Coverage Pointers - Volume XXI, No. 25

Volume XXI, No. 25 (No. 564)
Friday, May 29, 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.  The situation here is improving.  I can feel it in my bones and the evidence at my home office is clear.  I shaved off my quarantine beard.

Optimism starts to return, even in light of the sad truth of 100,000 US COVID-19 deaths and far more, across the world.  Our office continues to work remotely – and efficiently – although we expect some return to the office over the next 30 days.  In the meantime, we are available to all who need us.

We remain busy with business interruption claims, as national counsel for a number of clients and are also handling claims in the jurisdiction in which our lawyers are admitted – New York, New Jersey and Connecticut.  The state courts have just opened for new filings, so the number of claims that have been warehoused awaiting that magical day, are now being filed.

Reach out to us if we can help with strategic advice on good faith handling of these claims, both first party and casualty.

We continue to serve the defense bar and insurance industry by maintaining a database and summary of COVID-19 BI lawsuits being spearheaded by Lee Siegel as well as a database and summary of state and federal legislative proposals coordinated by Ryan Maxwell.  Lee and Ryan authored a fabulous article in Law 360 summarizing the themes and theories of the lawsuits filed.  Contact either of them for access.

Flash – Child Victims Act Legislation Passed, Extending Statute of Limitations One More Year – Heads to Governor for Consideration

With the reopening of New York courts for filing, Child Victims Act cases are being filed.  The legislative “window” for the lookback lawsuits (extended statute of limitations) expires on August 14.  While the Governor had issued an Executive Order extending that time to January 14, we suggested that Order may be beyond the Governor’s power to do so, without additional legislative authority.  My prediction was that if any extension beyond 30 days is to be approved, the legislature would have to step in.  From this author’s perspective, we have argued, and continue to suggest, that the plaintiff’s bar has had 18 months to file lawsuits in this well-publicized area of practice and that is sufficient.

Well, the Legislature did step in. On May 27, both houses passed legislation [S7082/A9036] that extend the time to sue CVA cases for an additional year, to August 14, 2021.  That bill goes to Governor Cuomo’s desk for consideration.

For our new subscribers – and we have a gaggle of those – just an introduction to our publication.  What you are reading is what we affectionately call, here at the home office, “Dear CP” – it’s the cover letter – the actual newsletter is attached.  In the cover letter you will find highlights of the current issue of Coverage Pointers, and notes to our readers by our many delightful and talented column authors.  Because “history is my hobby”, you’ll also find, interspersed between the notes, what we call our “100 years ago” stories, news clippings from newspapers published exactly 100 years before the date of the current issue.  This year, marking the 100th anniversary of the 19th Amendment to the United States Constitution, granting universal suffrage to women, each issue contains at least one story dealing with the adoption of that Amendment.

By the way, there is yet another fabulous column by our good friend Heather Sanderson in our Canadian column, this time on COVID-19 impact on supply chain.


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.  

  • 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:

Courts are still coming back online, and their forced hiatus has left us with a pittance of decisions upon which to report.  Along those same lines, litigation which has been mothballed since mid-March, is also starting to heat up. By early next week, we will have actual live bodies in all courts around the State.  As the backlog clears, so too will it fill our respective columns in Coverage Pointers – or so we hope.  We are finding, however, that there is no such thing as 0-60 in litigation.  It will take time to get back to efficiencies of pre-March, but at least there appears to be movement in the right direction. 

In the meantime, we report on an interesting challenge to a life insurance rescission.  The decedent’s spouse brought the action challenging the rescission on the basis that the agent’s knowledge of the application misrepresentations should estop the carrier from voiding the terms of the policy.  With it comes a very interesting question of what duty an agent owes a purported third-party beneficiary.  The short answer is not much, but this case (insofar as life insurance is concerned, at least) raises the possibility that a legal duty could, in fact, exist.

This issue has traditionally come up in the context of “additional insured” arguments.  The putative AI possesses a certificate of insurance which designates it as an additional insured on a real-life policy.  Policy number, limits and effective dates are filled out, so the agent clearly knew of a policy.  Of course, the agent neglected to actually add the requesting party – or – in the alternative, ensure the policy was equipped with a broad form additional insured endorsement.

When the tender is extended, it is not met with a receptive carrier.  The language, not the certificate, defines the insurer’s obligations.  Many a jilted company have tried to then sue the agent who produced the ineffectual, and misleading, certificate of insurance.  While a good malpractice claim might exist in theory, there was no privity in contract, and otherwise no duty to the contractor.  This meant the agent/producer walked on summary judgment.  And walk, they consistently did.

While this case is far from opening the door to a negligence claim against an agent, the Appellate Division does appear to be suggesting a path which may, at least, survive summary judgment.  We doubt it, candidly, but it’s worth watching.

That’s it for this week.  Stay healthy and well.

Steven E. Peiper

[email protected]


Delaware Considers Suffrage Amendment:

The Evening Journal
Wilmington, Delaware

29 May 1920



Some “Anti” Members of House Don’t Want “Show-Down” On Ratification


            DOVER, Del., May 29.—With a threatened “strike” of anti-suffrage members of the House pending, Senator Walker’s suffrage ratification resolution that had been adopted by the Senate on May 5, was sent over to the House late yesterday afternoon.  It may not come to a final vote in the lower branch.  There are many anti-suffrage members of the House, who do not wish to stand up and be counted again on the suffrage question.  Whether friends of the suffrage cause can work up enough of a spirit or fair play among the House members for a vote on the Walker resolution Wednesday afternoon remains to be seen.

