All For You by Sister Hazel was my favorite song as a kid – don’t ask me why, I just loved it and sang it all the time; 3) I’m not really a prankster, so I would say my favorite April Fool’s day prank would have to be toothpaste replacing Oreo crème. Basic, I know; and 4) I think if I were to give a TED talk it would be about the benefits of attending and working at a summer camp. I could talk for hours about camp and the impact it has had on my life and my growth. I often talk with my camp friends about how the skills I learned as a camp counselor translate to my skills as a lawyer! Well that’s me for this week. For the next two weeks consider these topics:


  • What is the best piece of trivia you know?

  • What subject do you wish was taught in school that isn’t?

  • If you could have picked your own name, what would it be?

  • You’re quarantined without technology, what are you doing to stay occupied?


Keep sending me your best answers and check back next issue for mine!

On the no-fault front, I have two cases for you. First from the WDNY, another GEICO case, this time asking for a preliminary injunction and stay to stop no-fault arbitrations and litigation from a specific provider. Since this is a decision from the early stages of the case, we will be following to see where their RICO, fraud and unjust enrichment claims go. Next is a case from the New York County Civil Court that discusses the standards for both the fee schedule and lack of medical necessity defenses common in almost all no-fault cases.

That’s all folks,


Marina A. Barci

[email protected]



Oh No, Straw Hats Rise in Price:

New-York Tribune
New York, New York

17 Apr 1920


Wage Increase in Japan Boosts Straw Hat Prices


Change of Style Announced and Then Association Stages a Celebration

            Straw hats are going up this year, it was said yesterday at the convention of the National Association of Men’s Straw Hat Manufacturers of America at the Hotel Astor.  The Association had a dinner last night by way of celebration.

            The reason straw hats would cost more, members said, was the hat makers in Japan who used to work twelve hours a day for 10 cents a day before the war are now getting from $1.50 to $2 a day.  This year’s style in straws, it was said, would be a hat with a low crown and a broad brim made of braided straw.  Last year’s tall-crowned, narrow-brimmed style would return in 1921, the manufacturers said.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:


With the courts standing down, this column is propped up! At last count, seven (7) states have weighed into the legislative debate surrounding business interruption coverage for COVID-19. Now, two (2) bills have been introduced into the United States House of Representatives on Tuesday. We have summarized these bills here, and this installment of the Legislative List discusses the nuanced differences of each.


Until next time,

Ryan P. Maxwell

[email protected]


As Promised, News on Suffrage from 100 Years Ago:

Middletown Transcript
Middletown, Delaware

17 Apr 1920


North Carolina To Ratify, Daniels Wires To Mrs. Catt.

Washington. — Declaration of the North Carolina Democratic State Convention in favor of ratification of the woman suffrage amendment means "it is all over but the shouting," Secretary Daniels said in a telegram sent to Mrs. Carrie Chapman Catt, president of the National Woman Suffrage Association.

"The North Carolina Legislature, shortly to be called in special session, is certain to ratify," the secretary said, "thus giving us the 36 states necessary."



Enough Votes Pledged To Prevent Ratification This Session.

Dover, Del.—Legislative leaders reiterated the declaration that the suffrage question is a dead issue as far as the present special session of the Legislature is concerned. Representative McNabb (Democrat), spokesman for the "antis," said enough votes in the House are pledged to prevent ratification of the suffrage amendment.


CJ on CVA and USDC(NY):


Hello all,


I hope this issue of CP finds you well and adjusted to the new realities we all face. Luckily, we have had some relatively good weather in the Buffalo area (save for a couple snowy days last week), and I have been able to get outside to release some of the energy I have from being stuck at home. As I said in the last issue, I have been reading more during this stay-at-home period. I am happy to announce that I’ve moved on from Thucydides to reading Pat Conroy’s novels. The few thousand year jump forward I made was not by design, but happenstance. I was cleaning out a box of books my parents had given me awhile back and found a worn copy of The Great Santini. After finishing the novel that I have read many times before, I decided to look into the rest of Mr. Conroy’s collection. I’m currently reading The Water Is Wide, which chronicles Conroy’s year as a teacher on the almost forgotten Daufuskie Island (called Yamacraw Island in the book). It is an eye-opening, and entertaining, look into what the education system in the rural South looked like in era soon after Brown v. Board of Education. If this stay-at-home period lasts much longer, I have a feeling that this cover note will turn into a sort of book review as well as a portal for all information regarding New York’s District Courts and the CVA.                                           

On that note, some news on the CVA. Lawmakers have declined to extend the one year “look back” period set to close in August. (You can read about it here.) Many thought that the “look back” period would be extended in the state budget, however, that did not happen. There is some question as to whether or not the Governor’s executive order tolling any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding applies to the CVA “look back” period. However, there is a risk that claims that were to be filed under the “look back” period will be time barred even with the tolling of statutes of limitation because the “look back” prior was a creation of the legislature and is not technically a statute of limitation. Furthermore, as the pace civil litigation is drastically slowed, both plaintiffs and the institutions they are seeking recovery from will face issues relating to discovery. Many of the accused and many witnesses to the alleged events giving rise to these actions are elderly. As this pandemic puts increased stress on older populations evidence that would support these allegations, and evidence that may assist institutions in defending against them, may be lost as a casualty of the COVID pandemic.

Although courts have been slow, I am able to bring you one case from the Southern District. The court discusses the unique interplay between an excess insurer’s requirement that the primary policy not be more restrictive than the excess policy, and the primary insurer providing coverage to the insured under a reservation of rights, even when certain conditions have not been met.

Until next issue,

Charles J. Englert, III
[email protected]


Daylight Savings Time Controversial Now?  A Century Ago as Well:

The Montclair Times
Montclair, New Jersey

17 Apr 1920

Daylight Saving Bill Killed


The Senate Monday night defeated the daylight saving bill of Senator MacKay, of Bergen County, designed to bring New Jersey time into conformity with that of New York.


The vote was 11 against to 9 for. This marks the end of an attempt to pass a daylight measure at this session.

The House adopted the Eldridge bill legalizing the new time system, but it was smothered in a Senate committee. Senator MacKay's bill had been slumbering in committee until he called it up Monday night.

Dishing Out Serious Injury Threshold:

Dear Readers,

I hope everyone is staying safe in the midst of this virus. It seems the worst of this is behind us but that does not mean it is over by any means. We should all continue to be socially distancing and taking precautions to prevent a further spread of this virus. Hopefully, we will all be able to come out of quarantine in the next several weeks. In the meantime, we will be working vigilantly from our makeshift offices.

Despite requiring me to stay home and catch up on work, it does not seem that Court employees are putting out decisions at the pace previously expected. Since the Court closures there has not been any decisions issued pertaining to serious injury threshold cases. Hopefully, some decisions will come down in the next few weeks so we can have something to discuss in the next newsletter. In the meantime, stay safe.

Michael J. Dischley
[email protected]  


Taking the Oath:

Buffalo Courier
Buffalo, New York

17 April 1920


            Albany, April 16.—A bill designed to provide a new procedure in taking the oath of office by members of Assembly was introduced today in the Assembly by the rules committee as an aftermath of the Socialist trial.

            The procedure provided in the bill is something similar to that in vogue in the national house of representatives.  On the opening day of each session, under the terms of the bill, the members shall take the oath of office before the bar of the house from the Secretary of State.  At that time the measure provides objection can be raised to the eligibility or qualifications of any member.  Immediately after organization of the house any member who has not been permitted to take the constitutional oath because of alleged disqualifications may apply for an opportunity to qualify and the house is required to determine then the question of his eligibility.


Bucci on “B”:

Zoom…Skype.  It’s all about these platforms right now.  Our courts in New York will only allow a virtual meeting on Skype.  However, my firm and friends use Zoom.  I’m getting face time with people in our other offices which I wouldn’t otherwise get, which I appreciate.  I say we keep it.  Who needs to travel to court for a simple compliance conference?  Virtual is the name of the game.  Although things have been circulated suggesting that not all attorneys are acting appropriately in virtual conferences.  The worst I heard is that some attorney attended bare chested.  Who really needs to see your bare chest at a court proceeding? Unreal.

Anyway, there was nothing much from the courts about personal and advertising injury coverage this issue despite the courts promising that fully briefed motions would be decided during this time. Instead, this week I discuss a very interesting Coverage A case, where the Second Circuit Court of Appeals certified to the New York Court of Appeals the question of whether a “failure to accommodate” theory of discrimination states a covered occurrence under New York law.  The Second Circuit implied that this is a yes or no question independent of whether only claims of intentional conduct are pled.  We will report back when the Court of Appeals does what it does.

I’m still waiting for the weather to warm up.  And I need some sunshine.  I’m eating everything in sight to pass the time.  Too bad I’m addicted to food instead of exercise.   How are you guys getting by?  Email me.

Diane L. Bucci

[email protected]


All’s Not Fair when the Fare is Concerned:

The Buffalo Times
Buffalo, New York

17 Apr 1920


The seven-cent fare rate will go into effect tomorrow.

The city has lost out in a motion made to the Supreme Court to grant a stay of the order permitting the exercising of a seven-cent fare by the International Railway Company, pending a motion for a review of the order.

A telegram was received today by Corporation Counsel Rann from George Clinton, Jr., who appeared before the public service commission yesterday and today as special counsel for the city in the car fare matter. The telegram follows:

"Motion for stay denied without prejudice to renew any time after June 1st."

Buffalo will have to stand for a seven cent fare until June 1st at least unless the negotiations between the city and the company in the matter of the transfer can be completed before then.


John’s Jersey Journal:

A blackboard sign on a wall

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Dear Subscribers:

I hope you and yours are hunkered down and staying safe. I am enjoying working from my home office with a nice sunny window. My dog Donald promptly reports for work each day and snoozes at my feet.

Decisions are steadily coming out of the New Jersey appellate courts and the federal courts. But first we start with an important Executive Order.

New Jersey Imposes Restrictions upon Insurers for Non-Payment Cancellations during COVID19 Outbreak

On April 9, Governor Murphy issued an Executive Order No. 123 restricting the circumstances under which insurance companies can cancel due to nonpayment (Executive Order 123).  The Executive Order creates an “emergency grace period” during which time insurers cannot cancel the policy for non-payment.

Property and casualty insurance companies and life insurance companies shall not cancel due to nonpayment for a period of at least 90 days, “during which time claims shall be paid without regard to the nonpayment of premium.” Health insurance companies, for some reason, obtained a more favorable grace period of 60 days. The Executive Order took effect on April 9.

The Executive Order provides that the Commissioner of the Department of Banking and Insurance (DOBI) may extend the emergency grace period further “as necessary to protect the interests of policyholders, beneficiaries, and the public”.

But what about the unpaid premium, you ask. After the emergency grace period ends, the policyholder’s unpaid premium will be “amortized” or spread out over several payments. No guidance has been given on that yet. The Commissioner of DOBI is to direct insurers on how they may collect the unpaid premium.

New Jersey Federal Court Provides Good Explanation of New Jersey’s Rule Permitting Award of Counsel Fees in Coverage Cases

In New Jersey, a party may recover attorney fees in “an action upon a liability or indemnity policy of insurance, in favor of a successful claimant.” Rule 4:42-9(a)(6). The intent of the rule to discourage unfounded disclaimers of coverage. The award of counsel fees is not automatic, but rather is at the discretion of the court. Any “successful claimant” can request counsel fees, which includes the victor in carrier versus carrier litigation.

The Hartford v. Peerless case discussed in the attached issued provides a good overview of the rule and the factors that the court considers in determining whether to award counsel fees.

            Demand for UM/UIM Arbitration Must be Brought Within 6 years of Accident

Finally, we have a reminder that, in New Jersey, a demand for UM/UIM arbitration must be brought within 6 years of the accident. Mr. Doctors demanded UIM arbitration eight years after his accident, which the New Jersey Appellate Division—without hesitation—ruled was time-barred.

Having been home a month now I am getting cabin fever. Erin and I have done our yardwork, cleaned the basement, and put together a 2,000-piece puzzle (took a LOT longer than expected). We seem to be running out of things to do.

John R. Ewell

[email protected]


Ouija Boards to Blame – a Hundred Years Back:

The Buffalo Enquirer
Buffalo, New York

17 Apr 1920

Ouija Boards Blamed For Ills of Students

ANN ARBOR, Mich., Jan. 29.—"Ouija boards are becoming more plentiful in the fraternity and society homes and in the rooms of independent students than Bibles or prayer books and more frequently consulted," declared a member of the faculty of the University of Michigan, commenting on a report he had just received that two young women in his class had been obliged to leave school and place themselves in the hands of nerve specialists because of their devotion to the Ouija boards.

