Coverage Pointers - Volume XXI, No. 23

Volume XXI, No. 23 (No. 562)
Friday, May 1, 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:

Do you have a situation?  We love situations.  This remains at the bottom of our Top 10 situations, but we continue to persevere.

Return to Somewhat Normalcy Alert:  As of Monday, in existing cases, electronic filing in New York will resume.  Pleadings, motion, submissions will be accepted.  No new lawsuits yet ….

Promotions and Farewells:

May 1 marks Hurwitz & Fine’s 43rd anniversary, if counting by fiscal year, and we move to our third generation of leadership.

Before I start my bi-weekly ramble, let me salute Ann Evanko, my classmate and friend, who is stepping down as H&F’s managing partner after a dozen years at the helm.  She’s entitled to a break and she’ll be returning to her practice as an employment practices and mediation attorney.  I salute you, my friend.  Our new managing partner is the ever-talented Jody Briandi.  Jody, who chairs our Premises Liability Team, is the first litigation lawyer to serve in the role of Managing Partner and takes on that role on our 43rd anniversary. 

We bid a fond farewell to Larry Franco, who has spent 41 years at the firm, as a corporate and transactional partner, and Earl Cantwell, a member of our commercial litigation team and the author of Earl’s Pearls, a long-time CP column.  Earl is retiring to Florida.

We also welcome the advancement of Marc Schultz and Amber Storr to the ranks of firm Membership (what would be considered “partners” if we weren’t a professional corporation).  Marc is one of the backbones of our Labor Law Team and Amber is a stalwart in our commercial litigation group.  We’re proud of their well-earned promotions.

The Firm’s Role in COVID-19 Litigation

So, what have we been doing?  Lots of COVID-19 work, assisting carriers in carrying out their good faith obligations to their policyholders.  It is really a pleasure to work with these companies, as they try their best to respond to claims on an individual basis. I admire the many companies that are trying to do it right.

Casualty coverage questions and tort claims, related to COVID-19, are beginning to reach our desks.  Pollution exclusion?  Virus exclusions?  Occurrences?  E&O claims.  D&O claims.  EPLI claims. Now a trickle, soon, when the courts in New York reopen, a likely torrent.

For my LinkedIn friends, you know how active we’ve been in coverage discussion on that social media platform.

COVID-19 Resources:

COVID-19 Business Interruption Complaint Survey

Hurwitz & Fine’s Coverage Team has compiled a survey of known COVID-19 business interruption complaints filed to date. Special thanks to the coverage folks at Hepler Broom LLC for sharing its resources on this endeavor.

To access the survey, click hereTo access the complete summaries, click here.

Lee Siegel ([email protected]) has been managing that collection.

COVID-19 Business Interruption Coverage Legislative Summary

The Hurwitz & Fine Coverage Team prepared a consolidated resource document comprised of legislative summaries for all proposed state and federal legislation to date concerning COVID-19 business interruption coverage. To download our consolidated summaries, click here.

Ryan Maxwell ([email protected]) manages that collection.

Canadian COVID-19 Column

Heather Sanderson’s article is a must read for anyone who deals with COVID-19 north of the US Border. It’s in the attached issue::

Additional Coverage Issues for Canadian and American COVID-19 Claims Economic Loss under Loss of Business Earnings/Business Income Forms


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.


Clear Your Inventories:

This is a time to mediate cases to clear your desks for the upcoming surge in litigation.  Call us if you need help.

Keeping Streets Safe – 100 years Ago:

Press and Sun-Bulletin
Binghamton, New York

01 May 1920


            Can city streets be made safe?  Not as long as traffic regulation is made the plaything of legislatures and policemen.  That is the opinion of a writer in the Scientific American who lays down as the first principle of safety to be established the elimination of pedestrians from the pavement. 

            Keeping pedestrians on the sidewalk, he admits, is a costly undertaking.  San Francisco is attempting it.  On Market street, in that city, underground street crossings are to be built.  They will cost $17,000 apiece; and the viaducts, which it is proposed to substitute for them at some street corners, will cost almost as much.

            Yet the writer points out that booths for barber shops, shoe-shining parlors and similar enterprises can be constructed along the subways and at the entrance to the viaducts, and the rental from these will go far to reduce the cost.

            Congestion on the busy streets of the larger cities may in time call for such a solution.  The cost, for such a place as New York, would not be excessive.  If the plan works well in San Francisco, we shall probably see it adopted in the East. 


Peiper on Property and Potpourri:

It has been a long month for everyone trying to eke out a day’s work from home.  It has been no different for me.  At times, we have four different zoom calls going on at once.  My wife has the dining room table, my son has the kitchen table, and I have the desk upstairs.  We assume my daughter (13) has a workstation, but frankly, we’re all too scared to open the door to her room to find out.

Throughout it all, I must admit that for the most part our wi-fi has held up.  A big thank you to Verizon Fios for keeping us in the game.

My situation, to be honest, is not nearly as challenging as those of you out there with smaller children.  The disruptions of normal life are no doubt challenging, and I don’t envy you.  With two kids in double digits, my house is actually quite quiet until 10:30ish. On the bright side, though, you’re not yet trying to figure out middle school algebra…again…thirty years later.

I am delighted to join Dan’s earlier message in heralding Jody Briandi’s promotion to our Managing Partner.  She is a remarkable person, a darn fine lawyer, and will be a tireless advocate for this firm as we move forward.

I also want to take a few moments to acknowledge Ann Evanko’s tenure as President of the firm.  She assumed the position a few years after I was hired, and I’ve had the good fortune of watching firsthand how she has supported, protected, nurtured and (occasionally) kicked the firm ever toward a brighter tomorrow.  On a personal level, Ann has been a remarkable impact on my growth as a lawyer and administrator.  I am grateful for her time, her leadership and her direction.

Congrats to both of you, and best wishes on your coming successes.

Steven E. Peiper

[email protected]


My Sister is My Mother-in-Law?

Baxter Daily Citizen
Baxter Springs, Kansas

01 May 1920

Sister’s Mother-in-Law

            Toledo, O.—Miss Florence Dewey, forty-three years of age, the daughter of J. N. Dewey, wholesale fish dealer, and William Lindsay, a Milwaukee business man, eighty years of age, were married in Milwaukee the other day.  The marriage causes a peculiar relationship to exist in the two families.  The new Mrs. Lindsay is a sister of Mrs. Herbert Lindsay, her husband’s daughter-in-law.  Through her marriage to Lindsay, Mrs. William Lindsay now becomes sister’s mother-in-law, while Lindsay is his own son’s brother-in-law.


Wilewicz’ Wide-World of Coverage:

Dearest Readers,

I’ve lost count of the days or weeks that we have been on lockdown. I’ve started to lose the ability to tell days apart. When one works every day of the week and never leaves the house, all of the days become pretty much the same. However, one thing that could never slip my mind is my mini-me’s birthday. She turned 14 this year and, while cliché, I honestly don’t know where half of that time went.

Now, celebrating birthdays during quarantine is a rather unusual endeavor. Birthday parties are verboten, glitchy Zoom calls make for a poor substitute for family gatherings, and it turns out that it’s near impossible to even have balloons or flowers delivered, as those services are purportedly non-essential. Yet, we made the best of it by planning a day of food deliveries from her favorite still-open restaurants (Panera for breakfast, Five Guys for lunch, and our local Italian fave Osteria for dinner). Then, my parents sent up Edible Arrangements and flowers shipped in from out of state. We staggered other birthday present deliveries throughout the day, and I ordered a few celebrity shout-outs from Cameo as the main surprise. It made for a full day of contactless but joyful festivities, and I think she enjoyed them all. It was a good day.

Now, in the world of coverage, the courts do appear to be tackling pending appeals, albeit at a slower pace and likely from the comfort of their own homes. I’ll be back next time with a run-down of the latest from the Circuit Courts, stay tuned and see you all then.

Until next time,

Agnes A. Wilewicz

[email protected]


Was Race Really That Important for the Story a Century Ago?

Arkansas Democrat
Little Rock, Arkansas
01 May 1920


            Ernest Nowland, negro, got “all lit up” Friday night, imbibing too freely of white mule, and, loading a party of friends into his automobile, went out Main street at such a high rate of speed that every person in his way who heard him coming either hugged the curbing or drove into a side street to keep from being run down.

            And it was little short of a miracle that members of Al Amin patrol, who were drilling on the thoroughfare a short distance from the Consistory, were not moved down as a whole.  This probably would have happened had not one of their members who happened to be facing north when the speeding car hove in sight and who realized the danger of his comrades, gave the alarm in time for them all to get to a place of safety.

            As a result of his actions Nowland faced Judge Hale in police court Saturday morning and was fined $25 for driving an automobile while under the influence of liquor, $50 and costs for speeding and reckless driving, and $10 for violating the automobile license ordinance, in that he had a state tag on his car that had been purchased for another car. 


Barnas on Bad Faith:

Hello again:

It feels like we’re finally starting to get a little bit of good news about sports potentially coming back.  There are reports that Major League Baseball fully expects to play this season, possibly with games in three states and the playoffs extending into November.  The PGA Tour is slated to resume without fans in June, and Bundesliga may be returning in May.  I’m not a big Nascar fan, but it sounds like the Coca Cola 600 is going to be run at Charlotte Motor Speedway on May 24.  Locally, golf courses have reopened with social distancing measures in place, and I hear we may even have a law firm softball season.  It’s nice to see a bit of optimism, even if it is all still tentative and uncertain.

Court decisions have really slowed down in the bad faith arena.  This week’s case is from the Northern District of Indiana.  Previously, the court had granted a motion to dismiss a bad faith cause of action based on the insurer’s negligent failure to settle an underlying lawsuit within the policy limits.  The underlying plaintiff attempted to file an interlocutory appeal or to have the court certify the question to the Indiana Supreme Court.  The court, appropriately in my estimation, declined to take either action.  Check it out if you are so inclined.

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

Brian D. Barnas

[email protected]

Rules on Federal Court Amount in Controversy a Bit Different in 1920:

Daily Arkansas Gazette
Little Rock, Arkansas

01 May 1920


            The petit jury was discharged by Judge Trieber for the April term of United States District court yesterday afternoon.  Judge Trieber will leave tonight for St. Paul, Minn., where he will sit as one of the judges on the circuit court of appeals during a session of several weeks.  An adjourned session of United States District court will be held June 14 to dispose of cases on the docket for the April term.  Charles S. Harley, secretary to Judge Trieber, will leave Monday for St. Paul.

            Dr. M. G. Daly and William A. Hogue were found guilty on the charge of shooting wild duck in violation of the migratory bird treaty act yesterday and were each fined $5 and costs.

            John McWyatt of Hot Springs pleaded guilty to violation of the national prohibition act and was fined $5 and costs.

            The jury failed to agree in the case against Tobe Thompson, taxicab driver, charged with having been a retail liquor dealer without having paid the special tax, and was discharged.  Thompson’s case was reset for June 17. 


Off the Mark:

Dear Readers,

As you may recall, last edition I mentioned that some of the judges in the NYC Metro area were beginning to schedule virtual conferences.  While I haven’t had any virtual court conferences yet, I have had a number of telephone conferences with the courts.  My impression so far is that the judges are being very reasonable and are trying to resolve any cases they can.  

Hopefully the weather starts getting nicer soon.  Down here on Long Island, it has been windy and chilly, with a glimpse of a nice day every week or so.  I have heard that my cohorts in Buffalo have recently had snow.  As most of us are stuck at home, some warmer weather would be a nice lift to our spirits, especially those in the colder areas.

This edition of “Off the Mark” brings you a recent construction defect case from the US District Court for the Southern District of California.  In Liberty Mut. Fire Ins. Co. v. Bosa Dev. Cal. I, Inc., the Court examined the issue of the number of occurrences in a construction defect context.  As there were multiple discrete events that caused the damage at issue, the Court found multiple occurrences, thus, requiring the developer to pay multiple deductibles.

I hope everyone stays safe and healthy.

Until next time …

Brian F. Mark

[email protected]


Will North Carolina be the State to Push the Suffrage Amendment Over the Top?

The Oshkosh Northwestern
Oshkosh, Wisconsin

01 May 1920



A Special Session of the Legislature Will be Held to Ratify Amendment

(By Associated Press.)

            Raleigh, N.C.—Action of the Democratic state convention recently in adopting a platform plank for ratification of the woman suffrage amendment will be followed by a special session of the legislature about July 1.

            Louisiana is the only state to have a session before North Carolina but Suffrage leaders say no matter what action is taken in Louisiana it will have no effect on the fight for ratification of North Carolina.

            If Louisiana were to act favorably it would make the 36th state but on account of some uncertainty over the ratification in Ohio legislature, because of a referendum involved, suffrage advocates are anxious to have 37 states ratify the amendment.

            Opinion is divided here as to what action the North Carolina legislature will take.  In view of the fact that both political organizations in the state have adopted platforms including planks favoring suffrage, many party leaders believe the amendment will be ratified.  Besides Governor Bickett, many Democratic party leaders in the state have come out for the amendment, including Secretary Daniels, Senator Simmons and Congressman Hoey.  The legislature is overwhelmingly Democratic.

            Opponents of suffrage believe the amendment will either be defeated in the legislature or by the voters of the state.  They think the legislature will follow Senator Overman’s idea, thus putting  the suffrage question up to the voters, who, they believe, will reject it.

Editor’s Note:  Nope.  North Carolina ratified the suffrage amendment in 1971.  Took them half a century.

Boron’s Benchmarks:


Another two weeks of working from home.  The time has just flown by.   Right?  No, actually, it has not.  At least not for me.  But, “to be perfectly honest” – to quote many a lying witness’s start of their answer to a deposition or EUO question – working from home has its good and bad points.  On the plus side, I have not driven during rush hour in nearly two months.  Better yet, I have not spent a cent at a gas station in two months.  On the down side, the variety of the kinds and types of work experiences I normally enjoy from day-to-day as a coverage attorney who also litigates coverage cases has dwindled down to a mere handful of “different” daily experiences, as follows: (1) reading documents on my computer screen in my work-from-home office; (2) typing documents on my computer keyboard in my work-from-home office; (3) doing legal research using my computer mouse in my work-from-home office; and (4) participating in Zoom or Skype conferences via my computer in my work-from-home office.  So, I still have those different things giving me “variety”.  Oh, and I almost forgot – I am lucky enough to have two different computer screens in my work-from-home office, so there is that added variety to my every day experiences as well. Whenever I get tired of looking at one screen, boom, I just turn to the other.  You might say this all sounds like a nightmare, but I say,  “I’m still living the dream, people”.  I wouldn’t mind waking up from this dream soon, though.  Here’s hoping you are all still living your dreams, in one form or another. . .


This edition of Boron’s Benchmarks, the Coverage Pointers beat monitoring and reporting on insurance coverage decisions of the high courts of the 49 states not named New York, covers an opinion issued by the Supreme Court of Pennsylvania on April 22, 2020, holding Erie Insurance Exchange must defend its insured against the suit of a claimant who was shot at the scene of a murder-suicide.  The opinion is a very interesting read, as it analyzes two different policies in which the term “occurrence” is defined, and expected or intended injury is excluded from coverage.  Hopefully, I have tickled the interest of the coverage geek in you to read the opinion, after which you likely will be asking yourself did the complaint reflect the possibility that while the murder-suicide was undoubtedly reflective of intentionality, an “accidental” (third) shooting also occurred here, of the claimant, not part of the original murder-suicide plan?  Does the complaint reflect pleading into coverage?  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]


Shave and a Haircut (not quite) Two Bits:

The Buffalo Enquirer
Buffalo, New York

01 May 1920


Raised prices for tonsorial work will make their debut in Buffalo today, among which are the 20-cent shave, the 65 cent haircut as well as the 40 cent shampoo and the 50 cent massage for the more fastidious of the natives.


Barci’s Basics (On No Fault):

Hello Subscribers!

I hope you are all still staying healthy and safe! My answers to last issue’s topics are as follows: 1) I realize that “best” is subjective, so I will say that my current favorite trivia fact is that Whoopi Goldberg is the only fully African-American person to have won the coveted EGOT (or an Emmy, Grammy, Oscar, and Tony); 2) There are so many subjects I wish were taught in school that aren’t but one that I think would be particularly helpful would be loans – how to apply, what kinds you can get, eligibility requirements, how to manage them, etc.; 3) I am a big fan of my name, it is uncommon and it fits me well, so I don’t know what else I would pick for my name!; and 4) If I was quarantined without technology I would occupy myself by reading more and probably getting outside a lot more. That’s me for this week.

For the next two weeks consider these topics:

  • What is your favorite meal to cook for others?

  • What is your favorite number and why?

  • An unpopular opinion of yours.

  • Who is the first friend you remember making? Are you still in touch with them?

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

On the no-fault front, I have three cases for you this time. All unreported decisions from the Second Department’s Appellate Term. First, a case that discusses the requirement for a provider seeking assigned benefits to choose carefully whether to arbitrate or litigate, because once you choose, that is the forum all benefit disputes will be in that arise for treatment from the same accident. Second, a case that discusses policy cancellation filing requirement. Finally, the last case discusses the standard required to toll statutory interest.

That’s all folks,

Marina A. Barci

[email protected]

Cannibals a Problem, 100 Years Ago:

New York Herald
New York, New York

01 May 1920


Dr. Rice and His Party Have Battle Up Amazon.

