Coverage Pointers - Volume XXI, No. 24

Volume XXI, No. 24 (No. 563)
Friday, May 15, 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.  I’m still not crazy about the current situation, but we’re healthy and busy and that’s pretty darn good.

Hope you are all doing well, with health in your families and among your colleagues.  Life in the COVID-19 world has been busy.  We have excellent clients doing their good-faith best for their policyholders, considering the policy language.  We have several lawyers in our coverage team spending a lot of time serving the industry on COVID-related issues.  We’re monitoring BI litigation and legislative proposals and posting summaries of each on our website.  (167 Business Interruption lawsuits and 17 separate legislative proposals as of last posting).

Regular coverage work continues.

This is a monumental issue (attached) – some 50 pages in length.  We wanted to give you something to read in your spare time.

Just yesterday, it was announced that 30 upstate New York counties (of the 62 in New York) will begin accepting new suit filings next week (after two months).  That will lead to a blanket of new business, no doubt.

A return to courthouses, including acceptance of new case filings, will start next week in 30 upstate counties. The process will begin May 18 in the following counties: Broome, Chemung, Chenango, Delaware, Schuyler, Steuben, Tioga, Tompkins, Genesee, Livingston, Monroe, Ontario, Orleans, Seneca, Wayne, Wyoming, Yates, Fulton, Herkimer, Montgomery, Oneida, Otsego and Schoharie. On May 20, court openings will continue in Clinton, Essex, Franklin, Hamilton, Jefferson, Lewis and St. Lawrence counties.

Not open yet, counties like Bronx, New York, Kings, Queen, Richmond, Westchester, Nassau, Suffolk, Onondaga (that’s where Syracuse is located, for you downstaters), Albany, Erie, and Niagara

Interesting challenges ahead of us.


Child Victim’s Law Extension:

The Governor issued an Executive Order extending the statute of limitations for the look-back period for CVA claims another five months, to January 14, 2021.  Your editor believes that under the Executive Law, Section 29-a, he only has the power to extend limitations period for 30 days, but we’ll see what happens with legislative activity or otherwise.


Blog Updates:

We have an active blog on our website, bringing you up-to-date on many things, especially (lately) on COVID-19 issues.


Just released on Law 360:

Major Trends In COVID-19 Business Interruption Lawsuits By Lee Siegel and Ryan Maxwell (May 14, 2020)


A Greeting from Our New Managing Partner – Jody Briandi:

Greetings Coverage Pointers Subscribers! This may be my first CP contribution, though some of you may know me as the editor of Premises Pointers, one of the firm’s newsletter publications. Most recently, I have had the privilege of taking over as Managing Partner of Hurwitz & Fine effective May 1st.

This is an incredible honor for me as I began my legal career at the firm 23 years ago in 1997. Since then, I have been a member of our litigation department chairing the firm’s Premises Liability Practice Group.

As Managing Partner, I could not be prouder of the lawyers and staff with whom I work and who have trusted me with this responsibility.  They have navigated the challenges presented most recently by COVID-19 with cooperation, collaboration and ingenuity.  They have found creative solutions in response to the daily tests we have encountered personally and professionally. This has allowed us to provide uninterrupted service to our clients even though our surroundings have changed to a remote work environment.  As a bonus, we can now all add video conferencing to our list of skills!

Although current circumstances continue to change, our firm’s commitment to servicing clients remains steadfast and we are here to ensure client needs are met.  While I did not expect to be stepping into this new role during this time of uncertainty, the transition has been smooth and we are prepared for the future. Feel free to drop me a note if you would like to subscribe to Premises Pointers.  Stay well! 


Jody E. Briandi

[email protected]



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.


Peiper on Property and Potpourri:

It has been a busy two weeks for the first party lawyers out there.  COVID filings have been piling up almost too fast for us to keep up.  Almost, of course, because H&F’s own team of Siegel and Maxwell have been summarizing every single pleading we locate, so quickly, I think sometimes we know more about a particular lawsuit than the named defendants.   There is no doubt that we’re headed toward some interesting litigation; the results of which will shape business interruption caselaw and policy construction for years (if not decades) to come.

People, not just coverage folks, have universally taken notice.  Within the last two weeks, I have participated in discussions on a local, state and national level.  There are surely more questions than answers at this point, but there is a solid base of national-level case law which provides some significant direction – or so it should. If you’re interested in some training on where we’ve been and where we’re likely going (or just interested in our materials), drop me a line.

A bit of positive news, no doubt to be covered extensively by H&F’s own MLB beat reporter, Brian Barnas, it appears possible that we may have baseball to go with our July 4th hot dogs this year.  Warm weather, chlorinated pools, baseball and hot dogs.  Here’s hoping that a return to some form of normalcy is just around the corner.  

Steven E. Peiper

[email protected]


A Kiss is But a Kiss – Harassment 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York

15 May 1920


(By the United Press.)

            New York, May 15.—“I want a candy kiss,” 18 year old Frances Heckler told Joseph Weiss, candy store manager.  Weiss thought the girl meant a real kiss.  Magistrate Nolan set the price at $2.


Wilewicz’ Wide-World of Coverage:

Dear Readers,

We hope that this finds you all healthy and well. Things aren’t easy for anyone these days. The best we can hope for is for everyone to make it through these times, and I’m hopeful that we will. Even possibly stronger than before.

Amidst all of the coronavirus cases, both medical and legal (and there certainly will be many more in the coming months and years), it’s important to remember that there are many other types of claims, coverages, and thus coverage issues out there around the country. For instance, out of the Eighth Circuit Court of Appeals, we address a basic precept of CGL coverage – an “occurrence” being an “accident”.                                                                                   

In American Family Mutual v. Mid-American Grain, we bring you a good primer on basic coverage issues, such as the definition of an “occurrence”. There, a company was engaged to design and construct a grain and distribution facility in Missouri. They did so, but allegedly in an unworkmanlike way and they were eventually sued for damages arising out of a multitude of design and construction issues. The court laid out the logic and rationale for the definition of an occurrence in CGL policies – typically defined as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions”. In short, since all of the alleged damages in the case stemmed from the shoddy work and poor design or construction, there was no “accident”. If there was no “accident”, there was no “occurrence”. With no “occurrence”, there was no coverage in the first instance. A good, basic lesson, and a quick read.

Until next time, stay safe everyone,

Agnes A. Wilewicz

[email protected]


The Dial Telephone Comes to Chautauqua County – 100 Years Ago (Instructions Provided):
Dunkirk Evening Observer

Dunkirk, New York
15 May 1920

How to Make a Local Call

            Look up the number in the new directory delivered shortly before consolidation.  All telephone numbers will be changed.

            Suppose the number to called in Dunkirk 2743.

            Remove the receiver completely from the hook before you start to dial and do not replace it or do not move the hook while you are dialing.

            Place the finger in the hole through which “2” is seen.

            Pull the dial around to the right to the finger stop and then release it.

            Do not touch the dial while it is returning to rest.

            Repeat this operation for “7” then for “4” and last for “3.”

            The dialing operation is now completed.

            Put the receiver to the ear and wait for the called party to answer. 

            You should hear in the receiver either the “ringing” signal, an intermittent burr-rr-ing sound, indicating that the called party’s telephone bell is ringing, or the “busy” signal, a rapid buzz-buzz-buzz, indicating that the called party’s line is busy.  The ringing signal differs materially from the busy signal by being loess intense and by occurring at less frequent (about three second) intervals.

            If neither the busy nor ringing signal is heard and no operator answers, place the receiver on the hook for a full second, then remove it and dial the desired number again.  If no signal is audible, again hang up the receiver for a full second, then dial the repair clerk, 13, and explain as clearly as possible what the trouble is, using another telephone if necessary.

            After finishing the conversation or in case the called party does not answer after what you consider a reasonable time, replace the receiver on the hook and the machinery will disconnect your telephone from the one you have called.

            If you have occasion to dial a number a second time or to make another call, be sure to replace the receiver on the hook for a full second before doing so.


Barnas on Bad Faith:

Hello again:

Even with the shutdown, attorneys have still been able to participate in discovery.  Discovery is often a hot issue in bad faith cases.  The case in my column from the Eastern District of Kentucky exemplifies this.  Oftentimes, we see courts permitting insureds to conduct extensive discovery or discovery that should be precluded as privileged simply because there is a bad faith cause of action alleged.  It’s a constant struggle to preserve insurers’ rights to rely upon well-established protections like the attorney-client privilege and work product doctrine in bad faith cases.

While the Woods court declined to order carte blanche disclosure, it reached a conclusion that I find troubling.  First, the court ordered the insurer to disclose its coverage opinion received from counsel on a key legal issue of applicable offsets.  More troubling, the court ordered disclosure of claim file materials which were generated after the lawsuit was filed.  While this was a UIM claim and there was no disclaimer, certainly the insurer should be entitled to protection of its claim file not only after litigation is threatened, but after it is actually filed.  Finally, and most egregiously, the insurer was ordered to produce communications with its trial counsel, most of which took place after the lawsuit was filed.  While the court did permit the insurer to withhold communications with trial counsel specific to the bad faith cause of action, it defies logic to hold that communications between client and counsel after a lawsuit is filed against it should be turned over to the plaintiff, whether bad faith is alleged or not.  Take a look at the decision and draw your own conclusions, but I’m not with the court on this one.

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

Brian D. Barnas

[email protected]


Yankees Evicted from Polo Grounds?:

New York Herald
New York, New York

15 May 1920


Notified BY Giants’ Owners That They Can’t Use Polo Grounds Next Year.


            A brief, formal announcement from Francis X. McQuade of the executive staff of the Giants yesterday made it clear that the historic Polo Grounds will be  a two league playing field no longer after this year and that the Yankees must find another field for their home use next season.  The McQuade announcement was as follows:

            “After a conference between Charles A. Stoneham and John J. McGraw in Pittsburg to-day it was definitely decided that the Polo Grounds will be the home of the Giants exclusively after the baseball season of 1920.

            “The American League club of this city has been notified of this decision.”

            Thus an arrangement which has been a decidedly convenient and pleasing one for the fans of this city will as a result of the action of the New York National League club soon cease to exist. 

Editor’s Note:  It didn’t happen.  The Yankees stayed at the Polo Grounds until the end of the 1922 season, when they moved in the new Yankee Stadium, the House that Ruth Built.


Off the Mark:

Dear Readers,

It seems that more people are starting to get over the initial shock of working remotely as my e-mail traffic has picked up greatly.  Unfortunately, the courts do not seem to be on the same pace.  This week’s search did not reveal any noteworthy construction defect decisions to report on. 

I hope everyone stays safe and healthy.

Until next time …

Brian F. Mark

[email protected]


The Leader-Post
Regina, Saskatchewan, Canada

15 May 1920

LONELY WIDOW, AGE 30, WORTH $40,000, wishes to hear from honorable gentleman under 60, object matrimony.  Write Mrs. Hill, 14 East 6th St., Jacksonville, Fla.


Boron’s Benchmarks:

As we avoid public gathering places, and spend a ton more time at home these days … I mean weeks … no, make that months, Beth and I have turned into a couple of binge-watchers.  We try to draw the line at what we consider to be the reasonable time frame of two hours a night, max.  We are watching shows we never would have watched, if not for this COVID-19 thing.  Under normal circumstances, we choose to mostly watch relaxing comedies and nostalgic favorites. Truth be told, I personally would watch my favorite baseball movies, Field of Dreams and The Natural, once a week each, if I had my druthers.

Our recent foray into what some would call “riveting dramas”, but what I would call very, very dark shows, such as Ozark and Barry, has been eye-opening for us. At least most of the time.  You see, during the scariest moments these shows become less than eye-opening for us, because we just close our eyes until it sounds like the most gruesome stuff has passed, then crack them open to see if it is safe to start watching again.

Unsettling as these shows may be, they provide us with fodder for conversation, at first between the two of us – and God knows the two of us desperately need new conversation topics at this point – and then also with others in the family who are watching such shows.  So, I guess these very, very dark shows are actually “good” for us in that sense.

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 the State of Washington on May 7, 2020.  The Court holds that a title insurer must defend its insured against a letter demand.  Interesting facts, and the Court’s analysis provides, dare we say, fodder for conversation.  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]


Our Old Friend Mrs. Hill was Worth $40,000 in Kentucky:

The Owensboro Messenger
Owensboro, Kentucky

15 May 1920

LONELY WIDOW, AGED THIRTY, worth $40,000, wishes to hear from Honorable gentleman under sixty.  Object matrimony.  Write Mrs. Hill, 14 East Sixth Street, Jacksonville, Fla.


Barci’s Basics (On No Fault):

Hello Subscribers!

I hope you are all still staying healthy and safe!

My answers to last issues topics are as follows: 1) I have always enjoyed hosting dinner parties and it is the only time I like to cook, otherwise I don’t see the point of cooking just for myself, especially since I don’t like leftovers all that much! I am trying to be better about this now since I can’t go to the store every other day to pick up food. My favorite meal to make for other people is baked ziti with a big salad on the side and probably some delicious chocolate cake or brownie sundae for dessert. Although I don’t enjoy cooking, I do like to bake and have been trying out a new recipe every weekend (and am trying to drop the goodies off at a different friend’s house every weekend so I don’t eat them all!); 2) My favorite numbers are 13 and 21. I have no good reason for this other than I’ve always liked them. When I was little they were my soccer numbers, but I didn’t stick with soccer very long so I can’t imagine they are my favorite for any sentimental reason, but let’s go with that; 3) Nutella is gross. I know, I know, widely unpopular opinion. I like chocolate and hazelnut together, but any time I see Nutella I can’t get over the image of my freshman college roommate scooping Nutella out of a jar and licking it off her fingers so it’s a no go for me; and 4) My first friends were named Samantha, Kelly, and Katie. I’m not sure who came first, but my mom was friends with each of their mom’s separately, and we spent a lot of time together as babies/toddlers. So I guess I personally did not make those friends, but they have been around my whole life and we are still in touch! That’s me for this week.

For the next two weeks consider these topics:

  • As a kid, what did you want to be/what job did you want when you grew up?

  • What is a good quote that has stuck with you?

  • What is your favorite smell?

  • Did you have a favorite cartoon as a child? If so, what was it?

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

On the no-fault front, I have two cases for you this time. First, from the Second Department an interesting case that denies a motion for declaratory judgment on two grounds – no evidence to show the assignor was noticed for the EUOs he failed to appear at and no admissible evidence to show the accident was staged. The second case hails from New York County Supreme, where a lengthy discussion reveals that the assignor had standing to sue the carrier for reimbursement of benefits.

That’s all folks,

Marina A. Barci

[email protected]


Mrs. Hill Did Better in Oklahoma:

The Guthrie Daily Leader
Guthrie, Oklahoma

15 May 1920

LONELY BATCHELOR GIRL—Worth $300,000 wishes to hear from honorable gentleman under 60.  Object, matrimony.  Write Mrs. Hill, 84 East 6th St., Jacksonville, Fla.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Captain’s log, stardate 9529.4: We’ve boldly gone two months without stepping foot in our office. I wonder what it looks like? I wonder what it smells like? I never thought I’d see the stardate that I craved take-out chicken souvlaki from the mall food-court, but here we are. And that greasy pizza? Keep it together…

Shameless plug for H&F’s Legislative Summary document that we have maintained and will continue to do so. It can be located here. Although that space has appeared to slow, it is anticipated to ramp up once legislatures across the country begin transitioning into the post-pandemic position.

This week, Ryan’s Capital Roundup features a tour-de-nation of legislative and executive branch initiatives surrounding civil immunity for healthcare facilities, workers, and others (proposed or enacted) from various states. I have summarily selected pertinent language and/or concepts included in each and focused my attention on (1) the purposes that such immunities would serve; (2) the groups for which immunities would extend; (3) the scope and extent to which those immunities might exist; and (4) the duration for such immunities. This list is certainly not exhaustive, but it was interesting to see the similarities and differences in these proposed/enacted initiatives. What does a post-shutdown legal world look like? Utah has an answer:

(2) Subject to the other provisions of this section, a person is immune from civil liability for damages or an injury resulting from exposure of an individual to COVID-19 on the premises owned or operated by the person, or during an activity managed by the person.

Until next time,

Ryan P. Maxwell

[email protected]


A Cut Above the Rest:

The Buffalo Times
Buffalo, New York

15 May 1920

Barbers Won’t Raise Fee For Home Service

            NEW YORK, May 15.—Union barbers in New York who have voted to strike on Monday for higher wages, have decided to protect the innocent party in the controversy—the well-known public—as much as possible.