Dr. Warren Forsythe, head of the university health service, admitted that there had been a great influx of nervous students appearing lately for treatment.

One city nerve specialist said he had treated university women for extreme nervousness and that their difficulty seemed to have been caused by too close association with the Ouija board and too great belief in its wanderings.

If the above warning is correct, then it is further proof that the entire population of earth is menaced by Ouija boards, and like paraphernalia. This menace is due chiefly to a lack of knowledge. The people should have the entire truth on the subject, and that is my only purpose in speaking on it.


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

A virtual Seder, with way too much leftover matzoh, that was my Passover. Usually, there are about 20 people at my Seder table, including my kids and dearest friends. Perhaps I’m getting a bit ahead of myself. Passover, my personal favorite Jewish holiday, is the celebration of the liberation of the Israelites from the bondage of Egyptian slavery. If you’re old enough, surely you remember Charlton Heston’s “The Ten Commandments” playing on TV about this time every year. I had an uncle who did a great impression of the Edward G. Robinson character’s famous line, “Where’s your Moses now?” Look it up on YouTube, you won’t be disappointed. So, the word Seder literally means “order.” During the festive meal, Jews world-wide, in a tradition lasting more than 3,000 years, tell the story in a set order, or in Hebrew, Seder. This year, there was nothing orderly about Passover, certainly nothing orderly about being quarantined in my home in Connecticut, and really nothing orderly about our world at all. A grocery store run with COVID-19 hanging in the air feels like taking our lives in our hands. Can I make it another day without milk, do we really need eggs? But, on reflection, sitting at home, reluctant to go out, I felt a sense of connection to what the plight of the Israelites must have been during that very first Passover in Egypt. The final plague was the death of the first-born son from each family. A first-born son myself, I’ve always felt especially connected to this part of the Passover story. As the telling goes, the Israelites painted their doorframes with lamb’s blood to signal the angel of death to pass-over their homes. An unseen death was in the air then, as it is now. A more apt connection to my biblical history and today I cannot imagine. The story of Passover, however, is not one of plagues and death but ultimately it is a story of freedom. In our current world, as the COVID-19 death curve begins to plateau, soon we will again have our freedom. Hopefully, our brief confinement will lead to our greater appreciation of what we have and each other. Let’s not wander in our own metaphysical desserts for 40 years.

Be safe and stay healthy.

Lee S. Siegel

[email protected]


Rally Against Phone Booths?”

New York Herald
New York, New York

17 Apr 1920


Booth Door James; Antics Fail To Arouse Interest.

Henry Rose, a honey merchant of Richmond Hill, L. I., was a victim yesterday of the indifference with which the public has come to regard persons who execute a war dance in telephone booths.

Rose entered a booth in the South Ferry Building, and after trying vainly for three-quarters of an hour to get the number he wanted decided to try another booth. Then he found that the door he had shut upon himself had jammed on its rollers and that he was a prisoner.

For twenty-five minutes more he danced up and down, made faces through the glass of the door and used words of a character to turn the commodity in which he deals into pure gall. But none of those crowding past him at the ferry entrance paid any attention to him. They are accustomed to persons at telephone instruments behaving exactly as he was.

He was liberated after he remembered that he was still able to write. He wrote a statement of his case on the back of an envelope and passed it under the door to a girl whose attention he was able to attract. At the end of another half hour a policeman and two subway workmen with crowbars effected his release.


Cara’s Canadian and Cross-Border Connections (with Heather Sanderson):

Hello subscribers,

Yup, I had reason to not trust the nice weather. Last week there were a couple days of warm weather and I chose to bring some plants out onto my balcony. The next morning, I woke up to snow. I ran out and grabbed the delicate seedlings. It has since snowed again and although I was wearing shorts and sandals last week during my daily walks, it’s back to jackets and boots. I tried to take advantage of the cold weather by getting cozy and baking. Per social media, bread baking seems to be keeping people busy, but I stuck to something “easier,” chocolate chip cookies, which fell flat…literally… They looked like sad pancakes. Accordingly, I’ll be reverting back to gardening, puzzles, and supporting local breweries (Froth, Thin Man, Belt Line to name a few) by continuing to buy and drink all their delicious beers. Stay safe and healthy, subscribers!

Cara A. Cox
[email protected]

On April 7, 2020 Premier Stephen McNeil of Nova Scotia became so completely exasperated with the Covid-idiots who refused to stay home and observe the nationally coordinated social distancing requirements that he went on provincial media, telling Nova Scotians to “Stay the blazes home!” – the closest Nova Scotia’s Premier could get to swearing in public life. It worked and spawned memes, merchandise and, of course, music. So, home we stay to halt the transmission of an unseen, uncaring, indiscriminate virus that has resulted in a national death toll of just over 1,000 and sickened several thousand more. Lives matter. Health matters. But while we stay home wishing that we had a volleyball to talk to (think, Tom Hanks’ character in Cast Away), the economy sinks to lows not seen since the 1930’s.  Canada’s GDP sank 9% in March, the largest one-month contraction on record. Supporting that statistic is the pending ruin of thousands of small businesses that support thousands of individuals and families. As discussed in our column, it is very clear that business earnings insurance is not the salvation for this economic crisis spawned by public health measures to control the pandemic. Rather, the solution lies in government initiatives and our own tax dollars.

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]


Some Things Never Change:

The New York Times
New York, New York

17 Apr 1920


Demand Commission Be Suppressed And Threaten Massacre—Allenby Takes a Hand.

            LONDON. April 16.—The Zionist organization announces that it is reliably informed from Palestine that the Arabs have demanded the suppression of the Zionist Commission in Palestine within five days, the expulsion of its leaders and the disbandment of the Jewish Battalion, threatening a massacre of Jews if the demands are not carried out.

            The Zionist reports say that the Palestine administration agreed to accede to the demands, but that Field Marshal Viscount Allenby, commander of the British forces in Palestine, vetoed this decision.

            The Zionists laid the matter before the Foreign Office and field marshal Allenby has been instructed to inquire into the situation immediately.  His orders are to do everything possible to prevent trouble, but to ignore the Arab proposals.


Jen’s Gems:



I write this from my house where, like most of us, I am working from home with my husband and my two kids.  This has certainly been an adjustment impacting both big and little things.  Yesterday, was my youngest daughter’s 5th birthday.  We would normally throw her a big party with all our family, but, of course this year, we had to keep it to just “our little family” as my daughter calls it.  Thankfully, my husband was in full party planning mode and set up a day of excitement and wonder.  It started with balloons when she walked down the stairs (blown up using the disposable helium tank my husband bought), followed by a board game extravaganza (seven boards, winner of the most games gets the WWE championship belt – also something my husband bought from who knows where), then on to Trolls World Tour the movie.  This was, admittedly, the most excitement I also have had in a fairly long time.  And, no I did not win the championship belt, that went to my uber competitive 7-year-old who I am not positive about it, but I am pretty sure she cheats.


Beyond that, in terms of my column this week, I have no trial court cases to report on, but as a small glimmer of hope we are seeing things slowly starting up again.  This week I got multiple notices from state court judges scheduling Skype conference calls along with notice from different courts outlining their plans for getting some aspects of nonessential cases moving again.   Hopefully, this trend will continue.

Well, until next issue, hope everyone stays safe, healthy and sane.

Jennifer A. Ehman

[email protected]


Headlines from this week’s issue, attached:

Dan D. Kohane
[email protected]

  • Nothing New under the Sun.  Without a Requirement in Trade Contract that Additional Insured Coverage be Provided, Additional Insured Coverage is Not Provided


Steven E. Peiper

[email protected]

  • Specific Language of BI Clause only Required the Insured to Establish a Loss of Earnings; Carrier’s Attempt to Tie Income Claim to Lost Sales Rejected


Michael J. Dischley
[email protected]

  • Nothing new this week.


Agnes A. Wilewicz

[email protected]


  • Seventh Circuit Finds that Ambulance which Struck Another Vehicle and Fatally Injured its Driver Was Not Covered where Not Expressly Listed as a “Covered Auto” in Renewal Policy



Jennifer A. Ehman

[email protected]

  • Courts were quiet this week. No cases to report.


Brian D. Barnas

[email protected]

  • Insurer Did Not Handle Second Property Damage Claim in Bad Faith where It Investigated Second Claim and Relied upon its Expert’s Conclusions


John R. Ewell

[email protected]

  • Good Explanation of New Jersey’s Rule Allowing Attorney Fees to Successful Claimant in an Action upon a Liability Policy

  • Demand for UIM arbitration 8 Years after Accident was Time-barred, says New Jersey Appellate Division


Lee S. Siegel

[email protected]

  • Quarantine May Be Temporary, But Settlements Are Forever; (also) Lying is Bad, But It’s Allowed When Part of a Judicial Proceeding


Diane L. Bucci

[email protected]

  • Second Circuit Certifies to the New York Court of Appeals the Question of Whether an Insurer Must Defend an Insured Against a Discrimination Claim under a Failure to Accommodate Theory


Brian F. Mark
[email protected]

  • No noteworthy cases to report on this edition as the pandemic continues. 


Eric T. Boron

[email protected]

  • Insurer Owed Duty to Defend Against Accident Occurring Sometime After Wheelbarrow Fell Out of Insured’s Pickup Truck


Marina A. Barci

[email protected]

  • Preliminary Injunction and Stay Granted to GEICO in No-Fault Fraud Action to Prevent Provider from Filing Additional No-Fault Arbitrations and Litigation

  • IME Report Established Lack of Medical Necessity


Ryan P. Maxwell

[email protected]

Legislative List

  • While Most States Follow The New Jersey Model, Several Explore Voiding Virus Exclusions and Other Nuances and the Federal Government Gets In the Game


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

[email protected]


  • Insured’s Failure to Follow Excess Policy’s Conditions Does Not Always Bar Recovery under That Policy



Cara A. Cox

[email protected]

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

  • Coverage for COVID-19 Economic Losses Under Canadian Loss of Business Earnings Forms?


Earl K. Cantwell

[email protected]


  • It’s Spring, So Here Is a Coverage Pointers Golf Case



We wish you good health, physical and mental. Be healthy, be strong.


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

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

Dan D. Kohane

[email protected]

Agnes A. Wilewicz

[email protected]

John R. Ewell

[email protected]

Dan D. Kohane, Chair
[email protected]

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


Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Diane L. Bucci

Brian D. Barnas

John R. Ewell

Eric T. Boron

Marina A. Barci

Ryan P. Maxwell

Charles J. Englert

Cara A. Cox

Diane F. Bosse

Joel R. Appelbaum

Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Eric T. Boron

Brian D. Barnas

Jennifer A. Ehman, Team Leader
[email protected]

Marina A. Barci

Jody E. Briandi, Team Leader
[email protected]

Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri

Dishing out Serious Injury Threshold

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

John’s Jersey Journal

Lee’s Connecticut Chronicles

Off the Mark

Boron’s Benchmarks

Barci’s Basics (on No Fault)

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

Bucci On “B”

Cara’s Canadian and Cross-Border Connections (with Heather Sanderson)

Earl’s Pearls


Dan D. Kohane
[email protected]

04/09/20       Lexington Ins. Co. A/S/O Prime Alliance v. Kiska Development
Appellate Division, First Department
Nothing New under the Sun.  Without a Requirement in Trade Contract that Additional Insured Coverage be Provided, Additional Insured Coverage is Not Provided

Kiska is not an additional insured under the policy that Mt. Hawley issued to Bayport because the contract between Kiska and Bayport lacks the requisite "express and specific language requiring that [Kiska] be named as an additional insured".  The contract required Bayport to procure insurance naming 14 West as an additional insured, but it only required Kiska to be a Certificate Holder, and the Certificate states that it "does not amend, extend or alter the coverage afforded by the [policy]”.

Kiska cites various provisions of its contract with Bayport that require Bayport to indemnify it. That is a different requirement than one of AI coverage.

A general provision incorporating the Kiska-14 West contract by reference would not require Bayport to procure additional insured coverage for Kiska.

Mt. Hawley concedes that 14 West is an additional insured under the policy that it issued to Bayport, but it contended that 14 West's claim is academic because 14 West is already receiving defense and indemnity from third-party plaintiff New York Marine and General Insurance Company (Kiska's insurer). This argument is unavailing. The New York Marine policy (under which 14 West is an additional insured) is excess to Mt. Hawley's policy (under which 14 West is also an additional insured). Therefore, Mt. Hawley — not New York Marine — should be defending 14 West in the main action.