Special to The Sun and New York Herald.

            NEWPORT, April 30.—News of a thrilling adventure with cannibals by Dr. Alexander Hamilton Rice and his exploration party up the Amazon River reached there to-day.  The story says Dr. Rice killed two cannibals and that Chester Ober, a member of the expedition, slew another.  The new is told in a letter to Miss Pauline Stevens, a friend of Mr. Ober.  The letter says the party, in a canoe, was exploring one of the tributaries of the Amazon with Indian guides when they were suddenly attacked by twenty-five cannibals, who rushed into the water at them.

            Although taken by surprise at a bend in the river, Dr. Rice and his companions quickly recovered and brought their rifles tin play to good effect.  After three of the savages had been slain the others fled.

            Dr. Rice was on his third trip up the Amazon, going much of the way in a large yacht.  Mrs. Rice accompanied him.  She remained on the yacht while the explorers went further up the river.  They are now on their way home and are expected at Newport about May 15. 


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Happy birthday to my eldest son, a wee little tyke—just three. He continues to impress us every day as he learns and develops. It has been a wild ride and the past several weeks are no exception. But, as I know he does, we see every day is a joyous occasion to share with him and his brother.

The Hurwitz & Fine Coverage Team continues to maintain a consolidated resource document comprised of legislative summaries for all state and federal legislation introduced to date concerning COVID-19 business interruption coverage. It can be accessed here. Believe me when I tell you that we are monitoring these and other bills daily, with the latest update as of April 30. As bills are introduced, modified, or moved through committees and votes, that information is relayed through this document ASAP.

The latest update comes from New York (Assembly Bill No. 10226B), which has separated the operative language for business interruption and contingent business interruption coverage, each separately requiring a COVID-19 covered cause of loss. The language rendering the virus exclusion null and void has been moved from Section 1.(c) to Section 1.(e).

Should you hear anything before we do, please share the wealth with us and email me directly at [email protected]. Also, email me with questions or just to let me know what you think of these (and other) bills that are floating around.  We are all in this together and that is why tracking these as they move through the legislative process is something worth maintaining for YOU, our loyal readers.

In this issue, we provide our two cents on a recent bill introduced in the Pennsylvania State Senate that invokes the infamous state police powers.

Until next time,

Ryan P. Maxwell

[email protected]


Beware the Tax Man:

The Sacramento Star
Sacramento, California

01 May 1920

Got the Penny

            The Government has not collected every dollar due it from income tax sources.  Some persons have evaded payment; some have avoided the collector, and still others haven’t pad all they legally owe.  Included in the latter class are many wealthy men.

            The man of small income, usually salary hardly can cheat Uncle Sam.  But the man of millions can do this more easily.  His income is a matter of considerable bookkeeping, and may be juggled to the end that Uncle Sam gets less than his share.

            Does the government get after him?

            It should.  But, have you heard of any millionaire getting caught “with the goods on him”?

            However, Uncle Same spent exactly 12 months in collecting 1 cent from a man in Grand Junction, Col.  The actual amount the man owed on his 1919 tax was 10 percent of 5 cents.  He didn’t have a half a cent, and forgot about it.  Not so with the U.S. treasury department, which bombarded the Grand Junction fellow with statements until a check for 1 cent was forwarded to Washington.

            Having displayed this ability as a collector of pennies, will the treasury now set itself to the task of collecting the dollars and the thousands which should have been paid, and weren’t.


CJ on CVA and USDC(NY):

Hello all,

There is not much of anything new to report these days. It seems that most everyone has fallen into a routine adjusting to our new normal. There is hope though that things will start to return to what we once knew. My brother, who works in construction, has been told that he should expect to return to the jobsite within the next month. Reports are that New York will be bringing back construction work and manufacturing prior to allowing other industries to return to normal. Therefore, I’m optimistic that we may be able to have some barbeques by the Fourth of July. Hopefully you all are staying well and working hard.

On the CVA front there is not much news to report. We are still keeping an eye on the news for mentions of an extension of the “look back period.” With New York State Courts paused for non-essential matters, there has been no movement on any case that was filed prior to the pause.

I do have one decision to report from the Eastern District of New York. The decision boils down to this:  two policies providing coverage to the same party, for the same risk, and the same interests, both having “other insurance” clauses are treated as co-primary policies and split the claim.

Until Next Issue,

Charles J. Englert, III
[email protected]


Second Bravest Man Weds:

Buffalo Evening News
Buffalo, New York

01 May 1920

Second Bravest Man in War Gets Married

            Frank J. Gaffney, vice-president of the Lockport post of the American Legion, who has been called “the second bravest man in the world war” was married at 10:30 o’clock this morning to Marie Georgen, 215 Locust Street.  Nuptial high mass was celebrated in Our Lady of Lourdes church, Main and Best streets, the Rev. Martin Phillips officiating.

            Gaffney received one of the two congressional medals of honor awarded to private soldiers in the war for conspicuous bravery.  He was decorated on the steps of the Buffalo city hall a few months ago by Commissioner Heald.  He was a corporal in the 108th regiment and lost an arm in the war.


Dishing Out Serious Injury Threshold:

Dear Readers,

I hope everyone is doing their best to stay sane during this time. We have been at this for some time and it is easy to see this as the new normal. Hopefully, that is not the case, and we can get back to some semblance of normal in the near future. In the meantime, we should all continue to be responsible and take all necessary precautions so we can emerge out of this with our health and a greater appreciation for the little things that we missed during this quarantine.

While not many decisions have been made in the last several weeks, we are beginning to see an uptick in decisions. In the Serious Injury Threshold world, we have a lone decision from the Fourth Department, dealing with permanent consequential limitation of use and significant limitation of use categories and the oft contested 90/180 category.

Stay safe,

Michael J. Dischley
[email protected]  


How Kind – Folks were Trying to “Educate Native Americans to be Real Americans”:

Galena Evening Times
Galena, Kansas

01 May 1920


            Extension of work for the American Indian is being undertaken by Northern Baptists as part of the New World Movement.  A great campaign of education, the establishment of churches and a thorough system of welfare work are important features of the proposed Baptist program for the Indian.

            That the Indian has been neglected is asserted in a recent survey made by Northern Baptists.  “Of the 336,000 Indians in this country, only 75,000 can read or write,” states the report.  “Less than 100,000 can speak the English language, not one-fourth have been admitted to citizenship, and, while there are a few good schools, there are not enough to meet the need.”

            The opening of a new station among the Navajo in Arizona, the largest existing tribe at the present time; extension tribe at the present time; extension of work in California; establishment of stations among the Rocky Boy Bank and the Flatheads of Montana; a new school of secondary grade in Oklahoma, are among the immediate steps to be taken in enlarging the work among the Indians. 


Bucci on “B”:

Hello Friends:

There is an interesting Coverage B case to report on today, Nat'l Union Fire Ins. Co. of Pittsburgh v. DISH Network, L.L.C., No. 15-CV-01053-JLK, 2020 WL 1933273 (D. Colo. Apr. 17, 2020). It essentially involves Dish’s demand for coverage against claims that it violated several statutes including the Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227.  Two of seven National Union umbrella policies issued to Dish did not contain TCPA exclusions and those policies are the focus of the decision.  What makes it interesting, among other things, is that the two courts that addressed coverage under Dish’s primary policies came to inconsistent decisions. Maybe next time I’ll compare the four of the relevant decisions.  Maybe there will be an appeal.  I’ll certainly look out for that.

In the meantime, I’m still going stir crazy but, and I may be wishful thinking here, it looks like it may ease up soon.  Then we can see you all at conferences and such.  Joe Brown may be writing an article about what this will look like when we go back to work and out to non-essential places.   I really can’t imagine it and am looking forward to his predictions. 

As for my favorite topic, the weather, I know April showers bring May flowers but this is ridiculous.  Maybe it’s more wishful thinking, but I have to believe the sun will come out before the blasting heat of summertime sets in.

Until next time…stay safe.   

Diane L. Bucci

[email protected]


A Buck an Hour for Plumbers:

The Post-Star
Glens Falls, New York

01 May 1920


            At the meeting of the Plumbers’ Local 773 and the Master Plumbers of this city last evening in the Dolan building a wage increase of nearly fifty per cent was granted, the raise to go into effect today.  Up until today the plumbers have been receiving seventy cents an hour and under the new schedule they will receive $1 an hour, making a thirty cent increase on an hour’s work and nearly $14 on a week of 44 hours. 


John’s Jersey Journal:

A blackboard sign on a wall

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Dear Subscribers:

It has now been six weeks since I packed up my office and moved it home. What an interesting six weeks it has been. My wife, who is an attorney by trade, cut my hair this week. As she is relatively inexperienced at cutting hair, I recommended a bowl cut to her. She declined my recommendation and did her best to imitate my usual barber. She did great in my opinion.

The socially distant weekends have been a great opportunity to get caught up on those pesky home improvement projects I’ve been avoiding. I’ve tried to patch my lawn by planting grass seed several times now, but then it snows killing the grass seed. Buffalo is expecting an inch of snow (or more) this weekend. If the rain and snow ever stop, I have to install a new roof over our Florida room. Before you think “faulty craftsman exclusion”, I note that in my college years I had a job doing small roof projects.

In my column, I cover the Garden State. What you can expect to find in this column is a discussion of recent coverage cases state and federal courts, insurance legislation, or regulations from New Jersey. If it happened in Jersey, it happened recently, and it involves insurance, you will find it here.

Today’s column, while featuring coverage cases, would be more aptly titled New Jersey Federal Civil Procedure. In law, civil procedure is the rules of the game so to speak. The civil procedure rules tell you when and how you can move your case along. These cases provide examples where the insurer, by knowing the rules of the game, managed to gain an advantage in the litigation. The first concerns severing a bad faith claim and the other relates to keeping the suit in the insurer’s chosen forum.

New Jersey Federal Court Grants Insurer’s Motion to Sever Bad Faith Claim

In Bayshore v. Ace American, Ace’s insured sued for coverage and also asserted a bad faith claim. Ace moved to sever the bad faith claim. Rule 21 of the Federal Rules of Civil Procedure allows a court to sever and stay claims in the “interests of justice and efficiency”. Ace successfully obtained a severance of the bad faith claim and a stay of all discovery relating to that claim. The federal judge was convinced that it made more sense to determine whether the claim was covered first. If the claim was not covered by the policy, the bad faith claim would be moot. So the judge severed the bad faith claim and stayed all discovery as to that claim.

The case illustrates that, as a practical matter, sometimes it makes sense for an insurer to try to sever the bad faith claim, especially where the insurer is confident in its coverage denial.

London Insurer Wins Fight over Forum

Certain Underwriters at Lloyd’s, London v. KMG arises out of a tragic death on an amusement park ride. A fairgoer at the Ohio State Fair was ejected from the ride. You may remember seeing it on the news a few years ago. Underwriters insured the owner of the ride and paid the wrongful death claim. Underwriters sued for subrogation against the ride manufacturer, a Dutch company, who attempted to remove to federal court. In New Jersey, a Notice of Removal must be brought within 30 days of being served with the summons and complaint. This one was filed 35 days after. Underwriters’ counsel opposed the removal asserting it was untimely and won, allowing them to keep the suit in their chosen forum.

The cases are discussed in further detail in the issue, which is the PDF attached to this email.

If you have a New Jersey situation, feel free to reach out to us. We would love to work through the coverage issues with you. My email and cell are listed below.

John R. Ewell

[email protected]

(716) 220-1478

Kissing Teachers Around 100 Years Ago, as Well;

Daily News
New York, New York
01 May 1920


Mr. and Mrs. Stephen Woolsey, parents of thirteen-year-old Mary Elizabeth Woolsey, who charge Dr. Oliver C. Mordorf, principal of Public School 139, with hugging and kissing the girl, held an hour’s conference with District Superintendent James J. Reynolds yesterday afternoon in Erasmus Hall High School.


            Following the conference the Woolseys made no statement, but Mr. Reynolds said they had placed the facts before him and he had advised them to put their complaint in writing and he would forward it to Superintendent Ettinger.

            Mary went home crying yesterday morning and said:  “They sent me home from school.”  Asked who sent her home, she ran into the house.


            In a statement issued yesterday by Dennis R. O’Brien, attorney for Mr. Mordoff (he says the newspaper accounts of the case have been “grossly exaggerated,” and that when the real facts are known it will be realized Mr. Mordorf had committed no indiscretion.  He said the principal would not resign.

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

It’s wet and dreary in Connecticut these days. We can’t wait for May’s Flowers to arrive to provide some distraction from our on-going quarantine. We’ve binge-watched Ozark, The Good Place, and Designated Survivor (two out of three ain’t bad, that’s what Meatloaf told us anyway). And, there’s a theme in this edition of the Connecticut Chronicles – it’s three. According to Connecticut District Judge Shea, it takes three bad acts to establish a general business practice in order to survive a CUIPA/CUTPA summary judgment motion. Read on for the details in what is shaping up to be quite an interesting case bad faith / misrepresentation insurance litigation.

I hope everyone is well and continuing to be safe.

Lee S. Siegel

[email protected]


Imported Domestics:

Buffalo Courier
Buffalo, New York

01 May 1920


            New York, April 30.—Fifty-one negresses recruited to fill gaps in the ranks of domestic servants in the United States, arrived here today from Kingston on their way to householders in various parts of the country, who sent for them and paid their traveling expenses.  A delegation from the Salvation army met them at the pier and arranged to see them safely on their way to their destinations.

            The arrivals said there were others like them willing to leave Jamaica for domestic employment in the United States if steamer and railroad fares would be paid for them.

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

After arriving to Buffalo for college, I quickly noticed how closely connected Western New York is to our neighbors to the North. Even travelling abroad, when asked where I was from, I would reply with “Buffalo” or “New York State”. Everyone assumed I meant New York City, but I was quick to correct them because Western New York is far from and very different than the “downstate” region. Although many people outside of North America are usually not familiar with Western New York or Buffalo, I would simply ask if they knew where Niagara Falls was and, most of the time, people realized Buffalo is closer to Canada than New York City. Many Western New Yorkers spend the warmer months crossing the border to enjoy the Canadian beaches; friends will simply cross the border for cuisine they can’t find in Buffalo; and last Spring, I went to Toronto with one of my friends to find her wedding dress. So, when I heard the terrible news coming out of Nova Scotia, I was surprised and then very disheartened. However, as my co-author, Heather, has so eloquently stated, “Life is worth living and we must demonstrate to those left behind that life, is indeed, good”.

Cara A. Cox
[email protected]


Hello Subscribers,

On April 18 and 19, 2020, a single person went on a tear through rural Nova Scotia setting homes and vehicles alight killing people he knew, as well as complete strangers and people that came to help his victims or put out the fires he started, all the while dressed as an officer of the Royal Canadian Mounted Police and while driving a replica RCMP cruiser. His crime spree finished when he stopped to get gas and was discovered by RCMP police officers in an unmarked vehicle doing the same thing.  He was killed.  By the time it was all over, 22 innocent people were dead. This man’s actions were despicable, incomprehensible and terrifying. They shook our belief that it can’t happen here; that this happens elsewhere. We don’t yet have an explanation for what happened.  It won’t really matter when we do. How do we deal with evil of that magnitude? Can we forgive him and comfort those left behind? We don’t have a choice. Life is worth living and we must demonstrate to those left behind that life is, indeed, good.

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]


Musical Justice:

The Evening World
New York, New York

01 May 1920


            The American public has accepted the idea that Justice is blind, beautiful and admirable, but rather a dull stick at the party.

            Federal Judge Landis of Chicago has made repeated efforts to tickle the lady’s short ribs and get her to put a little jazz into the performance of her duties.  It must be admitted that as a vaudevillian he succeeds rather better than most of his associates of the Bench—and this without violating the fundamental principles of the goddess.

            His latest exploit was the imposition of the record short sentence of twenty-five seconds on a prisoner found guilty of the serious offense of tampering with the mails.

            The culprit, it appears, abstracted letters which his wife wrote to another man.  The Judge was privileged to review the correspondence and seems to have decided that the man had rather good reason for his acts.

            A more conventional Judge might have suspended sentence.  Not Judge Landis.  The court decreed twenty-five seconds as a fair punishment, then called “Time’s up” before the marshal reached the door with his prisoner. 


Jen’s Gems:


Hope everyone has settled into working out of their homes at this point.  We will probably all get good at it just in time for our offices to reopen.  My house continues to be a buzz of activity between my husband’s conference calls, my kids’ zoom calls and complaints about who is talking too loud, who took whose seat, requests for food, etc.  But, admittedly, it is nice to know that we can spend nearly eight weeks in one house with limited contact to the outside world and still like each other.  We are, however, slightly starved for entertainment.  This morning my five-year-old went to the doctor.  She was so excited about the appointment.  She talked about it nonstop, bragged to her sister (that she had somewhere to go, and Ella did not), and even wanted to try on her surgical mask to get ready.  In the old days, a doctor’s appointment would have been met with grumbles and questions about shots.  How times have changed.