            There will be three hours’ opportunity to bring about another House “show-down” on suffrage Wednesday.  The House yesterday afternoon concurred in the Senate resolution fixing Wednesday afternoon at 3 o’clock for final adjournment of the Legislature.  The House after receiving the suffrage resolution from the Senate adjourned until 12 o’clock Wednesday.

Editor’s note:  Delaware did consider – and rejected – ratification of the 19th Amendment in June and was not one of the original 36 states (the number necessary for ratification) to support suffrage. On March 6, 1923, Delaware showed its support for women’s suffrage by belatedly ratifying the 19th Amendment.  By that time, the Amendment was approved and the ratification vote in 1923 was symbolic.  By the way, of the states that were in the union at that time, Alaska and Hawaii had not yet joined the United States, of course, the last state to vote in favor of the Suffrage Amendment was Mississippi. That state voted against ratification on May 29, 1920, with the state Senate voting 94-23 to reject ratification.  The state belatedly ratified the Amendment on March 22, 1984.


Wilewicz’ Wide-World of Coverage:

Dear Readers,

What a week. Less than two weeks ago my daughter and I went for a walk in the snow, and we did a mini-photoshoot amidst the puffy cotton ball snowflakes. Now this Tuesday we hit a record high of 93 degrees in the blazing sun. In the meantime, we’ve had a couple of hailstorms and today’s forecast is literally “tropical rainstorm”. At least we’ve had plenty to do indoors of late. Between the claims that just keep coming in and the home-schooling adventure, these weeks of lockdown have actually passed by faster than anticipated.

Now, in the Wide World of Coverage, the courts are beginning to reopen from their slumber and the appellate divisions are issuing decisions again. So, from the Second Circuit Court of Appeals, we bring you USLI v. WW Trading Co. There, the carrier attempted to rescind a policy but did not notify the insured of the intent to rescind for over two years. Since the insurer had first acquired knowledge of the insured’s misrepresentations in April 2014 when it sent a notice of nonrenewal specifically addressing those issues, its delay until April 2017 of sending a notice of rescission was unreasonable. A carrier must act promptly if it wants to rescind and must announce its decision within a reasonable time. Sending a letter two and a half years after the fact is unreasonable as a matter of law. This case also discussed the policy’s employee exclusion and construction operations exclusions, finding that neither applied to bar coverage for the personal injury claims presented. As always, the full summary is annexed, along with a link to the case itself.

Until next time!

Agnes A. Wilewicz

[email protected]


Proper Attire for the Groom, 100 Years Ago:

Buffalo Courier
Buffalo, New York

29 May 1920

Man’s Wedding Costume.

            Dear Mrs. Wheeler—Will you kindly print in your paper at your earliest convenience what is proper for a man to wear for a church wedding to be held at 12 o’clock noon; also what color tie and gloves are worn.                                                               

            The correct dress for such an occasion is a black cutaway coat, a chesterfield or skirted overcoat; waistcoat to match coat (with white edging) or white; trouser to match coat, or of grey striped worsted; high silk hat with felt band; shirt and cuffs pleated or stiff linen or pique, white; collar, wing or poke; cravat of grey or black and white four-in-hand or ascot; gloves, grey suede or glace; boots, patent leather, buttoned kid tops; jewelry, pearl or moonstone links, studs and cravat in.  This is the formal costume for any daytime social event.


Barnas on Bad Faith:

Hello again:

I can’t believe that Memorial Day has already come and gone, and that the month of May is already over.  It seemed like the initial days of quarantine dragged on forever and now the calendar has been racing ever since.  At least the warm weather has finally returned to Buffalo.  Within a couple weeks we went from whiteout conditions and temperatures below freezing to high temperatures in the 90s, which is a bit too hot for me personally.  The weather in Buffalo, much like life these days, is unpredictable.

The sports world continues to slowly come back as much of the country and the world continues on with reopening.  I’ve watched more NASCAR in the last couple weeks than I have in my entire life combined.  I have to say I’m enjoying it a lot more than I expected to, but I’m still in the market for a favorite driver.  The NHL has a plan to return and it looks like the NBA is going to play a tournament at Disney.  If Major League Baseball can figure out its economic situation, which seems like no given at this point, it seems like we might be looking at a resumption of all three of the big four sports leagues that were forced to shut down because of the virus at some point during the summer.

I have another case from the Eastern District of Kentucky in my column this week.  This is a much better decision than last issue’s.  This week, the court dismisses a bad faith claim against the insurer where the underlying plaintiff’s negligence claims against its insured had been dismissed.  Absent any liability against the insured, the court found the insurer could not be liable for bad faith.  Sounds good to me.

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

Brian D. Barnas

[email protected]


Our Friend, Mrs. Hill, Still Searches, Although She Now is Only Worth $40,000:

Arizona Daily Star
Tucson, Arizona

29 May 1920



LONELY WIDOW, age 30, worth $40,000, wishes to hear from honorable gentleman under 60.  Object matrimony.  Write Mrs. Hill, 14 East Sixth Street, Jacksonville, Fla.

Editor’s note:  Mrs. Hill has become a dear friend of CP.  We report on her search for matrimony in almost every issue. Her stated worth floats between $30,000 and $300,000, depending on when and where she published her ad.  In 2020 dollars that’s between about $400,000 and $4,000,000.  You think someone would bite?


Off the Mark:

Dear Readers,

Our annual Memorial Day weekend camping trip was cancelled this year due to the pandemic.  The kids were a little upset but made the best of it by having a backyard campout.  We barbequed, but it just wasn’t the same as being in the woods.  