However, it is too early to determine indemnification obligations because there has to be a determination that Bayport was the proximate cause of the collapse of the wall.

Steven E. Peiper

[email protected]


04/09/20       Binghamton Precast & Supply Corp. v. Liberty Mut. Fire Ins.
Appellate Division, Third Department
Specific Language of BI Clause only Required the Insured to Establish a Loss of Earnings; Carrier’s Attempt to Tie Income Claim to Lost Sales Rejected


Plaintiff’s business involves fabricating job specific precast concrete items.  As such, rather than creating a pre-made inventory from which an order is filled, plaintiff is provided with a specific set of instructions/dimensions and makes each item in a “made to order” fashion.  When plaintiff’s cement mixer broke, the company was unable to operate during the two day time period it took to repair/replace the faulty mixer.

At the time of the loss, plaintiff was insured for certain business interruption damages under an Equipment Breakdown policy. That coverage applied for losses of net income (plus other operating expenses) incurred during the “period of restoration.”  The relevant “period of restoration” triggered immediately upon a loss of covered equipment, and extended for up to thirty days.

Here, plaintiff argued that because all of its items were “made to order” it lost two full days of income during the shutdown.   Further, because each day was, in effect, a “made to order day” the loss of the two days of work could never be recovered. 

Liberty is reported to have acknowledged the shutdown, and the methodology plaintiff utilized to compute its damages.  Nevertheless, Liberty argued that plaintiff failed to present a compensable loss because it could not establish which “sales” were lost as a result of the closure.

In defining what “business income” was covered, the policy provided that the carrier “would consider the experience of your business before the ‘breakdown’ and the probable experience you would have had without the ‘breakdown’ in determining the amount…of payment.

In construing this language, the Court affirmed the trial court’s decision that the language was clear and unambiguous.  The Appellate Division further explained that terms of a business interruption policy must be construed within the reasonable expectations of any other policyholder.  Because the plain language provided coverage for losses of net income, and did not tie that income to specific sales, the Court rejected Liberty’s argument that plaintiff needed to establish evidence of lost work.  On the contrary, the policy actually advises that plaintiff need only establish what they made during the breakdown and compare that number with what they would have made absent a breakdown.   To construe a “sales” requirement into the definition of business income would, in effect, render the policy useless as the income is earned on production – not on sales of pre-made inventory.

In line with this logic, the Appellate Division also rejected Liberty’s argument that plaintiff had not sustained a traditional loss because it was able to ultimately fill the work that was scheduled to be performed during the shutdown.  While the work was performed, the Court noted that it displaced other work that would have otherwise been performed.   As such, with the breakdown pushing other work further into the future, plaintiff lost opportunities which could not be made up due to the original shutdown.

Despite this ruling, the Appellate Division did rule that a question of fact existed as to whether plaintiff satisfied its obligation to mitigate its damages under the policy.  Rather than simply delaying other production, Liberty argued that the loss could have been made up with weekend and overtime shifts after the cement mixer was restored to operations.  The Court found a question of fact as to whether plaintiff’s reasons for not engaging in overtime or weekend work was reasonable under the circumstances of the claim. 


Michael J. Dischley

[email protected]

There have not been any new decisions pertaining to serious injury threshold cases since our last newsletter. Hopefully, some decisions will come down in the next few weeks so we can have something to discuss next newsletter.


Agnes A. Wilewicz

[email protected]

04/09/20       Markel Ins. Co. v. Rau
Seventh Circuit Court of Appeals
Seventh Circuit Finds that Ambulance which Struck Another Vehicle and Fatally Injured its Driver Was Not Covered Where Not Expressly Listed as a “Covered Auto” in Renewal Policy

United Emergency Medical Services owned a fleet of ambulances and had coverage with Markel Insurance Company. In 2016, Chester Stofko was driving his vehicle when it was struck by a United ambulance. Stofko’s resultant injuries were fatal, and his estate sued the ambulance company for damages. When United submitted the claim to its carrier Markel, it turned out that the ambulance in question (“Ford #4497”) was not expressly listed on that policy and thus coverage was denied. Coverage litigation ensued to determine whether or not defense or indemnification was actually owed.

The policy at issue provided coverage for “covered autos”, namely only those vehicles listed on the policy. Notably, Ford #4497 was not listed on the policy for the 2016 year term (though mistakenly United’s broker did issue an i.d. card). Moreover, the policy only permitted changes in writing, and such written requests were then put in the underwriting file. Then, an amendatory endorsement would be issued and United would receive any such endorsement from Markel that reflected the changes. In this case, Ford #4497 had been taken off the prior policy year because it had had transmission trouble and was deemed inoperable. When the policy was renewed, there was no indication that United wanted to reinstate coverage for that ambulance, despite it later being put back into service.

A couple of weeks after the policy was issued, United’s Administrative Director sent Markel’s agent to request that Ford #4497 be added back on the Policy and that a different ambulance be removed. He copied United’s owner, Blankinship, on that email. In his request, he listed the specific ambulances that he wanted on the Policy and stated, ‘Also before I forget we took a truck off the policy a few months ago for a transmission issue that was down for a few months. I’m sure you recall this, I know Thomco doesn’t like us to add & remove units like musical chairs … I can just write [it] in on the state form and hopefully they [won’t] have a problem with it.’” However, no one ever followed up on that email, nor was it acknowledged by the agent. Indeed, the agent had no recall of ever having seen it. No endorsement was issued and the policy was never amended.

Whether or not that email was ever sent, received, or exactly what happened to it is all of no moment. The court reviewing the case instead cited to the well-settled principle that courts “may not rewrite an insurance contract”. Rather, “the Policy states that its “terms can be amended or waived only by endorsement issued by [Markel] and made a part of this policy.” Regardless of whether or not the March 30 email was sent or received, “it is undisputed that neither [the agent] nor Markel accepted or responded in any way to United’s request to reinstate coverage for Ford #4497. Markel did not endorse any such change to the Policy, and so Ford #4497 was not covered.”


Jennifer A. Ehman

[email protected]

Courts were quiet this week. No cases to report.


Brian D. Barnas
[email protected]

04/09/20       Balu v. The Cincinnati Ins. Co.
United States District Court, Eastern District of Pennsylvania

Insurer Did Not Handle Second Property Damage Claim in Bad Faith where It Investigated Second Claim and Relied upon its Expert’s Conclusions

Plaintiffs were insured under a homeowner’s insurance policy with Cincinnati. In 2016, they submitted a claim under the policy to recover for water damage to the roof above their pool and dining room and to the interior walls and ceiling of their pool room. Cincinnati paid for the water damage to the interior of the pool room but retained Forensic Engineer Scott M. Wasson to investigate the roof above the dining and pool room.

Wasson issued a detailed report and concluded that damage to the roof above the dining and pool rooms was caused by improper construction, namely inadequate roof slope and sealing.  Wasson also noted that several shingles were partially unsealed but showed no sign of wind damage. He concluded that the interior damage to the walls and ceiling of plaintiffs’ pool room was the result of water intrusion caused by the improper sealing of a plumbing vent, a fireplace vent, and the skylights in the roof of the pool room.  Cincinnati Insurance sent a letter on, informing the plaintiffs that their claim for damage to the roof was denied. The letter explained that the roof damage was not caused by a storm related incident but by the improper construction of plaintiffs’ roof.  Cincinnati denied plaintiffs’ claim (the 2016 claim) because coverage for damage caused by faulty, inadequate, or defective workmanship was explicitly excluded in their homeowner’s insurance policy.

Two years later, in 2018, Cincinnati received a second claim from the plaintiffs.  This claim also sought recovery for damages to plaintiffs’ roof and the interior of their pool room. Cincinnati again retained Wasson to investigate the loss. Wasson issued a second report in which he again concluded that the damage to the interior of the pool room and the roof was a result of faulty construction of the roof.  Cincinnati sent another denial letter. Cincinnati did not cover the water damage to the interior of the pool room a second time because it was caused by the faulty construction of the roof which plaintiffs had not repaired.

The plaintiffs retained a public adjuster (Metro) to investigate the damage.  Wasson and a Metro representative met at the insured residence for a mutual inspection.  Cincinnati did not change its decision to deny the plaintiffs’ 2018 claim.  Plaintiffs brought a lawsuit alleging breach of contract and bad faith.

Cincinnati obtained summary judgment on the bad faith claim.  Plaintiffs’ argued that Cincinnati incorrectly relied on its resolution of the 2016 claim to conclude that the new damage to their roof and pool room interior in 2018 was caused by the faulty roof construction identified in 2016.  However, the plaintiffs’ conceded that they did not repair the roof after their 2016 claim was denied.  Plaintiffs also did not dispute that Wasson performed a second inspection and again concluded that the same unrepaired faulty construction caused the claimed damage.

Essentially, plaintiffs claimed that the damage was caused by wind, snow, and ice.  However, the court stated that whether Cincinnati correctly identified the cause of damage was not material to the plaintiffs’ bad faith claim.  Rather, the plaintiffs were required to present clear and convincing evidence to substantiate their claim that Cincinnati acted unreasonably.  The record demonstrated that Cincinnati sent Wasson to perform a second inspection and based its denial of the 2018 claim on the results of his investigation.  This was sufficient to defeat the bad faith claim.


John R. Ewell
[email protected]

04/03/20       Hartford v. Peerless
United States District Court, District of New Jersey
Good Explanation of New Jersey’s Rule Allowing Attorney Fees to Successful Claimant in an Action upon a Liability Policy

After Hartford settled an action on behalf of their mutual insured, Hartford sued Peerless for equitable contribution. The trial court ordered that Peerless must provide Hartford with one-third of the defense costs and one-third of the settlement. Hartford then moved under New Jersey Court Rule (“NJCR”) 4:42-9(a)(6) for an award of attorney fees in the amount of $480,000.

Under NJCR 4:42-9(a)(6), a party may recover attorney fees “[i]n an action upon a liability or indemnity policy of insurance, in favor of a successful claimant.” The rule seeks “to discourage groundless disclaimers and to provide more equitably to an insured the benefits of the insurance contract without the necessity of obtaining a judicial determination that the insured is, in fact, entitled to such protection.” In short, it attaches a potential cost to an insurer’s wrongful refusal to indemnify.

The Rule as promulgated awarded defense costs only where an insurer refused to indemnify or defend its insured’s third-party liability to another. It is not limited to actions by an insured against its carrier, however. “New Jersey courts have also awarded attorney fees incurred by an insured in a declaratory judgment action to determine the existence of coverage of liability to third parties.” In short, all successful claimants—not just policy holders—are eligible to recover attorney fees under this rule. Such eligible claimants “include excess or secondary carrier[s] which successfully prosecute a coverage action against the primary carrier when the latter has wrongfully refused to defend its insured.”

Ultimately, however, the award of defense costs is not mandatory in every action on an indemnity or liability policy, but rather is committed to the trial judge’s broad discretion.

In deciding whether to award fees, the court may consider several factors, including: (1) the insurer’s good faith, or lack thereof; (2) excessiveness of the plaintiff’s demands; (3) bona fides of one or both of the parties; (4) the insurer’s justification in litigating the issue; (5) the insured’s conduct in contributing to the necessity of litigation; (6) the general conduct of the parties; and (7) the totality of the circumstances.

In this case, the trial judge exercised his discretion and determined an award of attorneys’ fee was not appropriate for a variety of reasons. The primary reason the judge declined to award attorneys’ fees was because Peerless ultimately paid its share, the mutual insured received the benefit of its insurance contract. The judge was also not impressed that the legal fees exceeded the amount in controversy, and found the litigation to be “uneconomical”.


04/03/20       Doctors v. NJM Ins. Co.
New Jersey Superior Court, Appellate Division
Demand for UIM arbitration 8 Years after Accident was Time-barred, says New Jersey Appellate Division

Kenneth Doctors (“plaintiff”) was involved in a motor vehicle accident with Mary Staeger on January 5, 2010. He was insured with NJM. Plaintiff sued Staeger for personal injuries. Staeger's policy had a $100,000 limit for bodily injury liability. Plaintiff’s policy included $300,000 in underinsured motorists (UIM) coverage.