            Any many who wants a shave, haircut, massage, shampoo, only had to call the union headquarters and a barber will appear at the home or the club.  The barbers will charge only the usual fee for the home service.  


CJ on CVA and USDC(NY):

Hello all,

I hope that this note finds you healthy and faring well. It was another odd weekend celebrating a holiday in an unusual way. Usually our Mother’s Day is spent with a brunch at my parent’s house before heading to dinner with my wife’s family. This year was spent delivering flowers and cards from a safe distance, and time on Zoom and FaceTime supplanted our brunch and dinner plans. To pass some of the time I have decided to start re-watching The West Wing before it leaves Netflix for one of the HBO platforms. If any of my readers are at all interested in political dramas, and have not yet watched this series, I cannot recommend it enough.

Just last week New York received a very interesting bit of news. On Friday, May 8th, Governor Cuomo signed an Executive Order extending the expiration of the CVA “look back” period from August 14, 2020 to January 14, 2020. My comments in this week’s issue discuss whether or not we think this Executive Order will stand as valid once August 14th rolls around. Two days prior to the Governor’s Executive Order, Lucian Chalfen, spokesman for the New York court system, told the New York Law Journal that the courts were going to give survivors of child sex abuse an opportunity to file their claims before the “look back” period runs out. (The full article is linked here.) As of right now, we can only speculate as to whether or not the Executive Order will stand, but we urge any insurer who receives a CVA-related claim to promptly work the claim up. As Dan Kohane said at the onset of this health crisis, Insurance Law 3420 and its deadlines still apply.

Until Next Issue,

Charles J. Englert, III

[email protected]


Flu Remedies Quite Popular:

The Oklahoma City Times
Oklahoma City, Oklahoma

15 May 1920


Hamlin’s Wizard Oil a Reliable, Antiseptic Preventive

            During influenza epidemics spray the nose and throat several times a day with one part Wizard Oil and two parts water, using an atomizer.  If you haven’t an atomizer, gargle the throat and snuff the mixture up the nose.  This treatment sets up an antiseptic wall of defense against “Flu” germs.

            Chest colds and sore throat lead to grip.  Stop them at once with Wizard Oil before they can develop into dangerous influenza.

            Get it from druggists for 30c.  If not satisfied, return the bottle and get your money back.

            Ever constipated or have sick headache?  Just try Wizard Liver Ships. Pleasant little pink pills, 30 c at druggists.  Guaranteed. 


Dishing Out Serious Injury Threshold:

Dear Readers,

I hope everyone is doing well during these times. In good news, as covered by the firms Labor & Employment team, parts of New York are beginning to open back up. While this is likely a long way out for us in the Greater New York City area, it is encouraging news. Hopefully, everyone continues to be responsible, stay safe, and hopefully we can get through this sooner rather than later.

In the Serious Injury Threshold world there have not been any substantive cases that have come down in the last few weeks. Nonetheless, there is an interesting case that came out of the Second Department dealing with plaintiff’s failure to timely submit opposition papers, failed to provide a reasonable excuse to have the decision vacated, and resulting in the Court not considering any potentially meritorious defense.

Stay safe,

Michael J. Dischley

[email protected]


Remedies for a Malaria Epidemic in Florida?:

Tallahassee Democrat
Tallahassee, Florida

15 May 1902


WHY?  Because we will have more mosquitoes.  The only guard we have against this dreaded epidemic is to keep the mosquitoes killed out as near as possible.  Let us tell you how to do it.




Bucci on “B”:

Hello friends:

There were no Coverage B cases for this edition.  I’ll catch you guys next time.  

Diane L. Bucci

[email protected]


Typhoid Epidemic in Niagara Falls?

The Buffalo Times
Buffalo, New York

15 May 1920

Typhoid Breads Out Among Students

            Niagara Falls, May 15.—A typhoid fever epidemic among students at Niagara University is being investigated by representatives of the State Health Department.  Dr. Edward Clark of Buffalo, State sanitary supervisor for Western New York, and Dr. Edward S. Godfrey, Jr., of Albany, were unable to discover, in an inspection of the university and its environs yesterday, any unsanitary causes from which the epidemic may have arisen.  It is believed the disease was brought into the student body by a man afflicted with it when he recently entered the employ of the university and spread through infection.  Twelve of the students have contracted the disease and are being treated at St. Mary’s Hospital.  Among these is William Comerford, 14 years old, of Buffalo.  There have been no deaths.


John’s Jersey Journal:

A blackboard sign on a wall

Description automatically generated

!!!  Breaking News  !!!

New Jersey Courts Greatly Expand Auto Insurance

Workers Comp. Carriers Now Allowed to Pursue Subrogation Against Auto Insurers

Even though the last major amendment to the no-fault law was 32 years ago, New Jersey courts are still working out the interplay between Workers’ Compensation and auto insurance.

We start with an all-too-familiar fact pattern and a question:

Jane Smith, while driving a car in the course of her employment, is struck by a negligent motorist. Should the economic cost of her injuries ultimately be borne by the workers’ compensation insurance system or the automobile insurance system?

In 2016, the New Jersey Appellate Division ruled a workers’ compensation carrier can pursue subrogation from the tortfeasor’s automobile liability carrier. Thus, even though a Workers’ Compensation carrier is primary for the loss, it could still pursue subrogation against the tortfeasor or its liability carrier. This was a significant break from the norm. Prior to this, the common understanding of the statutory scheme was that the New Jersey no-fault law barred subrogation in such cases. That decision was appealed to the New Jersey Supreme Court.

On Tuesday, the Supreme Court’s decision was handed down. The Supreme Court was divided 3-3 over their interpretation of New Jersey law—whether the workers’ compensation insurance or automobile insurance would bear the economic costs.

Three justices, the concurrence, voted to affirm the Appellate Division, stating in their view, nothing prevented the Workers’ Compensation carrier from pursuing subrogation and transferring the risk onto the tortfeasor’s automobile insurance. In their view, neither the collateral source rule nor AICRA (the current form of New Jersey’s no-fault law) precluded such action.

The other three, the dissent, voted to reverse, stating that, in their view, allowing such subrogation actions is contrary to the no-fault insurance system. These justices reasoned that a plain reading of AICRA supported that subrogation in such case was not permitted. The purpose of AICRA was to contain the cost of automobile insurance and Comp has traditionally been covering these losses. The dissent reasoned that under a plain reading of the no-fault laws and looking to the Legislative intent, subrogation was not permitted against an auto insurer.

One justice did not participate, causing the stalemate.

Since the decision is 3-3, a deadlock, the Appellate Division’s decision stands. Without a majority, the Supreme Court could not overturn or modify the decision.

So what is the effect of this decision, and more importantly, the fact the Appellate Division’s ruling will stand?

Going forward:

  • Workers’ compensation carriers can sue tortfeasors or their automobile insurance carrier in a subrogation

  • This will shift costs that had been allocated to the workers’ compensation system to the auto insurance industry

  • Lead to increased litigation

  • Lead to increased automobile insurance premiums

Historically, Workers’ Comp has been paying such accidents without right of subrogation. When I say “historically”, New Jersey’s Workers’ Compensation law was enacted in 1911.

New Jersey’s no-fault system was introduced sixty years later, in 1972. Since its inception, the no-fault law has made the workers’ compensation system the primary source of reimbursement for economic damages suffered by a driver injured in a work-related automobile accident.

In 1984, the Legislature introduced the Automobile Insurance Freedom of Choice and Cost Containment Act. As the name implies, the goal was to reduce auto insurance premiums.  The high cost of insurance forced many low-income residents to drop their auto insurance. To address this, in 1988, the Automobile Insurance Cost Reduction Act (AICRA) was enacted in further effort of bringing down the costs of auto insurance.

That’s important because in New Jersey, when a statue is unclear, the courts are to look at the legislative intent. The concurrence does not, in my view, ever consider the legislative intent behind the no-fault law. Their focus ends at the legislative intent behind the Workers’ Compensation law and the Workers’ Comp statute authorizing subrogation. The dissent has the more appropriate analysis. In addition, the dissent seemed to better appreciate that Workers’ Comp has been bearing the cost of these accidents for decades (and charging a premium to reflect this).

The impact of this decision cannot be overstated. New Jersey auto insurers will, in all likelihood, now face a floodgate of lawsuits as Workers’ Comp carriers pursue risk transfer against the auto insurance industry. As liability insurers receive these lawsuits and effectively end up absorbing what was previously understood to be a Comp loss, the only option will be to increase their premiums.

With respect to Workers’ Compensation carriers, it is a very favorable decision. In automobile accidents, Workers’ Compensation carriers can now pursue subrogation against the tortfeasor’s liability carrier. Previously, they would have faced a swift motion to dismiss and been stuck with these costs as the Comp carrier. Conceivably, being able to foist these losses onto the auto industry will save the workers’ comp scheme incalculable sums of money. Although I suppose the auto insurers will be able to do the math on their end.

The New Jersey courts used to of the mindset it was better to pass this cost onto consumers of the product. Now the New Jersey courts see fit to foist these losses onto the auto insurance industry.

How do the New Jersey courts have so much power, you ask? In the court’s view, the New Jersey Legislature has not made their intentions clear enough, allowing the courts to interpret the ambiguity.

Will the Legislature step in and overturn the Appellate Division’s ruling? If the auto industry reacts by raising premiums to reflect this new, increased risk,
I would think the Legislature would have to act.

My question is why now? Workers’ Comp was enacted 109 years ago, no-fault 48 years ago, and the most recent major amendment to no-fault (AICRA) was 32 years ago. Why is there suddenly confusion now? And why make this gargantuan shift now?

Department of Banking and Insurance ORDERS Insurers to Reduce and Refund Premiums

For those insurers who have not fled the state, bad news comes in pairs. On May 12, the New Jersey DOBI issued a Bulletin ORDERING insurers who transact insurance policies in New Jersey to reduce their premiums due to the pandemic. Bulletin. 

The directive applies to the following lines of insurance:

∙ Private passenger automobile;

∙ Commercial automobile;

∙ Workers’ compensation;

∙ Commercial multiple-peril;

∙ Commercial liability;

∙ Medical malpractice; and

∙ “Any other line of coverage where the measures of risk have become substantially overstated as a result of the COVID-19 pandemic”.

Commissioner Marlene Caride states that the Department recognizes that “the overall risk of loss for private passenger automobile insurance has been reduced in recent months … [and] that reductions in risk extend beyond automobile lines of insurance.”

Insurers are required to issue an initial premium refund or credit (representing the reduction in risk to date) and reduce the premium charged each month the “public health emergency” continues. Insurers may comply with the mandated premium refund by providing a premium credit, reduction, return of premium, dividend or other appropriate premium adjustment, based on:

∙ Reclassification of exposures to comport with current exposure, or

∙ Reduction of the exposure base (miles driven, payroll, receipts, etc.) to reflect actual or anticipated exposure.

Insurers can also issue a uniform reduction (such as a fixed percentage) without prior approval from the DOBI.

Insurers who transact insurance in New Jersey have been given one month to comply (June 15). This directive applies to all admitted, licensed, and surplus lines insurers. In addition, licensed and admitted insurers must file the rate changes with the Department within 15 days of implementing the refund program.

An insurer that can demonstrate its rates are “not excessive, inadequate, or unfairly discriminatory, or otherwise contends it should not be subject to the terms of this Bulletin”, must do so by June 1, 2020.

As other states get wind of this, others will not be far behind.

Finally, Agnes and I recently wrote whether or not an attorney should sign their client's name to an interrogatory verification. The article stems from an attorney who was caught forging his client’s name and the ABA published it here.

John R. Ewell

[email protected]


Tennessee Typhoid as Well:

The Tennessean
Nashville, Tennessee

15 May 1920

The Typhus Danger.

            One would suppose that the American people’s experience with epidemics during the past three or four years would lead them to pay serious attention to the warnings that are coming from responsible sources regarding the problem what may be called world sanitation.  We have fared better than most other countries, it is true, but influenza and pneumonia have taken an appalling toll of American Lives, and it is not pleasant to consider the possibility of worse plagues still to come.

            There is such a possibility, according to the men who are in the best position to know.  The principal present danger is typhus, which is raging over Central Europe and the Near East.  No way of controlling it has yet been found and its spread has been so steady and rapid that men like the surgeon general of the United States and the head of the American Red Cross believe that there is grave danger of its appearance in this country.  “America is just as unsafe as Europe from typhus,” says Mr. Davidson, who is now in Paris.  “More people are dying daily now than during the war.  The scourges now sweeping Eastern Europe and Asia constitute the mightiest danger to all humanity since the deluge.”—Charleston News and Courier.


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

I can’t believe it’s only been two weeks since our last edition. Here in Connecticut, we’ve experienced summer, fall, and winter again—my arms were still peeling from an unexpected sunburn while hail and snow briefly fell from the skies this week. I have the heat going as I write tonight, with the mercury hovering just above freezing. Friday the forecasters call for a high of 78°. The weather seems to be following the rumors about the courts reopening—up and down. But just as the warm weather is set to return, so are the courts. Virtual and telephonic conferences, decisions and orders all have been slowly reemerging, like the early spring growth through the frost. While we’re not sure what court is going to look like, the wheels of justice will soon be turning again, and our work and your work, while surely different, will again be the same.

Stay well and be safe.

Lee S. Siegel

[email protected]


Smallpox Epidemic in Indiana:

The Republic
Columbus, Indiana

15 May 1920


            The smallpox epidemic which for weeks raged in Ogilville and vicinity has just about subsided, there being now but one home at that place under quarantine.

            The home is that of Earl Merritt, who was taken ill a little more than a week ago of the disease, and his is the last case reported.  A son born to Mr. and Mrs. Merritt a week ago was vaccinated when but two days old, and it is said the child is extremely ill from the vaccination.  


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

Hello Subscribers,

Although I may be counting the time at home in months now, I’m still not sure what season it is in Buffalo, NY. Last week, I enjoyed one of the first warm days in WNY with my cellmate boyfriend, Jim. Even though it seemed like the warm weather was here to stay, given Jim suffered his first sunburn of the year, the following week we experienced snow for a couple days following that one warm, sunny day. However, the forecast looks promising and the fear of snow or frost destroying my juvenile balcony garden is dissipating. In the meantime, I am enjoying a virtual book club organized with friends (we’re reading Lies, Inc. by Philip K. Dick), painting, and attempts at getting creative in the kitchen.

But please remember, most of us can only estimate how much longer this will last, and I implore you to do whatever makes you happy but also reach out to those who are a little more isolated than you. Continue to make those phone/video calls, drop off care packages or do whatever—while still practicing social distancing—for those who do not have someone to interact with daily.

Cara A. Cox
[email protected]

Is it nine weeks now? What's today? Sameday?  Or, is it Someday? I now cringe when someone talks about 'the new normal'. That phrase is beginning to sound like fingernails running down a chalkboard. I don't know about you, but each day has its challenges and successes and few of those are normal or ever were normal (but that's me griping). However, my client contact and my networks through the FDCC, DRI and Canadian Defence Lawyers, have never been more personally fulfilling than they have been over the last few weeks. I have also started a project where each week I have reached out to someone that I have lost contact with to catch up and share what is happening. It has been very worthwhile.

On the subject of reaching out, I enjoyed reaching out to all of you through this newsletter and providing snapshots of what is happening in Canada. The Canadian federal government warned about the complication of handling a pandemic in the upcoming spring flood and summer wildfire seasons. They were right. The Fort McMurray April 27, 2020, flood discussed in this week's newsletter is a lesson on just that. Hope you find it an interesting read and that it translates to other scenarios on your desks. Keep smiling underneath those masks.

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]


Liquor Epidemic in Coney Island?:

Times Union
Brooklyn, New York

15 May 1920


Federal Prosecutor Ross To Seek Injunctions

            Coney Island will be made as “dry” as possible, Federal District Attorney Ross announced this morning.  William B. Allen, who is in charge of the enforcement agents, will have a force of men on hand at the opening of the season this afternoon and will maintain a close watch throughout the entire summer.  But while every effort will be made to keep the Island “tight,” other resorts in the borough will not be overlooked, it was announced.  Ross said that he will take out injunctions against the owners of various cafes and restaurants.