In terms of my column this week, I report on a really interesting cooperation case.  As many of you know, it is difficult in New York for an insurer to prevail on a breach of cooperation and that difficulty is compounded by the fact that courts also require carriers to comply with New York Insurance Law Section 3420(d).  This of course is the provision which requires insurers to deny coverage in bodily injury and property as soon as is reasonably possible or risk waiving otherwise applicable exclusions and breach of conditions.  In order to establish a breach of cooperation, an insurer must show that they have meet the Thrasher test.  Under this test, an insurer who seeks to disclaim coverage on the ground of noncooperation is required to demonstrate that (1) it acted diligently in seeking to bring about the insured's cooperation, (2) its efforts were reasonably calculated to obtain the insured's cooperation, and (3) the attitude of the insured, after its cooperation was sought, was one of willful and avowed obstruction.  The third piece is obviously the most difficult to establish.  In Burlington Ins. Co. v. Sublink Ltd., the case I report on, the trial court found that the insurer should have recognized that the test was met and disclaimed instead of waiting.  Because the insurer waited, it then violated the Insurance Law and waived its right to do so.  A good read.

Until next issue…

Jennifer A. Ehman

[email protected]


Apparently, One Wife Wasn’t Enough:

Democrat and Chronicle
Rochester, New York

01 May 1920


Western “Bluebeard” Is Also Accused of Murdering 2 Wives.

            Los Angeles, Cal., April 30.—At least two of the numerous women James R. Huirt is alleged to have married in various parts of the country were murdered by him, two others met “accidental” deaths while with him, and he “might have murdered more,” according to an alleged confession made public to-day by J. Morgan Marmaduke, his attorney, and county officials.  Huirt said he “could not remember” what happened to some of the women because of his still weakened condition resulting from two attempts to commit suicide, the reputed confession said.  He lay on a cot in the County Hospital as he talked.

            Huirt had been held here several days while officers investigated reports of numerous marriages.

Married Dozen Women.

            He married “twelve or fifteen woman probably more,” Huirt was quoted as saying.  A desire to kill obsessed him four years ago, Huirt was alleged to have said , and women were his especial victims, there being no direct motive for their deaths and no desire to kill men, children or animals.

            Nina Lee Deloney, killed at Long Beach, Cal., and Elizabeth Pryor, near Plum, Wash., were the “wives” whose murders the officers said Huirt confessed.

            The “partial confession,” said the officers, related to the deaths of Bertha Goodrich and Alice Ludvigson.  Miss Goodrich was tipped out of a boat in Lake Washington, near Seattle, and Miss Ludvigson was drowned in a river in Idaho, they said.

            A party immediately left for the place near San Diego where Huirt said he buried Miss Deloney’s body.

Headlines from this week’s issue, attached:

Dan D. Kohane
[email protected]

  • When Insurer Transfers Coverage from One Car to Another, the Policy is not Canceled so the Cancelation Rules Do Not Apply

  • SUM Policy Does Not Provide SUM Coverage for Other Vehicle Owned by an Insured and Not Listed on Policy


Steven E. Peiper

[email protected]

  • Arbitrations Follow Yogi’s Rule – Ain’t Over Till’ It’s Over


Michael J. Dischley
[email protected]

  • All Parties Fail on Their Respective Motions for Summary Judgment as Court Finds Triable Issues of Fact due to Defendant Expert Report


Agnes A. Wilewicz

[email protected]

  • Check back next time for the latest from the U.S. Circuit Courts.


Jennifer A. Ehman
[email protected]

  • Trial Court Finds Cooperation Denial Untimely Based Upon 3420(d)


Brian D. Barnas

[email protected]

  • Interlocutory Appeal and Certification to the Indiana Supreme Court Denied after Negligent Failure to Settle Claim was Dismissed


John R. Ewell

[email protected]

  • District of New Jersey Grants Insurer’s Request to Sever Bad Faith Claim

  • By Knowing the Rules of the Game, London Insurer Keeps Chosen Forum


Lee S. Siegel

[email protected]

  • Connecticut Court Sets the Rule of Three in order to Establish a CUIPA Claim


Diane L. Bucci

[email protected]

  • National Union Polices Do Not Provide Coverage for Remedies Available to the Government Plaintiff for its Violations of the Telephone Consumer Protection Act


Brian F. Mark
[email protected]

  • California Federal Court Finds that Multiple Occurrences Caused the Defects, and Thus, Developer was Liable for Paying Multiple Deductibles


Eric T. Boron

[email protected]

  • Affirmance of Superior Court Ruling that Insurer Has Duty to Defend Liability Said to Arise Out of “Accidental” Shooting – Homeowner’s Policy – Personal Catastrophe Policy


Marina A. Barci

[email protected]

  • Once Provider Elects to Arbitrate No-fault Benefits, Provider Is Bound to Arbitrate All Claims Arising from Same Accident

  • Policy Cancellation Must be Filed with DMV within 30 days of Effective Date to Apply to No-Fault Provider

  • Statutory Interest Successfully Tolled where Provider Delayed having Trial for 14 Years


Ryan P. Maxwell

[email protected]

Legislative List

  • Hurwitz & Fine Continues to Maintain COVID-19 Business Interruption Insurance Legislative Summaries for State and Federal Legislative Bodies

  • Pennsylvania State Senate Introduces Bill Invoking Police Powers to Retroactively Add Covered Cause of Loss for COVID-19 Business Interruption Losses


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

[email protected]

  • Two Policies Providing Coverage to the Same Party, for the Same Risk, and the Same Interest are Treated as Co-Primary Policies


Cara A. Cox

[email protected]


Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

  • Additional Coverage Issues for Canadian and American COVID-19 Claims

  • Economic Loss under Loss of Business Earnings/Business Income Forms

Stay safe. Stay healthy.

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
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)


Dan D. Kohane
[email protected]

04/29/20       Global Liberty Ins. Co. v. Ho Suk Shin
Appellate Division, Second Department
When Insurer Transfers Coverage from One Car to Another, the Policy is not Canceled so the Cancelation Rules Do Not Apply

In November 2016, Global Liberty commenced this proceeding to permanently stay arbitration of an uninsured motorist benefits claim filed by its insured, Ho Suk Shin (“Shin”) following an automobile accident in July 2014. The accident occurred when the insured's vehicle was struck by a 2009 Chevrolet driven by Tortorelli. Tortorelli held an automotive insurance policy for the 2009 Chevrolet issued by State Farm.

Global Liberty argued that State Farm's failure to notify the Department of Motor Vehicles that it had removed the 2009 Chevrolet from the insurance policy violated section 313(2)(a) of the Vehicle and Traffic Law and rendered the purported termination of the policy ineffective. State Farm contended that, although it had issued an insurance policy to Tortorelli for the 2009 Chevrolet, the vehicle was removed from coverage in January 2014, and a 2005 Ford was substituted under the same policy. State Farm contended that it assigned a new number to the policy because the 2005 Ford was going to be used for commercial purposes.

Although the cancellation of an insurance policy is not effective as to third parties unless the cancellation is filed with the Commissioner of Motor Vehicles, the court determined that the insurance policy was not cancelled but rather that the same coverage was transferred to a different vehicle.  There wasn’t a cancellation so the cancellation rules were not in play.

04/29/20       Government Employees Ins. Co. v. Kul
Appellate Division, Second Department
SUM Policy Does Not Provide SUM Coverage for Other Vehicle Owned by an Insured and Not Listed on Policy

Kul was operating is motorcycle and was injured.  He applied for SUM (underinsured motorist benefits) under a policy issued by GEICO on a Lexus he owned (the “4467” policy). The 4467 policy had a $100,000 SUM limit. The motorcycle was insured under a separate GEICO policy, the “4549” policy, which had $25,000 SUM limits (and so none would be available to him because of the tortfeasor’s $25,000 liability policy).

GEICO argued that the only vehicle listed under the 4467 policy was the Lexus and that policy would not provide coverage owned by the insured and not covered by the policy, under a policy exclusion. GEICO moved to stay arbitration.

As the party seeking a stay of arbitration based upon a lack of coverage, GEICO bore the initial burden of showing the existence of sufficient evidentiary facts to justify the stay. It did.  Kul failed to submit evidence to rebut GEICO's evidentiary showing. Accordingly, the lower court should have granted that branch of the petition which was to permanently stay arbitration.


Steven E. Peiper

[email protected]

04/30/20       Am. Inter. Spec. Lines Ins. Co. v. Allied Capital Corp.
New York Court of Appeals
Arbitrations Follow Yogi’s Rule – Ain’t Over Till’ It’s Over

The underlying claim involves a qui tam action against Allied Capital and its nearly wholly owned sister company, Ciena Capital.  Apparently, both were sued by the US Federal Government for fraud involving a loan origination scheme.  The matter was resolved when Ciena agreed to pay more than $10 million in penalties.  Allied funded the payment.  Both companies then brought an action to recover their indemnity and defenses costs from American International Specialty Lines Insurance Company (“AISLIC”).  AISLIC denied coverage, and Ciena/Allied demanded arbitration under the terms of the policy. 

At the arbitration, counsel to Ciena/Allied stated that the amount of recoverable defense costs could be subject to a second hearing before the panel.  In response, AISLIC’s counsel stated that there was no basis for a second hearing because the defense fee issue will be resolved with an affirmance of the company’s denial.  Importantly, the panel never explicitly stated that it was considering anything but a complete decision on all disputed issues.  AISLIC never consented to a bi-furcated hearing schedule. 

Nevertheless, at the conclusion of the arbitration, a 2-1 decision ruled that AISLIC had no obligation to provide indemnity to Ciena/Allied.  However, the panel also concluded that a defense obligation was owed, and, as a result, a second hearing would be necessary to determine damages.  Before that hearing could take place, Ciena/Allied requested the panel reconsider its decision on indemnity. 

AISLIC opposed by arguing that an application for reconsideration was not appropriate in arbitration proceedings.  In addition, AISLIC also argued that the decision was correct the first time and should not be disturbed.  The Panel did consent to Ciena/Allied’s request, and ultimately changed its position.  The revised decision, referred to as the Corrected Partial Final Award, held that Ciena/Allied were entitled to both defense and indemnity, and set the matter for a follow up hearing on defense costs. 

The subsequent damages hearing was held over objection of AISLIC, and resulted in a Final Award.  AISLIC seeks to vacate the award in this appeal by arguing that an arbitrator (or panel) is not permitted to revisit a decision after it is disclosed to the parties.  Under the doctrine of functus officio, once the decision is rendered the arbitrator/panel is stripped of all power over the dispute.  Here, AISLIC argued that upon issue a decree relative to the scope of the coverage for indemnification, the panel was barred from revisiting the merits of the dispute.  In essence, although it was only a “Partial” Final Award, the decision was a “final” award nonetheless. 

The Appellate Division agreed with AISLIC, and vacated the Corrected Partial Final Award.  On appeal, however, the Court of Appeals disagreed.  Here, the Court noted that the panel’s decision was not final.  Rather, while they resolved a singular issue (i.e., the scope of indemnity), the issue of damages remained an open issue.  Under these circumstances, the panel was free to revisit its previous position until a truly final decision was rendered. 

The Court noted that because AISLIC did not consent to a bifurcated arbitration process, there was nothing in the record to suggest that the initial decision by the panel was final and sacrosanct.  On that basis, where there was no final award and no agreement to bifurcate, the panel acted within its authority by revisiting the initial decision. 

Peiper’s Point

It is noted that the Court of Appeals declined the opportunity to comment on whether parties could, actually, agree to bifurcate an arbitration and thereby preclude a panel from revisiting, in effect, an interlocutory order. 

If you have any interest in reviewing the Appellate Division ruling we wrote about back in 2018, you can access the link here:

Michael J. Dischley

[email protected]

04/24/20       Deering v. Prosser et al.
Appellate Division, Fourth Department
All Parties Fail on Their Respective Motions for Summary Judgment as Court Finds Triable Issues of Fact due to Defendant Expert Report

Plaintiff sued seeking damages for injuries he sustained in a motor vehicle accident. Plaintiff alleged that he sustained back injuries and claimed a serious injury under the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories of serious injury. Defendants moved for summary judgment dismissing the complaint and plaintiff cross-moved for summary judgment on the issues of negligence and serious injury. The trial court granted defendant's motion and dismissed the complaint as well as granted that part of plaintiff's cross motion on the issue of defendant's negligence. Plaintiff now appeals from the order and judgment insofar as it denied his cross motion with respect to the issue of serious injury and granted defendant's motion.

The court found that, contrary to plaintiff's contention, he did not meet his initial burden on the cross motion of establishing that he sustained a serious injury under the permanent consequential limitation of use and significant limitation of use categories of serious injury. In support of his cross motion, plaintiff submitted the report of defendant’s expert who examined plaintiff and opined that plaintiff had only mild limitations and degenerative disc disease. Defendant’s doctor found no objective evidence of any acute injury sustained as a result of the accident and found no objective evidence that the accident aggravated plaintiff's preexisting back condition. Thus, the court found that, at the very least, the report raises a triable issue of fact whether plaintiff sustained a serious injury under the permanent consequential limitation of use and significant limitation of use categories as a result of the accident.

Nonetheless, the Appellate Division found that the trial court erred in granting defendant's motion with respect to those two categories of serious injury. In particular, in support of her motion, defendant simply relied upon plaintiff's deposition testimony "and other admissible evidence submitted to" the court. That "admissible evidence" included defendant’s expert report as well as an affidavit of plaintiff's treating chiropractor, which was submitted by plaintiff in support of his cross motion. The chiropractor adequately addressed the opinion of defendant's expert that plaintiff's injuries were not caused by the accident. Indeed, he addressed plaintiff's preexisting back condition and opined that the accident aggravated it. He further opined that plaintiff sustained an "acute/symptomatic disc injury" as a result of the accident and explained how plaintiff's symptoms and limitations before and after the accident were different. The Appellate Division thus found that defendant failed to meet the initial burden of establishing that plaintiff's back injury was not causally related to the accident inasmuch as her own submissions raised a triable issue of fact.

The Appellate Division further found that defendant failed to meet her initial burden of establishing that plaintiff did not sustain a serious injury under the permanent consequential limitation of use and significant limitation of use categories. In this regard, plaintiff's chiropractor set forth objective evidence of an injury in those categories i.e., a positive straight leg raise test, and muscle spasms. Defendant's submissions also raised a triable issue of fact whether plaintiff's alleged limitations and injuries were significant and consequential. In plaintiff's affidavit he described all of the landscaping work that he was able to do at his job before the accident that he was unable to do after the accident. He also testified regarding those limitations during his deposition testimony. Plaintiff's chiropractor noted plaintiff's limitations at work, as well as the fact that plaintiff had difficulty standing more than 30 minutes. He further reported that plaintiff demonstrated radiculopathy during the physical examination. Thus, it was found that defendant's submissions raised an issue of fact whether plaintiff's limitations and injuries were significant and consequential.

With respect to the 90/180-day category of serious injury, the Appellate Division found that the trial court properly denied that part of plaintiff's cross motion seeking summary judgment on that category, but erred in granting that part of defendant's motion with respect to that category. The Appellate Division found that there was a triable issue of fact whether plaintiff “has been curtailed from performing his usual activities to a great extent rather than some slight curtailment.”


Agnes A. Wilewicz

[email protected]

Check back next time for the latest from the U.S. Circuit Courts.


Jennifer A. Ehman

[email protected]

04/03/20       Burlington Ins. Co. v. Sublink Ltd.
Supreme Court, New York County
Hon. Gerald Lebovits
Trial Court Finds Cooperation Denial Untimely Based Upon 3420(d)

This decision addresses a denial of coverage based upon lack of cooperation.  Burlington issued an insurance policy to Sublink, a construction contractor.  While the policy was in effect, the underlying plaintiff sustained injury in connection with a construction project on which Sublink was serving as a contractor.  A personal injury action was brought against Sublink and certain other parties.  Burlington assumed Sublink's defense and retained counsel to represent it.

The underlying plaintiffs sought to depose a witness from Sublink. That deposition repeatedly was adjourned. In January 2018, the underlying plaintiffs moved to strike Sublink's answer for failure to produce a representative for depositions. Sublink's principal, Joe Visconti, notified defense counsel that he would appear for a deposition. The deposition was scheduled for April 26, 2018.  Despite repeated attempts, defense counsel was not able to reach Visconti until a day before the deposition at which point, Visconti told defense counsel that he was not appearing.  By order dated May 1, 2018, the trial court struck Sublink’s answer for its repeated failure to provide a witness to be deposed.

When Burlington was advised that Sublink’s answer was struck, it wrote to Visconti laying out the circumstances under which the answer was stricken and warning him that his actions (and their effect on Sublink’s defense) violated the terms of Sublink’s insurance.  Burlington did not, however, disclaim coverage at that point. Rather, Burlington's letter warned Visconti that if he did not contact it promptly and confirm that he would appear for a deposition in the action should the trial-court order be vacated, Burlington would then be forced to disclaim coverage. Burlington's letter also stated that if the trial-court order stood, Burlington might be forced to disclaim coverage in any event.

Over a year later, the Appellate Division, Second Department affirmed the order striking Sublink’s answer, and a week later Burlington disclaimed coverage. Burlington then commenced this declaratory judgment action.  When Sublink failed to appear, Burlington moved for a default judgment.