On August 21, 2013, plaintiff's attorney wrote to NJM for permission to settle the claim against Staeger for $99,000. Counsel stated it was "my client's intention to pursue underinsured motorist benefits under . . . [his] policy." The letter advised NJM that the tortfeasor had a $100,000 policy. It was counsel's intention to settle with the tortfeasor for $99,000 in exchange for a "General Release." The letter advised NJM that counsel would "[p]roceed with underinsured motorist arbitration proceedings in the event I am unable to settle my client's UIM claim with NJM." Counsel added if NJM did not respond in thirty days, he would forward it the General Release "and demand arbitration of my client's UIM claim."

NJM approved plaintiff's request to settle against Staeger for $99,000. Over the next two years, NJM sent letters to plaintiff requesting additional information such as medical bills and reports. Plaintiff’s attorney did not respond.

Eight years after the accident, in February of 2018, plaintiffs’ newly retained attorney wrote to NJM demanding arbitration. Plaintiff filed an Order to Show Cause requiring NJM to show cause why plaintiff was not entitled to arbitration of his UIM claim. NJM opposed, arguing that the statute of limitations for plaintiffs' UIM claim expired on January 5, 2016, six years after the date of the accident citing that the statute of limitations had expired. The trial court agreed with NJM that the demand for arbitration was time-barred. Plaintiff appealed and the Appellate Division affirmed.

Plaintiff did not dispute the statute of limitations for his UIM claim expired six years after the date of the accident. The Appellate Division saw no reason why plaintiff could not have timely filed the demand.

Author’s Note: How did this case ever reach the Appellate Division?


Lee S. Siegel

[email protected]

03/31/20       Kenneson v. Eggert and Nationwide
Connecticut Appellate Court
Quarantine May Be Temporary, But Settlements Are Forever; (also) Lying is Bad, But It’s Allowed When Part of a Judicial Proceeding

Kimberly Kenneson, a pro se plaintiff, had quite a legal journey. It all started, unfortunately enough, when she was assaulted by Carl Rosati and Michael Altman. Now, my astute readers may have noticed that neither Rosati nor Altman is a defendant. It’s ok, you can look now. So, who is Eggert? She is the lawyer Nationwide hired to defend Altman. We’ll get back to her role in a second.

At trial, Kenneson wins. The jury awarded her $67,556.07 against Altman and $380,037.38 against Rosati. It’s important to note that Rosati did not defend himself at trial. Altman moved to set aside the verdict and for collateral source reduction. Several weeks later, the court held a hearing on the motions and, at Eggert’s request, a settlement conference. Kenneson and Eggert negotiated, ultimately agreeing on a $67,000 payment from Nationwide to resolve the case against Altman.

A rather standard written settlement agreement provided that “[b]y signing this release, [the plaintiff] expressly acknowledges that he/ she has read this document with care and that he/she is aware that by signing this document he/she is giving up all rights and claims and causes of action, and any and all rights and claims that he/she may now have or which may arise in the future ... against [Nationwide and Altman].”  The release also stated that ‘[the plaintiff] further acknowledges that no representation of fact or opinion has been made to him/her by [Nationwide and Altman] ... which in any manner has induced [the plaintiff] to agree to this settlement.’ ’’

Here's where things get interesting. Kenneson discovered, perhaps belatedly, that she could not collect against an uninsured, assetless, dead Rosati. She then went back to the well, seeking to open-up the judgment against Altman so that she could reallocate Rosati’s damages to Altman. Connecticut permits the reallocation of an uncollectible amount of damages among other liable parties. Under Conn. General Statutes § 52-572h(g)(1), a plaintiff may seek “to open the judgment filed, after good faith efforts by the claimant to collect from a liable defendant, …. and [the court] shall reallocate such uncollectible amount among the other defendants in accordance with the provisions of this subsection.” Pretty nifty. I bet your state doesn’t permit that.

That bit of arcane Connecticut practice aside, we all know what Altman/Nationwide’s defense was: the finality of settlement. But Kenneson was not your ordinary pro se. She argued that she did not know that signing the release would forfeit her right to reallocate and, here’s the kicker, that Eggert engaged in ‘unfair and deceptive’ behavior when she instructed her to sign the release ‘without explaining what it was and how it can affect a judgment.’

Kenneson lost that fight. But she remained undaunted, starting this lawsuit accusing Eggert and Nationwide of fraud. Eggert moved for summary judgment, arguing that the cause of action for fraud was barred by collateral estoppel and by the settlement agreement. Kenneson lost that fight too. But still undaunted she prevailed on appeal, having argued that the trial court erred in concluding that the intentional misrepresentation claim was barred by collateral estoppel. Kenneson alleged that Eggert ‘‘falsely represented to the plaintiff ... that she would not get any of her $67,556.07 award against ... Altman unless she signed a document ... to settle the judgment ....’’ And plaintiff alleged that ‘‘Eggert, with the intent to deceive the plaintiff, knowingly failed to disclose and/or concealed that [the release and the withdrawal] would result in the loss of the plaintiff’s right to reallocate damages ....’’ Finding a question of fact on the intentional misrepresentation claim, the Appellate Court remanded to the trial court.

Kenneson’s luck was about to run out. Eggert changed her tact, moving again to dismiss but this time claiming the absolute immunity of the litigation privilege. This time the Appellate Court agreed with the trial court’s (third) dismissal of Kenneson’s fraud claim.

On appeal, Eggert argued that her statements made at the post-verdict settlement conference were protected by the litigation privilege and, therefore, the court lacked subject matter jurisdiction over the intentional misrepresentations claim. The applicability of the litigation privilege depended on whether the intentional misrepresentations took place during a judicial proceeding. The Connecticut Supreme Court has framed the inquiry as whether there is a sound public policy reason to permit complete freedom of expression during the judicial proceeding. The concept of judicial proceeding is expansive, encompassing more than just trials, including any hearing before a judicial or quasi-judicial-functioned tribunal.

The rules may be a bit fuzzy, but the court’s application of them are even fuzzier. Here, the statements at issue were made in the hallway, during settlement negotiations, outside the presence of the judge, were not under oath, nor in any document filed in connection with the litigation. Still, the court found them to be absolutely protected. “Here, the discussion in the hallway, as part of the post-verdict settlement conference, was a step in the ongoing judicial proceeding. A post-verdict settlement conference, such as the one in the present case, is judicial in nature. The conference was part of the ongoing litigation…” the court reasoned.

The next step required the court to evaluate whether Eggert’s statement – you have to sign the release or you will get no money – was relevant to the judicial proceeding. “The record reveals that Eggert’s statements at issue are relevant to the subject matter of the judicial proceeding. The parties met to settle the action brought by the plaintiff against Altman, Eggert’s client. Indeed, the purpose of the post-verdict conference was to reach an ‘‘agreement ... with the plaintiff with the court’s assistance.’’ As the court noted, the statements at issue were part of a conference to resolve the underlying tort action initiated by the plaintiff. Accordingly, the court correctly found that the absolute immunity of the litigation privilege applied to bar the action.”

Therefore, although the appellate court once upon a time found a question of fact as to whether Eggert’s statement to the pro se plaintiff constituted an intentional fraud, it now concluded that the statements were part of and relevant to a judicial proceeding. Accordingly, even if Eggert’s statements were proven fraudulent, in Connecticut they are immune from liability.

[Author’s Note: The Model Rules of Professional Conduct, preamble, provides that “As negotiator, a lawyer seeks a result advantageous to the client but consistent with requirements of honest dealings with others.” Connecticut’s “Lawyers’ Principles of Professionalism” require that in negotiations the lawyer is to conduct themselves with dignity. Connecticut Rule of Professional Conduct 4.1 requires that when representing a client, the lawyer not make false statements of material fact to a third person. A lawyer is, however, permitted to “bluff” on issues such as valuation and settlement range. There are many examples of Connecticut lawyers being censured or disbarred for sharp practices and dishonesty during negotiations (e.g. misrepresenting the uneroded limits of insurance, misrepresenting a client’s intention to make a payment, misrepresenting whether client’s funds were deposited in lawyer’s account, among others). Accordingly, notwithstanding the Appellate Court’s finding of absolute immunity, the savvy practitioner should be wary of crossing that ill-defined line between bluff, puffery, lie, and fraud.]


Diane L. Bucci
[email protected]

04/09/20       Brooklyn Center for Psychotherapy v. PIIC
United States Court of Appeals, Second Circuit
Second Circuit Certifies to the New York Court of Appeals the Question of Whether an Insurer Must Defend an Insured Against a Discrimination Claim under a Failure to Accommodate Theory

In the Underlying Action, Fanni Goldman, a deaf woman, alleged that the Brooklyn Center for Psychotherapy discriminated against her because of her disability.  She alleged that it refused to serve her because of her disability, refused to schedule an appointment, refused to provide her with a sign language interpreter, was rude, dismissive, disrespectful, “intentionally discriminated” against her and acted with “deliberate indifference.”

Ms. Goldman pled violations of Title III of the federal Americans With Disabilities Act, Section 504 of the Rehabilitation Act of 1973 (29 USCA §794), the New York State Human Rights Law, the New York City Human Rights Law, and the New York City Administrative Code § 8-101 et. seq.  Brooklyn Center argued that PIIC had a duty to defend under Coverage A, which is triggered by bodily injury or property damage caused by an occurrence.

Ms. Goldman alleged that she was caused to suffer humiliation, fear, anxiety and emotional distress.  The parties agreed that these allegations could constitute bodily injury but disagreed about whether the complaint alleged an occurrence, defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

When Brooklyn Center sued PIIC to recover the defense costs it incurred in defending against Ms. Goldman’s claims, the District Court dismissed its complaint holding that Ms. Goldman’s allegations of intentional conduct did not give rise to an “occurrence.”  While recognizing that Ms. Goldman pled a claim for failure to accommodate discrimination, which did not necessarily require intent, the District Court held that regardless of the legal theory pled, Ms. Goldman’s complaint was replete with allegations of uncovered intentional conduct.

On appeal, the Second Circuit decided that it could not answer the core question which it framed as whether an insurer has a duty to defend a discrimination claim alleging a “failure to accommodate” theory of recovery.

The court addressed the three available theories of a discrimination claim, disparate treatment, disparate impact, and failure to make reasonable accommodation.  The court explained, disparate treatment is where the defendant “treats some people less favorably than others” based on one or more protected characteristics, stating that, “proof of discriminatory motive is critical.” It explained disparate impact claims as those involving “practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and could not be justified by business necessity.”  Proof of discriminatory motive is not required for a disparate impact claim.  The court further explained, “failure to accommodate claims involve allegations that a disability makes it difficult for a plaintiff to access benefits to which [she is] legally entitled,” and defendant failed to reasonably accommodate her.”  An accommodation is not reasonable if it would cause an undue hardship.

Analyzing the elements of a failure to accommodate cause of action, the Second Circuit noted that “proof of discriminatory intent” is not required, comparing it to a disparate impact claim, which courts have found generally to be covered because a plaintiff need not prove discriminatory intent.  The Second Circuit noted that Brooklyn Center could defend itself against Ms. Goldman’s allegations by showing that accommodating her was an undue hardship even if its actions were intentional.  

The Second Circuit noted that neither the New York Court of Appeals nor the New York Superintendent of Insurance have provided guidance on the question of whether an insurer owes the insured a defense against a failure to accommodate claim.  The Circuit Court certified the question to the New York Court of Appeals apparently seeking a sweeping statement regarding whether failure to accommodate claim alleges an occurrence for purposes of the duty to defend.

The Second Circuit held that all four factors that the federal courts consider to determine whether certification is appropriate weighed in favor of certification.  In addition to the lack of sufficient guidance or precedent, the court stated that the language of the Policy was ambiguous “with respect to coverage for failure to accommodate claims.” Also, held the court, the question implicated an important public policy that the Court of Appeals is better situated to make, and the answer to the question would be wholly determinative of the outcome of the appeal. 


Brian F. Mark
[email protected]

No noteworthy cases to report on this edition as the pandemic continues. 


Eric T. Boron

[email protected]

03/25/20       North Star Mut. Ins. v. Ackerman
North Dakota Supreme Court
Insurer Owed Duty to Defend Against Accident Occurring Sometime After Wheelbarrow Fell Out of Insured’s Pickup Truck

North Star Mutual Insurance (North Star) brought a declaratory judgment (DJ) action against its insured, Ackerman, as well as two motorists who were involved in an accident allegedly caused by North Star’s insured Ackerman.  The DJ also included as defendants two other insurers seeking to establish the parties' rights and responsibilities arising out of an accident.  It was alleged Ackerman was driving eastbound on Interstate 94 when a wheelbarrow fell out of Ackerman’s pickup truck and landed on the interstate.  Victim #1 was traveling on the interstate behind Ackerman and allegedly lost control of his vehicle after he came upon “an object” on the road.  Victim #1’s vehicle went through the interstate’s median and struck Victim #2’s vehicle, resulting in alleged severe injuries to Victim #2.