            The first injunction will be taken out today against Louis Stauch, proprietor of one of Coney Island’s largest establishments.  Stauch and a waiter were arrested last week on a charge of selling liquor, but Stauch was acquitted on the ground that it could not be proved that the liquor was on the premises for purposes of sale with Stauch’s knowledge.  Ross said that Judge Chatfield’s decision yesterday in the Federal court that the presence of liquor in a saloon would indicate intention to sell, would simplify matters greatly for the agent.


Headlines from this week’s issue, attached:

Dan D. Kohane
[email protected]

  • No Coverage under Auto or Homeowner’s Policy for Assault


Steven E. Peiper

[email protected]


  • Failure to Comply with Inspection Requirement Results in Cancellation of Coverage


  • Where Defendant Produces Specific Evidence of Residency Elsewhere, a Hearing is Needed to Determine Sufficiency of Leave & Mail Service


Michael J. Dischley
[email protected]

  • Plaintiff Fails to Establish a Reasonable Excuse for Default and Therefore Court Did Not Need to Determine any Potentially Meritorious Defense


Agnes A. Wilewicz

[email protected]

  • Eighth Circuit Holds that Defective Design and Poor Workmanship Claims were Foreseeable as a Matter of Law, Thus They Were Not an “Accident” and Therefore not an “Occurrence” Under CGL Policy (Missouri Law)


Jennifer A. Ehman

[email protected]

  • Trial Court Finds No Special Relationship Between Insured and Broker

  • Insurer Establishes Irrebuttable Presumption of Prejudice Where Notice Was Not Given Until After Default; Liability Insurer’s Contact With Health Insurer Did Not Constitute Notice By Insured


Brian D. Barnas

[email protected]

  • Court Ordered Disclosure of Coverage Opinion and Post-Litigation Communications with Counsel in Bad Faith Case


John R. Ewell

[email protected]

  • New Jersey Supreme Court Cannot Agree on Interplay between Workers Compensation and Auto Insurance. The Appellate Division’s Ruling that, a Workers’ Compensation Carrier can Pursue Subrogation from Tortfeasor’s Automobile Liability Carrier, Will Stand.


Lee S. Siegel

[email protected]

  • How to Train Your Umpire


Diane L. Bucci

[email protected]

  • Not much on the Coverage B beat this time.


Brian F. Mark
[email protected]

  • No noteworthy decisions to report on this week.


Eric T. Boron

[email protected]

  • Native Tribe’s Demand Letter Triggered Title Insurer’s Duty to Defend, Says Washington Supreme Court 


Marina A. Barci

[email protected]

  • Insurer Fails to Support Declaratory Judgment Action with Admissible Evidence

  • Insured Has Standing to Sue Carrier Directly Even Though Assignments of Benefit were Made


Ryan P. Maxwell

[email protected]

Legislative (and Executive) List

  • Excerpts and/or Summaries of Pending or Enacted Legislation and Executive Orders Defining the Scope of Immunities Granted to Healthcare Providers (and others) Nationwide

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

  • Governor Cuomo Unilaterally Extends the Child Victims Act “Look Back” Period in Light Of COVID-19 Related Court Closures


Cara A. Cox

[email protected]

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

  • When the Global Economy Hits Home, Do You Have Coverage?

  • First Came the Plague, then Came the Flood: The April 27, 2020 Fort McMurray Flood



Stay healthy. Stay strong.  I thought I’d change my photo for this signature block.

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]

05/06/20       Rinaldi v. Wakmal and Utica First Ins. Co.
Appellate Division, Second Department
No Coverage under Auto or Homeowner’s Policy for Assault

Rinaldi, was involved in a physical altercation with the defendant Wakmal. It is undisputed that Rinaldi struck Wakmal in the face twice during the altercation. Wakmal subsequently commenced a personal injury action against Rinaldi (the “underlying action”).

Rinaldi was covered under a homeowner's insurance policy issued by Utica First (“Utica”) and an auto policy issued by Progressive. Rinaldi tendered the defense of the underlying action to both insurers, who both disclaimed coverage. Rinaldi sued both carrier seeking defense and indemnity. Rinaldi moved for summary judgment on the complaint insofar as asserted against Utica and Progressive, and those defendants separately cross-moved for summary judgment, in effect, declaring that they are not obligated to defend or indemnify Rinaldi in the underlying action.

The duty to defend is triggered whenever the allegations of a complaint, liberally construed, suggest a reasonable possibility of coverage, or the insurer has actual knowledge of facts establishing a reasonable possibility of coverage. An insurance carrier can be relieved of its duty to defend if it establishes, as a matter of law, that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision.

When an insurer seeks to disclaim coverage on the further basis of an exclusion, the insurer will be required to provide a defense unless it can demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation.

Here, the coverage provided by the automobile policy issued by Progressive was limited to accidents arising out of the ownership, maintenance, or use" of the covered vehicle. Progressive met its initial burden of demonstrating, prima facie, that the incident at issue, a physical altercation which occurred after Rinaldi and Wakmal had left their respective vehicles, did not arise from the ownership, maintenance, or use of the covered.  Policyholder had nothing really to say about it and accordingly, no auto coverage for the altercation.

Similarly, Utica demonstrated that despite the manner in which the cause of action in the underlying action was labeled, the assault alleged therein was an intentional act, which did not constitute an "occurrence" within the meaning of Utica's policy. Since there was, accordingly, no legal basis upon which Progressive or Utica could be held liable for coverage, they had no obligation to defend or indemnify Rinaldi. Moreover, coverage for Rinaldi's conduct was also barred by exclusions in both policies for bodily injury caused by, or resulting from, intentional acts of the insured.


Steven E. Peiper
[email protected]

05/07/20       Williams v. New York Prop. Ins. Underwriting Ass’n
Appellate Division, First Department
Failure to Comply with Inspection Requirement Results in Cancellation of Coverage

The New York Property Insurance Underwriting Association is a statutorily created program which was created to assist underserved/high risk areas in securing fire insurance.  Created by Insurance Law § 5402, NYPIUA is granted specific authority to develop and implement a “plan of operation.”  As part of that plan, NYPIUA specifically exempts an applicant from coverage if, “after reasonable notice,” the applicant failed to provide access for inspection. 

Here, NYPIUA’s underwriting supervisor submitted an affidavit establishing the existence of a “plan of operation” which detailed, inter alia, the need to be submit to an inspection.  In addition, NYPIUA also elicited an affidavit from an investigator who demonstrated at least two failed attempts to access the premises.  On this basis, the Court found that NYPIUA had properly cancelled the policy. 

In opposition, plaintiff argued that he never received the cancellation.  The Court rejected this argument on that basis of the commonly accepted “presumption of mailing” where NYPIUA demonstrated the cancellation was sent in the ordinary course of business. Moreover, the court noted additional evidence indicating that the cancellation notice was also sent to plaintiff’s broker, who, in turn, acknowledged receipt. 

Brownstone Capital, LLC v. Lindsay
Appellate Division, Second Department
Where Defendant Produces Specific Evidence of Residency Elsewhere, a Hearing is Needed to Determine Sufficiency of Leave & Mail Service

The instant matter begin in December of 2016 seeking to compel specific performance of a real estate contract.  Plaintiff attempted to serve defendant at his last know address in Brooklyn by leaving the Summons and Complaint with a “personal of suitable age and discretion” pursuant to CPLR 308(2).  Plaintiff, thereafter, sent a copy of the Summons and Complaint to the same address via the United States Postal Service.

In February of 2018, plaintiff moved for a default judgment.  The motion was converted to an Order on February 26, 2018.  In response, defendant moved to vacate and dismiss the claim on the grounds that he was never properly served.  In support of the motion, defendant submitted an affidavit alleging that he was a resident of Florida and that he never resided at the property in Brooklyn.  To further support his position, defendant submitted insurance and utility bills, his driver’s license and a tax return all of which suggested he lived in Florida.

When the trial court denied defendant’s application to vacate, the instant appeal ensued.  In reversing the trial court, the Appellate Division noted that the process server’s affidavit is sufficient to establish prima facie evidence that service was sufficient.  The burden then rests with the defendant to adduce information to the Court’s attention which contradicts the process server’s affidavit.  The Court specifically says that bare allegations are insufficient, but rather the movant must demonstrate “specific facts [that] generally rebuts the presumption of proper service.”

Where, as here, the defendant/movant meets this burden, an evidentiary hearing on the sufficiency of service is necessary.  Accordingly, the matter was remanded to the Supreme Court, Kings County for further proceedings. 


Michael J. Dischley
[email protected]

05/06/20       Kiran Deep v. City of New York, et al.
Appellate Division, Second Department
Plaintiff Fails to Establish a Reasonable Excuse for Default and Therefore Court Did Not Need to Determine any Potentially Meritorious Defense

In an action to recover damages for personal injuries, plaintiff was allegedly injured when the vehicle she was operating collided with a vehicle owned by the defendant City of New York and operated an employee of the City of New York Department of Parks and Recreation.

The defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendants' motion was originally returnable on April 13, 2018, but was adjourned to May 11, 2018, and then further adjourned by Order to June 22, 2018, with direction that opposition to the motion be served by June 1, 2018. Approximately two weeks prior to June 22, 2018, the plaintiff's attorney contacted the court to request another adjournment, contending that she was waiting for an expert report necessary to oppose the motion, and was advised that any request for an adjournment had to be made at the calendar call on the scheduled return date of the motion. The plaintiff did not serve any papers in opposition to the defendants' motion and did not appear in court on June 22, 2018. By order dated June 22, 2018, the court granted the defendants' unopposed motion for summary judgment dismissing the complaint.

Thereafter, the plaintiff moved, in effect, pursuant to CPLR 5015(a)(1) to vacate the order dated June 22, 2018. However, by order dated September 14, 2018, the Supreme Court denied the plaintiff's motion. The plaintiff appeals.

Pursuant to CPLR 5015, "the court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person with such notice as the court may direct, upon the ground of . . . excusable default" (CPLR 5015[a][1]). "A party seeking to vacate an order entered upon his or her default in opposing a motion must demonstrate both a reasonable excuse for the default and a potentially meritorious opposition to the motion" (Harrison v Toyloy, 174 AD3d 579, 580; see Santos v Penske Truck Leasing Co., 105 AD3d 1029, 1029). "A motion to vacate a default is addressed to the sound discretion of the court" (Vujanic v Petrovic, 103 AD3d 791, 792; see Harrison v Toyloy, 174 AD3d at 580). "Upon an application satisfying the requirements of . . . subdivision (a) of rule 5015, the court shall not, as a matter of law, be precluded from exercising its discretion in the interests of justice to excuse delay or default resulting from law office failure" (CPLR 2005).

Here, the Appellate Court found that the Supreme Court providently exercised its discretion in declining to accept the plaintiff's proffered excuse of law office failure, more specifically that the plaintiff's default in appearing in court on June 22, 2018, was due to law office failure occasioned by a "clerical error," which resulted in "the date being miscalendared," since it was not supported by a "detailed and credible explanation of the default" (Vujanic v Petrovic, 103 AD3d at 792; see Servilus v Walcott, 148 AD3d 743, 744; Dobbyn-Blackmore v City of New York, 123 AD3d 1083, 1084).

The plaintiff's attorney's additional contention, that a misspelling of her firm's name in "e-courts" resulted in the matter not appearing in the firm's calendar, was improperly raised for the first time in reply (see Harrison v Toyloy, 174 AD3d at 580) and, in any event, under the circumstances presented, failed to establish a reasonable excuse for the plaintiff's default in appearing in court on June 22, 2018.

Moreover, the Appellate Court found that the Supreme Court's determination that the plaintiff's default was not occasioned by law office failure, but rather was due to willful neglect, is supported by evidence in the record that approximately two weeks prior to the scheduled return date of the motion, the plaintiff's attorney contacted the court in order to request an adjournment and was advised that any application for an adjournment had to be made at the calendar call on the scheduled return date of the motion.

Furthermore, the plaintiff counsel’s conclusory assertion that she could not timely oppose the defendants' motion, because she was waiting for an expert report, was insufficient to establish a reasonable excuse for the plaintiff's default in opposing the motion (see Harrison v Toyloy, 174 AD3d at 580).

Based on the foregoing, he Appellate Court found that as the plaintiff failed to establish a reasonable excuse for her default, it is unnecessary to determine whether she had a potentially meritorious opposition to the defendants' motion (see Servilus v Walcott, 148 AD3d at 744; Dobbyn-Blackmore v City of New York, 123 AD3d at 1084).


Agnes A. Wilewicz

[email protected]

05/12/20       American Family Mutual Ins. Co. v. Mid-American Grain Distr.
U.S. District Court, Eighth Circuit
Eighth Circuit Holds that Defective Design and Poor Workmanship Claims were Foreseeable as a Matter of Law, Thus They Were Not an “Accident” and Therefore not an “Occurrence” Under CGL Policy (Missouri Law)

American Family Mutual had issued a commercial general liability insurance policy to Mid-American Grain Distributors, for a policy year of 2014-2015. In February 2015, Mid-American entered into an oral agreement with Lehenbauer to design and construct a grain storage and distribution facility. Mid-American performed that work, but within a year Lehenbauer terminated those services. They then sued Mid-American for breach of contract, negligence, breach of implied duties of workmanlike performance, and damages arising out of a “multitude of design and construction issues”. Mid-American sought defense and indemnification under its policy with American Family, and coverage litigation ensued.

At issue in the coverage case was whether there was even an alleged “accident” in the first instance. This was important because the CGL policy, like many, only provided liability coverage (i.e. defense and indemnification) for “occurrences”. An “occurrence” was defined in the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions”. If, from the pleadings, there was even a reasonable possibility of coverage for the alleged claims, the duty to defend would trigger. However, if the allegations did not even allege an occurrence, the insured would neither be entitled to defense nor indemnification of the claims. At the outset, it is the insured’s burden to demonstrate this in the first place.

Here, under Missouri law, an intentional act could be an “accident”, in some limited circumstances. The scope of the inquiry is to determine whether the insured foresaw or expected the injury or damages that resulted from that act. That is, were the resulting damages the “normal, expected consequence” of the shoddy work. If so, they were no accident, and thus not an occurrence. The allegedly poor workmanship of Mid-American here was exactly that, normal and expected damages due to shoddy work. As pleaded, all of Lehenbauer’s damages flowed directly from the design and construction issues at the facility. Since they were thus foreseeable as a matter of law, they were not an “occurrence” under the policy.


Jennifer A. Ehman

[email protected]

05/12/20       Trimasa Resturant Partners, LLC v. Global Coverage, Inc.
Supreme Court, New York County

Hon. O. Peter Sherwood
Trial Court Finds No Special Relationship Between Insured and Broker

The facts are simple.  Trimasa, a restaurant, leased space in Tribeca, NYC to build out and operate a Japanese restaurant. Global was its broker and obtained certain primary and excess policies of insurance for the work. Trimasa’s GC noticed lead paint on the basement columns and sanded it off, rather than follow proper NYC DEP/EPA lead abatement protocols. The lead dust went airborne, got in the high-end apartments in the adjacent residential buildings which caused claims, remediation costs and damages in the millions.

The primary policy for Trimasa had an Absolute Lead Paint exclusion so the carrier disclaimed.  The GC had no coverage either.  Trimasa sued Global. It admitted it never specifically asked Global to get lead paint coverage so all it had was a claim based on a Special Relationship. That Special Relationship was based on advice and guidance, (that the court accepted as true since it was in the Complaint), that Global gave to Trimasa on other things and coverages but admittedly, not about lead.

This special relationship argument is made all the time and it is often misunderstood by attorneys and judges with a few exceptions. There is often a belief that a Special Relationship, even if it exists, is a Catch-All, applying to any and all coverage issues. It is not.

The right way to understand it and why the broker prevailed is that a Special Relationship (even if it exists), must be about the exact coverage at issue.  For example, supposed you are sued for allowing a broad Employee Exclusion to be in the policy which results in an uninsured claim. That you may have a Special Relationship with your broker on handling Claims or advising on Business Interruption coverage and limits, does not mean that you have a Special Relationship as to Employee Coverage. Unless the insured, even at the Complaint phase, alleges facts, that there was a Special Relationship as to the Employee Coverage at issue in the lawsuit, no other Special Relationship is relevant.

Judge Sherwood got that and dismissed the case noting that Trimasa did not allege that it specifically requested coverage of lead paint risk.