In considering that motion, the court noted that there was no question that Sublink was in default, but it must also consider whether Burlington timely and validly disclaimed coverage.  Burlington argued that Visconti told Burlington investigators in late May 2018 that he would indeed be willing to appear for a deposition if he were afforded sufficient notice of the deposition date. These statements by Visconti, Burlington contended, ameliorated Visconti's prior failure to cooperate—thereby assertedly depriving Burlington of grounds to disclaim until the Second Department's September 2019 decision established Sublink's noncooperation "as a matter of law."

The court found no merit in this contention concluding that Burlington had not shown why it would have been required to credit Visconti’s newfound cooperation after he failed to appear for a deposition or produce a representative for nearly four years, and even after the Supreme Court clearly signaled that Sublink’s continued failure to comply with its discovery obligations risked severe discovery sanctions.  The court noted that Sublink’s continued and persistent failure even led the Supreme Court to conclude that Sublink’s (mis)conduct was sufficiently grievous to warrant precluding Sublink from offering evidence at trial.  In these circumstances, even if Visconti's change of heart appeared genuine, Burlington would have had a strong argument that Sublink was not entitled to one last chance to cooperate before losing coverage.  Accordingly, Burlington has a sufficient basis to deny coverage in May 2018, and the 16-month delay was not reasonable for purposes of Insurance Law §3420(d).

The court also noted that the Second Department’s affirmance did not materially change Burlington’s (non)cooperation analysis as “an insurer is not required to establish prejudice due to noncooperation before it may disclaim … Noncooperation alone, if sufficiently willful and obdurate, will suffice.”  Accordingly, Burlington’s request for default judgment was denied.


Brian D. Barnas
[email protected]

04/22/20       Travelers Indem. Co. v. Johnson
United States District Court, Northern District of Indiana
Interlocutory Appeal and Certification to the Indiana Supreme Court Denied after Negligent Failure to Settle Claim was Dismissed

On April 27, 2008, Brittany Johnson was injured in a vehicular collision involving a semi-truck.  Horn was the operator of the truck, and he was employed by Sandberg Trucking.  Both Horn and Sandberg Trucking were insured by Travelers.  As a result of the collision, Johnson suffered serious injuries and sued both Horn and Sandberg Trucking in state court.  Travelers took exclusive possession and control of the defense and all settlement negotiations.  Ultimately, an excess verdict was entered against Horn, and he assigned his right to sue Travelers to Johnson.

Travelers filed a Complaint for declaratory judgment against Johnson in Indiana federal court, alleging that it should be relieved of any future responsibility because it had paid Johnson the full amount of the insurance policy and statutory interest. Johnson brought counterclaims for negligent failure to settle, bad faith failure to settle, and breach of contract.  Travelers filed a Motion to Dismiss.

Travelers argued that, under Indiana law, an insurance provider does not breach the obligation of good faith and fair dealing that it owes to its insured when it negligently fails to settle a claim within the policy limits of an insurance contract.  Johnson argued that an insurance provider breaches the obligation of good faith and fair dealing that it owes to its insured when it negligently fails to settle a claim within the policy limits of an insurance contract.

Ultimately, the Court agreed with Travelers’ argument and an insurance provider does not breach its duty of good faith and fair dealing that it owes to its insured when it negligently fails to settle a claim within the policy limits of an insurance contract. Johnson filed a request for an interlocutory appeal or certification to the Indiana Supreme Court.

The Indiana federal court denied both requests.  The motion to dismiss only dismissed the negligent failure to settle claim.  Johnson still had several counterclaims remaining, including a bad faith claim.  The court noted that Johnson could present all of her bad faith claims together on appeal if summary judgment is granted against her.  The court also denied the request for certification because there was not an absence of Indiana precedent on the issue.


John R. Ewell
[email protected]

04/27/20       Bayshore Recycling Corp. v. Ace American. Ins. Co.
United States District Court, District of New Jersey
District of New Jersey Grants Insurer’s Request to Sever Bad Faith Claim

Following a fire loss, Bayshore Recycling sued Ace American Insurance Company seeking: (1) a judgment declaring that it is entitled to recover under an insurance policy Ace issued to Bayshore, (2) breach of contract, and (3) punitive damages for its bad faith claim. Ace moved to sever plaintiff’s bad faith claim and stay discovery of the bad faith claim.

Rule 21 of the Federal Rules of Civil Procedure provides federal courts with the authority to sever and stay claims for pretrial proceedings or trial in the interests of justice and efficiency. The factors used to determine whether severance is appropriate include: (1) whether the issues sought to be tried separately are significantly different from one another, (2) whether the separable issues require the testimony of different witnesses and different documentary proof, (3) whether the party opposing the severance will be prejudiced if it is granted, and (4) whether the party requesting severance will be prejudiced if it is not granted.

The Court determined the coverage issues were significantly different from the bad faith claim. Bayshore, opposed the severance and stay, contending the declaratory judgment and breach of contract claims are not significantly different from its bad faith claim, and that the three causes of action all deal with the handling of the insurance claim. Bayshore alleged that Ace misrepresented the meaning of certain provisions of the policy, failed to acknowledge and act reasonably promptly concerning the insurance claims, failed to conduct a meaningful and timely investigation, and failed to advise of available coverage. Since those alleged acts are not relevant to whether there is coverage for the claim, the Magistrate Judge found that the first factor weighed in favor of severance.

The Court determined that the bad faith claim required the testimony of different witnesses and different documentary proof from the coverage issues. The Court reasoned that Bayshore’s bad faith claim will require the testimony of different witnesses and different documentary proof from the declaratory judgment and contract claims. Discovery relating to claims personnel, claims handling procedures and guidelines, and best practices is not directly relevant to whether the claim is covered. The Court further reasoned that bad faith discovery “distracts from” and would “undoubtedly delay” resolving the primary focus of the case—whether coverage is owed. The Court found that the second favor weighed in favor of severance.

Finally, the Court ruled that Bayshore would not be prejudiced if the stay were granted. The Court noted it would prolong resolution of the case by granting the stay, however, such course was prudent because if the policy did not cover the loss in the first place, the bad faith claim would be moot. The third factor weighed in favor of severance.

Accordingly, the Magistrate Judge granted the insured’s motion for severance of the bad faith claim and stayed discovery relating to that claim.


04/28/20       Certain Underwriters at Lloyd’s v. KMG Int’l BV
United States District Court, District of New Jersey
By Knowing the Rules of the Game, London Insurer Keeps Chosen Forum

Certain Underwriters at Lloyd’s, London (“Underwriters”) issued a policy to an amusement ride company, Amusements of America, who provided amusement rides and attractions at the Ohio State Fair. One fairgoer was killed after a ride called the Fireball malfunctioned mid-ride.

After Underwriters covered the wrongful death claim, they filed a subrogation action against KMG International BV (KMG). KMG manufactured the Fireball. Underwriters docketed the action in New Jersey Superior Court, Somerset County. KMG, a Netherlands company, removed the action to federal court thirty-five days after being served.

Underwriters moved to remand the case back to state court, citing that the Petition for Removal was filed late. A plaintiff may challenge removal to federal court by moving to remand the case back to state court based on (1) lack of district court subject matter jurisdiction or (2) a defect in the removal process. A motion for remand on the basis of a procedural defect in the removal must be filed within thirty days of the notice of removal.

Underwriters contended that KMG missed the deadline to file its Notice of Removal by five days, and thus, the removal was procedurally defective. The Magistrate Judge agreed and remanded the case back to state court, allowing the London insurer to keep its chosen forum.


Lee S. Siegel

[email protected]

03/26/20       Vermont Mutual Ins. Co. v. Natiello
United States District Court, District of Connecticut
Connecticut Court Sets the Rule of Three in order to Establish a CUIPA Claim

I am reminded of the 1975 movie Monty Python and the Holy Grail. Friends and I can still quote long blocks of Monty Python movie dialogue (this is a judgment-free column, at least as pertains to its author). There is a scene in Holy Grail in which King Arthur is doing battle with the Killer Rabbit of Caerbannog. After three of his knights are killed and many others wounded, Arthur calls for the Holy Hand Grenade of Antioch. In order to learn how to use the device, he must read from the Book of Armaments, Chapter 2, verses 9-21:

And the LORD spake, saying, "First shalt thou take out the Holy Pin. Then shalt thou count to three, no more, no less. Three shall be the number thou shalt count, and the number of the counting shall be three.

Arthur follows the teachings of Saint Attila, pulls the pin and tosses the hand grenade, thus defeating the Killer Rabbit in order to continue his quest for the Holy Grail.

Perhaps United Stated District Judge Michael Shea had this in mind when deciding a recent Connecticut bad faith claim. Natiello and her co-counterclaim plaintiffs alleged that Vermont Mutual violated the Connecticut Unfair Insurance Practices Act (CUIPA) by failing to settle a liability claim within policy limits. Natiello and her husband were installing aluminum soffet material on their three-story rental property. Nathaniel Sutera (Natiello’s brother-in-law) was on top of the scaffolding when it fell, causing him serious physical injuries. He sued. [To my New York readers, Connecticut does not have an equivalent to New York’s Labor Law.] Notwithstanding Sutera’s offer to settle for the policy’s $1 million limit, Vermont declined and took the case to trial where the jury returned a $7.2 million verdict (reduced on post-trial motions to $3.6 million).

Vermont, instead of paying the judgment, brought this suit seeking a declaration that Natiello’s policy was void as a result of misrepresentations by her husband (the underlying plaintiff’s brother). [Complaint at ¶18: “Based on information and belief, Timothy Sutera intentionally provided incomplete and untruthful testimony for the benefit of Nathaniel Sutera both prior to and during trial to the detriment of Vermont Mutual Insurance Company.”] Natiello and the Sutera brothers counterclaimed for, among the things, bad faith under the Connecticut CUIPA / CUTPA statutes. Vermont moved to strike the bad faith claims and the court obliged.

To prevail under the Connecticut Unfair Trade Practices Act, a plaintiff must establish a CUIPA violation. Here, the insureds argued that Vermont violated the part of the act prohibiting unfair settlement practices (Conn. Gen. Stat. §38a-816(6)). But, under the Connecticut construct, a singular violation or an isolated incident is insufficient. Rather, the burden on the insureds was to establish that Vermont engaged in the alleged unfair claim settlement practices “with such frequency as to indicate a general business practice.” Id.

So, what constitutes “such frequency”? Judge Shea wrote that there is no magic number. The insureds pointed out that the adjuster testified that she had been deposed in another bad faith case against Vermont. Is two enough to establish the frequency requirement?

No, unless two is succeeded by three. [“Four shalt thou not count, neither count thou two, excepting that thou then proceed to three.”] Judge Shea observed, “It is also worth noting that, while there is no “magic number” of instances required, the cases in which this Court has found sufficient evidence to survive a motion for summary judgment or, alternatively, sufficient allegations to survive a motion to dismiss, have all involved at least three other instances.” (emphasis added, citations omitted). There is a magic number, indeed, and that number is three.

Having failed to produce sufficient evidence from which reasonable jurors could conclude that Vermont’s failure to settle constituted a general business practice, the court granted Vermont summary judgment as to the CUIPA/CUTPA claims. Vermont’s efforts to rescind coverage remain on-going. And, the insureds common law bad faith and breach of contract claims also remain. It should be an interesting trial.


Diane L. Bucci
[email protected]

04/17/20       Nat'l Union Fire Ins. Co. of Pittsburgh v. DISH Network
United States District Court, District of Colorado

National Union Polices Do Not Provide Coverage for Remedies Available to the Government Plaintiff for its Violations of the Telephone Consumer Protection Act

In the underlying action, the U.S. Government and the states of California, Illinois North Carolina and Ohio sued Dish Network L.L.C. for illegal telemarketing practices in violation of the Federal Trade Commission Act, the Telephone Consumer Protection Act (“TCPA”), the Telemarketing and Consumer Fraud and Abuse Prevention Act, and the Telemarketing Sales Rule (TSR).  The prayer for relief sought statutory damages and penalties as well as injunctive relief under the TCPA.

The complaint alleged that Dish Network and its authorized dealers used illegal solicitation techniques to sell Dish products and services.  Among other things, they were accused of violating Do Not Call Lists, and engaging in abandoned call practices in violation of TSR, which prohibits prerecorded sales pitches by requiring that the telemarketer connect the call to a sales representative within two (2) seconds of the person's completed greeting. 

Dish Network authorized dealers to use its trademarks and trade names, to collect money on its behalf, and to perform other services.  Dish paid its dealers (the telemarketers) commissions and other financial incentives for telemarketing services. As an aside, Dish tried to distinguish itself from the dealers to no avail.

National Union issued seven commercial umbrella policies to Dish.  It denied coverage for the underlying action and sued Dish to obtain a declaration of its right to deny coverage primarily under the 2003 and 2004 policies because the later policies contained TPCA Exclusions which were admittedly applicable.   

In the 2003 policy, National Union agreed to pay sums…that Dish became legally obligated to pay by reason of liability imposed by law.  In the 2004 policy, National Union agreed to pay sums that Dish becomes legally obligated to pay as damages by reason of liability imposed by law. This could have been an important point for Dish, because the argument was that because it was not limited to damages, the 2003 policy covered penalties and injunctive relief.  However, the court held that this argument ignored the other numerous provisions in the policy that limited coverage to damages in the 2003 policy.  The case essentially turned on whether the remedies under the TCPA qualified as penal, which are not insurable, and whether there were damages within the meaning of the policies.

The 2003 policy defined an advertising Injury as “injury arising solely out of your advertising activities as a result of ... [o]ral or written publication of material that violates a person’s right of privacy.” The 2004 Policy defined Advertising Injury offense as injury “arising out of ... oral or written publication, in any manner, of material that violates a person’s right of privacy.”

The 2003 policy precluded coverage arising out of an offense committed by an    insured whose business is advertising, broadcasting, publishing or telecasting.”  The 2004 exclusion was substantially similar as it pertains to the issue at bar.  

Dish’s primary insurers, Travelers and Ace, brought their own, separate declaratory judgment actions to establish that the claims were not covered.  These two cases resulted in inconsistent decisions.

In Ace Am. Ins. Co. v. Dish Network, LLC, 173 F. Supp. 3d 1128 (D. Colo. 2016), aff'd, 883 F.3d 881 (10th Cir. 2018), the district court granted summary judgment in favor of ACE, holding that the TCPA statutory damages sought in the underlying action were penal and therefore uninsurable under Colorado public policy.  It also found that the prospective injunctive relief sought did not constitute damages under the ACE policies.  In addition, the District Court found that the advertising injury exclusions were applicable.  The United States Court of Appeals for the Tenth Circuit affirmed holding that the Underlying Complaint sought punitive damages and financial penalties that were uninsurable as a matter of Colorado public policy and prospective injunctive relief was not damages.  The Tenth Circuit did not rely on the exclusions.  

In Travelers Prop. Cas. Co. of Am. v. DISH Network L.L.C., No. 12-03098, 2014 WL 1217668, at *1 (C.D. Ill. Mar. 24, 2014), the district court granted partial summary judgment on the duty to defend in favor of Dish, concluding that the claims asserted fell potentially within coverage for bodily injury property damage, personal injury, and advertising injury.  It held that coverage for an advertising injury was not precluded by Travelers’ similar exclusions and, because the statutory damages did not require proof of intentional misconduct, they could be insurable under Colorado law thus triggering the duty to defend.  The court also found that Travelers failed to show that the costs of complying with an injunction were not damages under the Travelers Policy.

In this case, National Union primarily relied on the Ace decision, arguing that the TCPA statutory damages sought in the Underlying Lawsuit were penal and therefore uninsurable under Colorado public policy, and that the injunctive relief was prospective and did not qualify as damages.  In Ace, the Tenth Circuit relied on Kruse v. McKenna 178 P.3d 1198 (Colo. 2008), which cemented a three-part test for determining whether a statute is penal such that the claim could not be assigned as follows:

To determine whether a statutory claim is one for a penalty such that the underlying claim can be assigned consistent with survival statute, courts look to whether (1) the statute asserted a new and distinct cause of action; (2) the claim would allow recovery without proof of actual damages; and (3) the claim would allow an award in excess of actual damages.

Id. at 1201-02. Applying that test, the Kruse court held that TCPA damages were penal in nature and, as such, the claims could not be assigned.  

Dish argued that Kruse was no longer good law because of the Colorado Supreme Court’s intervening decision in Rooftop Restoration, Inc. v. American Family Mutual Insurance Co., 418 P.3d 1173 (Colo. 2018) held that the Kruse test no longer applied.  The court disagreed stating that Rooftop governs only when the legislative intent is clear; Kruse applies where the legislative intent is less than clear, which the court found was the case here. 

The court first addressed whether injunctive relief could qualify as damages.  Agreeing with the Tenth Circuit in Ace, the court held that the policies obligated National Union to pay for damages arising out of past injuries, not the cost of preventing future violations.

Second, the TCPA provided for $500 in damages for each offense which was trebled to $1,500 if the violator acted knowingly or willfully.  Dish argued that the $500 penalty was not penal in nature because it did not require willful, knowing or intentional conduct.  National Union argued that whether the damages were penal depended on what was alleged, and the governments brought the action “as punishment for the public good” which qualified the damages as penal and hence, uninsurable.   The court agreed.