North Star asserted the CGL policy it issued to Ackerman did not cover the liability claims because of exclusions for the use of motor vehicles as well as the loading and unloading of equipment.  In opposition it was argued that there were other non-vehicle related negligent acts giving rise to potential liability, such as Ackerman’s failure to secure the wheelbarrow in the back of the truck, failure to give notice to the public of the presence of the wheelbarrow on the interstate, as well as a neglect of the duty to remove the wheelbarrow from the interstate, and as such the concurrent cause doctrine applied to provide coverage.

The Supreme Court’s analysis recited that it had on past occasions adopted the concurrent cause doctrine, “under which coverage exists when both a covered risk and an excluded risk contribute to an accident.”  Under the doctrine, said the court, coverage will be found if there is a “causal connection” between the insured risk and the injury, the injury cannot be disassociated from the covered risk, and the potential of creating an unreasonable risk of injury arose just as much from the insured risk as it did from the excluded risk.  The court went on to note that it had held in previous somewhat similar cases that concurrent coverage existed under an automobile policy and a farm policy because there were both “motor vehicle”-related acts of negligence and non-“motor vehicle”-related acts of negligence involved in the same accident.  In prior similar cases it had decided, applying the concurrent cause rule, the court’s opinion recited that it had held, “The concurrent cause rule ... takes the approach that coverage should be allowed whenever two or more causes do appreciably contribute to the loss, and at least one of the causes is an included risk under the policy.”

Ultimately, the Supreme Court of North Dakota ruled that under the concurrent cause doctrine the GCL policy provides coverage, and thus there was a duty to defend.  The failure to remove the wheelbarrow from the road and the failure to warn were independent acts that allegedly were a cause of the injury.  The injury potentially arose just as much from failure to remove the wheelbarrow and warn other drivers, which are covered risks, as it arose from the transportation of the wheelbarrow, noted the court in its opinion.

North Dakota is a state whose judiciary has favorably looked upon and often utilized the concurrent cause doctrine in coverage analysis.  However, other states, in contrast, look favorably upon and are inclined to employ the efficient proximate cause doctrine when analyzing a scenario such as this North Star case presented.  The efficient proximate cause doctrine says if a covered peril is the efficient proximate cause that sets in motion a chain of events, where links in the chain of events are uncovered perils, there is nonetheless a covered loss.  Certainly, as with all coverage analysis careful evaluation of the specific fact pattern giving rise to the loss should determine which causation doctrine will be applied and how.  And further, when there is clear and ambiguous anti-concurrent cause language set forth in the CGL policy at issue, the existence of such language may well play a key role in determining the coverage issue where multiple causes have contributed to or are alleged to have contributed to a loss.


Marina A. Barci

[email protected]

04/10/20       GEICO v. Strut
U.S. District Court, Western District of New York
Preliminary Injunction and Stay Granted to GEICO in No-Fault Fraud Action to Prevent Provider from Filing Additional No-Fault Arbitrations and Litigation

GEICO brought this action against Dr. Strut, Dr. Hart, and Res Physical Medicine and Rehabilitation Services, P.C. alleging civil RICO claims, common-law fraud, and unjust enrichment. The defendants moved to dismiss the complaint, so GEICO moved for a preliminary injunction to prevent the defendants from commencing any new no-fault arbitrations and litigation against GEICO and to stay any no-fault arbitrations currently pending against GEICO from the defendants. The Magistrate Judge issued a Report and Recommendation (“R&R”) denying the defendants’ motion to dismiss and granting GEICO’s preliminary injunction and stay upon GEICO’s posting of $500,000 security.

The defendants objected to the R&R on three grounds: (1) GEICO did not carry their burden of establishing that they are entitled to a preliminary injunction and a stay; (2) GEICO may not seek interim relief from this Court without first availing themselves of the no-fault process; and (3) $500,000 is insufficient security. Here, we’re going to focus solely on the defendants’ second objection.

Courts have regularly held, when presented with similar facts, that it is more efficient and beneficial for defendants if all of their claims are resolved in one action, rather than hundreds of different proceedings, and, if they prevail, are entitled to statutory interest on their unpaid claims. Additionally, numerous courts have held that risk of inconsistent judgments in no-fault arbitrations (and RICO and fraud based litigation) constitutes irreparable harm. For these reasons, and others articulated on the other points, the District Court accepted the R&R in full.


04/07/20       NYC Sports Acupuncture P.C. v. MVAIC
Civil Court, New York County
IME Report Established Lack of Medical Necessity

Mr. Graham was a pedestrian involved in a motor vehicle accident in October 2014. On March 6, 2015 Mr. Graham submitted to an IME by Dr. Johnson, a licensed chiropractor and acupuncturist, who concluded that there was no need for further chiropractic or acupuncture treatment. On April 2, 2015, MVAIC issued a blanket denial for all future chiropractic and acupuncture benefits effective April 9, 2015.

Mr. Graham however was treating with NYC Sports Acupuncture from at least January 15, 2015 to July 15, 2015 for alleged injuries that he suffered as a result of that accident. For the January to March 2015 dates of service, MVAIC reduced the amount billed to be paid under its claim of what the appropriate amount was pursuant to the fee schedule. For each of the bills from April to July 2015, they were denied based on the IME for lack of medical necessity.

MVAIC essentially moved for summary judgment based on their defense of fee schedule and lack of medical necessity. The Court found that, as to fee schedule, MVAIC failed to sustain its burden that the chiropractic fee schedule for the rates of reimbursement over another physician fee schedule for the acupuncture treatments was not met, but that their defense of lack of medical necessity has not been rebutted and thus they are entitled to partial summary judgment on that issue.


Ryan P. Maxwell
[email protected]

Legislative List

04/17/20       HOT OFF THE PRESS: COVID-19 Business Interruption Coverage Legislative Summary

Various Legislative Bodies
While Most States Follow The New Jersey Model, Several Explore Voiding Virus Exclusions and Other Nuances and the Federal Government Gets In the Game
As with most of the world today, it is no secret that the coverage realm is abuzz amidst the global Coronavirus pandemic. The hot topic in coverage today is the potential for business interruption and civil authority coverage available to businesses who have understandably felt economic pressures of the halt on life. Does a government stay-at-home order due to the existence of a virus constitute direct physical loss or damage to property that necessitates suspension of operations? Legislatures across the country have begun to take steps towards answering this question in the affirmative—by retroactively modifying the terms of insurance contracts. And if you read Coverage Pointers as much as we write it, you know that we think ransacking the insurance industry is the wrong move, entirely.

At last count, seven (7) states have introduced bills (LA, MA, NJ, NY, OH, PA, SC). Finally, the federal government has tossed its hat in the ring with two separate bills introduced in the House of Representatives on Tuesday. Each of these bills, discussed further below, has been summarized in a consolidated resource document that can be accessed here.

As with many a great adventure, our story begins in, of all places, New Jersey. Hurwitz & Fine’s John Ewell analyzed the New Jersey business interruption bill in a previous installment of Coverage Pointers (Volume XXI, No. 20), which remains pending in the New Jersey Assembly that will not reconvene until May. The operative language in the New Jersey bill, which was introduced on March 16 and has become a model for many a bill that will be discussed below, provides that:

"[E]very policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption in force in this State on the effective date of this act, shall be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic, as provided in the Public Health Emergency and State of Emergency declared by the Governor in Executive Order 103 of 2020 concerning the coronavirus disease 2019 pandemic."

The New Jersey bill applies to policies issued to insureds with less than one-hundred (100) full time employees working normal weeks of twenty-five (25) or more hours. The New Jersey bill also allows insurance carriers to “recoup” amounts paid for business interruption claims, albeit from an account to be funded by assessments levied against, you guessed it, insurance carriers (Who knew that the shell game was still a thing in 2020?).

On March 24, April 3, and April 13 respectively, Ohio (House Bill No. 589), Pennsylvania (House Bill No. 2372), and the New York Senate (Senate Bill No. S8178) introduced bills recreating the New Jersey model out of whole cloth, including language concerning their applicability to insureds with less than one-hundred (100) full time employees. The Pennsylvania Bill was referred to the Committee on Insurance and the New York Bill was referred to the Senate Committee on Insurance, where they remain.

Separate from the New York Senate Bill mentioned above, we previously wrote extensively about the problems inherent in the original iteration of the New York business interruption bill proposed in the Assembly on March 27. That bill largely mirrored the New Jersey model, except it more broadly applied to policies issued to insureds with less than two-hundred fifty (250) full time employees (more than 98% of businesses in the state). However, on April 8, language was added (Bill No. 10226A) that would render virus exclusions “null and void”—despite prior approval by New York’s DFS. Specifically, the new language would be contained in Section 1.(c) and provides that

“Any clause or provision . . . which allows the insurer to deny coverage based on a virus, bacterium, or other  microorganism  that  causes  disease,  illness, or physical distress or that is capable of causing disease illness, or physical distress shall  be  null and void . . ."

Unlike the original language of the bill, which was silent with respect to the applicability of the approved virus exclusion, the Assembly has “fixed the glitch” in spectacular fashion. Thousands Flee. Certainly, even if COVID-19 resulted in direct physical loss or damage—which we vehemently disagree with—those policies that specifically exclude viruses should be enforced as written. Am I being obtuse?

Interestingly, on April 13, the Pennsylvania House also introduced House Resolution No. 842 “[u]rging the Congress of the United States to facilitate payment to insurance companies through Federal stimulus funds for the reimbursement of costs associated with the payment of claims made on business interruption insurance policies during the COVID-19 pandemic." In seeming recognition of the nearsightedness of requiring insurance companies to pay claims that are not covered under existing policy language, and then expecting those same insurers to fund their own relief for such claims through an assessment, the proposed House Resolution would:

“urge the Congress of the United States, as part of an overall COVID-19 relief package, to reimburse, via the disbursement of Federal stimulus funds, insurance companies for the costs associated with the voluntary payment of claims to businesses made through business interruption insurance . . . ."

Pennsylvania is playing long-ball. What does a “voluntary payment” scheme look like on the unprecedented scale confronted here? What government funding and relief might be worth exploring to tap into the existing, private claims infrastructure? It’s unclear to me, but I’m just a guy on the internet asking questions.

On March 24 and April 8 respectively, Massachusetts (Senate Docket No. 2888) and South Carolina (Senate Bill No. 1188) introduced bills largely modelled after the New Jersey Bill. These bills slightly modified applicable policies to include those issued to insureds with one-hundred fifty (150) or fewer full-time equivalent employees in their state. More importantly, however, these bills explicitly include troubling language indicating, in part and parcel (from the South Carolina version):

 "[N]o insurer in this State may deny a claim for a loss of use and occupancy, or business interruption, with respect to COVID-19, including, but not limited to, attempted insurer denials on account of:

  1. COVID-19 being a virus, even if the relevant insurance policy excludes losses resulting from viruses;

  2. there being no physical damage to the property of the insured or to any other relevant property; or

  3. orders issued by any civil authority, or acts or decisions of a governmental entity."

The Massachusetts version does not contain reference to “civil authority” or “acts or decisions of a governmental entity”, but provides that an insurer cannot deny a claim for “there being no physical damage to the property of the insured or to any other relevant property.” In essence, without referencing “civil authority”, “any other relevant property” would prohibit a disclaimer predicated upon lack of access to property due to relevant property damage elsewhere—at the heart of civil authority coverage.

The Massachusetts bill was referred to its Joint Committee on Rules on April 6. South Carolina’s bill was referred to its Senate Committee on Banking and Insurance.

The Louisiana Senate has introduced its own version of a business interruption bill (Senate Bill No. 477). That bill discusses a covered peril for business interruption “due to imminent threat” posed by COVID-19 (i.e., no direct physical loss or damage, but merely the potential for same). The Louisiana Bill would apply to every policy insuring against “loss or damage to property that includes the loss of use, loss of occupancy, or business interruption", regardless of the number of full-time employees employed by the insured. Louisiana’s version, in striking contrast to the New Jersey model, does not provide for relief of insurance carrier’s paying these claims. However, as discussed above, this also means that Louisiana has not proposed to fund its non-existent relief of carriers by charging additional assessments on—well, insurance carriers.