Notes:  Special thanks to Howard S. Kronberg, Esq., Keidel, Weldon & Cunningham, LLP, who represented the broker for this summary and congrats on the decision.  This decision is significant because, along with three prior appellate decisions, it clarifies and curtails that improper use and understanding of a Special Relationship which every policyholder’s attorney asserts against brokers and agents.  If you would like a copy of this decision, feel free to contact Howard Kronberg at [email protected].

04/29/20       Greenberg v. Utica First Ins. Co.
Supreme Court, New York County
Hon. Gerald Lebovits
Insurer Establishes Irrebuttable Presumption of Prejudice Where Notice Was Not Given Until After Default; Liability Insurer’s Contact With Health Insurer Did Not Constitute Notice By Insured

This decision arises out of an October 10, 2010 accident at a restaurant owned and operated by Thai Lemon Grass on Broadway, Inc.  The issue is whether the insured provided timely notice under a liability policy issued by Utica.

The focus of the decision is on the acts of a Peggy Stewart, a recovery analyst with Rawlings Company, LLC, and whether her contact with Utica constituted timely notice by the insured.  Rawlings had been retained by Aetna Health Plans to obtain reimbursement of medical and other expenses paid by the health insurer.  On January 7, 2011, Ms. Stewart wrote to Thai Lemon requesting the identity of its insurer.  In response, the restaurant provided Utica’s name, address, phone number and policy number.  On April 29, 2011, Ms. Stewart called the general liability department at Utica who advised that no claim had been filed against the policy.

On June 22, 2011, the injured plaintiff commenced the underlying action.  The restaurant defaulted, and a default order was issued on December 16, 2011.  An inquest was then held on June 12, 2012, and judgment awarded against the insured three months later.  When the injured plaintiff was unable to collect on the judgment, it filled this lawsuit.

Utica ultimately disclaimed based on late notice submitting that its first notice came on April 4, 2012, when, for the first time, the restaurant’s insurance broker sent copies of a recovery letter to Utica, a notice of inquest and the summons and complaint.  Utica took the position that the notice was untimely, and there was a irrebuttable presumption of prejudice.

The injured plaintiff relied on Ms. Stewart’s contact with Utica to establish timely notice.  The court however was not persuaded finding that Ms. Stewart did not clearly advise Utica that an occurrence had taken place and that notice of claim was being made.  Utica was not given any information about the accident, and Ms. Stewart did not advise that the injured plaintiff or the insured had a claim against Utica. Indeed, Ms. Stewart even acknowledged, by way of an affidavit, that even if she had mentioned the injured plaintiff's name and the date of the accident during the phone call, she would not have advised Utica that she was giving notice of the accident or asserting a claim against Utica on behalf of plaintiff or anyone else.  Moreover, notice was not given when the restaurant’s employee gave its insurance agent the summons and complaint in January 2012 as an insurance broker is the agent of the insured, not the insurer.

Having determined that the notice of claim was delayed, the court then turned to the question of whether the insurer was prejudiced as a result of the delay.  Under the Insurance Law, where the insurer alleges prejudice due to untimely notice, "the burden of proof shall be on: (i) the insurer to prove that it has been prejudiced, if the notice was provided within two years of the time required under the policy; or (ii) the insured, injured person or other claimant to prove that the insurer has not been prejudiced, if the notice was provided more than two years after the time required under the policy.”  Notwithstanding (A), though, "an irrebuttable presumption of prejudice shall apply if, prior to notice, the insured's liability has been determined by a court of competent jurisdiction . . ."

As the injured plaintiff obtained a default judgment against the restaurant in December 2011, and Utica did not receive notice until April 2012, Utica established an irrebuttable presumption of prejudice. 


Brian D. Barnas
[email protected]

05/12/20       Woods v. The Standard Fire Ins. Co.
U.S. District Court, Eastern District of Kentucky
Court Ordered Disclosure of Coverage Opinion and Post-Litigation Communications with Counsel in Bad Faith Case

Woods was driving a truck owned by her father (a Connecticut resident) and insured by Standard when she was injured in a collision in Kentucky.  Woods settled with the tortfeasor and filed a UIM claim with Standard.  Before Woods filed suit, Standard made a settlement offer in which it offset the UIM coverage limits as permitted by Connecticut law.  Woods disagreed and argued that Kentucky law applied.  Woods filed suit alleging breach of contract and bad faith claims.  The claims were bifurcated, and eventually the breach of contract claim was settled.  The bad faith claims continued.

A discovery dispute arose during the bad faith claim.  Woods sought Standard’s in-house counsel’s coverage opinion on the legal issues, communications with trial counsel up to shortly before the motion was filed, draft pleadings and filings prepared by trial counsel, and post-complaint claim notes.

First the court considered whether the attorney client privilege applied.  Kentucky law does not provide a categorical exception for the attorney-client privilege in bad faith cases.  However, the prevailing view of Kentucky law is that the attorney-client privilege and work product doctrine are generally inapplicable in first party bad faith cases.  The court concluded the attorney client privilege did not apply to the coverage opinion or to trial counsel’s communications with Standard about the breach of contract claim.  The Court found that the communications were relevant to whether Standard had a reasonable basis to apply offsets and held that Standard would not be prejudiced by turning over communications related to the defense of claims not currently pending against it (the settled contract claim).

The court declined to order Standard to turn over communications between Standard and trial counsel related to the pending bad faith claim.

Turning to work product, the court ordered Standard to produce the claim file, including information that was entered post-suit.  However, the court did permit Standard to redact information about the bad faith claims in the complaint from the claim file.  The court did permit Standard to withhold trial counsel’s draft pleadings and court filings as work product.  Lastly, the court ordered Standard to disclose the coverage opinion as it concluded that the driving force behind the coverage opinion was not anticipated litigation but rather was determining whether and how much to pay on the claim.  The court also noted that Standard’s position was undercut by the fact that it had offered to disclose it in exchange for withholding other privileged material.


John R. Ewell
[email protected]

05/12/20       New Jersey Transit Corp. v. Sanchez
New Jersey Supreme Court
New Jersey Supreme Court Cannot Agree on Interplay between Workers Compensation and Auto Insurance. The Appellate Division’s Ruling that, a Workers’ Compensation Carrier can Pursue Subrogation from Tortfeasor’s Automobile Liability Carrier, Will Stand.

New Jersey Transit Corporation (New Jersey Transit) sought to recover workers’ compensation benefits paid to an employee, David Mercogliano, who sustained injuries in a work-related motor vehicle accident. It sued the individuals allegedly at fault in the accident, defendants Sandra Sanchez and Chad Smith, pursuant to N.J.S.A. 34:15-40, a provision of the Workers’ Compensation Act that authorizes employers and workers’ compensation carriers that have paid workers’ compensation benefits to injured employees to assert subrogation claims.

Mercogliano was acting in the course of his employment when the New Jersey Transit vehicle he was driving was struck from the rear by a vehicle driven by defendant Sanchez and owned by defendant Smith. At the time of his accident, Mercogliano was insured under a standard automobile policy, under which he was entitled to personal injury protection (PIP) and other benefits. New Jersey Transit’s workers’ compensation carrier paid Mercogliano workers’ compensation benefits. Mercogliano neither sought nor received PIP benefits under his automobile insurance policy in connection with his accident.

New Jersey Transit filed a complaint seeking to “recoup workers’ compensation benefits pursuant to N.J.S.A. 34:15-40(f).” Defendants pled as an affirmative defense that New Jersey’s no-fault insurance statutory scheme barred New Jersey Transit’s subrogation claim and moved for summary judgment. The trial court granted defendants’ motion, ruling that New Jersey Transit could not assert a claim based on economic loss. It noted that N.J.S.A. 39:6A-2(k) defines economic loss for purposes of AICRA to mean “uncompensated loss of income or property, or other uncompensated expenses, including, but not limited to, medical expenses.” In the trial court’s view, because New Jersey Transit’s workers’ compensation carrier paid benefits for all of Mercogliano’s medical expenses and lost income, he had no “uncompensated loss of income or property,” and thus sustained no economic loss for purposes of AICRA. The trial court relied on Continental Insurance Co. v. McClelland, 288 N.J. Super. 185 (App. Div. 1996), and policy considerations in reaching its decision.

The Appellate Division reversed that judgment. The Appellate Division agreed with New Jersey Transit that its subrogation action arose entirely from “economic loss comprised of medical expenses and wage loss, not noneconomic loss.” However, it rejected the trial court’s view that an employer’s or workers’ compensation carrier’s subrogation claim based on benefits paid for economic loss contravenes AICRA’s legislative intent. The Appellate Division noted that in the Workers’ Compensation Act, the Legislature imposed on an employer the obligation to pay workers’ compensation benefits for an accident arising from an injured workers’ employment, and that N.J.S.A. 34:15-40 “gives the workers’ compensation carrier an absolute right to seek reimbursement from the tortfeasor for the benefits it has paid to the injured employee.”

The Appellate Division acknowledged that N.J.S.A. 39:6A-6’s collateral source rule places the primary burden on the employer’s workers’ compensation carrier to compensate an employee injured in the course of employment, in the event that only workers’ compensation benefits and PIP benefits are available sources of reimbursement. It noted, however, that “where both workers’ compensation benefits and the proceeds of a tort action have been recovered, the tort recovery is primary” under N.J.S.A. 34:15-40. The Appellate Division therefore concluded that the collateral source rule posed no obstacle to New Jersey Transit’s claim.

The Appellate Division viewed Continental to have been rejected by subsequent Appellate Division jurisprudence, and declined to follow it. The court instead invoked Lambert v. Travelers Indemnity Co. of America, 447 N.J. Super. 61, 67, 75 (App. Div. 2016), which identified the Workers’ Compensation Act – not AICRA – as the governing law for subrogation claims based on workers’ compensation benefits paid to workers injured in motor vehicle accidents in the course of their employment. The Appellate Division therefore reversed and remanded the matter for the entry of partial summary judgment in favor of New Jersey Transit.

The New Jersey Supreme Court granted certification. Following extensive briefing and oral argument, the justices of the Supreme Court were split 3-3.

Due the deadlock, the judgment of the Appellate Division is, by default, affirmed.

Concurring Opinion:

Justice Patterson, Chief Justice Rabner, and Justice Fernandez-Vina concurred with the Appellate Division’s judgment and voted in favor of allowing workers compensation carriers to pursue subrogation against the tortfeasors and transfer the risk to the tortfeasor’s auto insurer.

Justice Patterson wrote the concurring opinion and noted that the Workers’ Compensation Act provides employers or carriers with a mechanism through which to recover benefits paid when the injuries that necessitated those benefits were caused by a third party, N.J.S.A. 34:15-40, which limits the employer’s or carrier’s right of recovery to the same “action that the injured employee . . . would have had against the third person,” in accordance with traditional principles of subrogation. Justice Patterson next traced the history of AICRA and observes that, under N.J.S.A. 39:6A-6, when an employee injured in a work-related accident is entitled to benefits under the Workers’ Compensation Act, that statute – not AICRA – provides his or her primary source of recovery for medical expenses and lost wages.

In Justice Patterson’s view, when the Legislature enacted AICRA, it did not amend the Workers’ Compensation Act to eliminate or circumscribe the statutory right of subrogation in cases involving injuries to employees in motor vehicle accidents.

She reviewed relevant case law and noted that Continental was not followed in later Appellate Division decisions. Noting that the trial court will have the discretion upon remand to expand the record and resolve any factual dispute about whether all payments were economic loss, Justice Patterson confined her analysis to workers’ compensation subrogation based on payments made for economic loss. Justice Patterson explained that, to the trial court, the act that gave rise to New Jersey Transit’s subrogation claim – its payment of benefits to Mercogliano under N.J.S.A. 34:15-15 and N.J.S.A. 34:15-12(a), (c) –simultaneously defeated that claim, because it left Mercogliano with no “uncompensated” loss.

In addition, Justice Patterson discerned no evidence that the Legislature intended to bar a workers’ compensation subrogation claim by virtue of the very benefits that created that claim in the first place and instead concludes, like the Appellate Division, that Mercogliano suffered an economic loss in the form of medical expenses and lost wages, and that New Jersey Transit paid him benefits for that economic loss.

Dissenting Opinion:

Justices Albin, LaVecchia, and Solomon disagreed with the Appellate Division and voted to reverse the Appellate Division, and rule that the workers’ compensation carrier’s subrogation action against the tortfeasors (and their auto liability insurers) was barred by AICRA.

Justice Albin authored the dissenting opinion and expressed the view that, when a driver is involved in a work-related automobile accident and his economic costs are recoverable under either his private automobile insurance carrier’s personal injury protection (PIP) policy or under his employer’s workers’ compensation scheme, New Jersey’s no-fault automobile insurance system makes the workers’ compensation carrier primarily responsible for reimbursing those costs. When an injured driver’s economic losses are “collectible” under his PIP policy but paid by his employer’s workers’ compensation carrier, Justice Albin explained, the no-fault system prohibits a workers’ compensation subrogation action against the tortfeasor or the tortfeasor’s automobile liability insurance carrier. See N.J.S.A. 39:6A-6, -12. In Justice Albin’s view, allowing the workers’ compensation carrier here to sue the tortfeasors or their automobile insurance carrier in a subrogation action permits the very outcome the Legislature intended to foreclose through adoption of no-fault insurance – more litigation and greater financial burdens on the automobile insurance system.

Lee S. Siegel

[email protected]

05/05/20       Liberty Mutual Ins. Co. v. Puchovich
United States District Court, District of Connecticut
How to Train Your Umpire

In this period of mostly all COVID-19 all the time, we decided to highlight a basic property insurance issue: how do parties pick an appraisal umpire? Magistrate Judge William Garfinkel addressed that very question in a recent dispute between Liberty Mutual and its homeowner-insureds, Mark and Oksana Pukhovich. The insured property is in Monroe, a tony suburb in eastern Fairfield County. It’s a nice house, looks like it even has a pool.

Unfortunately, the Pukhovichs experienced a water loss event and could not come to an agreement with Liberty as to the value of the loss to their home. And, to make matters worse, neither side could agree on a “disinterested umpire” to arbitrate the dispute. Connecticut homeowner’s policies provide an appraisal process to resolve these things.

6. Appraisal. If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and disinterested appraiser within 20 days after receiving a written request from the other. The two appraisers will choose a competent and disinterested umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the “residence premises” is located.

As Judge Garfinkel noted, the policy provides no instruction to the court on the criteria to employ in selecting the disinterested umpire. “Here, the Policy does not provide criteria to be used in the umpire section process,” the court wrote.

As luck would have it, there was limited Connecticut case law for Judge Garfinkel to consult. In the only case apparently on point, Connecticut Magistrate Judge Smith was called on to appoint a neutral in a reinsurance arbitration between two insurance companies. In re The Travelers Indem. Co., No. CIV. 3:04 MC 196(TPS, 2004 WL 2297860 (D. Conn. Oct. 8, 2004). There, the court weighed the impartiality, relevant arbitration experience, and experience in the insurance and reinsurance business of the proposed umpires. Judge Garfinkel noted that treatises provide that, “[G]enerally accepted insurance principles dictate only that ‘an umpire selected to arbitrate a loss should be disinterested, unprejudiced, honest and competent.’” Brothers v. Generali U.S Branch, No. CIV.A. 1:97–CV–798–MHS, 1997 WL 578681, at *3 (N.D. Ga. July 11, 1997) (quoting 6 Appleman, Insurance Law and Practice § 3928, at 554 (1972)). The umpire “should be impartial, honest, and competent, and should not live an unreasonable distance from the scene of the loss.” Corpus Juris Secundum, Insurance § 1897 (2011).

Using these guideposts, Judge Garfinkel appointed William Zimmer as the disinterested umpire. The judge cited Zimmer’s experience as a property adjuster, working his way up to  VP Claims-Master Adjuster, that he is licensed in Connecticut among other states, that he is resident in Connecticut and available, that he has served as an appraiser or umpire in 16 prior Connecticut matters for 14 different insurers, and concluded that Zimmer would be unbiased. Although Zimmer has done work on behalf of Liberty previously, he readily disclosed that as a potential conflict, which the court found compelling.


Diane L. Bucci
[email protected]

Not much on the Coverage B beat this time.


Brian F. Mark
[email protected]

No noteworthy decisions to report on this week.