This edition of “Off the Mark” brings you a recent decision from the US District Court for the Middle District of Alabama, Eastern Division.  In Owners Ins. Co. v. GTR, Inc., the Court examined the carrier’s duty to defend and its duty to indemnify.  Although the Court found no duty to defend, it determined that the duty to indemnify was not ripe for adjudication as the underlying action remained pending.

This decision is a bit perplexing as the Court determined that the claims for damages fell outside the applicable policy period and that even if the damages had occurred within the policy period, the damages were precluded by an applicable exclusion.  The Court does not explain how a duty to indemnify could possibly be owed in this case.  In fact, the Court only offers that if the insured prevailed in the underlying action, the issue of indemnity would be moot.  Seems like the Court should have granted the insurer summary judgment on both the duty to defend and the duty to indemnify in this one.  This duty to indemnify issue is something to be mindful of when bringing or handling a coverage action in the Eleventh Circuit.

I hope everyone stays safe and healthy.

Until next time …

Brian F. Mark

[email protected]


The Babe:

The St. Louis Star and Times
St. Louis, Missouri

29 May 1920



            BOSTON, May 29.—Before a crowd of nearly 25,000 fans, Babe Ruth knocked his eleventh home run in the fourth inning of the first game of the double-header between the New York Yankees and the Boston Red Sox here this afternoon.

            Ruth landed on one of Joe Bush’s fast ones and sent it over the left field fence, scoring Meusel, who was on second.

Editor’s Note:          Babe Ruth ended up with 54 home runs in 1920, that was higher than the total of 14 of the 15 other major league teams that year.  All told, he stroked one of every seven home runs in the American League that year.


Boron’s Benchmarks:

Every so often we are reminded Mother Nature is a bit of a prankster. We got a big-time reminder over the past two weeks.  Two weekends ago I took some video of lake effect snow whipping across my yard, thickly coating the lawn and shrubs.  Hilariously, included in the video is my lawn care guy mowing my lawn at the same time.  Dan Kohane’s legal assistant explained to me that what I had witnessed and caught on video was a “smowing” event, not uncommon to Western New York in the springtime.

Now fast forward ahead to yesterday when I had to water down my lawn, so it didn’t spontaneously combust in the sunny, sweltering 93-degree afternoon heat.  It was so hot I saw a bird pull a worm out of the ground using an oven mitt.  “Weather” you like it or not, I’d better stop there with the silly jokes before I go on to say something like I set the house on fire just to cool off.  No, I didn’t do that.  Just thought about doing it.

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 a denial by the Pennsylvania Supreme Court of a petition filed by attorneys for a Pittsburgh, Pennsylvania, restaurant in COVID-19 business income loss litigation against our good friends at Erie Insurance.  The petition sought “extraordinary relief”.  To find out what the “extraordinary relief” sought was, follow the link I provide to not only the Order issued May 14, 2020, by the Supreme Court of Pennsylvania denying the restaurant’s petition, but also click on the link I’ve provided to a pdf of the restaurant’s petition, plus of course, take a minute to peruse my write-up of the matter, which may be found within our actual issue of Coverage Pointers.

Until next time, hang in there, stay healthy, stay hopeful, and stay cool, like us insurance coverage geeks.  Most of us, anyway.

Eric T. Boron

[email protected]


World War II Predictions:

Nashville Banner
Nashville, Tennessee

29 May 1920


Gloomy Picture of Near Future Is Presented by Senator Lewis.

            Chicago, Ill., May 29.—(By International News Service.)—Warning that in the not far distant future there will be another world war with the principal countries of Europe and Asia combined against the United States was sounded in an address given before the Illinois Bar Association by former United States Senator James Hamilton Lewis.

            “Even before the second election following the forthcoming presidential choice England and Germany will be in a commercial league,” he declared.  “both will join with Russia and Japan to prevent the United States from extending its commerce, and to protect British interests in Asia and India.  Then the United States will find itself completely isolated.  After this some grievance will be found whereby these nations will unite either to humiliate or attempt to destroy the United States.”


Barci’s Basics (On No Fault):

Hello Subscribers!

I hope you are all still staying healthy and safe! Yesterday I had to install my window air conditioners, even though a week ago the heat was still on. The weather seems to be just as stir crazy as we are.

My answers to last issue’s topics are as follows: 1) As a kid, my dream was to be a dolphin trainer. Dolphins have always been my favorite animal, and I have always thought that it would be really interesting to work with them; 2) The quote I always come back to is “In order to make your dreams come true, you have to wake up”; 3) My favorite smell is probably chocolate. Fun fact, if you are ever in Hershey, Pennsylvania, and go to the Hershey Hotel, they use chocolate mulch so that even the grounds smell like chocolate there!; 4) My favorite cartoon as a child was definitely Rugrats. That’s me for this week. For the next two weeks consider these topics:

  • What is a weird food combination that you enjoy?

  • Is there a movie you can watch over and over again without getting tired of it?

  • Are you an inner speech person? If not, how do you process thoughts?

  • What is the worst meal you’ve ever had?

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

On the no-fault front, I have two cases for you. Both discuss timely and proper EUO notices.

That’s all folks,

Marina A. Barci


An Ad for Auto Liability Insurance:

Greensboro Daily News
Greensboro, North Carolina

29 May 1920

Lost His Store, His Buick, His Piano and Household Furniture to Satisfy a $9,000.00 Judgment

No Liability Insurance on His Automobile

Mr. Automobile Owner read what happened recently to a prosperous, substantial Virginia Merchant as per the following dispatch:

            “J.R. Radcliff, proprietor of a General Store at Goshen, Virginia, a town with a population of about 150, in operating an automobile ran down a child and was sued for damages in the court of Rockbridge County.  The jury rendered a verdict of $9,000 with costs and interest, and judgment having been entered, the Sheriff of Rockbridge county advertised and sold to satisfy the judgment a new Buick car, an upright piano, household furnishings and general merchandise possessed by Mr. Radcliff.  In this case there was no insurance.”