An interesting caveat to the Louisiana Bill is that it also requires every policy of insurance covering business interruption to include a form notice of exclusions contained within the policy that is prescribed by the commissioner, which is to be signed by the named insured and

"shall be conclusively presumed to become a part of the policy or contract when issued and delivered, irrespective of whether physically attached thereto. A properly completed and signed form creates a rebuttable presumption that the insured knowingly contracted for coverage with the stated exclusions."

It appears that Louisiana is willing to permit the application of the virus exclusion, so long as the insured is properly notified ahead of time.

Finally, the Federal House of Representatives has introduced legislation regarding coverage for business interruption coverage of COVID-19. Two separate bills were introduced in the House on Tuesday (H.R. 6494 & H.R. 6497). I was only able to find the text for one of these bills, H.R. 6494. In pertinent part, the text of the bill indicates that

"[E]ach insurer that offers or makes available business interruption insurance coverage

  1. shall make available, in all of its policies providing business interruption insurance, coverage for losses resulting from

  2. any viral pandemic;

  3. any forced closure of businesses, or mandatory evacuation, by law or order of any government or governmental officer or agency,including the Federal Government and State and local governments; or

  4. any power shut-off conducted for public safety purposes; and

  5. shall make available business interruption insurance coverage for losses specified in paragraph (1) that does not differ materially from the terms, amounts, and other coverage limitations applicable to losses arising from events other than those specified in paragraph (1).

Notably, the Bill does not provide relief to insurance carriers. In addition, as with several of the state bills introduced, this Bill specifically voids exclusions contained in business interruption policies, providing

"Any exclusion in a contract for business interruption insurance that is in force on the date of the enactment of this Act shall be void to the extent that it excludes [these] losses."


"Any State approval of any exclusion of losses from a contract for business interruption insurance that is in force on the date of the enactment of this Act shall be void to the extent that it excludes [these] losses"

There is also language in H.R. 6494 allowing for the reinstatement of a voided exclusion upon written authorization by the insured to allow for such a reinstatement or if the insured fails to pay any increased premium for providing business interruption coverage without the exclusion and the insurer provided thirty days’ notice of the increased premium and the insureds rights with respect to coverage, including the date the exclusion would be reinstated without receipt of the increased premium.

We will continue to follow each of these bills as they progress through the legislative process.


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

03/30/20       Evanston Ins. Co. v. Harrison Street Residences, LLC
United States District Court, Southern District of New York
Insured’s Failure to Follow Excess Policy’s Conditions Does Not Always Bar Recovery under That Policy

Plaintiff brought a motion for judgment on the pleadings seeking a declaration that it will never be required to provide excess coverage to defendants because the defendants selected primary insurance policies with terms more restrictive than the excess policies.

This action arises out of an underlying personal injury action where a dry wall contractor alleges that various parties, including defendants, negligently contributed to his injuries and violated the New York Labor Law. Harrison Street Residences (HSR) entered into an agreement with Pav-Lak Contracting (PLC), in which PLC agreed to act as construction manager for the work at HSR’s jobsite (the insured premises). The dry wall contractor was employed by a third-party (PG Drywall) and not either defendant. The agreement between HSR and PLC required that PLC, “procure and maintain insurance…at its own expense, until completion and final acceptance of the work, and that HSR be included as additional insureds on all General Liability…and Excess Liability policies.” PLC obtained two primary CGL policies, one policy issued by Colony Insurance Company (Colony) and another issued by State National Insurance Company (State National).

The Colony policy provided that an “insured” refers to:

any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured . . . only with respect to liability caused, in whole or in part, by your ongoing operations performed for that insured.

Colony then disclaimed coverage for the underlying suit, (1) of both defendants pursuant to its policy's limitation that it would provide coverage to additional insureds "only with respect to liability caused by" PG Drywall, because it determined that that PG Drywall was not responsible for causing the injury, and (2) of HSR for an additional reason, i.e., because HSR had not entered into a written agreement with PG Drywall, it did not qualify as an additional insured pursuant to the requirements of the policy. In 2019, two years after its initial denial, Colony agreed to defend the defendants subject to a reservation of its right to (1) withdraw from the defense, (2) seek a declaration that it has no obligation to Defendants, and (3) recover amounts paid.

The defendants also obtained three Excess Liability policies; one from Alterra Insurance Company, one from Admiral Insurance Company, and one from Evanston Insurance Company, the policies provided coverage in the order listed. The three Excess policies were issues as follow form policies, each requiring that the conditions of the prior policy for coverage to be afforded. The Alterra policy provide that coverage was only available through it when the underlying limits of the primary CGL policies had been reached, and provided the insureds met all of the terms and conditions of the underlying CGL policies. Additionally, the Alterra policy provided:

You, as a condition of this insurance, will require by written contract that all sub­contractors working on your behalf maintain primary insurance naming you as an additional insured, which insurance shall be evidenced by certificates of insurance maintained by you and shall include the following: . . . You are included as an additional insured and such insurance as is required by your contract, and reflected by the certificate shall be primary and not contribute with insurance provided by this policy; and shall contain terms, conditions, and coverages not more restrictive than this insurance in the context of any claims to which this insurance also applies.

In May of 2017, Evanston, successor in interest to Alterra by way of merger, sent a letter to HSR wherein it denied coverage under the Alterra Policy because, in part, Colony had denied coverage to HSR or Pav-Lak. Further, Evanston stated that because Defendants "have failed to comply with the requirements of the above-cited Insurance Requirement endorsement, [Evanston] must decline coverage for [the Underlying Action] under the Excess Liability Policy." Evanston reserved its right "to adopt the coverage position taken by State National." On April 5, 2018, Evanston sent a letter to HSR stating that it would "monitor to the exhaustion of the underlying limits in connection with the defense and/or settlement of [the Underlying Action] under a full Reservation of Rights," and that it "reserve[d] the right to investigate this matter and disclaim coverage for any damages that are not covered under the policy referenced above." Evanston added that because its policy "follows form to the Admiral Excess Policy" and the Admiral Policy "does not provide broader underlying coverage than that provided in the underlying insurance," any coverage restricted by either the Alterra Policy or the Admiral Policy would bar coverage under the Evanston Policy.

Plaintiff moved for judgment on the pleadings alleging that Evanston not be required to cover defendants because the Excess policies were issued following the Alterra policy, which provided that the terms of the underlying policy not be more restrictive than those of the excess policies. Evanston argues that because the underlying policy requires that "the putative additional insurance be in privity of contract with the Named Insured" and "the liability be caused in whole or in part by the Named Insured," defendants have breached the terms of the Alterra policy, and therefore also breached the terms of any policy issued on a follow from basis of the Alterra policy.

The court disagreed with Evanston, stating that Evanston’s reliance on the doctrine that a breach of a condition precedent allows and insured to disclaim coverage is misplaced, in this context. The court explained that, while the insured may have breached a condition precedent in the excess policy by purchasing a primary policy with more restrictive conditions than the excess policy, the issuer of the primary policy may still choose provide coverage nonetheless. In the court’s view, the purpose of an excess insurance policy is to provide coverage in excess of what the underlying policies would provide. And that, “plaintiff chose to enter into excess coverage agreements with Defendants, presumably understanding the purpose of these policies, and it is not clear how Plaintiff would suffer if it is ultimately required to provide excess coverage for an incident if the underlying insurers do, in fact, provide coverage. Plaintiff, therefore, is not entitled to a declaratory judgment that “it will never be required to provide coverage to defendants.” 


Cara A. Cox
[email protected]

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

Cara’s Cross-Border Connection: Heather

Coverage for COVID-19 Economic Losses Under Canadian Loss of Business Earnings Forms?

Since the pandemic broke, we have been living in two-week cycles.  It takes two weeks from the time of exposure to manifest symptoms.  It takes two weeks for public health authorities to measure success of social distancing steps taken two weeks prior.  Most of us have spent the last two weeks in our own homes, venturing out to collect groceries and other essentials.  Some are in full quarantine, unable to leave their four walls, dependent upon others who leave food at their door.

We are all experiencing what is being dubbed as "the new normal".  But what is really happening is that we are moving into a new, uncharted era where the way in which we conducted ourselves prior to the onset of the pandemic will be forever changed by an indiscriminate, invisible virus. Therefore, it is only fitting that I write this article two weeks after authoring the article that appeared in this column as to the availability of civil authority coverage for economic losses stemming from the public authorities’ COVID-19 mitigation efforts.

This week the focus is on coverage for a COVID-19 claim for commercial economic loss under a typical Canadian first party property policy.  The word ‘typical’ in the last sentence is important. It must be remembered that Canadian commercial property insurers do not use a common form of coverage.  All that can be said is that there are similarities between various policies.  Some of the forms in use are influenced by forms used in the United Kingdom; some by forms used in the United States, and still others are generated “in house”. Consequently, the comments expressed here are generalities and care must be taken to apply them to specific policies.  In order to focus the discussion, I thought it best to discuss the coverage issues that arise from what hopefully is a typical claim that has been presented to the Canadian property and casualty insurers hundreds of times over the last two weeks. To quote a familiar disclaimer: The narrative, names, characters, and incidents portrayed in this article are fictitious. No identification with actual persons (living or deceased), places, buildings, and products is intended. None should be inferred. 


“Our Business is on Life Support”

Luke Hatch and his wife Melissa, who are ex-pats from the UK, own all the shares of an Alberta numbered company that operates a pub in the trendy Kensington district of Calgary called the “Hog and Rooster”.  The pub opened five years ago re-creating Luke’s neighbourhood pub from his home in Lincolnshire, England

The pub is in leased space that includes a parking lot behind the building.  In terms of floorplan, there is indoor seating capacity for 80 and a seasonal rooftop patio that seats 20, a full kitchen serving pub style menu items.  By year two of operation, profits from the pub had paid back the loan taken out to finance the leasehold improvements and Luke and Melissa were seeing a profit.  Business progressed such that in January 2020 there was talk of opening a beer tent in the parking lot behind the building during the July 2020 Calgary Stampede in order to maximize sales during that 10-day public festival.

During the first week of March 2020, one of their top servers took a one-week holiday in Mexico, returning March 7.  The server worked shifts on March 8 and 9 but left work at the end of her shift on March 9 with headache, a runny nose and sore throat.  On March 11, the server called to say that she had been diagnosed with COVID-19 and needed to self-isolate for 14 days.

In some ways, Luke and Melissa Hatch were not surprised at the diagnosis. News of coronavirus had become part of the popular press and news at the end of February 2020.  Business at the Hog and Rooster began to drop. March 8, was wing night, and the Flames/Vegas game was being televised. That meant that the pub was near capacity. Receipts were on par for wing night.  However, the other nights in early March were 30-40% off budget. Luke’s conversations with other restaurant operators in the Kensington district indicated that his experience was not unique.

On March 12, Luke and Melissa decided to immediately close the Hog and Rooster in order to perform a deep clean of all surfaces. It was the socially responsible thing to do and they needed to preserve their public goodwill as they expected that news of the public test of their server would be become public knowledge.

The Hog and Rooster was to re-open following its clean on March 18.  In the meantime, on March 15, the City of Calgary declared a state of public emergency due to the presence of COVID-19 in the community. This declaration reduced the occupancy of all bars and restaurants to 50 customers or 50% of their fire code capacity, whichever is less.  That meant that when the Hog and Rooster was slated to re-open on March 18, capacity would be limited to a maximum of 40 patrons. Bars and restaurants in the Kensington area that opened after the March 15 public emergency declaration (and, in particular, to try to capture St. Patrick’s Day sales on March 17) were shamed on social media.

By March 18, (when the Hog and Rooster was slated to re-open), those restaurants and bars in Kensington that chose to close to preserve their goodwill proudly announced their stance that they were putting public health before profit. It was clear to both Luke and Melissa Hatch that the occupancy restrictions and the likelihood that business would be very slow would mean that little revenue would be generated even if they did open. Therefore, although the public health authorities had not mandated that they close, it was clear that they should not open on March 18 as planned, if they wanted to preserve the goodwill of their business. In view of these considerations, Luke and Melissa Hatch reluctantly laid off their staff and hung a sign on the door of the Hog and Rooster stating that the pub would be closed until the public emergency was at an end.

On March 27, 2020, the Province of Alberta issued CMOH-07-2020 under the Public Health Act, forcing all non-essential businesses to terminate their public facing services until further order. Luke and Melissa could offer take-out food services from the Hog and Rooster, but could no longer serve patrons on the premises.