Despite that its findings were conclusive, the court addressed National Union’s argument that the claims asserted did not potentially implicate coverage for property damage, bodily injury, personal injury, or advertising injury and/or that they were excluded by the policies’ business and advertising exclusions.

It found that there was no bodily injury because at most, Dish’s actions caused mental anguish or emotional distress which, without more, did not qualify as bodily injury.

Dish argued the claims involved property damage because the calls deprived the consumers of the use of their phones, relying on decisions holding that unsolicited faxes were property damage because they caused a loss of use of ink and paper.  The court found that there was no property damage here because unwanted telemarketing call does not utilize finite resources like ink or paper and did not meaningfully prevent the use of the phone.

The court found even if the advertising injury offense was satisfied, the policies’ exclusions for advertising injury committed or alleged to have been committed in any advertising or advertisement in the conduct of the insured’s advertising, broadcasting, or other publishing activities and/or whose business is “[a]dvertising, broadcasting, publishing or telecasting applied to defeat coverage. In Dish Network Corp. v. Arrowood Indem. Co., 772 F.3d 856, 873 (10th Cir. 2014), the Tenth Circuit held that Dish is engaged in the business of “broadcasting” and “telecasting,” as those terms are commonly understood and, consequently, that coverage for Advertising Injury was unavailable. According to the district court, Arrowhead was dispositive.

Reach out if you would like a copy of the decision. 


Brian F. Mark
[email protected]

04/13/20       Liberty Mut. Fire Ins. Co. v. Bosa Dev. Cal. I, Inc.
United States District Court, Southern District of California
California Federal Court Finds that Multiple Occurrences Caused the Defects, and Thus, Developer was Liable for Paying Multiple Deductibles

This declaratory-judgment action arises out of an underlying construction defects action related to a condominium construction project.  Bosa Development California II, Inc.'s ("Bosa") was the developer of the Legend condominium project ("the Legend Project").  Before Bosa began construction on the Legend Project, Bosa purchased a "wrap-up" insurance policy issued by Liberty Mutual Fire Insurance Company (“Liberty”) for all contractors and subcontractors involved in the project.  Bosa, as the developer of the project, hired several subcontractors to perform work on the Legend Project.  In its agreement with the subcontractors, Bosa disclaimed responsibility for supervising the subcontractor's work, and required each subcontractor to enroll in the Liberty Policy.

The Liberty policy provides that the amount Liberty will pay for "bodily injury" and "property damage" is limited to $2,000,000 per "occurrence," subject to a total

aggregate limit for all damages within the "products/completed operations hazard" of $4,000,000.  The Liberty policy also required Bosa to pay a $500,000 deductible for each "occurrence."  An "occurrence" is defined as "an accident, including continuous repeated exposure to substantially the same general harmful conditions."

The homeowners of the Legend condominium building, "The Legend Condominium Association" ("the Association"), provided notice to Bosa of various construction and engineering defects and then commenced suit against Bosa.  The defects included: (1) defective installation of exterior concrete flatwork, planters, canopies, balconies, and waterproofing, resulting in water damage; (2) defective installation of plumbing and HVAC; and (3) improper selection of materials such as cast iron piping and an Eccoduct In-Slab Duct Ventilation System.

Bosa filed a cross-complaint against various subcontractors, arguing the subcontractors caused the harm alleged against Bosa.  In response to Bosa's and the subcontractors' tenders, Liberty agreed to defend Bosa and the subcontractors in the underlying action pursuant to the terms and conditions of the Liberty Policy, subject to a reservation of rights.  Once all of the claims had been made, Liberty originally determined that there were as many as 12 claims comprising of 11 occurrences for which Bosa owed separate deductibles of up to $500,000 each.  Bosa challenged Liberty's position, and maintained that Bosa's supervision of the project constituted one occurrence, and thus it was only liable for one $500,000 deductible.

The Association eventually settled their claims against Bosa and the subcontractors in the underlying action, paying the full $4,000,000 aggregate limit.  After the settlement of the underlying action, Liberty commenced a declaratory-judgment action against Bosa seeking a declaration that there were multiple occurrences for which Bosa was liable for in the underlying action.  Bosa filed a complaint against Liberty in state court seeking declaratory relief, which was removed and consolidated with Liberty’s action.  Both parties filed motions for summary judgment.

The Court began its analysis by determining that Liberty carried the burden as to the number of occurrences.  The Court noted that under California law, the causation test states that the number of occurrences under an insurance policy depends on the cause of injury rather than the number of injurious effects or harms.  However, when a cause is interrupted, or when there are several autonomous causes, there are multiple "occurrences" for purposes of determining policy limits and assessing deductibles.

Liberty argued there were at least three, discrete events that caused the damage at the condominium: (1) the alleged defective installation of exterior concrete flatwork, planters, canopies and balconies, and waterproofing; (2) the alleged defective installation of interior plumbing and the HVAC system; and (3) the alleged negligent selection of materials, namely pipes and an Eccoduct system.  Bosa argued that it was liable for no more than one $500,000 deductible for the one "occurrence" arising out of its negligent development and supervision of the project.

Liberty argued there were multiple occurrences because there were multiple, discrete events that caused the damage to the condominium building.  Specifically, Liberty's position is that different subcontractors worked on different areas of the building, and those different subcontractors caused different damage to the building.  Bosa, however, asserted that there was only one occurrence because the damage was the result of a single event—its own negligent supervision of the subcontractors.

The Court examined case law from the District Courts for the Northern and Central Districts of California holding that distinct accidents caused by distinct defects in distinct areas of the property cannot be treated as a single occurrence under California law.  The Court rejected Bosa’s argument of one occurrence, finding that the undisputed facts showed that there were three occurrences.  The Court further noted that there was no showing that the "negligent supervision" of the waterproofing that allegedly caused the water damage was the same as the "negligent supervision" that caused the improper installation of plumbing, or the improper selection of materials.  In fact, Bosa failed to produce any evidence that it was negligent as a developer of the project at all.  The Court pointed out that Bosa had previously argued that it was not and could not be negligent because it disclaimed all liability for construction defects.  Bosa even filed a cross-complaint against the various subcontractors, arguing the subcontractors caused the harm alleged against Bosa.

The Court found that under Bosa's interpretation of the insurance policy, there would never be more than one occurrence.  As the policy clearly contemplates multiple occurrences by its definition of what constitutes an occurrence, Bosa’s interpretation was found to be flawed.

As Liberty satisfied its burden in proving that there were three occurrences, summary judgment was granted in its favor.


Eric T. Boron

[email protected]

04/22/20       Erie Ins. Exchange v. Moore et al.
Supreme Court of Pennsylvania
Affirmance of Superior Court Ruling that Insurer Has Duty to Defend Liability Said to Arise Out of “Accidental” Shooting – Homeowner’s Policy – Personal Catastrophe Policy

By the razor-thin margin of 4-3 the majority of the Supreme Court of Pennsylvania judges determined last week that Erie Insurance Exchange (“Erie”) had a duty to defend the estate of its insured against an injury suit where it was indisputable the claimant was shot by the insured’s gun during a fight at the scene of a murder-suicide.

The allegations of the complaint found to trigger (no pun intended; well, maybe, just a little) Erie’s duty to defend the estate of the insured, Mr. McCutcheon, against the personal injury lawsuit of the claimant, Mr. Carly, include the following.  The personal injury complaint alleged that on the evening of September 26, 2013, Mr. McCutcheon broke into the home of his ex-wife, Terry McCutcheon, in order to shoot and kill her, and then kill himself. He communicated these intentions in a note he left for his adult children. Mr. McCutcheon succeeded in executing this plan, first shooting and killing Terry and, eventually, shooting and killing himself. However, after McCutcheon killed Terry, but before he killed himself, Mr. Carly arrived on the scene. Mr. Carly, who had been dating Terry, approached the front door of her home, rang the doorbell and received no answer. Mr. Carly became concerned, placed his hand on the doorknob “in order to enter and the door was suddenly pulled inward by [McCutcheon] who grabbed [Carly] by his shirt and pulled him into the home.” Mr. McCutcheon was “screaming, swearing, incoherent, and acting ‘crazy.’ ” Then, “a fight ensued between the two and at the time, [McCutcheon] continued to have the gun in his hand” which he apparently had used to kill Terry. During this “struggle” between the two men, McCutcheon was “knocking things around, and in the process [he] negligently, carelessly, and recklessly caused the weapon to be fired which struck [Carly] in the face,” causing severe injuries. In addition, “other shots were carelessly, negligently and recklessly fired” by McCutcheon, “striking various parts of the interior of the residence and exiting therefrom.”

I presume I have your attention now.

McCutcheon’s estate sought coverage of the lawsuit under two insurance policies issued by Erie to McCutcheon: a homeowner’s policy and a personal catastrophe policy.

The homeowner’s policy states, in relevant part:

We will pay all sums up to the amount shown on the Declarations which anyone we protect becomes legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence during the policy period. We will pay for only bodily injury or property damage covered by this policy.

The homeowner’s policy goes on to define an “occurrence” as:

an accident, including continuous or repeated exposure to the same general harmful conditions.

Similarly, McCutcheon’s personal catastrophe policy provides coverage for amounts an insured becomes legally obligated to pay due to personal injury resulting from an “occurrence,” and defines a covered “occurrence” as:

an accident, including continuous or repeated exposure to conditions, which results in personal injury or property damage which is neither expected nor intended.

Both policies expressly exclude from coverage bodily injury, property damage or personal injury expected or intended by anyone we protect.  The homeowner’s policy further provides expected or intended injury is excluded even if “the degree, kind or quality of the injury or damage is different than what was expected or intended,” or “a different person, entity, real or personal property sustained the injury or damage than was expected or intended.” Based on these provisions, Erie concluded it owed no coverage to the estate because Carly’s injuries were not caused by an accidental “occurrence,” but rather were “expected or intended” by McCutcheon. As a result, Erie filed the present declaratory judgment action.  Erie was granted summary judgment by the trial court, holding no duty to defend.  The trial court determined the prospect of injury due to a gun firing during a struggle over that gun was reasonably anticipated, and did not fall within the definition of an accident and did not constitute an occurrence that would trigger coverage.  (There I go again.  Sorry.)

On appeal to the Superior Court, the trial court was reversed.  While the Superior Court’s opinion noted that gunshot wounds commonly are inflicted deliberately, “not all injuries from gun violence are intentional”.  Superior Court also found the allegations of the complaint “fairly portray a situation in which injury may have been inflicted unintentionally”.

Now, I imagine you are wondering, as did I, how anyone could give credence to the notion that after killing his ex-wife, and intending to and ultimately succeeding in killing himself, the shooter may only have negligently rather than intentionally shot the claimant?  Supreme Court’s opinion notes the duty to defend is broad, but also acknowledges mere “artful” pleading of the alleged facts cannot alone be enough to trigger the duty to defend the shooter.  However, here, the four corners of the complaint – taken as true and liberally construed – set forth, in Supreme Court’s opinion, an accidental shooting.  In a footnote to its opinion, the Supreme Court indicated it appeared both the trial court and Superior Court relied in part upon the claimant’s deposition testimony.  Supreme Court further indicated doing so was improper as the duty to defend must be determined by focusing on the allegations set forth within the four corners of the claimant’s complaint, comparing and analyzing the allegations to what is within  the four corners of the applicable policies.  Supreme Court also noted that if Erie did not want to cover any injuries by gunshot no matter how they occurred, Erie could have written such a broad exclusion into the policies, but it did not do that.


Marina A. Barci
[email protected]

04/16/20       Ellen Sue Ginsberg, D.O., P.C. v. New York City Tr. Auth.
Appellate Term, Second Department
Once Provider Elects to Arbitrate No-fault Benefits, Provider Is Bound to Arbitrate All Claims Arising from Same Accident

The plaintiff medical provider attempted to bring a lawsuit against NYCTA to recover no-fault benefits. NYCTA moved to dismiss the complaint on the grounds that the provider had previously elected to arbitrate claims arising out of the underlying incident. Since the claims against NYCTA are for treatment of the same assignor for injuries arising out of the same accident, the provider is bound by its election to arbitrate these claims, even though they are asserted against a different entity in this round.


04/24/20       Pravel, Inc. v. State Farm Mut. Auto. Ins. Co.
Appellate Term, Second Department
Policy Cancellation Must be Filed with DMV within 30 days of Effective Date to Apply to No-Fault Provider

State Farm moved to dismiss the plaintiff-provider’s claim for no-fault benefits on the basis that the subject insurance policy was cancelled. The policy was allegedly cancelled on August 28, 2013 and the motor vehicle accident in question occurred on September 4, 2013. The Court found that State Farm failed to demonstrate that it had filed a copy of the notice of cancellation with the Department of Motor Vehicles as required by Vehicle and Traffic Law (“VTL”) § 313(2)(a) within 30 days of the effective date of cancellation. Thus, State Farm could not demonstrate that the policy cancellation was effective with respect to the plaintiff’s assignor as they were not the named insured or member of the insured’s household pursuant to VTL § 313(3). As such, State Farm’s motion was denied.


04/24/20       A.M. Med. Servs., P.C. v. Travelers Ins. Co.
Appellate Term, Second Department
Statutory Interest Successfully Tolled where Provider Delayed having Trial for 14 Years

Plaintiff-provider originally commenced this action in 2002 to recover assigned no-fault benefits for services originally rendered in 2001. Issue was joined in July 2002 and discovery was exchanged in March 2003. In July 2017, plaintiff finally filed a notice of trial. Travelers moved to strike the notice of trial, or in the alternative, to toll the accrual of no-fault statutory interest from March 2003 to July 2017. When a provider does not commence a no-fault action within 30 days of the receipt of the insurer’s denial, the regulations provide that statutory interest does not begin to accumulate until an action is commenced. If an action has been commenced, statutory interest accumulates unless the applicant unreasonably delays the proceedings. Here, plaintiff argued that interest was appropriate because it was Travelers that “unreasonably delayed” the proceedings by not responding to the plaintiff’s discovery demands. The Court determined that this argument was not supported by the record and lacked merit. Thus, Travelers succeeded in having the interest tolled from March 2003 – July 2017, but the notice of trial was not struck.


Ryan P. Maxwell
[email protected]

04/23/20       H&F Continues To Track Proposed Business Interruption Legislation
Nationwide Legislative Bodies
Hurwitz & Fine Continues to Maintain COVID-19 Business Interruption Insurance Legislative Summaries for State and Federal Legislative Bodies

The Hurwitz & Fine Coverage Team continues to maintain a consolidated resource document comprised of legislative summaries for all state and federal legislation introduced to date concerning COVID-19 business interruption coverage. It can be accessed here. Believe me when I tell you that we are monitoring these and other bills daily, with the latest update as of April 30. As bills are introduced, modified, or moved through committees and votes, that information is relayed through this document ASAP.

The latest update comes from New York (Assembly Bill No. 10226B), which has separated the operative language for business interruption and contingent business interruption coverage, each separately requiring a COVID-19 covered cause of loss. The language rendering the virus exclusion null and void has been moved from Section 1.(c) to Section 1.(e).

Should you hear anything before we do, please share the wealth with us and email me directly at [email protected]. Also, email me with questions or just to let me know what you think of these (and other) bills that are floating around. 


04/15/20       Pennsylvania Bill Proposes Sweeping Retroactive Coverage
Pennsylvania State Senate
State Senate Introduces Bill Invoking Police Powers to Retroactively Add Covered Cause of Loss for COVID-19 Business Interruption Losses

On April 15, the Pennsylvania Senate introduced a bill (SB 1114) concerning the retroactive construction of all insurance policies insuring business interruption to “provide among the covered perils coverage for loss or property damage due to COVID-19 and coverage for loss due to a civil authority order related to the declared disaster emergency and exigencies caused by the COVID-19 disease pandemic.” This language is hardly new, as similar bills have cropped up in more than a half-dozen states (we are continuously tracking these bills here). What is different about the Pennsylvania bill is the sweeping language it includes among its “legislative findings” and elsewhere:

The General Assembly finds the following:


  1. As a result of the continued spread of COVID-19, businesses have been forced to close and those that can remain open have drastically reduced their workforce, which has led to significant adverse impacts to both businesses and individuals.

  2. Inherent in the police powers of the legislature is the ability to enact laws that are necessary for the good of the public. Those laws may result in an impairment of contract rights when the legislature has a significant and legitimate public purpose, such as remedying a social or economic problem.

  3. COVID-19 and the mandated closures have resulted in major economic upset throughout this Commonwealth, and businesses are in dire straits. Although businesses may have insurance to account for losses related to business interruptions, they are prohibited from making such claims because of a "virus exclusion" to covered perils related to global virus transmission and pandemic.

  4. Because of the "virus exclusion," businesses will be prohibited from making claims under business interruption or civil authority provisions, which may be their only lifeline during these uncertain times.

  5. The Insurance Services Office has developed a rider to provide an insured with the option of purchasing coverage for business interruptions related to loss or damage caused by viruses, but to date the form has not been approved.

  6. Permitting coverage for business losses during the COVID-19 disease pandemic and Statewide outbreak is necessary to prevent further economic disruption and allow businesses to remain functioning in the face of continued and uncertain closures.

  7. COVID-19 is unlike anything we have experienced, and the social and economic effects must be mitigated to ensure the stability and well-being of the residents of this Commonwealth and the businesses that employ them.