Do Not Operate an Uninsured Automobile, for You Might Suffer a Similar Severe Penalty, Insure Your Car at Once Against Damages and Liability


O.L. Grubbs, Pres.    Phone 312     General Agents     109 E. Market Street     
A.K. Moore, Sec.-Treas.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

My wife and I enjoy watching HGTV every now and then like the rest of North America, and there is always something about that kitchen reveal that makes you think, “Gosh, if I only had the patience and purse to pursue that here!” Well, Nana bought our three-year old a “dream kitchen” and its big reveal was yesterday when it arrived on our porch—some assembly required. And if you have ever assembled a child’s kitchen set, let me tell you, it’s almost three-hours of patience and a “pursed” lip or two. But, as with HGTV, the big reveal was everything. I have had more “waffles” in the past two days than the past two years and our oldest could not be more thrilled. That is, of course, until the kiddie-pool heats up in the sun, and then he is over the kitchen set entirely…but I digress…

In this edition of Ryan’s Capital Roundup, the wait is over! The United States House of Representatives have introduced a Pandemic Risk Insurance Act (PRIA) modelled after the (untested) Terrorism Risk Insurance Act (TRIA) and we break down the key provisions included in this federal “backstop”.

Additionally, I have summarized a letter penned by several State Attorneys General to President Trump in an effort to avoid a federal attempt to expand carrier liability beyond the plain terms of business interruption insurance policies—at the risk of catastrophic insolvency. We also have a pair of regulatory bulletins. The first out of Albany, New York DFS has issued a supplement to Insurance Circular Letter No. 9, which had extended the expiration of licensing originally for a period of 60-days. The last is one I found interesting from Kentucky in which that state’s Department of Insurance has issued guidance waiving the ability of an insurer to rely upon vacancy clauses where the grounds for triggering such a clause entirely arises out compliance with various Executive Orders suspending operations.

Until next time,

Ryan P. Maxwell

[email protected]


A Century Ago – A Woman Publishes a Newspaper:

Parsons Daily Eclipse
Parsons, Kansas

29 May 1920


(International News Service)

            Hood River, Ore., May 29.—Mrs. W. L. Morrison, editor and publisher of the Maupin Times, although a woman of slight build, has for five years past done both the reporting, editing and mechanical work in connection with her paper, a weekly.  She also finds time to print letter heads and other stationery for the residents of the vicinity.


CJ on CVA and USDC(NY):

Hello all,

Summer has arrived in Western New York! This Memorial Day Weekend was the hottest one I remember in quite some time. I spent this past weekend celebrating my 28th birthday, and although the celebrations were quite different this year, notes and calls from family and friends made it seem almost normal. My parents had my wife and I over for a socially distant outdoor dinner and gifted me a new pair of snow skis. At least I was able to think cold thoughts on the hottest day of the year thus far! I hope that your summer seasons are starting off on a good foot and that everyone was at least able to enjoy some sunshine over the holiday weekend.

On the coverage front we go back to the Southern District of New York this issue. I have written up a decision on summary judgment where the court dismisses a plaintiff’s complaint essentially for not purchasing the right insurance. Plaintiff sought coverage for costs related to delivering a customer new product after a recall tainted a prior delivery. However, plaintiff failed to realize that “product recall expenses” did not include the expense to replace the actual product!

Until Next Issue,

Charles J. Englert, III


Another Ad for Auto Insurance:

Portage Daily Register
Portage, Wisconsin

29 May 1920

Auto Insurance

            Old Reliable Companies ought to be considered.  Small companies are constantly in danger of going out of business, leaving you with the necessity of defending yourself in some Auto Accident.

            A woman was recently awarded $80,000 for personal injuries.  What would this mean to you.  See us before taking out a policy.

Tel 681.


Kelm-O’Keefe Agency
Phone 681


Dishing Out Serious Injury Threshold:

Dear Readers,

I don’t know about you, but Memorial Day really snuck up on me this year. I hope everyone was able to escape the craziness for a little while, safely enjoying time with your family, and paying respect to those who made the ultimate sacrifice. For me, I was thankfully able to spend some time outside with my family, with whom I’ve been quarantining, and enjoyed some of the nice weather we had this weekend.

Unfortunately, we do not have any substantive Appellate Division decisions pertaining to Serious Injury Threshold law in the recent weeks. However, we do have an interesting decision from the Supreme Court in Kings County. Briefly, the decision notes that Defendants’ motion provided an expert affidavit with opinions that were conclusory and, therefore, Defendants were unable to meet their burden.

Stay safe,

Michael J. Dischley
[email protected]  


Pasteurized Milk:

Buffalo Evening News
Buffalo, New York

29 May 1920



            Properly pasteurized milk is the cheapest form of life insurance.  To give you the best quality obtainable we bottle our milk and cream in the country, right at the source of production.

            We will not sacrifice quality to meet a price.  A trial will convince you.

Seneca 3400
Buttermilk   Cottage Cheese


Bucci on “B”:

Hello all,

No good Coverage B cases this edition.  Good cases are hard to find these days, but we keep monitoring and searching to bring you the best coverage information available.

This week, I’d like to see if you can answer a couple of personal and advertising coverage questions. The insured manufacturer is sued by competitor alleging that the manufacturer’s false/likely to mislead or confuse labeling, promoting, and marketing of a product similar to the competitors as being compliant with eye health study's recommendations on zinc when it was not compliant.  The underlying complaint alleged two counts of patent infringement and one count of false advertising.  The specific policy language is not provided.  Do any of these claims qualify as personal and advertising offenses and, if so, are there any applicable exclusions?  Use a standard ISO form for policy language.  I look forward to your opinions.