Eric T. Boron

[email protected]

05/07/20       Robbins v. Mason County Title Ins. Co.
Washington Supreme Court
Native Tribe’s Demand Letter Triggered Title Insurer’s Duty to Defend, Says Washington Supreme Court 

This case concerns privately owned coastal property’s tidelands and clam beds. A native tribe issued a letter to the property owners of the tribe’s intent to harvest clams from the tidelands under fishing rights the tribe had obtained through a treaty made in 1854 with the federal government.  This case also involves a 37-year-old title insurance policy with an exclusion from coverage of claims arising from “easements not disclosed by the public records.”

The Washington Supreme Court’s holding that the title insurer was under a duty to defend against the tribe’s intent to harvest clams turned in part on specific Washington state property laws, but also arguably reflects a concerning trend developing in the high courts of this land that insurers “put their insured’s needs before their own”, as the Supreme Court of Washington put it, when interpreting and applying their own insurance policies.

Background Facts:  When Leslie and Harlene Robbins purchased property in Mason County, Washington state in 1978, they obtained from Mason County Title Insurance Company (“MCTI”) a standard title insurance policy.  That title insurance policy provided MCTI will insure Leslie and Harlene Robbins “against loss or damage sustained by reason of: ... [a]ny defect in, or lien or encumbrance on, said title existing at the date hereof.” Specifically, the title insurance policy stated:

[MCTI] shall have the right to, and will, at its own expense, defend the insured with respect to all demands and legal proceedings founded upon a claim of title, encumbrance or defect which existed or is claimed to have existed prior to the date hereof and is not set forth or excepted herein.

The Robbinses sued MCTI after MCTI refused to defend the Robbinses against a claim arising from a letter issued by the Squaxin Island Tribe asserting the 1854 Treaty of Medicine Creek gave the tribe the right to take shellfish on the Robbinses’ tidelands.  The tribe’s treaty right “is not disputed in this case”, according to the opinion of the Supreme Court of Washington.    MCTI’s position was that the tribe’s treaty claims were excluded from coverage because they concerned public or private easements not in the public records searchable by MCTI. The Robbinses contended MCTI’s refusal to defend not only breached its obligations under the title insurance policy, but reflected bad faith claim handling.

The Superior Court (trial level) granted MCTI summary judgment.  The Court of Appeals reversed, holding there was a duty to defend owed by MCTI to the Robbinses, a further finding MCTI’s breach of that duty to defend constituted bad faith.

Washington’s Supreme Court determined the tribe’s letter constituted a “demand” triggering coverage obligations.       


Marina A. Barci
[email protected]

05/04/20       Liberty Mut. Ins. Co. v. Martin
Supreme Court, New York County
Insurer Fails to Support Declaratory Judgment Action with Admissible Evidence

Liberty Mutual brought a declaratory judgment action against injuries parties and their medical providers seeking an order that it was not required to pay no-fault benefits on two grounds: 1) EIP Jackson failed to appear for properly scheduled examinations under oath, thereby breaching a condition precedent to coverage and barring him and his assigned medical providers from recovering no-fault benefits; and 2) Alleged EIPs Martin and Bailey staged the collision.

As to the first ground, the Court found that Liberty Mutual failed to show Jackson was properly notified of the scheduled EUOs. The scheduling letters with affidavits of service attached had no signatures, dates, or notarizations on the affidavits, thus they are defective and cannot be used to establish that the letters were properly mailed. No other evidence was submitted to show notification of the EUOs, so Liberty Mutual’s declaratory judgment was dismissed against Jackson.

An insurer seeking a declaration of no coverage on default based on a conclusion that the underlying collision was staged must establish prima facie the "fact or founded belief that the alleged injury does not arise out of an insured incident." Here, Liberty Mutual submits an affidavit from a claims investigator familiar with the case to support its conclusion that the collision was not genuine. That affidavit, in turn, relies heavily on the transcripts from the EUOs of Martin and Bailey. The Court found that Liberty Mutual failed to show that those transcripts are admissible (the transcripts are not signed and there is no evidence they were provided to Martin and Bailey to review and sign) and therefore the key portions of the affidavit in support were based in hearsay. Thus, Liberty Mutual did not establish a founded belief that Martin and Bailey were engaged in insurance fraud rather than being genuine victims of a car accident and the motion for default judgment was denied.

05/06/20       Allstate Ins. Co. v. Kapeleris
Appellate Division, Second Department
Insured Has Standing to Sue Carrier Directly Even Though Assignments of Benefit were Made

Defendant Kapeleris, was involved in a motor vehicle collision in April 2008. In October 2008, Kapeleris underwent spinal surgery at Winthrop University Hospital, which was performed by a physician associated with Long Island Neurosurgical Associates, P.C. Nassau Anesthesia Associates provided the anesthesia services for the surgery. Kapeleris assigned her right to no-fault insurance benefits for medical expenses to Winthrop and to Nancy Epstein, a physician who was associated with LI Neurosurgical.

In November 2008, Winthrop submitted a claim to Kapeleris' insurer, Allstate, for no-fault benefits related Kapeleris' surgery and related care in the amount of $51,489.16. That same month, LI Neurosurgical submitted a claim to Allstate in the amount of $6,348.99, and Nassau Anesthesia submitted a claim for $1,263.63. Allstate denied all three claims on the ground that the services were not medically necessary based upon an independent medical examination that was performed in August 2008. Subsequently, the three providers billed Kapeleris directly for their services. In August 2011, Kapeleris settled the bills submitted by the three providers through direct payments made from an attorney trust account by the attorneys representing Kapeleris in connection with her personal injury action stemming from the underlying accident. Payment was made to Winthrop in the amount of $21,317.02, to LI Neurosurgical in the amount of $2,250, and to Nassau Anesthesia in the amount of $1,542.86.

In February 2014, Kapeleris submitted the matter to arbitration seeking $33,588.11 in connection with the three claims at issue. In March 2015, the arbitrator rendered an award in favor of Kapeleris in the sum of $10,682.87. Allstate appealed the award to a master arbitrator, who affirmed the award. Allstate then commenced this action pursuant to Insurance Law § 5106(c) for a de novo determination of Kapeleris' claims for no-fault benefits. Kapeleris served an answer to the complaint that included a counterclaim for no-fault benefits. Allstate moved for summary judgment or, in the alternative, to dismiss Kapeleris' counterclaim for lack of standing, arguing that Kapeleris assigned her rights to those benefits to the medical providers that treated her. Kapeleris cross-moved, among other things, for summary judgment dismissing so much of the complaint as alleged that she lacked standing and, in effect, for a determination that she had standing to seek recovery of no-fault insurance benefits from Allstate.

An accident victim may assign his or her no-fault claim to a medical provider who has provided a medical service. The no-fault regulations provide that assignments must be made on the prescribed statutory forms and the prescribed language requires the assignee (treatment provider) to certify that "[t]hey have not received any payment from or on behalf of the assignor [patient] and shall not pursue payment directly from the assignor for services provided by said assignee for injuries sustained due to the [subject] motor vehicle accident" (11 NYCRR R Appendix 13 [NYS Forms NF-3, NF-4, NF-5, NF-AOB]). In the opinion of the DFS Office of General Counsel, a health care provider who has accepted a no-fault assignment of benefits from a no-fault claimant may not pursue the patient directly for health services rendered that have been denied as medically unnecessary.

Here, in support of her cross motion, Kapeleris submitted evidence establishing that although she had assigned her right to no-fault benefits to two medical providers, Winthrop and Nancy E. Epstein, she was billed directly by Winthrop and LI Neurosurgical for their services after the claims of those providers were denied by Allstate for lack of medical necessity and that she remitted payment to those providers for their services in connection with the subject accident. Thus, neither Winthrop nor LI Neurosurgical could certify that "[t]hey have not received any payment from or on behalf of the assignor [Kapeleris]," and that they would "not pursue payment directly from the assignor for services provided by said assignee for injuries sustained due to the [subject] motor vehicle accident." This evidence was sufficient to demonstrate that the assignment to Winthrop and LI Neurosurgical, though valid when made, had been rendered ineffectual, and therefore, Kapeleris had standing to pursue her claims for no-fault benefits against Allstate for services rendered by Winthrop and LI Neurosurgical. Furthermore, there was no evidence of an executed assignment of benefits to Nassau Anesthesia. Thus, Kapeleris demonstrated that she had standing to pursue her claim for no-fault benefits against Allstate for the payments she made to all three providers. The Court determined the rest of the claims were without merit or not properly before it.


Ryan P. Maxwell
[email protected]

Legislative (and Executive) List
05/15/20          Survey of Proposed and Executed Civil Immunities For COVID-19 Nationwide
Various Legislatures, Agencies, and Executives
Excerpts and/or Summaries of Pending or Enacted Legislation and Executive Orders Defining the Scope of Immunities Granted to Healthcare Providers (and others) Nationwide

At the bottom of this column, I have provided a catalogue of links to the materials referenced throughout this column. Before we get there, I have provided what I believe to be a comprehensive digest of the purposes that such immunities would serve, the groups for which immunities would extend, the scope and extent to which those immunities might exist, and the duration for such immunities. This list is not nearly exhaustive (I am but one man, with two kids and a busy wife), but merely what I have been able to identify as pertinent to any discussion about the scope of immunities being provided to healthcare workers, facilities (and others). And, I caution, that any materials excerpted herein should be read with the understanding that the particular piece of legislation or executive order should be read in its entirety prior to assessing any particular legal issue. These are merely listed to begin a discussion about what states nationwide have done in and may do in this space in the future. Until such “immunities” are tested in the courts, the scope and extent of litigation—inevitable litigation—cannot fully be fathomed and/or determined.

Pay special attention to Utah Senate Bill 3007 that was signed by the Governor on May 4. Specifically, Section (2). In fact, I’ll excerpt that one here:

Subject to the other provisions of this section, a person is immune from civil liability for damages or an injury resulting from exposure of an individual to COVID-19 on the premises owned or operated by the person, or during an activity managed by the person.

Yes. I read it again just to make sure. Will other states follow suit?

Purposes served by immunity


Providing reasonable protections from the risk and expense of lawsuits to businesses will help encourage businesses to remain open and reopen and that providing such a safe harbor to businesses that operate reasonably consistent with applicable public health guidance will help ameliorate the social harms of a closed economy and the resulting unemployment.

The Coronavirus has put, and will continue to put, a significant strain on health care facilities, health care providers, and health care resources of this state; the Coronavirus has undermined, and will continue to undermine, the ability to deliver patient care in the traditional, normal, or customary manner; and our health care facilities, health care professionals, and their supporting workers need  protection to respond to this pandemic and to do what they can do to continue to provide treatment and services for the  people of Alabama.


Protections against liability for healthcare professionals and facilities responding to this emergency were necessary “in order to encourage maximum participation in efforts to expeditiously expand Connecticut's health care workforce and facilities capacity . . . .”


“Whereas, The deferred operation of this act would tend to defeat its purposes, which are to make certain changes in law in response to a public health emergency, each of which is immediately necessary to carry out to accomplish important public purposes, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public health and convenience.”


“It has been reported that this bill would grant immunity to all medical doctors and healthcare workers in New Jersey for all inpatient or outpatient procedures or any medical treatment rendered during the timeframe of the COVID-19 emergency. This is not an accurate statement.

The enactment of this bill is to ensure that there are no impediments to providing medical treatment related to the COVID-19 emergency and that all medical personnel supporting the COVID-19 response are granted immunity. However, medical care rendered in the ordinary course of medical practice does not provide the granting of immunity. For example, procedures performed by licensed medical professionals in their ordinary course of business, including orthopedic procedures, OB/GYN services, and necessary cardiological procedures.

It is not the Legislature’s intent to grant immunity for medical services, treatment and procedures that are unrelated to the COVID-19 emergency.”

Group of Individuals/Entities Immunized


COVERED ENTITY. Any of the following: A business entity; health care provider; educational entity; church; governmental entity; cultural institution; any director, officer, trustee, manager, member, employee, or agent of the covered entity with respect to any act or omission performed while acting on behalf of the covered entity.


The term "health care professional" means an individual who is licensed, registered, permitted, or certified in any state in the United States to provide health care services and any retired professional, professional with an inactive license, or volunteer approved by the Commissioner of the Department of Public Health or her designee. The term "health care facility" means a licensed or state approved hospital, clinic, nursing home, field hospital or other facility designated by the Commissioner of the Department of Public Health for temporary use for the purposes of providing essential services in support of the State's COVID-19 response.


“Health care facility” means any program, institution, place, building, or agency, or portion thereof, private or public, other than federal facilities or services, whether organized for profit or not, used, operated, or designed to provide medical diagnosis, treatment, nursing, rehabilitative, or preventive care to any person or persons. . . .

"Health care professional" means physicians and surgeons and others [], podiatrists licensed [], dentists [], psychologists [], nurses [], veterinarians [], acupuncturists [], massage therapists [], naturopathic physicians [], chiropractors [], occupational therapists [], physical therapists [], respiratory therapists licensed [], speech pathologists or audiologists [], and pharmacists . . . who (i) are providing health care services at a health care facility in response to the COVID-19 outbreak and are authorized to do so; or (ii) are working under the direction of the Hawai‘i Emergency Management Agency (HIEMA) or Hawai‘i Department of Health (HDOH) pursuant to any Executive Order . . . related to the COVID-19 outbreak (hereinafter collectively referred to as Emergency Proclamations).  

“Health care volunteer” means all volunteers or medical, nursing, social work, occupational, physical, or respiratory therapist students who do not have licensure who (i) are providing services, assistance, or support at a health care facility in response to the COVID-19 outbreak and are authorized to do so; or (ii) are working under the direction of HIEMA or HDOH pursuant to my Emergency Proclamations.


“all health care providers, including but not limited to "health care provider" as defined in K.S.A. 40-3401, and also including registered nurses, advanced practice registered nurses, licensed practical nurses, pharmacists, unlicensed volunteers, military personnel, or students and other support personnel and all entities or individuals referenced in K.S .A. 48-915, making clinical and triage decisions and rendering assistance, testing, care or advice in the care of patients reasonably suspected or confirmed to be infected with COVID-19, rendered in response to any Kansas Department of Emergency Management mission related to the COVID-19 outbreak, and the proclamation issued declaring a state of disaster emergency pursuant to K.S.A. 48-924”


“Health care facility”, (i) hospitals, including acute and chronic disease rehabilitation hospitals, []; (ii) state hospitals, mental health centers and other mental health facilities under the control of the department of mental health []; (iii) hospitals operated by the department of public health []; (iv) psychiatric hospitals []; (v) skilled nursing facilities []; (vi) assisted living residences []; (vii) rest homes []; (viii) community health centers[] and mental health centers []; (ix) home health agencies that participate in Medicare; (x) clinics []; or (xi) sites designated by the commissioner of public health to provide COVID-19 health care services, including, but not limited to, step-down skilled nursing facilities, field hospitals and hotels.

“Health care professional”, an individual . . . (i) authorized to provide health care services pursuant to licensure or certification [] ; (ii) a student or trainee in their approved medical professional services academic training program; (iii) a nursing attendant or certified nursing aide, including an individual who is providing care as part of the individual’s approved nursing attendant or certified nurse aide training program; (iv) certified, accredited or approved [] to provide emergency medical services; (v) a nurse or home health aide employed by home health agency that participates in Medicare; (vi) providing health care services within the scope of authority or license permitted by a COVID-19 emergency rule; or (vii) a health care facility administrator, executive, supervisor, board member, trustee or other person responsible for directing, supervising or managing a health care facility or its personnel.

“Volunteer organization”, an organization, company or institution that makes its facility available to support the commonwealth’s response and activities under the COVID-19 emergency.


“Health care facility” means any healthcare facility [], and any modular field treatment facility and any other site designated by the Commissioner of Health for temporary use for the purpose of providing essential services in support of the State’s response to the outbreak of coronavirus disease during the public health emergency and state of emergency declared by the Governor in Executive Order 103 of 2020.

“Health care professional” means a physician, physician assistant, advanced practice nurse, registered nurse, licensed practical nurse, or other health care professional [] who is [] authorized to provide health care services in this State, an emergency medical technician or mobile intensive care paramedic [], and a radiologic technologist [].


According to our Medical Malpractice team, Executive Order 202.10 extended immunities to Physicians; Physician Assistants; Specialist Assistants; Nurse Practitioners; Licensed Registered Professional Nurses; and Licensed Practical Nurses, and has been extended to hospitals, nursing homes, and other facilities under the newly enacted “Emergency or Disaster Treatment Protection Act

  • OHIO:

"Health care provider" means a health care professional, health care worker, or emergency medical technician or a home health agency, hospice care program, or facility, including any agent, board member, committee member, employee, officer, or volunteer acting in the course of the individual's service or employment.