The Canadian Federal Government’s COVID-19 Financial Relief Measures

The Canadian federal government issued several payroll-support programs, as well as interest free business financing loans.

On March 27, 2020 the Canadian federal government announced a 75% wage subsidy program for eligible employers for up to 12 weeks, retroactive to March 15, 2020 that is paid in cash to the eligible business (75%WS). Legislation enabling the program was passed by Parliament on April 8 and the program is expected to be funded by the end of April.

To qualify for 75%WS, the Hog and Rooster has to re-hire its workforce and demonstrate a drop of at least 30% in revenue (measured on an accrual method or a cash method) but only a 15% drop is required for the month of March.  The Hog and Rooster has two options for comparing revenues. Option 1 is to compare the 2019 to 2020 revenue for the calendar month in which the period began. Option 2 is to compare the applicable month’s revenue to the average revenue earned in January and February 2020. The selected method would be required to be used for the entire duration of the program. The wage subsidy received by the employer in a given month would not be considered revenue for purposes of these calculations.

Through this program, the Hog and Rooster is eligible for a subsidy of 75% of its employees’ pre-crisis wages to a maximum of $847 per week, provided the employee is paid that amount during the subsidy period. However, even though Luke and Melissa Hatch worked at the Hog and Rooster, as they were not on the payroll when the crisis broke, they are not employees under the 75%WS. As a result, this wage subsidy is not available for them.

Although Luke and Melissa Hatch would not personally benefit under the 75%WS, on April 8, the Hog and Rooster rehired its staff, retroactive to March 18. In the meantime, to cover the soon to be subsidized payroll, the Hog and Rooster has applied to their bank for an interest free loan to cover the payroll amount that will be funded by the 75%WS.


Other Ongoing Expenses

Since closing on March 12, Luke and Melissa Hatch have been struggling to pay the commercial cleaner that sanitized the premises; their ongoing lease payments and their equipment rental leases. They are reluctant to extend the loan that are taking out to meet the payroll requirement under the 75%WS to fund these ongoing expenses. The Hog and Rooster may not make it out of this pandemic alive and this loan would simply be like throwing a life jacket to a drowning victim that will die in any event.


The Insurance Claim

Perhaps another avenue of economics salvation is the Hog and Rooster’s commercial insurance policy that has a loss of business earnings endorsement that stipulated an indemnity period of 12 weeks and was subject to a one week waiting period. To manage its ongoing financial commitments, the Hog and Rooster submitted a claim on its business insurance policy for loss of business earnings for the full 12 weeks from March 12 when the Hog and Rooster closed to start its deep clean, or for as long as the provincial order closing public facing services is in place. The policy wording that is in play reads:

We will pay for the actual loss of Business Income (defined to include net income plus continuing operating expenses) you sustain due to the necessary “suspension” of your “operations” during the “indemnity period” …

“Operations” means your business activities occurring at the described premises even if such activities would not have produced income during the “indemnity period” ….

“Suspension” is defined as the partial or complete cessation of your business activities; or that part or all of the described premises is rendered untenantable.

“Indemnity period” means …the period of time that begins when the physical loss or damage occurs that is caused by or results from a Covered Cause of Loss at the described premises and ends no later than the number of weeks shown in the business income declaration during which time your business income continues to be directly affected by the physical loss or damage to property at the described premises caused by or resulting from the perils insured.

The perils insured refers to the coverage agreement of the commercial property form which states:

The perils insured are all risks of direct physical loss or damage to the property insured, subject to those risks specifically excluded.

The policy does not have a virus exclusion.

Luke Hatch ended the letter accompanying the claim stating that premiums have been paid for five years without a prior claim; that payment of the claim will keep a local employer alive and support the community; that the business was thriving before the crisis but now “our business is on life support”.


The Hog and Rooster’s Coverage Position

The Hog and Rooster argues that the likely presence of virus at the premises inadvertently spread by the server who tested positive for COVID-19 is “a physical loss”. The indemnity period therefore began March 12 and continues for 12 weeks or until the provincial order closing non-essential pubic facing businesses is rescinded, for during that time, the premises leased by the Hog and Rooster were “directly affected by the physical loss or damage” that the business sustained due to its physical exposure to the COVID-19 virus.

The Hog and Rooster disclosed that it is taking advantage of the 75%WS; that it is not “double dipping”, for when the insurance claim is paid, the Hog and Rooster will refund the government subsidy. The terms of the 75%WS are clear that if any business claiming the benefit fails to meet the eligibility requirements, the amount will be clawed back with penalties. Payment of the claim will mean that it no longer sustained a 30% drop in revenue due to the crisis and it would therefore lose its eligibility for the subsidy.



The Hog and Rooster’s loss of earnings claim has three phases:

  1. Phase One: March 12-March 18, 2020: Closed for deep cleaning due to the significant probability that COVID-19 virus was on the premises.

  2. Phase Two: March 18-March 27, 2020: Closed due to the probability that earnings would not cover operating expenses due to a loss of market and the strong possibility of loss of goodwill through public shaming;

  3. Phase Three: March 27, 2020 onwards due to the provincial order prohibiting public facing services.


Did Physical Loss or Damage Occur?

Evidence will likely be marshalled showing that on a balance of probabilities, virus was deposited on the insured property due to the inadvertent transmission by the server who tested positive for COVID-19. Further, medical opinion is likely to show that the virus is rendered inert by disinfection.

The presence of virus on the various surfaces within the pub did not produce any chemical change to those surfaces, nor did it destroy those surfaces.  However, the presence of virus would have a detrimental effect on the health of patrons and other employees.  In that sense, the virus harmed the insured property and it is therefore likely that a Canadian court would hold that the insured property sustained “physical damage” or “physical injury” until such time as it was disinfected. During that period of time, the premises would be considered untenantable. This conclusion is supported by a number of cases discussed in the article published in this column on April 1, 2020 see:

Smith v. Inco Ltd., 2011 ONCA 628, leave to appeal to the Supreme Court of Canada refused, 2012 CarswellOnt 4932 (S.C.C.) and reconsideration and rehearing of the leave to appeal to the Supreme Court of Canada refused 2014 Carswell Ont 12113 (S.C.C.): “Evidence that the existence of the nickel particles in the soil generated concerns about potential health risks does not, in our view, amount to evidence that the presence of the particles in the soil caused actual, substantial harm or damage to the property. The claimants failed to establish actual, substantial, physical damage to their properties as a result of the nickel particles becoming part of the soil.” Proof that the nickel particles were present and did generate human health issues would constitute substantial physical harm to the properties.

Hildon Hotel (1963) Ltd. v. Dominion Insurance Corp. Ltd. (1968), 66 W.W.R. 289 (B.C.S.C.):  Injury to property is the infringement of a property right. Damage to property is a pecuniary loss of property

Canadian Equipment Sales & Service Co. Ltd. v. Continental Ins. Co. (1975), 9 O.R. (2d) 7 (C.A.): where a potentially blocked pipeline was impaired until the potential for blockage was eliminated; that potential blockage constituted an injury to property

Privest Properties Ltd. V. Foundation Co. of Canada Limited, (1991), 57 BCLR (2d) 88 (B.C. S.C): where the court held that injury does not exist without a victim and property damage does not exist without proof of actual damage

D.P. Murphy Inc. v. Laurentian Casualty Company of Canada (1992), 315 A.P.R. 331 (P.E.I S.C. T.D.): where gasoline fumes rendered a building untenantable and constituted physical loss and damage

Protrux Systems Inc. v. Insurance Corp. of British Columbia, 2004 BCSC 1194: where a load of chipboard that fell into a river when a tractor trailer lost control “damaged” the river

Westside Transport Inc. v. Continental Insurance Company, 2004 BCSC 1195: similar to Protrux, where massive paper rolls fell into a lake from an over-turned tractor trailer; held that the lake was damaged by the presence of the paper rolls

Jessy’s Pizza (Bedford) v. Economical Mutual Insurance Co., 2008 NSSM 38 (Nova Scotia Small Claims Court): fumes from a seeping plume of oil under a building caused a pizza restaurant that leased space within the building to close; the presence of the fumes to the degree the premises could not be used was a direct physical loss or damage of the rented premises

Pilkington United Kingdom Ltd. v. CGU Insurance Plc, [2004] EWCA Civ 23 (Eng. & Wales C.A. Civil): where the court stated that in English law, “damage” refers to a changed physical state; that this plainly covers a situation where there is a poisoning or contaminating effect on property as a result of the introduction or intermixture of the product supplied but does not extend to a position where there is no physical harm.

However, the same logic and the same cases also support the conclusion that once the Hog and Rooster’s premises were disinfected, the pub was no longer directly affected by physical loss or damage and therefore, the indemnity period came to an end.


What does “directly” affected mean?

Chief Justice Gale in Kaufman v. New York Underwriters Insurance Company, [1955] O.R. 311 held that "direct cause" or proximate cause is the "effective" or "dominant" or "the cause without which" loss or damage would have not occurred.

In Sherwin-Williams Co. v. Boiler Inspection and Ins. Co., [1950] S.C.R. 187, the court stated at p. 202, the “… direct or proximate or proximate cause may not be the last, or, indeed, that in any specified place in the list of causes but is the one which has been variously described as the ‘effective’, the ‘dominant’ or ‘the cause without which’ the loss or damage would not have been suffered.”

In Ford Motor Co. of Canada v. Prudential Assurance Co. (1958), 14 D.L.R. (2d) 7 (Ont. C.A.), which was affirmed by the Supreme Court of Canada (1959), 18 D.L.R. (2d) 273, the Ontario Court of Appeal stated:

The extended coverage provided by those contracts is "against direct loss or damage to the property . . . caused directly by . . . riot". The words "direct" and "directly" in that clause are intended, no doubt, to limit the scope of the coverage and thus the liability of the insurers. In my opinion, the words are redundant and have no effect except to emphasize that the cause of the loss or damage covered by the contracts must be a "proximate" cause. They serve only to show that the doctrine of proximate cause is to be applied to the constructions of the contracts. (p. 15)

Another leading case is Filkow v. Gore Mutual Insurance Co., [1966] M.J. No. 71 (Man. Court of Appeal). That case considered a fire insurance policy that covered a herd of dairy cattle for $250 a head against “direct loss or damage” by fire. In that case, the insured’s dairy barn burned.  The herd of dairy cows were evacuated to the surrounding fields during the fire and did not perish in the building. However, they spent the night of the fire outside and were not milked on their regular schedule. The insured’s expert, a neighbouring farmer, testified:

Well, it wasn't the same bunch of cows any more ... An animal that stays in the barn for two or three years, then you turn them out, they just get stiff and gaunted up. And not being milked that night, the next morning there was about two-thirds of those cows that had mastitis ... the milk spoils in the udder of the cow ... And I guess the excitement of the animal, you know, caused them to get nervous, and they were coughing ... quite a few of them .... cows lying on the cold ground was another possible cause of the mastitis and that mastitis was "pretty well the end of a good cow" because, though it could be cured, the cow was spoiled for approximately a year as it had to be bred to freshen, and even then it would never be as efficient a milk producer.

He also said that several of the cows were coughing, indicative of pneumonia developing, and that several others were limping — the cause later being diagnosed as hoof-rot. The majority of the Court of Appeal justices held that the fire was the proximate cause of the diseases in the cows and allowed recovery under the policy. One of the justices dissented saying he had grave doubts whether the loss of the herd was a direct and natural consequence of the fire.

In Vanguard Realty Ltd. v. Royal & SunAlliance Insurance Co. of Canada, 2002 BCSC 1426, the court was asked to determine if a loss was one "resulting directly from one or more Fraudulent or Dishonest Acts”.  The Court held that “directly” refers to the issue of proximate cause and emphasizes that the loss cannot have been caused by another intervening act.

In Rayonier Canada (B.C.) Ltd. v. Protection Mutual Insurance Co., [1985] B.C.J. No 2884, log booms were scattered by wind generated waves and the issue was whether a policy that covered “direct action from waves” covered the resulting loss. The majority held that wind was the dominant cause of the loss of the booms and therefore the loss was covered.