Meantime, thankfully, it has warmed up a bit out there, and I’ve even seen some sunshine.  It has never meant more than it does now.  Friends and family can get together in the fresh air and social distance because there is space for everyone.  People are getting out and having fun.

Our fearless leader, Jody Briandi, held a firmwide Memorial Day weekend photograph competition.  The result was a fabulous collage that will be shared with all.  The point is that the photos showed that people were out doing things again like hiking, sightseeing, barbequing with friends and family.  Things are looking up! 

Diane L. Bucci


The First African-American Policewoman in New York City:

The New York Age
New York, New York

29 May 1920


            The only colored policewoman on the New York city force is Mrs. Lawon R. Bruce of 101 West 143rd street.  She is attached to the staff of the fifth police commissioner, Mrs. Ellen O’Brady, and her duties cover the whole of Greater New York.  She was appointed in January 1920, and is connected with the Welfare Bureau of the police department.

            Mrs. Bruce is a graduate nurse, Lincoln Hospital, and has served as a public-school nurse.

            Her duties require the exercise of considerable diplomacy and tact and are exercised with a view to the prevention of the causes of arrest rather than to the actual making of arrests.  She is a full-fledged police officer, with all the authority incident thereto, but most of her efforts are in the way of adjusting family dissensions and differences, especially as between parents and children.

            The influx of migrants from the South, bringing many families to live in a strange locality under conditions varying greatly from those to which they have been accustomed has created a new need for the kind of legal supervision possible only from a policewoman.  Mrs. Bruce tells some interesting incidents concerning her work, illustrating the fact that in many cases the parent needs advice and direction as much as the child.

John’s Jersey Journal:

A blackboard sign on a wall

Description automatically generated


Dear Subscribers:

Underinsured motorists coverage is a favorite of mine. In New Jersey, even more so, since insurers can actually write their own policy forms for it and write whatever reasonable restrictions they desire.

New Jersey’s view is that since UIM coverage is optional, insurers have freedom of contract in crafting their policies. Some carriers use forms prepared by ISO. Others write their own coverage forms. Accordingly, the UIM coverage provided in New Jersey can vary from insurer to insurer. Whenever I review a New Jersey UIM claim, I am always curious to see what how this particular insurer has chosen to write their coverage.

In New York, in comparison, the SUM endorsement is by regulation. So, as a result, every SUM policy in New York is substantially the same, making underinsured motorist coverage a lot more predictable. In comparison, New Jersey UIM is more of gamble.


New Jersey Appellate Division Finds UIM Carrier’s Policy to Be Ambiguous

On Friday, the New Jersey Appellate Division found an insurer’s UIM policy to be ambiguous. USAA wrote a policy of UIM coverage in New Jersey. Coverage was provided on a manuscript endorsement. The policy’s definition of “covered person” and “underinsured vehicle” to some extent conflicted over whether a person covered by multiple policies would be entitled to coverage under the USAA policy. Since the policy was ambiguous, the Court was required to apply the interpretation that favored the insured.

The claimant’s victory was short lived. Although she was deemed to be an insured, USAA’s policy had a step-down provision that reduced her coverage. Applying the step-down provision, her UIM coverage was not greater than the tortfeasor’s liability coverage. Thus, the UIM coverage was never triggered.

A long-fought battle but right result. Since this was a manuscript form, insurers who write UIM coverage in New Jersey should be unaffected by the decision (unless they used identical language in their UIM endorsement).

If we can assist you with a UIM claim, or other New Jersey coverage matter, feel free to reach out to us. My cell is 716-220-1478. We would love to work through the coverage issues with you.

John R. Ewell


Weather Insurance for Sale:

Times Union
Brooklyn, New York

29 May 1920

Weather Insurance

            Weather insurance is to be introduced here from Europe, where it has been a business of importance for some time.  We have had in our country insurance against death, fire, burglary, accidents and acts of Providence.  Against the rainy day we have had no insurance except the figurative rainy day.

            England is interested in health insurance, because she has so many rainy days.  Our periods of clear weather are longer.  Still, we have many enterprises which depend, to a great extent on favorable weather, and upon these the insurance companies expect to profit.

            There are several kinds of weather insurance, because, while exhibitions in the open, circus performances and other activities depend considerably upon the weather for success, drouth or excessive rainy spells are calamities to the farmer. 


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

In this Edition of Coverage Pointers, you may have noticed something was eschew. Was it that Lee’s Connecticut Chronicles did not address Connecticut law? Yes, you’re right. I was invited by our esteemed Editor to address an issue of Directors & Officers liability coverage, in an opinion rendered by New York’s First Department. Flip ahead to read all about the bankruptcy exception to the insured vs. insured exclusion.

I know, you think of me as your Connecticut coverage authority and, of course, all things COVID-19 (see our recent article in Law360). And you’d be right. But what you may not know is that my passion is Management and Professional Liability Insurance (and photography, and my dog Mocha, oh and my two kids, have to include them). In a former life, I managed a national insurance company’s coverage and bad faith litigation for its D&O, E&O, EPLI, Fidelity, Surety, and Cyber products. There is a wealth of knowledge and experience on the Hurwitz & Fine Coverage Team – we are truly a full-service insurance practice with a national reach.

That’s it for now. Keep wearing your masks and practice safe social distancing. Do it for each other if not for yourself.