"Health care services" means services rendered by a health care provider for the diagnosis, prevention, treatment, cure, or relief of a health condition, illness, injury, or disease, including the provision of any medication, medical equipment, or other medical product.

"Health care worker" means a person other than a health care professional or emergency medical technician who provides medical, dental, or other health care services under the direction of a health care professional authorized to direct the individual's activities. "Health care worker" includes a medical technician, medical assistant, dental assistant, orderly, nurse aide, and any other individual acting in a similar capacity.


"Health care facility" and "health care provider" shall have the same meaning as such terms are defined as provided in Section 6104 of Title 63 of the Oklahoma Statutes; and

"Health care services" means any services provided by a health care facility, health care provider, or by an individual working under the supervision of a health care facility or provider, that relate to the diagnosis, assessment, prevention, treatment, aid, shelter, assistance, or care of illness, disease, injury, or condition.


Any individual who holds a license, certificate, registration or certification or is otherwise authorized to practice a health care profession or occupation in this Commonwealth, and who is engaged in emergency services activities or the provision of disaster services activities related to the Commonwealth's COVID19 disaster emergency response pursuant to my March 6, 2020 Proclamation of Disaster Emergency in the following ty pes of facilities and care settings;

Any health care facility, within the meaning of section 802a of the Health Care Facilities Act, 35 P.S. § 448.802a, any nursing facility, personal care home as defined in 55 Pa. assisted living facility, as defined in Pa. Code § 2800.4 engaged in emergency services activities or the provision of disaster services activities related to the Commonwealth's COVID-19 disaster emergency response pursuant to my March 6, 2020 Proclamation of Disaster Emergency; or

Any alternate care site, community-based testing site, or non-congregate care facility used for the purpose of conducting emergency services activities or the provision of disaster services activities related to the Commonwealth's COVID19 disaster emergency response pursuant to my March 6, 2020 Proclamation of Disaster Emergency.

  • UTAH:

"Health care provider" means the same as that term is defined in Section 38 78B-3-403.

Immunities Proposed/Enacted


Section 3: “a covered entity shall not be liable for any damages, injury, or death suffered by any person or entity as a result of, or in connection with, a health emergency claim that results from any act or omission of the covered entity.”

Section 4: [Where Section 3 found not to apply], “a covered entity shall not be liable for negligence, premises liability, or for any non-wanton, non-willful or non-intentional civil cause of action to which this section applies, unless the claimant shows by clear and convincing evidence that the covered entity did not reasonably attempt to comply with the then applicable public health guidance” or “for a cause of action to which this section applies, a covered entity shall not be liable for damages from mental anguish or emotional distress or for punitive damages, but may be liable for economic compensatory damages in a cause of action that does not involve serious physical injury.”

Section 5: “Absent wanton, reckless, willful, or intentional misconduct, a health care provider is not liable for any damages, injury, or death alleged to have been caused  by an act or omission of the health care provider during the  performance or provision of health care services or treatment that resulted from, was negatively affected by, was negatively impacted by a lack of resources caused by, or was done in response to the Coronavirus pandemic or the state’s response to the pandemic.”


“[A]ny health care professional or health care facility shall be immune from suit for civil liability for any injury or death alleged to have been sustained because of the individual's or health care facility's acts or omissions undertaken in good faith while providing health care services in support of the State's COVID-19 response, including but not limited to acts or omissions undertaken because of a lack of resources, attributable to the COVID-19 pandemic, that renders the health care professional or health care facility unable to provide the level or manner of care that otherwise would have been required in the absence of the COVID-19 pandemic and which resulted in the damages at issue, provided that nothing in this order shall remove or limit any immunity conferred by any provision of the Connecticut General Statutes or other law. Such immunity shall not extend to acts or omissions that constitute a crime, fraud, malice, gross negligence, willful misconduct, or would otherwise constitute a false claim or prohibited act pursuant to Section 4-275 et seq. of the Connecticut General Statutes or 31 U.S.C. §§3729 et seq. . . .


“[H]ealth care facilities, [professionals, and volunteers,] that in good faith comply completely with all state and federal orders regarding the disaster emergency, shall be immune from civil liability for any death or injury to persons, or property damage alleged to have been caused by any act or omission [], which death of or injury to persons, or property damage occurred at a time when [it or they were] engaged in the course of rendering assistance to the State by providing health care services in response to the COVID-19 outbreak, unless it is established that such death or injury to persons, or property damage was caused by willful misconduct, gross negligence, or recklessness of the health care facility.”


[All entities listed in the previous section of this column] “shall be deemed immune from suit pursuant to K.S.A. 48-915, unless it is established that any adverse event or injury was caused by the willful misconduct, gross negligence, recklessness, or bad faith of such facility or health care provider. Nothing in this Executive Order shall be construed to modify, impair or supersede State law governing legal standards, procedures or judicial interpretation used in any civil action against an entity or individual where this Order is deemed not to cover such an entity or individual because of an allegation of willful misconduct or for any other reason”


SECTION 2. (a) Notwithstanding any general or special law to the contrary, except as provided in subsection (b), health care professionals and health care facilities shall be immune from suit and civil liability for any damages alleged to have been sustained by an act or omission by the health care professional or health care facility in the course of providing health care services during the period of the COVID-19 emergency; provided, however, that: (i) the health care facility or health care professional is arranging for or providing health care services pursuant to a COVID-19 emergency rule and in accordance with otherwise applicable law; (ii) arranging for or providing care or treatment of the individual was impacted by the health care facility’s or health care professional’s decisions or activities in response to treatment conditions resulting from the COVID-19 outbreak or COVID-19 emergency rules; and (iii) the health care facility or health care professional is arranging for or providing health care services in good faith.

(b) The immunity provided in subsection (a) shall not apply: (i) if the damage was caused by an act or omission constituting gross negligence, recklessness or conduct with an intent to harm or to discriminate based on race, ethnicity, national origin, religion, disability, sexual orientation or gender identity by a health care facility or health care professional providing health care services; (ii) to consumer protection actions brought by the attorney general; or (iii) to false claims actions brought by or on behalf of the commonwealth.

SECTION 3. Notwithstanding any general or special law to the contrary, a volunteer organization shall be immune from suit and civil liability for any damages occurring in or at the volunteer organization’s facility where the damage arises from use of the facility for the commonwealth’s response and activities related to the COVID-19 emergency, unless it is established that the damages were caused by the volunteer organization’s gross negligence, recklessness or conduct with an intent to harm.


“[A] health care professional shall not be liable for civil damages for injury or death alleged to have been sustained as a result of an act or omission by the health care professional in the course of providing medical services in support of the State’s response to the outbreak of coronavirus disease during the public health emergency and state of emergency declared by the Governor in Executive Order 103 of 2020; and (2) a health care facility or a health care system that owns or operates more than one health care facility shall not be liable for civil damages for injury or death alleged to have been sustained as a result of an act or omission by one or more of its agents, officers, employees, servants, representatives or volunteers, if, and to the extent, such agent, officer, employee, servant, representative or volunteer is immune from liability pursuant to paragraph (1) of this subsection.

Immunity shall also include any act or omission undertaken in good faith by a health care professional or healthcare facility or a health care system to support efforts to treat COVID-19 patients and to prevent the spread of COVID-19 during the public health emergency and state of emergency declared by the Governor in Executive Order 103 of 2020, including but not limited to engaging in telemedicine or telehealth, and diagnosing or treating patients outside the normal scope of the health care professional’s license or practice. The immunity granted pursuant to this subsection shall not apply to acts or omissions constituting a crime, actual fraud, actual malice, gross negligence, recklessness, or willful misconduct . . . . “


According to our Medical Malpractice team, Article 30-D grant immunity from civil or criminal liability for any harm or damages alleged to have been caused as a result of an act or omission related to:

  • The diagnosis, prevention, or treatment of COVID-19;
  • The assessment or care of an individual with a confirmed or suspect-ed case of COVID-19; and
  • The care of any other individual who presents for health services during the period of the COVID-19 emergency declaration, so long as the following criteria are met:
  • The health care facility or health care professional is arranging for or providing health care services pursuant to a COVID-19 emergency rule or otherwise in accordance with applicable law;
  • The act or omission occurs in the course of arranging for or providing health care services, and the treatment of the individual is impact-ed by the health care facility or health care professional’s decisions or activities in response to or as a result from the COVID-19 outbreak and in support of the State’s directive; and
  • The health care services are provided in good faith.
  • OHIO:

Any of the listed entities or individuals are not, during or in response to a disaster or emergency, “subject to professional disciplinary action and is not liable in damages to any person or government agency in a tort or other civil action for injury, death, or loss to person or property that allegedly arises from . . . An act or omission of the health care provider  in the health care provider's provision, withholding, or withdrawal of those services; Any decision related to the provision, withholding, or withdrawal of those services; [or] Compliance with an executive order or director's order issued during and in response to the disaster or emergency.”

Notably, this does not apply if the act, omission, decision or compliance constitutes willful or wanton misconduct.


“A health care facility or health care provider shall be immune from civil liability for any loss or harm to a person with a suspected or confirmed diagnosis of COVID-19 caused by an act or omission by the facility or provider that occurs during the COVID-19 public health emergency, if:

1.  The act or omission occurred in the course of arranging for or providing COVID-19 health care services for the treatment of the person who was impacted by the decisions, activities or staffing of, or the availability or capacity of space or equipment by, the health care facility or provider in response to or as a result of the COVID-19 public health emergency; and

2.  The act or omission was not the result of gross negligence or willful or wanton misconduct of the health care facility or health care provider rendering the health care services.

D.  In no event shall this act be construed to grant immunity from civil liability for an act or omission in the provision of health care services to a person who did not have a suspected or confirmed diagnosis of COVID-19 at the time of the services.”


“The aforementioned classifications of individuals (and not the facilities or entities themselves) shall be immune from civil liability and shall not be liable for the death of or any injury to person or for loss of or damage to property as a result of the emergency services activity or disaster services activity described above, except in the cases of willful misconduct or gross negligence, to the fullest extent permitted by law. This grant of immunity shall not extend to health care professionals rendering non-COVID-19 medical and health treatment or services to individuals.”

  • UTAH:

Senate Bill No. 3002: A health care provider is immune from civil liability for any harm resulting from any act or omission in the course of providing health care during a declared major public health emergency if: the health care is provided in good faith to treat a patient for the illness or  condition that resulted in the declared major public health emergency; or the act or omission was the direct result of providing health care to a patient for the illness or condition that resulted in the declared major public health emergency; and the acts or omissions of the health care provider were not: grossly negligent; or intentional or malicious misconduct.

[Note: This includes, under certain conditions, health care provided that is outside of the health care provider’s education, training, experience, or license, or use of investigational drugs or devices]

Senate Bill No. 3007: (2) Subject to the other provisions of this section, a person is immune from civil liability for damages or an injury resulting from exposure of an individual to COVID-19 on the premises owned or operated by the person, or during an activity managed by the person.

            (Did I read that right? Hopefully, all states follow suit)



“[T]his act shall be retroactive and apply to causes of action filed on or after March 13, 2020” and “shall terminate December 31, 2021, or one 18 year after a declared health emergency relating to Coronavirus 19 expires, whichever is later.”


“The immunity conferred by this order applies to acts or omissions subject to this order occurring at any time during the public health and civil preparedness emergency declared on March 10, 2020, including any period of extension or renewal, including acts or omissions occurring prior to the issuance of this order attributable to the COVlD-19 response effort” and “[u]nless otherwise specified herein, this order shall take effect immediately and shall remain in effect for the duration of the public health and civil preparedness emergency, unless earlier modified or terminated by me.”


“[D]uring the pendency of the Emergency Proclamations . . . .”


“It shall become effective immediately and remain in force until rescinded, until May 31, 2020, or until the statewide State of Disaster Emergency proclaimed on March 12, 2020, relating to COVID-19 expires, whichever is earlier.”


“SECTION 4. This act shall take effect upon its passage and shall apply to claims based on acts or omissions that occur or have occurred during the effective period of the COVID-19 emergency, declared on March 10, 2020 and until terminated or rescinded.”


“[S]hall be retroactive to March 9, 2020.


“The immunity outlined above extends until the State of Emergency in New York has been declared lifted by Governor Cuomo.”

  • OHIO:

applies only to the provision, withholding, or withdrawal of health care services, emergency medical services, first-aid treatment, or other emergency professional care, including the provision of any medication or other medical equipment or product, decisions related to such services or care, or compliance with an executive order or director's order by a health care provider during and in response to a disaster or emergency and through the duration of the disaster or emergency .


“This act shall apply to any civil action filed on or after the effective date of this act.  The provisions of this act shall be in effect until October 31, 2020, or until such time as the Governor affirmatively concludes the emergency declarations specified in paragraph 1 of subsection B of this section, whichever is later.”


“This order is effective Immediately and shall remain in effect for the duration of the disaster emergency.”

Links to Materials

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

05/08/20       Exec. Order No. 202.29: Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency
State of New York
Governor Cuomo Unilaterally Extends The Child Victims Act “Look Back” Period in Light of COVID-19 Related Court Closures

By way of executive order, on May 8, 2019, New York State Governor Andrew Cuomo modified section 214-g of the Civil Practice Law and Rules extending the time period for which a claimant may file a civil action for damages arising out of child sexual abuse until January 14, 2021. The Governor made this executive order by virtue of Section 29-a of Article 2-B of the Executive Law of New York.

The major question related to this order is, does the Governor have the power to unilaterally extend the CVA “look back” period? The pertinent language in the Executive Law is found in § 29-a 2.a reads:

2. Suspensions pursuant to subdivision one of this section shall be subject to the following standards and limits, which shall apply to any directive where specifically indicated:

a. no suspension or directive shall be made for a period in excess of thirty days, provided, however, that upon reconsideration of all of the relevant facts and circumstances, the governor may extend the suspension for additional periods not to exceed thirty days each

While the Governor has been issuing successive executive orders suspending various statutes of limitations thirty days at a time, this is the first order where the Governor has reached beyond the thirty-day window he is allowed by law. This unilateral action follows the State Legislature’s refusal to extend the CVA “look back” period in this fiscal year’s budget. While the State’s Courts have not been oblivious to the difficulty Judge Marks’s March 22, 202 Order limiting new filings to only essential matters, statutes of limitation cannot be extended or modified (baring an emergency) by any action other than an act of the State Legislature. While the effect of this executive order beyond August 14, 2020 is not clear at this time, we suspect that, should no legislative action be taken prior to August 14th, there will certainly be challenges to any claim filed after August 14, 2020 based on the legality of the Governor’s extension.

It is suspected that this executive order was issued as a way to prompt legislative action extending the “look back” period. There have consistently been a vocal minority of State Senators who have been pushing for an extension of the “look back” period ever since the CVA was signed by Governor Cuomo in February 2019. However, as previously noted, the Legislature has been reluctant to extend the same. News stories that discuss the CVA in relation to the current health crisis consistently report that plaintiff’s attorneys have hundreds of complaints ready to be filed as soon as the courts allow. We will be monitoring this situation closely as developments are sure to come quickly. For now, the best course of action is to be sure that as soon as claims are reported they are promptly reviewed, and a coverage decision is made within the bounds of New York Insurance Law 3420(d)(2). As always, we are happy to assist in any way that we can.

Cara A. Cox
[email protected]

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

Cara’s Cross-Border Connection: Contingent Business Interruption

When the Global Economy Hits Home, Do You Have Coverage?

As explained in the April 16 article of Coverage Pointers, we discussed the necessary conditions for business interruption coverage (also known as business income coverage) to be triggered are: (1) necessary suspension of operations (2) that is caused by a direct physical loss of or damage to the insured property. Next, we discuss contingent business interruption (CBI) coverage. To begin with, CBI protection is an extension of BI coverage. However, CBI coverage provides protection to an insured for loss of income not arising from damage or loss to the insured property, but instead protects against damage or loss of property owned or operated by someone else. Accordingly, in the ever-expanding global economy, businesses that rely on third parties in their operational chain should examine their businesses needs to determine if CBI coverage is appropriate.