Further, the bill defines “Civil authority order” as “[t]he order of the Governor, issued March 19, 2020, prohibiting or restricting the access to non-life-sustaining business locations in this Commonwealth as a direct result of property damage at or in the immediate vicinity of those locations. And, if that wasn’t enough, the bill defines “Property damage” as

“the direct physical loss, damage or injury to tangible property, as a result of a covered peril, including, but not limited to:

  1. The presence of a person positively identified as having been infected with COVID-19.

  2. The presence of at least one person positively identified as having been infected with COVID-19 in the same municipality of this Commonwealth where the property is located.

  3. The presence of COVID-19 having otherwise been detected in this Commonwealth.

The bill has retroactive effect to March 6 and pays 100% of the policy limit for insureds classified as small businesses and 75% of the policy limit for insureds classified otherwise.

There is a lot to unpack here.

Let’s begin with the “positives”. Although this bill acknowledges that ISO’s virus exclusion applies to prohibit coverage for COVID-19, it does not take the step that other bills have by expressly rendering such exclusions null and void (See New York A 10226A). If you have an exclusion, you can keep your exclusion…apparently (where have I heard that before?). However, in Section 4.(b), the bill does indicate “[t]he coverage required . . . must indemnify the insured for losses related to the declared disaster emergency . . . .” Does that implicitly render the exclusion void? The world may never know.

Notably, the bill attempts to define “property damage” for the purposes of “direct physical loss” and/or “civil authority”. However, this does not and should not modify defined terms like “property damage” in an insurance contract. Right? Right?

Now let’s tackle the elephant in the room, which is the Senate’s invocation of the police power. Under Article I, Section 8 of the Constitution, Congress was vested with certain enumerated powers. However, those powers not vested in this exhaustive list to the federal government, were left to the states. Chief among them, the police power is the power of each state to regulate the health, safety, and welfare of its citizens. The police power is “elastic and, in keeping with the growth of knowledge and the belief in the popular mind of the need for its application, capable of expansion to meet existing conditions of modern life and thereby keep pace with the social, economic, moral, and intellectual evolution of the human race.” Loretto v. Teleprompter Manhattan CATV Corp., 53 N.Y.2d 124 (1981) (internal quotes omitted), rev’d in part by, 458 U.S. 419 (1982). Such power is not unlimited and must be reasonable under the circumstances. “Whether a law falls within the . . . police powers does not depend on the lawmakers' subjective intent or the parsing of their proffered or true motives. Rather, the test is whether the law bears a reasonable relationship to the health, safety or welfare of the community . . . .” Association of Home Appliance Manufacturers v. City of New York, 36 F.Supp.3d 366 (S.D.N.Y. 2014); See Good Humor Corp. v. City of N.Y., 290 N.Y. 312, 49 N.E.2d 153, 155–56 (1943) (holding that the “[t]he statement of the purpose of the [law in question] in the committee report is not conclusive” and reiterating that the question is whether the law is “reasonably calculated” to achieve a legitimate police power purpose).

Unfortunately, when we navigate into the impairment of contract rights in the name of a state’s “police power”, we flirt with Lochner v. New York, 198 U.S. 45 (1905) territory, which had its rise and fall. The Lochner Era had dispatched with the idea that a State could interfere with private contractual rights in the name of the police power, recognizing that many laws purporting to be exercises of the police power are, in reality, redistributions of wealth or assistance to one particular group at the expense of others (is this sounding familiar?). “It is impossible for us to shut our eyes to the fact that many laws of this character, while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare, are, in reality, passed for other motives.” But Lochner is no more. See West Coast Hotel v. Parrish, 300 U.S. 379 (1937). Today, so long as courts can conceive some—any—reasonable relationship between the law and a legitimate purpose (even one not actually relied upon in passing the law), a law predicated upon a state’s police power will likely be upheld. Williamson v. Lee Optical, 348 U.S. 483 (1955).

In my opinion, any invocation of the broad police power held by states to shift economic burden from policyholder to insurer should be viewed through the lens of the ramifications it will impose on interstate commerce. Although the McCarron-Ferguson Act left insurance regulatory activity to the states, it did not do so at the expense of its broad commerce power. By requiring an insurer—likely insuring risks in other states and jurisdictions—to pay claims it would not otherwise have paid on the scale presented here, a state will likely reach beyond its borders and affect the insurer’s ability to pay claims made by policyholders outside that state and force a drastic premium increase across entire risk pools. That is not what the police power was meant to encompass.

Likely the challenges to bills like this one will fall under the Constitution’s Contracts Clause (Art. I, § 10) and/or the Fifth Amendment’s Takings Clause. Under Section 10 of Article I of the Constitution, no state shall pass any law “impairing the Obligation of Contracts.” Despite the fact that the Contracts Clause must be accommodated to a state’s police power, see Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 410 (1983), this accommodation is not absolute and there are “some limits upon the power of a State to abridge existing contractual relationships.” Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 242 (1978).

Those limits on the state's otherwise valid exercise of its police power are determined by a three-part test that asks:

  1. whether the contractual impairment is in fact substantial; if so,

  2. whether the law serves a significant public purpose, such as remedying a general social or economic problem; and, if such a public purpose is demonstrated,

  3. whether the means chosen to accomplish this purpose are reasonable and appropriate.

See Energy Reserves, 459 U.S. at 411–13; Allied Structural Steel, 438 U.S. at 242–44, 98 S.Ct. at 2721–22. Albeit in the pensions context, Allied Structural Steel shows many of the troubling characteristics presented here:

Not only did the state law thus retroactively modify the compensation that the company had agreed to pay its employees from 1963 to 1974, but also it did so by changing the company's obligations in an area where the element of reliance was vital—the funding of a pension plan. As the Court has recently recognized:

“These [pension] plans, like other forms of insurance, depend on the accumulation of large sums to cover contingencies. The amounts set aside are determined by a painstaking assessment of the insurer's likely liability. Risks that the insurer foresees will be included in the calculation of liability, and the rates or contributions charged will reflect that calculation. The occurrence of major unforeseen contingencies, however, jeopardizes the insurer's solvency and, ultimately, the insureds' benefits. Drastic changes in the legal rules governing pension and insurance funds, like other unforeseen events, can have this effect.” Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 721.

The Allied Structural Steel court equally found troubling that the retroactive effect of the state law meant that “[t]he company was thus forced to make all the retroactive changes in its contractual obligations at one time” and “impose[d] a completely unexpected liability in potentially disabling amounts [without] any provision for gradual applicability or grace periods.”

Not to be lost in any comparison to the Allied Structural Steel decision, however, is its dispatch of Home Building & Loan Assn. v. Blaisdell, 290 U.S. 398 (1934), which found a legitimate purpose in the use of state legislation to address “the broad and desperate emergency economic conditions of the early 1930's—conditions of which the Court in Blaisdell took judicial notice.” If any of these bills were to be enacted, this hurdle is one that would need to be overcome and for which I, today, do not have an answer.

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

04/14/20       Ocean Harbor Cas. Ins. Co. v. Great American E&S Ins. Co.
United States District Court, Eastern District of New York
Two Policies Providing Coverage to the Same Party, for the Same Risk, and the Same Interest are Treated as Co-Primary Policies

This dispute presented itself after a fire destroyed Andrea Afam’s home. At the time of the loss two insurance policies covered the risk, the first issued by plaintiff Ocean Harbor Casualty Insurance Company (“Ocean”) and the second issued by Great American Insurance Company (“GAIC”).  Ocean Harbor sought a declaratory judgment that it need only contribute 50% towards the loss amount of the premises, GAIC has filed two counterclaims, alleging Ocean Harbor should reimburse it for the entire amount ($378,799.30) because it claims it was required under federal and state law to return Afam’s monthly insurance premiums to her estate once the existence of concurrent hazard insurance was uncovered.

Afam owned the loss location and Selene Finance LP (“Selene”) held the mortgage. Afam maintained a homeowner’s policy issued through Ocean. In August of 2017, Ocean notified both Afam and Selene that it was canceling the policy due to Afam’s failure to pay her policy premiums. The policy was then reinstated when Afam paid her delinquent premiums. Around September 8, 2017, Ocean Harbor issued Afam another Notice of Cancellation, which it again sent to Selene. That notice advised both parties that Afam’s policy would be cancelled effective September 25, 2017 because an inspection of Afam’s property revealed that the “number of families had exceeded [Ocean] guidelines” and there was “excessive trash/debris” in the yard. After this notice, Selene sent notices to Afam instructing her that she must provide proof of hazard insurance, Afam never responded to Selene. Selene believing that the property was uninsured purchased a lender-placed hazard policy to cover the property retroactive to September 25, 2017.

Both insurance policies contained “other insurance” clauses. Ocean’s policy stated:

If a loss covered by this policy is covered by: (1) Other insurance, we will pay only the proportion of the loss that the limit of liability that applies under this policy bears to the total amount of insurance covering the loss; or (2) a service agreement, this insurance is excess over any amounts payable under any such agreement. Service agreement means a service plan, property restoration plan, home warranty or other similar service warranty agreement, even if it is characterized as insurance.

GAIC’s “other insurance” clause stated:

1. You may have other insurance subject to the same plan, terms, conditions and provisions as the insurance under this Coverage Part. If you do, we will pay our share of the covered loss or damage. Our share is the proportion that the applicable Limit of Insurance under this Coverage Part bears to the Limits of Insurance of all insurance covering on the same basis.

2. If there is other insurance covering the same loss or damage, other than that described in 1. above, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance.

In April of 2018 a fire destroyed the property, GAIC paid Selene the actual cash value of the property, less the deductible, and Ocean offered to reimburse GAIC 50% of the claim, but GAIC rejected this offer.

The court ruled in favor of Ocean based upon the reasoning that follows. Both policies insured the same person (Selene), the same risk (loss from fire), and the same interest (Selene’s interest in Afam’s property). In determining whether one policy was primary to the other or excess over the other the court looked to the “other insurance” clauses in both policies. Ocean Harbor’s policy provides that, in the event there is another insurance policy, it must pay its pro rata share if there is loss and up to an amount of $550,000. Likewise, GAIC’s policy states that if another insurance policy is subject to the same “plan, terms, conditions and provisions,” then GAIC’s share is also proportional and up to $550,000. These “other insurance clauses” required the parties to pay out losses in identical proportions, this makes both parties primary co-insurers, and therefore equally responsible for the loss.

GIAC argued that Ocean must pay the entire loss because it was required by New York State law to return any policy premiums to the estate of Afam when it learned that the Ocean policy had been reinstated. Relying on a provision of the Real Estate Settlement 6 Procedures Act (“RESPA”), 12 U.S.C. § 2605(f), namely, Regulation X, 12 C.F.R. § 1024.37(e)(2)(xi). This provision required that a borrower be reimbursed, by the loan servicer, any premium they paid on a force-placed insurance policy when it is revealed that the borrower had insurance which was in line with the loan agreement. The court was unconvinced by this argument as Regulation X required the premium be repaid by the loan servicer, not the insurer. The court also looked to the purpose of the regulation in its decision stating, “Congress identified that one of RESPA’s purposes was to eliminate the kickbacks or referral schemes perpetuated by mortgage loan servicers and force-placed insurers that resulted in excessive insurance premiums on consumers. In other words, the statute was specifically designed to protect homeowners. This is further demonstrated by the fact that RESPA only creates causes of action in favor of borrowers.

GAIC also argued that there was no valid consideration for this specific loss and thus should be reimbursed for the claim. GAIC’s argument rests on the fact that the policy it issued to Selene was a commercial policy. The court was not convinced. The court ruled that the GAIC policy contemplated every property that Selene had an interest in, including residential homes. The court held that Selene paid its premiums, GAIC paid Selene’s claim, and therefore both parties fulfilled their duties under the insurance contract. Furthermore, the court noted that if this were a valid argument GAIC would have sought recovery against Selene, not Ocean.

Accordingly, the court grants Ocean’s motion for summary judgment dismissing GAIC’s counterclaims. GAIC cannot prevail on its equitable subrogation claim because the doctrine of subrogation does not permit causes of actions against parties who did not cause the loss. Furthermore, there is no recognized cause of action for equitable indemnity under New York law.


Cara A. Cox
[email protected]


Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

Additional Coverage Issues for Canadian and American COVID-19 Claims

Economic Loss under Loss of Business Earnings/Business Income Forms

This article is the third in our ongoing look at how a typical commercial property policy applies to Canadian and American economic losses arising from the measures put in place by provincial, territorial and state public health authorities to control the person to person spread of the COVID-19 virus.

On April 2, 2020, we looked at the ability of non-essential businesses to access civil authority coverage. That article concludes that the public health orders are likely not denial of access orders. Rather, the orders halt all public services at non-essential business premises but do not prevent the owners and managers of those premises from accessing their premises. A further barrier to coverage is the absence of “…physical loss and damage…”. For these reasons, it is unlikely that the insureds can access civil authority coverage for economic losses due to the enforcement of the public health orders imposing measures to control the pandemic.

In the April 16, 2020 article, a common commercial property coverage agreement was analyzed in the context of a fictional claim put forward by the equally fictional Hog & Rooster pub, that is said to be situated in the Kensington district of Calgary, Alberta. That article discusses the application of the “physical loss and damage” cases discussed in the April 2 article to a situation where COVID-19 was likely present on the premises, as well as the “directly affected” requirement found in the coverage agreements. The Hog & Rooster closed to clean, but it was slated to open just days before the Province of Alberta issued its sweeping closure of all public facing services offered by restaurants and bars. The insurer determined that all of the various phases of economic loss sustained by the Hog & Rooster, which took it from discovery of the potential presence of COVID-19 on the premises through to the implementation of the provincial public health orders, are not covered, and, therefore, the Alberta numbered company that operates the Hog & Rooster is not entitled to coverage under the wording discussed in that article. The article also discussed the implications of the Canadian federal assistance plan on the insurance claim.

The Hog & Rooster’s story continues in this article. Luke and Melissa Hatch, who own all the shares in the Alberta numbered company that operates the Hog & Rooster and, who put forward the insurance claim on behalf of the numbered company, have received a letter from the insurer denying the claim for loss of earnings due to the forced closure of all public access to the pub. They object and, in this article, the insurer explains its position, refuting the objection to its coverage position. Luke and Melissa have also put forward an additional claim under the “dependent property” coverage of their policy, which the insurer also refutes. On a without prejudice basis, the insurer discusses the potential application of other policy provisions and concludes that the numbered company operating the Hog & Rooster is not able to access any of the various coverages offered by the policy.

In the event that it is wrong, the insurer has asked a forensic accountant to calculate its losses. Timothy Zimmerman, a forensic accountant and partner with RSM in Toronto, Ontario has provided an outline of how he would go about calculating that loss.

  1. The Hog & Rooster Receives a Denial Letter

Luke and Melissa believed that the numbered company that operates the Hog & Rooster had coverage for the loss of earnings arising from the impact of the measures to control the COVID-19 pandemic because losses from the presence of viruses on their premises were not excluded. However, to their surprise, they received a denial letter from the insurer.

The denial letter stated that the claim presented by the numbered company does not fall within the coverage of the policy covering loss of business earnings as (1) no physical loss or damage occurred but, if it did, (2) the loss of earnings arising from the alleged physical loss or damage are limited to those which occurred within the waiting period and, (3) with respect to the loss of earnings outside of the waiting period, at no time was the numbered company’s business income directly affected by physical loss or damage and, therefore, there were no losses within the “indemnity period” defined in the policy. The letter from the insurer concludes that for all of these reasons, the losses claimed do not fall within the loss of earnings coverage and, therefore, the insurer regrets its inability to indemnify.

Luke and Melissa firmly believe that the denial letter must be wrong. The policy covers “all risks of physical loss or damage” and if loss of earnings due to the presence of virus isn’t excluded, then, that loss of earnings must be covered.

  1. …But We Have Coverage Because Losses Due to Viruses Is Not Excluded …

Luke and Melissa’s reasoning seems to be logical. However, their conclusion is based upon the premise that if a loss is not excluded, it is covered. That false premise led to a wrong conclusion.

There is a set of rules as to how one reads an insurance policy that are contained in several decisions of the Supreme Court of Canada: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37; Progressive Homes Ltd. v. Lombard Gen. Ins. Co. of Canada, 2010 SCC 33; and Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, [2006] 1 S.C.R. 744.  So, where did they go wrong? By not following the five-step process set out in Jesuit Fathers as to how to read an insurance policy, Luke and Melissa reached the wrong coverage result.

  1. How an Insurance Policy Is Read

The first step is to read the declarations to be sure that they properly identify who is entitled to the protection of the policy as well as the limits of that protection in terms of time (whether it covers the time period in which the loss occurred, called the “policy term”) and the monetary limit which is impacted by the deductibles. The monetary limit is the most that the policy will pay for a given coverage. The deductible is how much of that claim the insured has to absorb before looking to the coverage. In this case it was clear that the numbered company operating the Hog & Rooster was the entity entitled to present a claim. Further, the claim set out in the claim form was within the policy term and within the policy limits.  The declarations also specified that the numbered company had to absorb the first week of lost earnings before looking to the loss of earnings coverage.