Lee S. Siegel

[email protected]


Women in the Insurance Sales Force:

The Standard Union
Brooklyn, New York

29 May 1920

What Shall I Be?
Answered for Girls

Insurance Saleswoman


            The changed conditions brought about by the vote and the war will enable girls to enter the insurance business on more equal terms with men.  The greatest opportunities are with life underwriting companies.

            There is not much experience or training necessary.  A notebook and the company’s financial statement, together with an understanding of the different policies sold by the company are all that is necessary for an agent.

            Personality is what counts.  The biggest thing is to be to get the confidence of the prospect.  After personality come initiative, tact and energy.

            There are more uninsured women than men.  It is true that a woman agent can approach women and sell insurance more easily than a man.  Married women usually advise their husbands as to the amount of insurance they should carry.  They are, therefore, in a position greatly to aid an agent in placing insurance on the lives of their husbands and sons.  A mother is an ideal person to see when trying to place insurance on a minor.  Here again it is easy for a woman to approach a woman.

            A few of the large insurance companies have opened women’s departments, in charge of girls.  The heads of these departments are those who have begun at the bottom and have worked their way up by hard work and perseverance.  Any position through which one gains a knowledge of insurance terms and principles may serve as a stepping stone.

            The occupation is a healthy one, not confined within four walls.  An insurance agent is her own mistress, and her time is her own.  No salary is offered.  The pay comes from commissions on policies written.  Returns from the first few months may be meager, but if successful they are cumulative.  An efficient saleswoman can eventually make several thousands of dollars a year. 


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

Hello Subscribers,

Although there was snow just a couple weeks ago, it looks like the warm weather is finally here to stay! This weekend, I took advantage of the weather and went on a jaunt to Whirlpool and Devil’s Hole State Parks in Niagara Falls, New York. New York has many lovely state and local parks but interestingly, there aren’t any national parks (albeit there are various national historic sites, monuments, and memorials). Besides the grocery (and liquor) store and home, the only place I go are parks! And even though I had plans to visit a national park or two over the summer, like many of you, my plans changed. However, there are plenty of parks throughout New York, with one very large park that would swallow other national parks whole. Although Yellowstone was the first national park in the U.S., which was established in 1872, it is not the largest national or state park. The “Largest National Park” title goes to Wrangell-St. Elias National Park and Preserve, in Alaska, at about 13.2 million acres. 20 years after Yellowstone was established, the Adirondack Park was created and per the Adirondack Park Agency, at approximately 6 million acres, it is the largest publicly protected area in the contiguous United States, greater in size than Yellowstone, Everglades, Glacier, and Grand Canyon National Parks combined. So, even if New York doesn’t have any national parks, our state parks hold their own.

As it warms up everywhere, I hope you, our subscribers, get a chance to visit your nearby parks—local, state, or national. Stay safe and enjoy some of the outdoors!

Cara A. Cox


We have had two back-to-back glorious days which allowed me to get into my garden - my tulips and daffodils are in bloom, this season’s annuals that I planted look happy, the willows seem proud of their new spring leaves. It is easy to forget about the world’s problems when one is in the garden. Turning off the news and tuning into the outdoors is very good for the soul.

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]


Measle Epidemic:

Buffalo Evening News
Buffalo, New York

29 May 1920


            Two deaths from measles and 88 new cases of that disease was the day’s report of that epidemic made at the close of the past 24 hours. Health Commissioner Fronczak said the eastern states "are seething with an enormous epidemic of measles and it is estimated that the money cost so far is over $4,000,000 to say nothing of absence from school, anxiety and other features that are common to sickness."

Fourteen policemen, mounted on bicycles, are at work placarding homes in Buffalo to which the epidemic has spread, the health commissioner said. So great has become the work of quarantining homes that the health department placarders were unable to cover the whole territory.


Jen’s Gems:

Hope all is well and that everyone had an enjoyable and safe Memorial Day weekend.  The weather in Buffalo was beautiful, and we got to celebrate my oldest daughter’s 8th birthday.

My column this week reports on an interesting trial court decision concerning estoppel.  Most situations where a carrier is precluded from relying upon a policy provision in New York, it is based upon a claimed failure to comply with New York Insurance Law § 3420(d)(2).  We see significantly less estoppel-based decisions so this is a good one to check out.

Have a great week.

Jennifer A. Ehman


Headlines from this week’s issue, attached:

Dan D. Kohane
[email protected]

  • Child Victims Act Extension Bill Passes Both Houses of Legislature


Steven E. Peiper

[email protected]

  • Life Insurance Agent’s Knowledge of Misrepresentations are Not Imputed to Issuing Insurer
  • Insurance Companies in Oklahoma are Now on Notice that an Offer of Settlement Made after Suit is Filed May not Shift Right to Attorney Fees and Costs


Michael J. Dischley
[email protected]

  • Defendants’ Affidavit as to Plaintiff’s Loss of Fetus Deemed Conclusory and Insufficient for Motion for Summary Judgment on Threshold Grounds


Agnes A. Wilewicz

[email protected]

  • Insurer’s Untimely Two and a Half Year Delay in Notifying Insured of Decision to Rescind Precluded Rescission; Neither the Policy’s Employee Exclusion Nor Its Construction Operations Exclusion Barred Coverage


Jennifer A. Ehman

  • Trial Court Concludes Carrier, Who Defended Its Insured Through Trial, Was Estopped from Denying Coverage Based upon an Uninsured Subcontractor Exclusion Raised after Opening Arguments in Underlying Action

  • Contractor Must Defend Property Owner Based Upon Allegations in the Underlying Complaint


Brian D. Barnas

[email protected]

  • Plaintiff’s Bad Faith Claim was Dismissed where Negligence Claims against the Insured had been Dismissed


John R. Ewell

  • UIM insurer’s definition of “covered person” was Ambiguous. Nevertheless, since Step-Down Provision Reduced UIM Coverage to Same Amount of Tortfeasor’s Coverage, UIM Never Triggered.