New York Department of Finance

The New York Department of Financial Services (“DFS”) has provided a shortlist of FAQs regarding business interruption (“BI”) coverage. One question posed is the difference between a BI and CBI policy. The DFS answers as followed:

As explained above, business interruption coverage requires a related property damage. For a contingent business interruption insurance policy, that property damage can be on someone else’s property but causes your business interruption. One example could be that a fire in a building on your street has closed the street to traffic and prevented your employees from coming to the office. As with regular business interruption insurance policies, coverage can vary and you should consult your broker or insurer or its agent. (Emphasis added).[1]

Although it appears CBI coverage is simple, there are disputes over such coverage for various reasons, including: (1) varying policy language can lead to uncertainty when applying the policy language to a particular claim or conflicting expectations between insureds and insurers; (2) an insured is left to rely on a third party’s cooperation during the investigation of a CBI claim because the physical damage occurs outside of the insured’s control and a third party may not be incentivized to cooperate given they have nothing or less to gain from cooperating with the investigation; (3) the insured and insurer may disagree over the actual impact the third party’s damage has on the insured’s business (e.g., an insurer may argue there are others reasons, including market loss, that caused or contributed to the loss of business); and (4) although there is CBI case law, the coverage is still relatively new and questions may likely remain as to the applicability of a very fact-specific case has on another with substantially varying details.

Requirements to Trigger CBI Coverage

In order to trigger CBI coverage, similar to BI coverage, there must be: (1) a direct physical loss or damage to a “dependent property”; (2) the loss or damage is caused by a covered cause of loss; and (3) the loss results in a suspension of operations at a covered location.

Relevant Provisions

Pursuant to the CBI provisions, under a typical ISO form, a carrier will “pay for the actual loss of Business Income [an insured] sustain[s] due to the necessary ‘suspension of [an insured’s] ‘operations’ during the ‘period of restoration’”. Additionally, the CBI provisions will generally state that the “provisions of the Business Income Coverage Form respecting direct physical loss or damage at the described premises, including the applicable Limit of Insurance, will apply separately to each ‘dependent property’ described in the Schedule.”

The ISO form also defines “dependent property” as “property operated by others whom [an insured] depend[s] on to…”

a.  Deliver materials or services to an insured, or to others for an insured’s account (Contributing Locations);

b.  Accept an insured’s products or services (Recipient Locations);

c.  Manufacture products for delivery to an insured’s customers under contract of sale (Manufacturing Locations); or

d.  Attract customers to an insured’s business (Leader Locations).

As seen above, policies will generally define these third-party properties as “dependent properties and not “contingent properties”:

  • Contributing Locations (“Suppliers”): Where an insured depends on one or more supplies for (or suppliers of) materials or services necessary for its products. Contributing Locations are also referred to as “upstream suppliers”. Generally, insureds almost exclusively rely on such locations to complete an insured’s products or services.
  • Recipient Locations (“Buyers”): Where an insured’s business or services are purchased or accepted. Recipient Locations are also known as “downstream buyers” because they are considered “customers” of an insured in an insured’s operational chain. Generally, they purchase or accept the bulk of an insured’s products or services.
  • Manufacturing Locations (“Providers”): Where an insured depends on a business to provide an insured’s products for delivery to an insured’s customers. Generally, Manufacturing Locations are businesses that deliver products to an insured’s customers under a contract of sale.
  • Leader Locations (“Attractors”): Where an insured’s business volume is dependent on a neighboring business to attract customers. These neighboring businesses attract customers to an insured’s business. Importantly, Leader Locations can range in scope: from a small “attraction” such as an anchor store in a mall which attracts customers to an insured’s local business to a larger “attraction” such as Disney World (or a sports team, Go Bills!) which attracts customers to a larger geographical area.

However, CBI coverage does not provide coverage in the following circumstances: utility service interruption of an off-premises power interruption (e.g. water or power supply), civil or military authority interruption, and lack of ingress or egress interruption. We will examine issues when dealing with CBI claims and how New York Courts[2] have addressed coverage disputes.

  1. Contributing Locations

In a 4th Circuit case, Millennium Inorganic Chemicals Ltd.[3], applying New York and New Jersey law, the Court examined whether a natural gas producer qualified as a “direct supplier”. The insured, Millennium, was a titanium dioxide producer who had a facility in Western Australia. Millennium had a contract with Alinta Sales Pty Ltd (“Alinta”), who purchased natural gas for sale from various producers, including 20% from Apache Corporation (“Apache”). Apache had a production facility on Varanus Island. Apache would inject the processed natural gas into the Dampier-to-Bunbury Natural Gas Pipeline (“DB Pipeline”), which was then commingled with other producers’ natural gas which would then make its way to Millennium’s facility. Millennium never had a contract or business with Apache and the title to the natural gas would pass from Apache to Alinta once it was injected into the pipeline. Thereafter, the title would pass again from Apache to Millennium once the (comingled) natural gas was delivered to Millennium’s facility. In June 2008, there was an explosion at Apache’s facility and production ceased. Apache notified Alinta, who then in turn sent a force majeure notice to Millennium and other customers. The Australian government intervened and imposed controls prioritizing delivery to domestic customers and essential services. Accordingly, Millennium’s gas supply was curtailed and was forced to shut down its manufacturing operations for months.

Millennium had two commercial liability policies, each with CBI endorsements for certain losses arising from disruption of the supply of materials to Millennium caused by damage to the insured premises and certain “contributing properties”. Notably, at Millennium’s request while shopping for policies, the CBI endorsements only provided coverage for “direct contributing properties… which wholly or partially prevents the delivery of materials to [Millennium] or to others for the account of [Millennium]”—there was no coverage for “indirect” suppliers. The endorsements also stated that only a “direct supplier of materials to… [Millennium]’s locations” were considered “contributing properties.”[4] Millennium had the option to list any of its “contributing properties” in the policies’ respective schedules but did not list any in either schedule.

Two days after the explosion, Millennium made a claim for CBI coverage with both carriers, National Union Fire Insurance Company of Pittsburgh PA (“National”) and ACE American Insurance Co. (“ACE”), because their facility had to close. After investigating the claim, both carriers denied the claims because Apache was not a direct supplier to Millennium. Subsequently, Millennium commenced an action against National and ACE.

After applying the doctrine of contra proferentem, the district court held that the terms “direct supplier” and “or to others for the account of [Millennium]” were ambiguous and held in favor of Millennium because “the physical relationship between the parties is as or more important than the legal relationship between the properties’ owners.” On appeal, the 4th Circuit reversed the lower court and held the policies were not ambiguous and utilized the dictionary definition of “direct” which meant without deviation or interruption from an intermediary. Under the circumstances, the Court held Apache could not be considered anything but an “indirect” contributing party given neither Apache nor Apache’s facilities had a direct legal or physical relationship with Millennium. The Court also held that Apache’s alternative argument that Apache was a direct supplier under the “for the account of” clause in the CBI endorsements also failed for the same reasons. Accordingly, there was no CBI coverage for Millennium given Apache was not a direct supplier and the true direct supplier, Alinta, did not sustain any physical loss or damage at its location.

  1. Recipient Locations

    Although it appears there aren’t any New York cases that explicitly discuss CBI coverage for “recipient locations,” an example of such would be where an insured and a third-party manufacturer contract to provide a certain number or amount of goods or services. If the insured’s recipient location’s operations are suspended due to a covered cause of loss, then the recipient location no longer has a need to buy the insured’s goods or services. Therefore, the insured’s income flow is interrupted until the recipient location becomes operational again.

  2. Manufacturing Locations

    In an unpublished E.D.N.Y. case, Park Electrochemical Corp.[5], the Court’s holding suggested that CBI coverage may be provided for losses within the U.S. even if the third-party property damage occurs abroad and emphasizes the effect of policy language. In Park, the insured, Park Electrochemical Corporation (“Park Electrochemical”), developed and manufactured printed circuit boards. Park Electrochemical had two wholly owned subsidiaries: Neltec, Inc. (“Neltec”), located in Arizona and manufactured and sold a product named N6000, and Neltec and Nelco Products, Pte., Ltd. (“Nelco”), located in Singapore and supplied Neltec with its entire supply of a vital component needed for the N6000 product. In November 2002, there was an explosion at Nelco’s Singapore facility. Accordingly, Nelco was unable to supply Neltec with the vital component needed to produce the N6000 product.

    Neltec’s claim was paid under its own, separate policy. However, Park Electrochemical’s carrier, Continental Casualty Company (“Continental”) denied its claim for CBI losses resulting from Neltec’s lost income because: (1) Nelco’s Singapore facility was not a covered location and excluded by the “territorial limits” provision, which stated the coverage territory to be the U.S., including its territories and possession, and Canada and (2) subsidiaries, such as Nelco, were not considered direct suppliers under the policy. Under its policy, Park Electrochemical and “its existing subsidiaries and affiliated companies” were identified as the named insured. Notably, Park Electrochemical’s policy language differed from Millennium’s as followed:

  • Millennium’s CBI language: National and ACE to provide CBI coverage only against loss directly resulting from necessary interruption of business conducted on premises occupied by [Millennium], caused by damage to or destruction of any of the real or personal property described above and referred to as contributing properties and which is not operated by [Millennium], by the peril(s) insured against during the term of this Policy, which wholly or partially prevents the delivery of materials to [Millennium] or… to others for the account of [Millennium] and results directly in a necessary interruption of [Millennium's] business.
  • Park Electrochemical’ s CBI language: Continental will pay for the loss resulting from necessary interruption of business conducted at Locations occupied by the Insured and covered in this policy, caused by direct physical damage or destruction to… any real or personal property of direct suppliers which wholly or partially prevents the delivery of materials to the Insured or to others for the account of the Insured…

Like Millennium’s policy, “direct suppliers” was not defined in Park Electrochemical’ s policy. However, the Park court arrived at a different decision than the Millennium court. The Park court held the term “direct supplier” remained ambiguous, even after applying the doctrine of contra proferentem. Continental’s extrinsic evidence was its interpretation was in accordance with the common practice of the insurance industry, case law, and treatises and commentaries. Continental emphasized that CBI coverage is intended to protect against damage to a third party’s property, whereas BI coverage protects against losses against damage to insured’s property. Furthermore, Continental argued the “supplier/receiver cannot be owned [sic] or a subsidiary of the insured party…” under its Claim Preparation Manual, which was provided to the insured’s broker, Aon Risk Services (“Aon”).

However, the Court held there was still ambiguity regarding the “direct suppliers” language because (1) Continental’s cited cases and respective policies explicitly stated CBI coverage was limited to loss caused by damage to entities not owned by the insured, and such language was absent in Park Electrochemical’ s policy; (2) Park Electrochemical was not provided with the Claim Preparation Manual at the time they entered into the contract with Continental; and (3) despite the Manual, an Aon representative testified “...generally, CBI provisions exclude entities owned or controlled by the insured, but she found it significant that the Continental policy lacked any such explicitly limitation, distinctly suggesting to her that the limitation might not apply…” Interestingly, Aon’s director of property claims explained that certain (CBI) policies may provide “interdependency coverage” which applies when the loss is to “an owned customer or supplier” and such coverage may be implied despite the absence of any “interdependency” clause within a policy. Interestingly, the Court held:

[t]he loss covered is not physical damage to property but a financial shortfall, and that shortfall must occur within the territorial limits of the policy. The coverage is not, however, totally open-ended as the financial short must be ‘caused by direct physical damage or destruction to… any real or personal property od direct suppliers. But the limitation stops there: the policy says nothing about where the “direct physical damage or destruction” must occur. If Continental wished to place a territorial limit on where “direct suppliers” must be located in order for coverage to attach, it could have included explicit language to that effect. This Court may not and will not read additional terms into the policy by implication or speculation. (Emphasis added).

Accordingly, the issue of whether “subsidiaries” may be considered “direct suppliers” under the policy was one for the jury to decide given the remaining ambiguity of “direct supplier”.

Although the Court did make a final determination on the policy language given the ambiguity, it highlights the importance of an individual policy’s unique language. Therefore, although many COVID-19 CBI claims will likely be denied for lack of physical damage to a third-party, insureds who overcome the “physical damage” hurdle may be entitled to CBI coverage—depending on the policy language.

  1. Leader Locations

    Although mentioned in our Business Interruption article, Duane Reade[6] appears again when addressing CBI issues. CBI coverage for Leader Locations becomes applicable when a policyholder sustains income losses in connection with damage or destruction to a leader location. The Second Circuit held the district court erred in tying the Restoration Period to the specific site of Duane Reade’s former store at the World Trade Center. Duane Reade argued that their BI policy provided coverage for damage to “Real or Personal Property whether insured or not, including… property of others.” Accordingly, Duane Reade interpreted this BI provision as creating CBI coverage and as such, was entitled to reimbursement for losses caused by damage to property that was not owned by Duane Reade, but upon which its business depends—the World Trade Center in which Duane Reade’s store was located. Duane Reade further argued it was entitled to such losses as provided in the “Attraction Properties” provision:

    This policy is extended to cover the Actual Loss Sustained by [Duane Reade] directly resulting from the interruption of [Duane Reade]’s operation caused by damage to or description of Real or Personal property at Attraction Properties.

    Attraction Properties are defined as properties within on[e] statute mile of [Duane Reade]’s location, not operated by [Duane Read], which attract potential customers to [Duane Reade]’s location. (Emphasis added).

    Given the BI and Attraction Properties provisions, Duane Reade agreed with the district court’s holding that the provisions evidenced the parties’ intentions to protect Duane Reade’s interest in the specific location of its valuable WTC store. Therefore, “[t]he district court held that the Restoration Period was necessarily tied to the hypothesized rebuilding of Duane Reade’s store at its former site at the WTC.”

    The Second Circuit held that the district court erred and explained the policy was a general policy that encompassed all of Duane Reade’s 200 locations, but which made “no reference to the WTC store or, for that matter, any specific property other than Duane Reade’s main headquarters, which [was] listed on the policy’s declaration page.” Compare to Anchor Toy Corp.[7], where a toy manufacturer’s factory was destroyed in a fire. The parties disagreed on the Period of Restoration (“POR”) where the insured had purchased a building for the location of their new factory instead of rebuilding but ended up needing to rebuild (the contract was cancelled due to various problems, including a defect in the title). Specifically, the carrier argued the POR should be calculated on rebuilding the exact building given the BI coverage would be for rebuilding or repairing “the above described premises,” which provided a “site-specific” location. The Court held the restoration period could be calculated based on the estimated time to rebuild, which included time and costs to modernize and ordinary construction delays.

    Conversely, in Duane Reade, the Second Court held that “the declarations page lists only Duane Reade’s corporate address, and no specific property is referred to in the BI clause, which omits even generic terms for location, such as “premises,” “site,” or “building.” Thus, nothing in the BI clause supported Duane Reade’s claim that the policy provided site-specific coverage for its WTC store.” The Court analogized with another 9/11 BI claim in the context of a leased premises, Streamline Capital, LLC[8] where the court rejected the insured’s argument that their BI coverage extended until the WTC was rebuilt. The Streamline court held that BI “coverage only applies to the suspension of the plaintiff's ‘operations[,]’ indicat[ing] that it is dependent only on replacing what is necessary to resume those operations—namely, the plaintiff's personal property, not a specific office at a specific location.”

    Therefore, insureds should be cautious when reading a policy, including the declaration pages, so as to not anticipate coverage where there is none. Insureds must remember, in either a BI or CBI claim, that a general policy does not provide site-specific coverage for a dependent property and site-specific policies will only provide coverage for a dependent property which is explicitly enumerated.


    When making a CBI claim, an insured will likely encounter various hurdles before being able to receive CBI coverage, including varying policy language, actual physical damage to a dependent property, disagreements of the extent of losses incurred, and complex fact patterns that may not be analogous to any current case law. Accordingly, if one does have a CBI policy, it is important to consider all these issues when preparing to submit a claim. Additionally, businesses who rely on various third parties and do not have CBI coverage should look at their own operations to determine if CBI coverage and what type of CBI policy may be appropriate.

    Cara’s Cross-Border Connection: Heather

    First Came the Plague, then Came the Flood: The April 27, 2020 Fort McMurray Flood

    Fort McMurray, Alberta is a 12-hour drive north of the United States/Canada border (in good weather), an 8-hour drive from Calgary and 4.5 hours from Edmonton. Carved out of the boreal forest and muskeg (peat bogs), Fort McMurray, with a population of about 65,000 sits in the floodplain of five rivers and, in particular, at the confluence of two of the largest in the region: the Athabasca and the Clearwater Rivers.  Fort McMurray exists because of the rivers and the industries they support, but this spring like other springs before it, the Clearwater River did its very best to send the historical heart of Fort Mac packing. 