Once of the leading cases on when insured property is directly affected by physical loss or damage is Acciona Infrastructure Canada Inc. v. Allianz Global Risks US Insurance Co., 2014 BCSC 1568, affirmed, 2015 BCCA 347. In that case, the court found that during construction of a building, slabs of concrete deflected and cracked as they cured due to improper framework and shoring practices. This damage, covered under an all-risk course of construction (or builders’ risk policy), impacted the construction schedule causing sub-contractors to incur additional costs as they had to perform their contracts out of sequence and under less desirable working conditions. One of the issues in the case was whether the general contractor’s liability for the extra costs incurred by the sub-contractors to perform their sub-contracts were “direct losses to the property insured”. If so, they were covered. The trial court held that these costs were of a different nature than the damage to the concrete slabs. The extra sub-contractor costs arose out of the contractual obligations that the general contractor owed to the sub-contractors and were not “direct” losses to the property insured. The British Columbia Court of Appeal agreed with this analysis.

Applying these authorities to the Hog and Rooster’s demand for coverage, the insurer is within its rights to declare that the losses incurred in Phases Two and Three are not the direct result of the presence of virus on the insured property. As in Acciona, the losses that the Hog and Rooster sustained which began on March 18 when it was slated to re-open but did not, through to the present, are of a different character than those that were sustained while the insured premises were being cleaned,

  • Phase Two: March 18-March 27, 2020

The losses in Phase Two (from March 18 when it was due to open following disinfection through to March 27 when the provincial order closing the public facing services of non-essential businesses was issued) were not the direct result of the presence of virus and the consequential need to disinfect the insured premises.  The Hog and Rooster would have opened on March 18, 2020 if it were not for the perceived damage to its goodwill that such a move would engender (in addition to the lack of anticipated profit due to reduced patronage).  The decision not to open that was predicated on the expected loss of profit due to the occupancy restrictions combined with the loss of goodwill broke the chain of causation. The loss of earnings after March 18 are therefore of a different character than the losses that were incurred between March 12 and March 18.

  • Phase Three March 27, 2020 Onwards

As of March 27, the Hog and Rooster was prohibited from opening to the public. The losses under this Phase Three had nothing to do with the presumed presence of virus on the insured property and the need to disinfect. Instead these losses were the direct result of the public health initiative to halt person to person transmission of disease by closing restaurants and bars and other non-essential businesses where members of the public congregate. Initiatives to halt person to person transmission of disease does not arise out of the physical condition of the insured property. Rather, the forced closure of the public facing services offered at the insured premises is due to reasons external to the physical integrity of the insured property and therefore the losses due to that forced closure are outside the scope of the policy.  With that said, the business remains insurable property and the reason for the placement of the coverage remains. For example, if during the period of closure an electrical fire occurs and the leased property is destroyed, then if all other terms and conditions are met, the policy would apply.


Conclusion as to Coverage

In view of this analysis, subject to an analysis of the exclusions, the insurer would be within its rights to declare that only the losses incurred from March 12 to March 18 would potentially fall within the policy coverage. However, that six-day period of loss is within the waiting period of the policy and, therefore, the loss of earnings for those days lies outside the coverage of the policy.

For all of these reasons, the insurer is within its rights to deny coverage to the Hog and Rooster under the loss of business earnings form.

This decision as to coverage imperils the viability of the Hog and Rooster and all other businesses that have similar claims under similarly worded forms. However, the bottom line is that the loss of earnings arising from pandemics is uninsurable.  As Colin Simpson, the CEO of the Insurance Brokers Association of Ontario is quoted as saying in the Canadian Underwriter (March 24, 2000, Will commercial BI policies cover pandemics after COVID 19?) “business interruption was never designed to respond to pandemics ….”  The wording of most commonly used loss of business earnings forms supports that conclusion.


Cara’s Cross-Border Connection: Extra Expenses and Rents

Business Income Coverage

Although Canadian commercial property insurers do not use a common form of coverage, as noted by Heather, in the U.S., there are two business income forms: (1) business income and extra expenses coverage form and (2) business income without extra expense form.


Relevant Definitions

Here are some of the relevant definitions found in the aforementioned BI forms:

  • < >: means the business activities occurring at the described premises and the tenantability of the described premises, if coverage for Business Income including “Rental Value” or “Rental Value” applies.
  • “rental value”: is defined as business income that consists of Net Income… that would have been earned or incurred as rental income from tenant occupancy of the premises described in the Declarations as furnished and equipped by you….
  • “period of restoration”: will generally be defined as the period of time that begins 72 hours after the time of a direct physical loss or damage for Business Income coverage or immediately after the time of a direct physical loss or damage for Business Income coverage caused by or resulting from any Covered Cause of Loss and ends on either the date when the insured property should be repaired, rebuilt or replaced with reasonable speed and similar quality or the date when the business is resumed at a new permanent location, whichever occurs first. Importantly, “period of restoration” will not include any increased period required due to the enforcement of any ordinance or law that regulates the construction, use or repair, or requires the tearing down of any property or requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or reassess the effects of “pollutants”.

Conditions Precedent

  1. Necessary Suspension of Operations

Whether a complete or partial cessation of operations is required depends on the jurisdiction. In New York, the “necessary suspension” language found in both BI forms requires the complete secession of an insured’s business for a valid BI claim. For example, a Manhattan commercial building owner made a business interruption claim to his carrier for loss of rent during a post-9/11 evacuation order but also for the loss of rent after the order when the insured acquiesced to his commercial and residential tenants’ demands for reduced rents (because the building was allegedly not in the same condition as it was prior to 9/11 despite insured’s attempts to clean up the building). The carrier argued there was only coverage for the period that no one could enter the building but no coverage from when the tenants were permitted back on the premises. The Court agreed with the carrier and held that in order for the business interruption coverage to be triggered, there must be a “necessary suspension,” i.e. total interruption or cessation of operations.

Business interruption claims have been litigated at length, including in the context of civil authority orders (e.g. post-9/11 and Hurricane Sandy claims). For additional information regarding this topic, please look at the April 1, 2020 Coverage Pointer’s column where the issue was discussed at length.

  1. Direct Physical Loss or Damage

Most property policies include “direct physical loss of or damage to” insured property language. This is another condition precedent not only for property damage claims, but for business interruption claims. However, jurisdictions have not uniformly interpreted what “direct physical loss or damage” means.

New York takes the dictionary and syntactical approach when providing meaning to the phrase “direct physical loss or damage.” For example, a law firm brought a breach of contract claim against its carrier for denying its business interruption claim that arose from not being able to enter the insured’s offices during Hurricane Sandy. The insured was unable to access the office because Consolidated Edison Co. of New York, Inc. (“Con Ed”) preemptively shut off power to certain areas in order to preserve the integrity of their equipment and system, which included the building in which insured’s offices were located. The building was subsequently closed because there was neither electricity nor elevator service. According, the insured could not physically access its offices. The carrier denied the claim because the lack of access to the offices was not a covered loss, i.e. no direct physical loss or damage. The Court held for the carrier and analyzed the minutiae of the phrase:

The words “direct” and “physical,” which modify the phrase “loss or damage,” ordinarily connote actual, demonstrable harm of some form to the premises itself, rather than forced closure of the premises for reasons exogenous to the premises themselves or the adverse consequences that flow from such closure.

The Court continued and referenced other decisions:

  • “…defining ‘physical loss’ as a requirement which is ‘widely held to exclude alleged losses that are intangible or incorporeal…”

  • “…business interruption policies generally require some physical damage to the insured’s business in order to invoke coverage…”

  • “The inclusion of the modifier ‘physical’ before ‘damages’… supports [defendant’s] position that physical damage is required before business interruption coverage is paid.”

The Court held that interpreting “direct physical loss or damage” to be read to include the mere loss of use of an insured premises, where there has been no physical damage to an insured premise would undermine the Court’s prior decisions.

  1. Extra Expenses

As noted above, there are two business income forms: one which includes extra expenses coverage and one that does not. If an insured selected extra expenses coverage and then suffers a covered peril, the subsequent extra expenses would also be covered. The Extra Expenses provision includes the following pertinent language:

Extra Expense means necessary expenses you incur during the “period of restoration” that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss.

We will pay Extra Expense (other than the expense to repair or replace property) to:

  1. Avoid or minimize the “suspension” of business and to continue operations at the described premises… including relocation expenses and costs to equip and operate the replacement location or temporary location.

Sounds easy enough. However, the Extra Expenses must be “necessary expenses” and importantly, must result from a covered incident. 


Landlords Beware: No Good Deed Goes Unpunished

On March 7, 2020, Governor Cuomo issued Executive Order No. 202.8. Per the Order, there is a 90-day moratorium on eviction (and foreclosure) proceedings for both commercial and residentials tenants. Accordingly, new proceedings may not commence until at least June 20. In 2017, 46.2% of New Yorkers were renters.[1]  As of April 13, New York State has processed approximately 600,000 unemployment claims, and an additional 200,000 are pending.[2]

Given the number of unemployment, inability to pay or collect rent is becoming more of an issue as we enter the second month of restricted movement. Although there are stories of landlords trying to help their tenants by holding off on collecting rent, there are similar stories of larger companies, like Tesla, who have been asking for rent reductions from their commercial landlords.

Whether it’s Tesla’s landlord or your landlord (whom you’ve never actually seen but who owns a couple rental properties in the area), if a landlord voluntarily reduces or defers rent payment, then the landlord risks losing out on that rental income. Although some landlords may be able to absorb the cost of reduced or deferred rental income, some may find themselves out of a job along with loss of any rental income safety net. If a business income loss claim is subsequently made for the loss in rent or outstanding rent due to tenants’ inability to pay rent due to virus-related unemployment, there will likely be no coverage. Remember the landlord who reduced rents in response to tenants’ demands? The Court held there was no coverage after tenants were permitted back on the premises because he was still able to collect rent as soon as tenants returned.


Extra Expenses: Preventative Cleaning Costs?

It’s been weeks since being able to just sit at a bar or shop for anything that wasn’t food or other essentials. If you aren’t an essential worker, you likely only leave your home for essentials and a workout. During grocery runs nowadays, you may have noticed signs at businesses with altered business hours like this one:

As explained above, in order for there to be coverage for Extra Expenses, there must be a loss or damage which was caused by a Covered Cause of Loss. Therefore, there may be claims for Extra Expenses for altered store hours and additional costs associated with “sanitizing” an entire store.


Earl K. Cantwell

[email protected]

01/21/20       Old White Charities, Inc. v. Bankers Insurance, LLC
Fourth Circuit Court of Appeals

It’s Spring, So Here Is a Coverage Pointers Golf Case

In July 2015, Old White hosted and sponsored a PGA tour event and ran a promotion that, if a golfer shot a hole-in-one on the 18th hole, all spectators present in the grandstand would receive a cash prize. Old White engaged Bankers to secure an insurance policy indemnifying Old White against such a payout from the contest. The policy application contained a warranty clause that the hole had to be at least 150 yards in distance for the hole-in-one to be covered by the policy. Bankers also included an addendum to the application stating that the 18th hole generally played an average of 175 yards, but that Old White had no control over the length of the hole on any given day of the tournament. The policy apparently ultimately contained a provision stating that, for a hole-in-one to be covered, it had to be at least 170 yards long.


Par for the course, in order for there to be litigation, two golfers shot holes-in-one on the 18th hole from a distance of 137 yards. Old White submitted a claim under the policy and the insurance company filed a declaratory judgment action seeking to obtain a declaration of no coverage because the holes-in-one did not comply with the distance requirement. The District Court held in favor of the insurance company, and this was affirmed on appeal. In this decision, the Court reviewed state law claims of negligence, reasonable expectations, and fraud alleged by Old White against Bankers.


The Appellate Court denied the negligence claim finding that Old White failed to establish the elements of duty and proximate cause. With respect to the “reasonable expectation” argument, the Court concluded that, where the provisions of an insurance policy are clear and unambiguous, they are not necessarily subject to judicial modification or construction, but will be given full effect according to the plain meaning. The Appellate Court believed that the contract was clear and unambiguous regarding the distance of at least 150 yards, and therefore Old White could not recover under the policy. The Court also concurred that Old White failed to establish a claim for fraud or misrepresentation against Bankers Insurance.


According to the Appellate Court, and the District Court, the policy was clear that a hole-in-one had to be at least 150 yards (or perhaps 170 yards?) to be covered, but it did not apply to holes-in-one shot at only 137 yards. Perhaps if Old White had paid a few more dollars for a few more yards, they could have secured coverage for an ace.

Another interesting background question not addressed in the decision is whether, since there were two holes-in-one, did that result in a double payout to the spectators in attendance?




Hurwitz & Fine, P.C.
1300 Liberty Building

Buffalo, New York 14202
Phone: 716-849-8900
Fax: 716-855-0874

Long Island Office:
575 Broad Hollow Road

Melville, New York 11747
Phone: 631-465-0700
Fax: 631-465-0313

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