Lee S. Siegel

[email protected]

  • Action by Creditors Trust Overcomes I v. I Exclusion


Brian F. Mark
[email protected]

  • Alabama Federal Court Finds No Duty to Defend, but Holds Duty to Indemnify Must Await Determination of the Underlying Action


Eric T. Boron

[email protected]

  • Pennsylvania High Court Denies Restaurant’s Emergency Application for Extraordinary Relief Seeking COVID-19 Business Income Coverage


Marina A. Barci

  • Receipt of EUO Scheduling Letter is Presumed with Proof of Mailing Unless Evidence is Submitted to the Contrary

  • Timely Verification Request Imperative When Denying Claim for Failure to Appear at Examination Under Oath


Ryan P. Maxwell
[email protected]

Legislative List

Regulatory Wrap-Up

  • Insurance Producer Licensing Extension Amended to Span an Additional Forty-Five Days

  • Department of Insurance Recognizes Compliance with Governor’s Order May Trigger Certain Policies’ Definition of Vacancy

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

  • Plaintiff’s Failure to Purchase Product Recall Liability Insurance Precludes Coverage for the Replacement of a Customer’s Product, as Replacement is Not Included as a “Product Recall Expense”


Cara A. Cox

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

Coverage for COVID-19 Supply Chain Disruption

  • A Look at the Impact of COVID-19 Disruption at Canadian Beef Processing Plants


Stay healthy.  We look forward to regularity of some denomination.


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


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

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]

Child Victims Act Extension Bill Passes Both Houses of Legislature:

In only the second or third time in 20+ years, not a single case on which to report.  Instead, I’ll advise that we just received word the Legislature passed a bill extending the time to sue CVA claims for a full year, from August 14, 2020 to August 14, 2021.  That bill heads to Governor Cuomo’s desk for consideration.


Steven E. Peiper

[email protected]

05/21/20       Vestal v. Pontillo
Appellate Division, Third Department
Life Insurance Agent’s Knowledge of Misrepresentations are Not Imputed to Issuing Insurer

Plaintiff’s decedent procured a life insurance policy from his brother-in-law, Pontillo, in 2011.  At that time, Pontillo sold life insurance as part of his position with Hudson Heritage Group.  Mr. Pontillo was also employed by Hudson Heritage Capital Management as a financial advisor at the same time. 

Mr. Pontillo helped decedent procure $5,000,000 in term life insurance.  Less than two years later, and thus within the contestability period of the policy, decedent died of complications arising out of excessive alcohol consumption.  In approximately 2015, plaintiff submitted a claim for benefits to the life insurance carrier, ReliaStar. 

Upon completing its investigation, ReliaStar concluded that the decedent submitted an application filled with errors and misrepresentations about his prior health history.  Accordingly, ReliaStar disclaimed any and all coverage obligations.   Plaintiff responded by commencing an action against ReliaStar and also against Mr. Pontillo.  With regard to Pontillo, plaintiff asserts that he knew of decedent’s history of drug and alcohol abuse, and as such he should have known that decedent would not be eligible for life insurance.  Plaintiff also named Hudson Heritage Group and Hudson Heritage Capital Management as defendants. 

ReliaStar appeared in the action, and asserted a counter-claim seeking to void the policy ab initio as a result of decedent’s misrepresentations.  Capital Management moved to dismiss the matter in lieu of an Answer. Pontillo/Hudson Heritage similarly moved to dismiss after filing a formal appearance.  The trial court granted Pontillo and Hudson Heritage’s motion to dismiss the claims of breach of contract.  The court also granted the motions of Hudson Heritage and Capital Management seeking dismissal of allegations based upon negligent hiring/supervision.  On appeal, the Appellate Division further granted that portion of the motions which sought dismissal of plaintiff’s claims based on fraud, negligence misrepresentation and concealment of material facts.

At the completion of discovery, all four defendants moved for summary judgment dismissing any and all remaining Causes of Action. The trial court granted ReliaStar’s counter-claim seeking to void the policy.  The court also granted Capital Management’s motion to dismiss plaintiff’s claims for breach of fiduciary duty, negligence and respondeat superior against HHCM.  Finally, the court granted Pontillo/Hudson Heritage’s motion to dismiss plaintiff’s allegations of breach of fiduciary duty, negligence and respondeat superior. 

Plaintiff appealed all portions of the Order, and the Third Department analyzed each motion argument as part of its opinion.  With regard to ReliaStar’s motion, the Court concluded that the carrier proffered evidence of “multiple misrepresentations” on his questionnaire.  If the answers had been accurate, ReliaStar further established that they would not have written the policy in question.

The Court advised that plaintiff conceded the misrepresentations and their materiality.  Plaintiff argued, however, that as an agent of ReliaStar, Pontillo’s knowledge of the falsities should be imputed to his principle.  Thus, under plaintiff’s theory, ReliaStar should be estopped from rescinding a policy it wrote notwithstanding its knowledge (albeit through an agent) of decedent’s disqualifying medical history.  Unfortunately, plaintiff’s theory was not pleaded in the original Complaint, and as such was not at issue in this lawsuit.  Accordingly, where there is no challenge that ReliaStar met its burden, it follows the matter was dismissed as against it.

The Appellate Division upheld the dismissal of Capital Management because it established through competent evidence that it did not sell, nor was even authorized to sell, life insurance policies.  Capital Management and Hudson Heritage are distinct legal entities, and the record was clear that Pontillo’s procurement of a policy for decedent was done, completely, in his capacity as an employee of Hudson Heritage.