    Originally known as Fort of the Forks, Fort McMurray began life in 1790 as a Northwest Company trading post but was taken over by the Hudson's Bay Company in 1821.  The settlement was rebuilt in 1875 and renamed Fort McMurray after a Hudson's Bay Company factor, William McMurray.  Thanks to the Athabasca River, “Fort Mac” was the southern limit of navigation of the Mackenzie River-Great Slave Lake network and gateway to the Northwestern Canadian wilderness.

    In the 1930s and 1940s, El Dorado Mining and Refining Limited had a uranium mine at Port Radium on the eastern arm of the Great Bear Lake in the Northwest Territories.  Radioactive ore was carried by First Nations men on their backs in burlap sacks and loaded onto tugboats to cross Great Bear Lake and, from there, to river barges, sailing down to Fort McMurray on the Athabasca River. The ore would be off-loaded at Fort McMurray into railway cars, bound for Port Hope, Ontario where the ore was refined. The ore that moved through Fort McMurray was used in the Manhattan project, and eventually, the creation of Fat Man and Little Boy.

    Fort McMurray was re-born in the late 1960s and early 1970s when investment poured into the region to develop the Athabasca oilsands deposit, the third largest oil deposit in the world after Saudi Arabia and Venezuela. The oil extraction process is only possible due to the massive amounts of water sourced from the Athabasca River.

    Due in large part to the development of the oilsands, Fort Mac has prospered, growing outward from its historic, downtown core in what’s known as the Lower Townsite, along with Waterways and Taiga Nova Industrial Park on the Clearwater floodplain. Although most of the residential communities are on the plains created by the escarpments that rise high above the floodplain, the development of the Lower Townsite intensified between 2000-2010 when the population of the city doubled overnight. Big box stores and condo complexes sprouted in the floodplain along with houses with finished basements.

    Fort McMurray has suffered 15 notable floods since 1835 – all but one were caused by spring ice jams along the Clearwater River. As the river ice breaks up and moves downstream in the spring, massive chunks of ice pile up where the Clearwater River meets the Athabasca River. This causes water levels to rise along the length of the Clearwater, inundating the downtown within the Lower Townsite.

    According to the municipality’s website, a study was commissioned in December of 2016 to assess structural barriers to ice jam situations. Based upon the outcome of the study, berms, retaining walls and a berm/retaining wall combination were recommended for flood mitigation. The flood mitigation program uses a design elevation of 250.5 metres above sea level. That elevation was chosen as 250 metres is the 1:100 year flood event.  A 100-year flood is a flood event that has a 1 in 100 chance (1% probability) of being equaled or exceeded in any given year. The additional half metre was “free board” or “insurance” that the structures would withstand the 1:100 year flood. The website indicates that the construction of these structural elements is in progress and three of the 13 sections (they are called ‘reachs’ on the website) are complete. The remaining reaches are either planned or have construction start dates.

[2] Please note, most cases reviewed do not explicitly state the type of dependent property at issue but generally describe the role of a dependent property in an insured’s operational chain.

[3] Millennium Inorganic Chemicals Ltd. v. National Union Fire Ins. Co. of Pittsburgh, PA, 744 F.3d 279 (4th Cir. 2014).

[4] Additionally, each endorsement contained a loss-mitigation provision which required Millennium to “use [its] interest to induce the [contributing properties] to make use of any other machinery, equipment, supplies or location available in order to resume operations and delivery of materials to [Millennium]”.

[5] Park Electrochemical Corp. v. Continental Cas. Co., No. 04–CV–4916 (ENV)(ARL), 2011 WL 703945 (E.D.N.Y. Feb. 18, 2011) (notably, although insured did not refer to the dependent property as a “manufacturing location,” the facts are clear that the subject dependent property was providing goods to customers—under contract of sale—which resulted in profits for the insured).

[6] Duane Reade, Inc. v. St. Paul Fire and Marine Ins. Co., 411 F.3d 384 (2d Cir. 2005).

[7] Anchor Toy Corp. v. American Eagle Fire Ins. Co., 4 Misc.2d 364 (N.Y. 1956).

[8] Streamline Capital, L.L.C. v. Hartford Cas. Ins. Co., No. 02 Civ. 8123(NRB), 2003 WL 22004888 (S.D.N.Y. Aug. 25, 2003).

The cataclysmic wildfire of May 2016 that burned 2,400 homes in Fort Murray included 134 homes in the Waterways neighbourhood that is prone to flooding. Thirty others within the flood zone were deemed to be unsafe due to toxic smoke. The municipality had to deal with the issue of whether to permit re-building of the burned homes on the floodplain. This was a contentious and difficult issue. One of the issues was whether the re-built homes had to comply with the 1:100 year flood standard. Complying with that standard would greatly increase building costs and would not be covered by standard homeowners’ coverage. According to news reports, the rebuilt homes were exempted from the standard by both the municipal and provincial authorities but I am not privy to the details, nor can I vouch for the accuracy of that statement.

April 26-27, 2020

Almost four years to the day after the wildfire entered Fort McMurray, another disaster crept into the City.  For weeks beforehand the municipality was concerned about a spring flood, but when the ice on both the Clearwater and the Athabasca started to move on Sunday, April 26, it became obvious that a flood was imminent. But this time, a flood would occur in the middle of the COVID-19 pandemic with social distancing public health orders in effect.

Reaching back to a plan for evacuation in the midst of a pandemic that was put in place in January, evacuation orders were issued, which according to news reports, forced more than 13,000 people in the Lower Townsite area from their homes.  Blocks of ice, some of which were several metres thick, were blocking the river channel where the Clearwater meets the Athabasca and the water level on the Clearwater River was rapidly rising. At 1:20 a.m. on Monday morning, April 27, the water flooded the evacuated areas with cold, silty, fast-moving water. By Monday evening, much of downtown Fort McMurray, Draper, Waterways and the Taiga Nova Industrial Park were submerged. In some cases, buildings were inundated with a metre to a metre and a half of water

As the area was evacuated, it is difficult to know with certainty, but it is believed that the flood water overwhelmed the storm and sewer system, causing backups into basements of buildings in the flood zone.

Fort McMurray Mayor Don Scott was quoted in a news report as stating that this flood is the 1:100 flood, but I have not located information as to whether the peak flow in fact reached or exceeded the 250 metre level.   News reports have stated that the epic ice-jam along the Clearwater River stretched 24 km[1] along the river. The only solution was to wait for warm weather so that the ice would move, allowing the water to recede. That began slowly on April 28 and by May 1 some of the evacuation orders were lifted to allow residents and business owners and operators back into the flood zone. Some of the residents returned to flooded basements and destroyed belongings.  I heard, but have not been able to verify, that a condo building in the flood zone built to the 1:100 year flood requirement did not have damage to the residential areas but the ground level and below grade parking levels took in water.

Commercial Insurance Coverage for the April 27, 2020 Fort McMurray Flood

Although there is no common form of commercial property insurance, I looked at a variety of forms used by the several of the top ten commercial property and casualty insurers in Canada and found that there are commonalities amongst the companies regarding the treatment of damage by flood and sewer backup. Most companies exclude the peril of flood and sewer backup in their main wording. A common form of exclusion for flood reads:

This form does not insure against loss or damage caused directly or indirectly … In whole or in part by flood, including "surface water," waves, tides, tidal waves, tsunamis, or the breaking out or overflow of any natural or artificial body of water.  This exclusion applies whether or not there are one or more other causes or events (whether covered or not) that contribute concurrently or in any sequence to the occasioning of the loss or damage, except for loss or damage caused directly by resultant fire, explosion, smoke, leakage from "fire protective equipment"… This exclusion does not apply to property in transit or loss or damage caused directly by leakage from the water main except for loss or damage caused directly by resultant fire, explosion, smoke, leakage from "fire protective equipment" … This exclusion does not apply to property in transit or loss or damage caused directly by leakage from a watermain.

"Surface water" means water or natural precipitation temporarily diffused over the surface of the ground.

A commonly used form of exclusion for sewer backup in the main property form reads:

This form does not insure against loss or damage caused directly or indirectly… By the backing up or overflow of water from sewers, sumps, septic tanks or drains, wherever located, unless concurrently and directly caused by a peril not otherwise excluded in this form.

Almost all of the insurers whose forms I looked at, offer flood coverage and sewer backup coverage, but they do so on the basis that each of these perils is an extension to the basic commercial policy (in other words these perils are separate endorsements offering additional coverage).  Further, in most policies, flood coverage and sewer backup coverage are each offered on a “per location” basis, with separate deductibles and limits for each location, together, in some cases, with an aggregate limit for flood coverage and a separate aggregate limit for sewer backup coverage.

In each of these forms it was clear that the flood and sewer coverage covered physical loss and damage to covered property, but not all covered the loss of business income due to flood, or the loss of business income due to sewer backup. I must emphasize that the flood and sewer backup coverage was different in each of the policies that I looked at.

Some of the extensions define “flood” as “the breaking through or overflow of any natural or artificial body of water and includes in the definition of “flood”, the concept of  “surface water”, defined as waves, tides, tidal waves and tsunamis.” Some cover “flood” and exclude “surface water”. Others leave “flood” undefined.

An Ontario trial court in Parker Pad & Printing Ltd. v. Gore Mutual Insurance Company, 2017 ONSC 3894 (Ont. S.C.J.) at para. 53, 54 considered a definition of “flood” that read “the breaking through or overflow of any natural or artificial body of water”  and held that while the term “body of water” might be ambiguous when considered in isolation, it is not ambiguous when considered in the context of the complete clause. In [the judge's] view, the context clearly shows that the intention was to include the rising, breaking out or overflow of an existing and identifiable body of water. As a result, the pooling of rainwater was held not to fall within that definition but rather is “surface water”. This view was once again reinforced by the same court in Le Treport Wedding & Convention Centre Ltd. v. Co-operators Insurance, 2019 ONSC 3041.

Most of the flood extensions that I reviewed exclude sewer backup, whether or not the backup was caused by flood.  A common form of that exclusion reads:

This Extension does not cover loss or “damage” caused directly or indirectly by any of the following perils whether or not caused by or attributable to “flood” ….  the backing up or overflow, within the area bounded by the bearing walls and the foundations of the building described on the “Policy Declarations” of water from within sewers, sumps, septic tanks or drains.

Was the insertion of that exclusion a lesson learned from the 2013 Alberta flood which, to that time, was the most expensive insured event in Canadian history (soon eclipsed by the 2016 Fort McMurray wildfire)? The flood was caused when the Bow and Elbow Rivers overflowed into the downtown and surrounding residential areas of Calgary. The overland flooding caused the municipal sewers to backup. Most of the policies that applied to properties damaged in that flood excluded flood but covered sewer backup. The insurers argued that the sewers would not have backed up if it were not for the flood; the damage was therefore directly caused by flood and the exclusion for flood removed all of the damage from the coverage. Most of the policies did not define sewer backup or flood.  The insureds argued that the sewers backed up; they were covered for sewer backup.  In most cases, the coverage issues were resolved on the basis that the insurers agreed to assume the cost of repair and replacement up to a negotiated level in each property they insured, but this was a steep price to resolve these coverage issues. Changes to the policy wording were required to align the underwriting intent with the overland flooding scenario, as well as deal with the public demand for flood coverage.

My review of the flood coverage extension wordings issued by various insurers indicates that the insurers have chosen different paths to deal with these issues. It is a cardinal rule of insurance coverage that insurers are obliged to prove exclusions. Therefore, the onus is on those insurers who exclude sewer backup from flood coverage to prove that exclusion. Under the wording set out above, the insurer must prove that the sewer backup both occurred and that it “directly or indirectly” caused some, or all of the damage that the insured has claimed between the bearing walls and the foundations. The words “directly or indirectly” are often found in insurance policies to exclude coverage when there are concurrent causes, one of which is covered and the other which is excluded:  Economical Mutual Insurance Company v. Gill, 2017 BCCA 351, at para. 45.  The Supreme Court of Canada decision, Vytlingam (Litigation Guardian of) v. Farmer, 2007 SCC 46 and its companion case, Herbison v. Lumbermens Mutual Casualty Co., 2007 SCC 47, held that where the language of “directly or indirectly” is utilized, a simple but-for analysis is not sufficient. Rather, courts must determine whether there was an "unbroken chain of causation" Vytlingam, at para. 37. In Herbison, the court elaborated on this approach insisting that "some causation link must be found, and it must constitute a link an unbroken chain” Herbison, at para. 14.

The insurers who choose not to exclude sewer backup from the flood coverage will be reliant upon the deductible and limits applicable to the flood coverage to control their exposure.

An interesting scenario emerges if the insured has both sewer backup coverage and flood coverage and:

  • the sewer backup coverage covers sewer backup however caused;
  • the flood coverage excludes sewer backup however caused.

In the event of an overland flood causing the sewers to back up, the insurer’s efforts to prove the exclusion in the flood coverage will in fact prove the separate sewer backup coverage. That will provide some level of compensation to the insured. However, the insurers are still left with sorting out damages and causation between the two coverages.

Prevalence of Flood Coverage

Anecdotal information that I received is that entities with multiple locations, or multi-tenant properties, some of which were in the Fort McMurray floodplain, could obtain flood coverage if it was sought.  However, in most of those cases, it was only offered with a per location deductible, a per location limit and a modest aggregate limit.  Further, single location commercial risks in the Fort McMurray floodplain who applied for flood coverage would, more often than not, be declined. There may be exceptions to that rule for commercial locations with high insured value, but the coverage offered but be minimal in comparison to the insured value of the property.

It therefore seems that very few commercial properties impacted by the Fort McMurray April 27, 2020 flood carried flood coverage. Either the coverage was too expensive, or it was simply unavailable. It also appears that few, if any, had limits that would provide full indemnity. It also appears from my review of the forms that not all of the insureds who did have flood coverage had coverage for loss of business income due to flood. For those that did have the coverage, the fact that the flood occurred while the public health orders to control COVID-19 were in effect will make the adjustment of the losses more difficult.

Impact of the Public Health Orders Controlling COVID-19

At the time the losses occurred, non-essential businesses were prohibited by a province-wide public health order from offering services to the public at the insured premises. They were able to provide online or curbside pickup services or, in the case of restaurants, take-out and delivery services.  Essential businesses such as grocery stores, pharmacies and hardware stores were operating, but observing social distancing. The oil and gas industry is an essential industry and allowed to operate, but it too was required to follow the social distancing guidelines.

As oil and gas service contractors service an essential industry, they were working, but they were operating on a reduced schedule in view of social distancing requirements. The maintenance that usually occurs during spring break-up (the slow period at the end of March until the snow and ice melts and the frost leaves the ground) was impacted due to the reduction in the number of contractors that could be on site at any given time. Consequently, some of the equipment usually used for maintenance which would normally be in the field in April was ‘racked’ i.e., in storage at the flooded Taiga Nova Industrial Park.  This means that the physical damage caused by the flood is greater than it would have been if the flood had occurred in any other year.  These factors will stress the limits of the flood coverage for those that have it. Those with flood coverage for the damaged equipment may not have coverage for the loss of business income stemming from that flood damage. If the coverage exists, then the factors leading to that loss of income will require careful analysis to determine entitlement to coverage, as all losses due to the COVID-19 pandemic are not covered, or fall within the “loss of market” exclusion which was discussed in this column in the April 16, 2020 article.

Generally speaking, with respect to the physical damage losses due to flood, the COVID-19 supply-chain disruptions will prolong the time required for any given business to “get up and running”. Flood-damaged businesses with flood coverage that extends to loss of business income that had little to no income due to the COVID-19 restrictions, will be further hampered by those same restrictions. Once the province re-launches the class of business operated at the insured premises, that business has to re-establish its market and cash flow. Business valuators will have to identify losses due to the flood and distinguish them from losses incurred while emerging from the COVID-19 control restrictions, in order to determine if there is a claim for business interruption due to flood.

The managers of those insured, non-essential business entities who have business interruption coverage for damage caused by flood are likely wondering if the declared “period of restoration” in their policies is sufficiently long enough for them to emerge from the COVID-19 restrictions and advance a claim. In the meantime, the residents of Fort McMurray are picking themselves up from yet another natural disaster, cleaning off the silt and writing another chapter of their lives. They define resilience.

[1] Approximately 15 miles.


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