The second step is to read the coverage agreements, together with the definitions of any terms used in the coverage agreements.  The numbered company operating the Hog & Rooster bears the onus of proving that the claim presented to the insurer falls within the coverage agreements of the policy, as all insureds must prove that any claim that they present to an insurer falls within the coverage agreements. If the claim is not within the coverage agreements, then the claim is not covered and the analysis stops there: Progressive Homes, para. 51. The insurer has concluded that the numbered company has not proven that its claim is within the coverage agreement of the loss of earnings form and therefore the analysis stops there.

If the claim survives a reading of the coverage agreements, which, in this case, it does not, then the third step is to read the exclusions, along with the terms defined in the exclusions.  If the loss in question is knocked out of coverage by one exclusion, the insured cannot look to the language in another exclusion clause to argue by inference that the exclusion does not apply:  Cumis General Insurance Co. v. 1319273 Ontario Ltd. (2006), 84 O.R. (3d) 113 (S.C.J.). The insurer bears the onus of proving that one or more of the exclusions removes an otherwise covered claim from the coverage of the policy:  Progressive Homes at para. 51. See also Ledcor at para. 52; Kahlon v. ACE INA Insurance, 2019 ONCA 774,  at para. 37; G & P Procleaners and General Contractors Inc. v. Gore Mutual Insurance Co., 2017 ONCA 298,  at para. 14. If an insurer proves that an exclusion nullifies any obligation to respond to the claim, then the analysis stops there.

When reading the exclusions, it is important to identify any exceptions to the exclusions that place the property, or the event to which the exception applies, back into the coverage. The insured bears the onus of proving that an exception to an exclusion clause applies: Ledcor, at para. 52; Progressive Homes, at paras. 26-29, 51.  Exceptions do not serve to create coverage; they only bring an otherwise excluded claim back within the coverage described by the policy: Progressive Homes, at para. 28. However, any other applicable exclusion or exclusionary endorsement can remove the excepted event or claim from coverage.

Once the exclusions are read, the fourth step is to read all of the endorsements to the policy to determine if the endorsement is an exclusionary endorsement or an endorsement that expands the coverage of the policy. The endorsements may have their own set of definitions or refer to definitions used in the policy. They also may have their own set of exclusions, terms and conditions so that they are in some ways ‘mini-policies’ added to the main policy.

Once the endorsements are read, one moves on to the fifth step which is to read the terms and conditions of the policy to be sure that the claim has been appropriately presented.  It is only when one has completed all five steps in this order that one can draw conclusions as to whether a given event is covered by the policy.

  1. The Answer to Argument That: “As Losses Due to Viruses Are Not Excluded, They Are Covered”

In view of the rules on how one reads and insurance policy, Luke and Melissa’s contention on behalf of the numbered company operating the Hog & Rooster that the absence of a virus exclusion means that they have coverage is not a legally defensible argument.  The coverage agreements are the only part of the policy that provide coverage. Exclusions do not grant coverage: Progressive Homes, para. 27.   At the risk of being repetitive, for the reasons explained in the April 16, 2020 article that appeared in this column, the Hog & Rooster’s loss of earnings that it presented to the insurer through the numbered company is not a covered claim, meaning that the policy simply does not apply to that type of loss or claim.

It cannot be said that the absence of an exclusion means that the event presented to the insurer is covered. Why? Because, once again, only the coverage agreements grant coverage. An exclusion does not grant coverage. Furthermore, an exclusion that exists in another policy, issued to another insured, on the basis of another premium structure, cannot possibly influence how the numbered company’s policy is to be interpreted.

A court looking at this case would confine the inquiry to the policy that was issued to the numbered company without resort to any other policy issued to anyone else. In Consolidated Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., [1980] 1 S.C.R. 888, at para. 25, the Supreme Court of Canada approved of the following quote from the 1907, Ontario Court of Appeal case, Pense v. Northern Life Assurance Co. which states that the object is to interpret the policy in issue:

In construing this provision, as any other contractual provision, the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far as is known to the parties. To ascertain the parties' intentions the court does not of course inquire into the parties' subjective states of mind but makes an objective judgment based on the materials already identified.

The Supreme Court of Canada has reiterated that position time and again, but most recently in Ledcor, para. 49 and Progressive Homes, para. 22. To be abundantly clear, the absence of an exclusion used by other insurers is not an interpretative tool to be used to interpret the coverage agreements of the policy issued to the numbered company operating the Hog & Rooster; either the claim is within the coverage agreements of the Hog & Rooster’s policy, read with the definitions, or it isn’t.

For all of those reasons, if the insurer is correct that the claim for loss of earnings at the Hog & Rooster does not fall within the coverage agreement of the loss of business earnings form, then there is no obligation to look at the exclusions. This does not mean that the claim that Luke and Melissa presented on behalf of the numbered company is excluded. What it does mean is that the claim is not covered.

For all of these reasons the insurer refutes Luke and Melissa’s contention that because the all-risks property policy does not exclude losses due to the presence of viruses and bacteria, the loss of earnings of the numbered company operating the Hog & Rooster due to the presence of COVID-19 is covered.  Firstly, the numbered company must prove that its claims fall within the coverage agreement of the policy. If it fails to do so, there is no coverage. At all. Secondly, the absence of an exclusion does not prove coverage. Ever.

  1. What If a Virus Exclusion Was in the Policy?

The insurer’s analysis would not be substantially different if the Hog & Rooster’s policy contained the same coverage agreements, but a virus exclusion was present in the policy. As explained in the April 16, 2020 article in this column, the claims would not be within the coverage agreement as there is an absence of physical injury or damage to covered property. The claim would be denied on the same basis. If the insurer is correct in its position, then there is no need to look at the exclusions.

The addition of a virus exclusion which in almost all cases specifically excludes the loss of business earnings due to the presence of virus or bacteria does not mean that loss of business earnings due to the presence of virus would somehow find themselves magically inserted into the coverage agreements. Those losses would still be outside the coverage if the coverage agreement requires “physical loss or damage”.

  1. Is a Virus Exclusion Redundant?

But that raises another question. If the coverage agreement does not apply to claims arising from the presence of virus, then is a virus exclusion redundant and unnecessary? The answer is “no”.

The main purpose of an exclusion is to exclude an otherwise covered claim. But that is not always the case: An exclusion can apply to an event or a category of damage, even if that event or category of damage is not within the coverage agreement.  Ledcor at para. 56 and Progressive Homes at para. 40.[1] Virus exclusions were inserted into commercial property policies in Canada and elsewhere to dictate that under no circumstances will the policy cover a loss of earnings due to the presence of virus.

According to the American Insurance Services Organization (ISO) circular dated July 2006, (LI-CF-2006-175), which referenced the then current virus concerns, (which, at the time were rotavirus, SARS, influenza (such as avian flu), legionella and anthrax), the virus exclusion was introduced for the following reason:

Although building and personal property could arguably become contaminated (often temporarily) by such viruses and bacteria, the nature of the property itself would have a bearing on whether there is actual property damage. An allegation of property damage may be a point of disagreement in a particular case. … While property policies have not been a source of recovery for losses involving contamination by disease-causing agents, the specter of pandemic or hitherto unorthodox transmission of infectious material raises the concern that insurers employing such policies may face claims in which there are efforts to expand coverage and to create sources of recovery for such losses, contrary to policy intent.  In light of these concerns, we are presenting an exclusion relating to contamination by disease-causing viruses or bacteria or other disease-causing microorganisms.

In the aftermath of the 2003 SARS outbreak, Canadian brokers and underwriters believed that the business interruption (BI) claims would be virtually non-existent due to standard policy wordings, which only cover physical damage.  However, the ramifications of covering a pandemic was brought home to the industry by a well-publicized $16 million USD settlement of a claim of loss of business earnings on a policy issued by a group of insurers led by AIG Europe Ltd., a London-based unit of American International Group Inc., to the Mandarin Oriental hotel group in Hong Kong for loss of business earnings due to SARS. That policy covered losses due to infectious diseases but graphically illustrated the enormous cost of a pandemic. Since then, virus and bacterial infection exclusions have become far more commonplace and are often a reinsurance requirement. These exclusions fully and completely underscore that loss of business earnings due to pandemics is outside the coverage. It follows that the virus exclusion is not redundant, as it was inserted to backstop the coverage agreements and to underscore that under no circumstances will the policy cover loss of business earnings due to the presence of virus or bacteria.                   

  1. Application of the Exclusions

Although the insurer believes it is on solid ground to deny the claim of the numbered company operating the Hog & Rooster’s on the basis that it does not fall within the coverage agreements, the insurer offered an analysis of the potentially applicable exclusions, without prejudice to its position that the claim is not covered.

Under the loss of business earnings form, once a suspension of operations occurs, then the insured must prove the claims fall within the “indemnity period”. The indemnity period begins when the physical loss or damage occurs which is caused by a covered cause of loss. The insurers take the position that physical loss or damage did not occur, but even if it did, then it was not caused by a covered cause of loss, thereby expanding their reasons to deny the claim.

  1. “Loss of Market” Exclusion: Canada

The policy contains an exclusion for “loss of use” and “loss of market”:

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How have the courts interpreted “loss of market”?  One of the earliest mentions of “loss of market” in the decided cases is a pair of English Court of Appeal cases, The Notting Hill (1884), 9 P.D. 105 and The Parana (1877), 2 P.D. 118. These shipping cases (where the cases refer to the name of the ship involved rather than the parties to the dispute) deal with delay in the delivery of goods by ship where the delay caused loss because of a fall in the market for the goods on board. The House of Lords subsequently disapproved of these cases in The Heron II, [1967] 3 All ER 686 at 709 but the disapproval was over the right to recover damages from the delay in delivery. There was no disagreement over the meaning of “loss of market” and “loss of market value”. In The Parana, the Court stated:

When goods are to be conveyed by railway for the purposes of sale it is generally for the purpose of immediate sale, and consequently if it be known to the carrier that they are sent to be carried for sale, he is liable in damages for loss market if they are not sent in time to sell immediately …[after considering the rule in several American cases the court continued]… in the case of failure to transport merchandise within a reasonable time …the …[recovery]…is the  difference in its value at the time and place it ought to have been delivered and  the time of the actual delivery.  It would appear that several railway companies consider the rule of damages for loss of market so well-established that they have inserted a condition in their contracts, in some cases, with parties who deliver goods to them for conveyance, to the effect that they will not be liable for loss of market.

In the Notting Hill, Brett, M.R., speaking for the Court stated:

If goods are sent by a carrier to be sold at a particular market … and by reason of delay on the part of the carrier they have not arrived in time for the market, no doubt, damages for the loss of market may be recovered.

This concept of “loss of market” was accepted by the Nova Scotia Supreme Court in the 1901 case, Bauld v. Smith (1901), 40 N.S.R. 294 in a case where a shipment of coal was delayed and it was known to the parties that the coal would sell at a better price if it had arrived on time rather than when it did in fact arrive.  Since then, the term has not been in common use as the causes of action to recover damages for delay have been refined.

In the United States, an exclusion for “loss of market” was considered in Boyd Motors Inc. v. Employers Ins. of Wausau, 880 F. 2d 270 (10th Cir. 1989). In that case a dealership was hit by hail, damaging an inventory of new cars being held for sale. The insurer paid the cost to repair the hail damaged vehicles. The insured put forward a further insurance claim for the difference between what it could have sold the cars for before it hailed and the post-hail sale price. The insurer relied upon a “loss of market" exclusion to deny the claim.  The 10th Circuit stated that the claim involved a loss of “market value” rather than “loss of market” and that the exclusion did not apply.

That court held that "market" refers collectively to matters external to any particular product item such as conditions that determine the degree to which supply of that commodity exceeds our falls short of demand. “Market value” refers to the qualities inherent in the individual item itself; in other words, the price that that specific article with those qualities would command in a given market. If a market is lost due to delay in distribution, changes in consumer habits, or a certain type of product is no longer in demand with its intended purchasers, then a “loss of market” occurs. If an item suffers depreciation due to its physical alteration, then that is a loss of market value.

In coming to these conclusions, the court in Boyd Motors referred to a 2nd Circuit, 1925 decision, Dietrich v. United States Shipping Board Emergency Fleet Corp, 9 F.2d 733, which in turn referred to the two English Court of Appeal cases, The Parana and The Notting Hill.

The “loss of market” exclusion, or a variation of the exclusion, has been considered in the United States in the 9/11 case, Duane Reade v. St. Paul, 279 F.Supp.2d 235 (S.D.N.Y. 2003) and in another 9/11 case, US Airways Inc. v. Commonwealth Insurance Co. 64 Va. Cir. 408. These decisions emphasise that the policy does not contemplate coverage for loss of market share, but only for actual damages sustained by the particular insured as a result of business interruption caused by physical damage at the premises covered by the policy.

Canadian courts have become less accepting of American case law as of late. That is particularly the case where the American case in issue takes a literal or definitional approach to the interpretation of insurance contracts (see MDS Inc. v. Factory Mutual Insurance Company, 2020 ONSC 1924 at para. 287 and following).   Exclusions are to be interpreted in the context of the entire contract together with the facts. In the event of ambiguity, then resort may be had to the reasonable expectation of the parties at the time the contract is entered into: Progressive Homes, para. 22-24; Kahlon v. ACE INA Insurance, 2019 ONCA 774.  With those caveats, “loss of market” ought to be interpreted in Canada along the lines discussed in the Boyd Motors case, particularly because it relies upon the old English Court of Appeal cases that have found some acceptance in Canada.

Assuming that the Boyd Motors interpretation of “loss of market” is accepted by Canadian courts, then the fact that non-essential Canadian businesses are prohibited from opening to the public is a quintessential “loss of market” situation and any losses flowing from the inability to open the premises to the public would be outside the scope of the policy. It is not reasonable to expect that a property insurer would cover the market conditions for the services or products of the insured entity that are outside the operations controlled by the insured.

The Hog & Rooster was set to open as of March 18, 2020 but Luke and Melissa opted not to in large part due to the expectation of reduced patronage following the City of Calgary’s March 15, 2020 declaration of a public health emergency due to the presence of COVID-19 in the community.  On March 27, the Province of Alberta shuttered all public facing services at non-essential businesses.  Therefore, losses from March 18, 2020 onwards would be excluded by the loss of market exclusion.

  1. Cara’s Cross-Border Connection: Loss of Market Exclusion, Shipping, and Zika

Generally, an insurer will not pay for the loss or damage caused by or resulting from delay, loss of use, or loss of market. In New York, “loss of market” has been considered where it appears in marine insurance policies and delayed shipments of goods between ports. Although many “loss of market” cases are older, they still provide relevant and thoughtful analysis as to what constitutes a “loss of market”. In a 2003 S.D.N.Y. case, the court referred to a 1925 case: Dietrich. As outlined in the Canadian discussion above, Dietrich highlighted the difference between “loss of market” and “loss of market value”–an important distinction—even though there was not a loss of market exclusion at issue.

In Dietrich, another case was referenced which involved a hemp shipment delay. Eventually, the shipment arrived at its destination but there was a drop in the market, which resulted in a “considerable loss” for the insured. It was held that insured had a valid loss of market claim due to the shipping delay. Dietrich also emphasized that a loss of market requires that the “loss” occur in the original market for which goods are intended.

The issue of “loss of market” is also understood in another S.D.N.Y. case: Duane Reade. In Duane Reade, the insured operated a drugstore in the World Trade Center. After the building was destroyed on September 11, 2001, the company sought coverage for ongoing business interruption losses under a policy issued by St. Paul Fire &Marine Insurance Co. The carrier argued that the company’s right to recovered was limited to the 21 months following the September 11th attacks. Conversely, the company argued it was entitled to recover for the entire period from September 11, 2001 until the World Trade Center was rebuilt. The court in Duane Reade emphasized that under New York law, the “loss of market” exclusion was intended to relate to losses resulting from economic changes occasioned by competition, shifts in demand, or the like. However, the court agreed with the company and held that there was an undisputed business income claim and the loss of market exclusion would merely affect the amount of loss the company was entitled to recover.

Compare this to a more recent issue: the Zika virus and its impact on Miami-Dade County, Florida. In the spring of 2016, Zika started making its way from South America to parts of the United States, including Miami-Dade County. Within Miami-Dade County, the most concentrated areas of Zika cases were in Miami Beach and Miami’s downtown center, known as Wynwood. Initially, the Centers for Disease Control and Prevention (CDC) simply issued a travel advisory directed at pregnant women and couples who may become pregnant. However, in an August 1, 2016 CDC “travel guidance” (or “travel advisory”), the CDC only explicitly recommended pregnant women not travel to the identified areas in Miami-Dade County. Nevertheless, the Miami area feared the economic ramifications of such a travel advisory and the fears were founded. After Zika, many businesses in the Wynwood and Miami area suffered economically:

91 percent of businesses studied experienced loss of revenue and profits during the Zika scare compared to the same time in 2015. The majority, 53 percent, saw losses of 21 to 30 percent. About 13 percent of businesses experienced declines as high as 31 to 40 percent…. Of the businesses surveyed, 84 percent lost customers due to concern around the Zika virus. About 36 percent of businesses decreased their prices to adjust for demand and 27 percent reduced their inventories. Two businesses laid off employees as a direct result of the Zika outbreak.[2]

Accordingly, although businesses attempting to survive through that situation may have believed that they had a valid claim for loss of business income, there was no physical loss or damage to their business premises and their coverage was not triggered. To our knowledge, there are no decided cases from the Zika scare in Miami. This situation is directly analogous to claims in the United States for COVID-19, where, depending upon the particular state, it is likely that the  claim will be denied due to the lack of direct physical damage or loss. It will also likely be denied because the loss of market exclusion would bar recovery because such losses likely resulted from economic changes occasioned by shifts in demand, changes in consumer habits, etc. in response to COVID-19, similar to what happened in Miami-Dade County during the Zika outbreak.

  1. “Pollution” Exclusion: Canada

The policy contains a pollution exclusion:

We will not pay for loss or damage or expenses caused directly or indirectly, in whole or in part, by pollution, arising out of the actual or threatened discharge, dispersal, release or escape of pollutants. (Emphasis added)

The definition of “pollutants” reads:

If pressed on this exclusion, the insurers would argue the position that the word “or” in the first line of the definition is disjunctive and that a pollutant is also a contaminant.  Mindful of the discussion of pollution exclusions in Robinson v. Primmum Insurance Co., 2014 ONSC 761, the insurers took the position that the Hog & Rooster was “contaminated” by the arguable presence of COVID-19, triggering that exclusion. The insurers are aware that there is a paucity of Canadian authorities interpreting the pollution exclusion of a property policy in this context.

  1. The Potential Application of “Dependent Property” Coverage

Luke and Melissa put forward a further argument supporting the Hog & Rooster’s demand for coverage.  Every year, there was a significant uptick in business thanks to the Calgary Stampede. Their experience showed that each day of the 10-day Stampede would result in 30-50% more business than any other day in July.

Luke hoped to increase business during the July 3-12, 2020 Stampede by operating a beer tent in the Hog & Rooster’s parking lot. To understand what Luke and Melissa were intending, a primer is in order for those for those unfamiliar with the impact that the 10-day annual Stampede has on the City of Calgary.

Encompassing two weekends and a full work week, Stampede “week” is really a 10-day, citywide, daily party.  Almost all businesses hold a Stampede event which could be a pancake breakfast, or a chili /burger lunch with entertainment, or a late afternoon into the evening party with food and entertainment.  Music and alcohol are a big part of all celebrations at all times of the day. Businesses decorate their premises with western themes. Calgarians wear western themed clothing. Businesses looking to host a party for their staff and clients will book venues far in advance.   Most often these venues are pop-up festival tents that are placed in the parking lots of businesses or are part of their patios.

The Hog & Rooster had never operated a Stampede party tent before but 2020 was going to be the breakout year for that endeavour. Luke and Melissa believed it would increase their capacity and take full advantage of the business opportunity that comes with The Calgary Stampede.  Booking entertainment and advertising that entertainment would be key to developing the clientele in order to get the best use out of the tent.

By March 15, 2020, when the City of Calgary declared a public emergency in order to protect Calgarians from the COVID-19 the virus, Luke had already started the application process with the City of Calgary for a permit to operate a tent in the Hog & Rooster’s parking lot during The Stampede. In addition, he had placed a deposit with a contractor who would supply a tent, floor, generator, heaters, chairs, tables, lighting and speakers. He had lined up a few bands and provided deposits to them as well.

The Calgary Stampede Board of Directors announced on April 23, 2020 that the 2020 edition of The Stampede is cancelled due to the need to suspend all so-called “super-spreader” events in which human to human transmission of the COVID-19 virus is highly likely. This is the first time in its 94-year history that The Stampede would not be held.

  1. Dependent Property: Canada

Following the cancellation of The Stampede, Luke wrote a letter to the insurer stating that even if the Hog & Rooster was allowed to operate by July 3, the date that The Stampede was due to begin, the numbered company operating the Hog & Rooster would lose earnings directly due to the cancellation of The Stampede. The “Dependent Property” wording of the policy entitled the numbered company to the earnings it would have received if The Stampede had proceeded as scheduled, together with all of the deposits paid associated with the beer tent and entertainment. That coverage reads:

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The Calgary Stampede was not listed in the “Loss of Revenue Coverage Summary” to be a dependent property of the numbered company operating the Hog & Rooster.

Luke pointed out in his letter accompanying this claim that (a) the Hog & Rooster’s business would be interrupted as a direct result of the loss of the 2020 edition of The Stampede which could not take place due to the likely presence of COVID-19 in the Calgary community; (b)  The Stampede meets the definition of “dependent property” under the coverage; (c) The Calgary Stampede was physically damaged due to the threat posed by the presence of COVID-19 in the Calgary community.

Sometimes known as “leader property coverage”, “dependent property” coverage is a common feature in Canadian commercial property wordings. However, under most policies, (including this one), the “dependent property” (as defined) must suffer physical loss or damage and the insured business must be interrupted as a direct result of that physical loss or damage.

The Calgary Stampede operates at several venues and is run by a board of directors who oversee various committees of volunteers. The premises where the events run by the Calgary Stampede Board are located (i.e., The Stampede fairgrounds where the agricultural fair, the rodeo and the midway are located, and mobile Stampede breakfasts and dancing are held in the City), were never physically damaged. The events were cancelled due to the significant possibility that they could be become a venue for person to person transmission of the COVID-19 virus.  For these reasons, the insurer denied the numbered company’s request for coverage under the dependent property wording for the expenses incurred to operate a parking lot beer garden during the now cancelled 2020 Calgary Stampede.

In addition to these reasons, the “dependent property” coverage cannot be transformed into “event cancellation insurance”, which in its common form, carries an exclusion for communicable diseases. If the event cancellation coverage had been in place and did apply, then the numbered company’s lost deposits and expenses associated with the cancellation may be covered, subject to the limits and sub-limits of that coverage.

Larger entities hosting more significant events (such as The Stampede itself) can obtain event cancellation coverage that does cover cancellation due to communicable diseases along with cancellations due to terrorism, natural catastrophe, public transport failure or denial of access or power failure.

  1. Requirement to Mitigate Losses

Finally, the insurer points out that if by March 12, 2020, COVID-19 virus was present at the Hog & Rooster (and that was physical damage triggering the commencement of the indemnity period, which is not the case), then the numbered company had a common law obligation to mitigate the losses at the Hog & Rooster, as well as a contractual requirement under the policy to do so.

The insurer questions why the deep clean of the premises, which had quite a small footprint, took five days. However, whether the deep clean could have been accomplished in a shorter period of time is of no moment, as the losses associated with the closure to clean are within the one week waiting period of the policy, even if evidence can be marshalled to prove that the clean could have been accomplished in less than five days.

Further, the Hog & Rooster is required to show that it took steps to operate a take-out and delivery service from the premises which is permitted under the public health orders and to account for the profits obtained as they are deductible from any claim that can be maintained under the policy.

  1. Cara’s Cross-Border Connection: Mitigating Losses

Along with a common law requirement to mitigate losses, most property insurance policies will include a list of duties in the event of a loss or damage which includes taking reasonable steps to mitigate additional damage or loss, similar to the duties of Canadian insureds’ responsibilities. For example, an American policy will may include the following language:

Take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside in the best possible order for examination.

However, the steps taken to mitigate a loss or damage will be examined carefully if there is a covered cause of loss. Mitigation is important not only because it is usually a condition precedent, but also because it provides the carrier “proof that appropriate steps had been taken following [a] loss or damage to prevent further damage so that the true extent of the loss resulting from a Covered Cause would be assertible and would not include damage that had occurred subsequent to the Covered Cause of Loss due to the negligence of [an] insured.”[3] Accordingly, although it is unlikely BI claims, including dependent property claims, will be covered without a covered cause of loss, insureds should still examine their respective policies to ensure they comply with all duties when a potential claim arises.

  1. Without Prejudice Calculation of the Losses

The insurer retained RSM Canada to conduct a without prejudice calculation of the loss claimed by the Hog & Rooster.  As is commonly the case, this loss of business earnings form does not stipulate how the loss is to be calculated.

The starting point of the analysis is to review the definition of “Gross Earnings” that is in the policy:

In this policy “gross earnings” means:

  1. Net sales and other earnings derived from the operations of the business, less the cost of

  2. Merchandise sold, including packaging materials;

  3. Materials and supplies consumed directly in supplying the service(s) sold by the insured; and

  4. Services purchased from 3rd parties for resale

  5. No other costs shall be deducted in determining Gross Earnings

RSM determined that this definition of Gross Earnings, as applied to the Hog & Rooster, effectively means revenue less the cost of food/beverage and related packaging and consumables.

The next step was to review the Hog & Rooster’s financial statement for the last fiscal year which ended January 30, 2020. The cost of their food/beverage and related packaging and consumables was approximately 40% of each sales dollar.  Put another way, after paying the direct/variable expenses, for every sales dollar earned, the Hog & Rooster had 60% left over to pay all other business expenses (staff, rent, utilities, etc.) and contribute to their bottom-line profit.  While not defined in the policy, RSM defined the “Rate of Gross Earnings” to be 60%, being the amount of money available to the business, on each sales dollar, after paying all direct/variable expenses.

The next accounting challenge is to measure the degree to which sales have declined as a result of the possibly covered peril(s).  The policy states:

in determining gross earnings, due consideration shall be given to the experience of the business before the date of damage or destruction and the probable experience thereafter had no loss occurred.

This, admittedly, is not helpful guidance; although, it introduces the concept of “probable experience” which can be interpreted broadly.  In essence, it is a blanket statement that allows us to use any means or data to determine a reasonable sales projection for the business that would reflect what would have happened had the incident not occurred.

There are many approaches to forecasting sales.  For restaurants, there is usually significant seasonality (e.g. December sales are very different from January sales and each month has its own unique sales pattern).  Therefore, it is often best to look back at sales in the same month the year before as an indication of expected sales and adjust for any sales trends leading up to the incident in the current year.

March 2019 had $130,000 in sales and April 2019 had $170,000 in sales (April had higher sales since the weather was nicer, turkey pot pies were popular around Easter, and the Calgary Flames were in the first round of the NHL playoffs).

RSM also looked at growth trends between 2019 and 2020 and the Hog & Rooster’s sales were generally up 10% year-over-year.  Therefore, RSM determined that the ‘probable’ experience of sales in March was $143,000.  Since the NHL season was cancelled on March 12, 2020, eliminating the playoffs as a driver for sales in 2020, we need to project April 2020’s sales in a different manner.  By comparing other years’ March vs. April sales, RSM determined that April usually has 4.9% higher sales than March.  Therefore, the probable experience of sales in April 2020 is determined to be $150,000.

There were actual sales in April as a result of the switch to take-out food and beverage.  However, because of the various causes of loss, actual sales were far below the probable sales, which are summarized as follows:


Sales in 2019

Probable Sales in 2020

Actual Sales in 2020

Loss of Sales





















Applying the 60% rate of gross earnings to the $173,000 of loss of sales, we arrive at an interim loss of gross earnings (to April 30, 2020) of $103,800 ($173,000 x 60%).

After arriving at the loss of gross earnings, adjustments will be required for any additional and saved costs incurred as a result of the incident, which may result in an increase or decrease to the net potentially covered loss.  Since we know that the Hog & Rooster rehired all their staff and their rent does not cease, we would not expect any significant saved costs.

Since all sales from March 28 onwards were by take-out, there is an increased cost to deliver the food to customers.  On average, the Hog & Rooster spent 20% on various food delivery apps (which they had never used before) to order/deliver food.  Therefore, this was an extra $15,000 they needed to pay third parties in order to conduct their business ($75,000 sales from March 28 to April 30 x 20% extra cost).  The policy refers to such an expense as a “costs to reduce loss.”

That brings the total loss estimate to $118,800 ($103,800 loss of gross earnings + $15,000 costs to reduce loss).

The calculation of $118,800 is the starting point.

The insurer has also asked that the calculation be allocated to the various periods where different coverage arguments might apply, which are:

  • March 1-11, 2020: sales decreased, but no insured losses being claimed

  • March 12-17: closed for deep cleaning

  • March 18-27: closed ‘voluntarily’ to maintain goodwill

  • March 28 onwards: take-out / delivery services begin (per provincial order).

Depending on the data available, this allocation is accomplished by making reasonable assumptions about which days the actual revenue was earned or by looking at detailed daily sales data.  For example, to determine the loss of gross earnings from March 12-17, we can look at the sales for the same dates in 2019 (shifted by 2 days to ensure we are capturing sales for the same days of the week).  Then apply the year-over-year trends that have already been calculated, to arrive at the probable sales level for March 12-17, 2020.  Since we know their sales levels were nil, we simply need to apply the 60% rate of gross earnings to the sales projection to determine the loss for these days.  A similar approach can be completed to estimate the loss for each of the loss periods that correspond with the different perils noted above.

Lastly, since the beer garden/tent in the parking lot was a new idea for 2020, if we were to measure a dependent property loss for July 3-12, 2020, we would have to make estimates based on available statistics (or anecdotal evidence) about the expected economic lift of The Calgary Stampede.

Once the detailed allocation of the loss is complete amongst the various periods of loss, the insurer plans to forward the RSM report to Luke and Melissa reiterating that it is maintaining its denial of coverage; that the report was prepared on a without prejudice basis to quantify the potential claim; that the loss as quantified is outside the coverage of the policy and, unfortunately, the insurer cannot indemnify the numbered company for the lost earnings at the Hog & Rooster.

Next Issue … We will present two articles …

Loss earnings claims under Contingent Business Coverage in the context of COVID-19:

In Alberta, home to 70% of the country’s beef processing capacity, there have been positive COVID-19 cases confirmed among employees at the Cargill beef processing plant in High River, Alberta that processes 30% of Canada’s beef, producing the largest workplace outbreak of COVID-19 in North America (821 infections with one death). The Cargill plant closed April 20, 2020 for two weeks for a deep clean and to permit physical distancing between employees. The resulting beef shortages have cut into the Hog & Rooster’s take-out sales as their beef brisket, a significant seller, is temporarily unavailable. The beef came from the Cargill plant; Melissa’s family owns a feedlot that sells to Cargill. We will look at the coverage available to the Hog & Rooster for contingent business interruption coverage as well as the contingent business interruption coverage for Melissa’s family’s feedlot who must now keep the cattle on feed longer until the Cargill plant is back on stream.

Concurrent Causes of Loss:

25 to 38 km long ice jams on the Peace and Athabasca Rivers in northern Alberta are causing flooding into the northern Alberta city of Fort McMurray and the Town of Fort Vermillion. The Fort McMurray situation is most dire; the entire downtown section of the City has been evacuated; water levels are over the roofs of cars. The overland flooding has overwhelmed the City’s sewer system causing backups. Commercial flood coverage has been issued to some of these businesses. How does the industry and the courts deal with concurrent causes of loss of earnings given that non-essential businesses are closed due to the public health orders to halt the transmission of COVID-19?


[1]           In Progressive Homes, the insurer argued that the insured’s liability for a defective building that it built is not within the coverage agreements. The insured and the court pointed out that if that was the case, what is the point of having an exclusion for damage to the work performed by the insured. The court concluded at para. 40 that “I would also note that not barring defective property from the definition of “property damage” at the outset gives meaning to the exclusion clauses discussed below.  …  This …[the exclusion]… would be redundant if defects were excluded from “property damage” at the outset.  While perfect mutual exclusivity in an insurance contract is not required, this redundancy supports the view that the definition of “property damage” may not categorically exclude defective property.” (Emphasis added).

In Ledcor, the issue was how the ‘faulty workmanship’ exclusion with its resulting damage exception in a builder’s risk policy is to be interpreted. At para. 53, the Supreme Court stated that the courts below analysed the policy improperly. The Supreme Court stated that “because the base coverage under clause 2 of the Policy is for “physical loss or damage”, it follows …[so said the courts below]… that the Exclusion Clause needs to exclude from coverage some physical loss.” At para. 54, the Court continued saying “…In the Court of Appeal’s opinion, a different reading of the Exclusion Clause would risk rendering it redundant. Under this view, the “cost of making good faulty workmanship” cannot be limited to the cost of redoing the faulty work. Rather, that exclusion must be construed more broadly to also exclude from coverage some type of physical loss or damage.” At para. 55, the Court stated “The Court of Appeal’s acceptance of this initial premise led it to a search of the dividing line between physical damage … that is excluded from the coverage and the physical damage that is “the resulting damage” and therefore covered as an exception…”. At para. 56 the Court stated “In my respectful view, the premise upon which the Court of Appeal proceeded is flawed. The “faulty workmanship” exclusion need not encompass physical damage. Although “[e]xclusions should be read in light of the initial grant of coverage” (Progressive Homes, at para. 27…), this Court has stressed that “perfect mutual exclusivity [between exclusions and the initial grant of coverage] in an insurance contract is not required”: Progressive Homes, at para. 40. Then, at para. 57, the Court stated, “…the Policy in this case contains exclusions that do not pertain to “physical loss or damage” otherwise covered…”.

[3]           Kleins Moving & Storage, Inc. v. Westport Ins. Corp., 196 Misc. 2d 735, at 739, 766 N.Y.S.2d 495 (Sup. Ct. 2003) (holding that the costs of insured’s alleged attempts at mitigating a loss, i.e. moving and manipulating covered property while the premises were being clear, repainted, and restored after a fire, did not constitute a covered cause of loss within the meaning of the policy because the duty to prevent additional damage and not intended to provide additional coverage).

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