With regard to Mr. Pontillo’s motion, the Appellate Division first noted that an agent can be liable to a third-party beneficiary if the relationship with the beneficiary is so close as to almost constitute privity.  This can be found where it can be established that the agent knew his representation was for a particular purpose, where the agent understood there would be reliance upon his or her representation and where there was conduct linking the mutual understanding of the agent’s work.

Here, although Mr. Pontillo knew, in a general sense, that the policy would benefit plaintiff, plaintiff was not involved in the decision to obtain life insurance, she was not involved in the selection or procurement of the policy from ReliaStar, and she was not involved in the selection of the amount of coverage purchased.    As such, where plaintiff could not establish a near privity type relationship with Mr. Pontillo it followed that her claims for negligence failed. 

The Appellate Division also noted that the customary agent/purchaser arrangement does usually give rise to a fiduciary relationship.  As such, because of plaintiff’s lack of involvement in the process she was unable to establish that Mr. Pontillo (or Hudson Heritage) owed a fiduciary obligation.

Finally, because plaintiff did not possess a valid claim against Mr. Pontillo for negligence or breach of fiduciary duty, it follows that her claims of respondeat superior against Hudson Heritage were also dismissed.  

05/05/20         Hamilton v. Northfield Ins. Co.
Oklahoma Supreme Court
Insurance Companies in Oklahoma are Now on Notice that an Offer of Settlement Made after Suit is Filed May not Shift Right to Attorney Fees and Costs

In answering certified questions from the Tenth Circuit, the Oklahoma Supreme Court held that unless the offer is made within 60 days of receipt of proof of loss, per 12 OS 3629(B), the insurer is not the prevailing party if its offer is made after suit is filed, and is less than the verdict for plaintiff at trial. Hamilton timely submitted Proof of Loss, the Insurer denied the claim and suit followed. Prior to trial, Insurer offered to settle for $45,000.00. Hamilton rejected, trial ensued, and a verdict for $10,652 was obtained. The U.S. District Court sided with Insurer as the prevailing party but the Circuit Court, following a panel rehearing certified two questions. In answering the questions,  the Supreme Court ruled that in order for the insurer to be the prevailing party, the offer of settlement must be made within  60 days from receipt of proof of loss, and is” not a courteous gratuity, but a contractual and legal necessity.” Oklahoma’s statute is designed to facilitate payments as expeditiously as possible when those amounts are owed under the policy.

In sum, an insurer cannot deny a claim and then, after suit commenced, offer to settle in the hope of becoming the prevailing party at trial and avoid fees and costs if plaintiff recovers any verdict in his favor. ”In other words, an offer of litigation “settlement” cannot serve as the catalyst for section 3629 (B)’s fee shifting provision.”

Caveat: As of this posting, the Supreme Court Opinion has not been released for publication, and may be subject to revision or withdrawal. In the interim, Counsel for insurers may want to advise their clients to carefully review and assess Proofs of Loss, and make appropriate offer of settlement within the 60 day time period if it hopes to avoid paying fees and costs in the event of an adverse verdict, even one less than what may have been made by an offer of judgment during the pendency of the litigation.

Editor’s Note: We thank our good friend and 20+ year Coverage Pointers subscriber John R. Woodard, III, partner in the Tulsa, Oklahoma firm of Coffey, Senger & Woodard, PLLC for preparing this summary. John can be reached at (918) 292-8787 and by email, [email protected].


Michael J. Dischley
[email protected]


05/12/20       Genzlinger v. New Heights Youth, Inc.
Supreme Court, Kings County
Defendants’ Affidavit as to Plaintiff’s Loss of Fetus Deemed Conclusory and Insufficient for Motion for Summary Judgment on Threshold Grounds

In an action to recover damages for personal injuries, plaintiff was allegedly injured when she was a pedestrian struck by a minivan owned by Defendant New Heights and operated by Defendant Rahme Anderson. 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.

As to the issue of serious injuries defined in Insurance Law § 5102(d), Plaintiff alleges that she sustained serious injuries in the form of a loss of fetus. She also alleges a permanent loss of use of a body organ, member, function or system, to wit: her left knee, cervical and lumbar spine. She further alleges a permanent consequential limitation of the use of a body organ or member and significant limitation of use of a body function or system. Lastly, Plaintiff alleges that she suffered a medically determined injury which prevented her from performing substantially all of the material acts which constitute her usual and customary daily activities for in excess of ninety (90) of the first one hundred eighty (180) days immediately following the accident.

In moving for summary judgment, Defendants submit an affirmed report regarding Plaintiffs examination by Alan M. Crystal, M.D., a board-certified orthopedic surgeon authorized to practice in that state of New York. Dr. Crystal found no limitations in the range of motion in Plaintiffs cervical spine, lumbar spine or left knee.

Further, Defendants argue that Plaintiff fails to meet the standard under the loss of fetus category. In support of this assertion, Defendants submit an affirmed report from Vincent Pillari, M.D., a board-certified OBGYN. Dr. Pillari avers that in his professional opinion the loss of Plaintiffs pregnancy "was not caused by the accident but rather much more likely caused by genetic abnormalities of the egg given her age was 43 years." Dr. Pillari notes that Plaintiff had no bleeding, cramping or other signs suggestive of early miscarriage at any time during the pregnancy. He further notes that Plaintiff was approximately two weeks pregnant at the time of the accident, and that the impact, as alleged, would be insufficient to cause damage to such an early pregnancy.

In opposition, Plaintiff asserts that Defendants fail to establish that Plaintiff did not sustain a serious injury under the loss of fetus category as the findings of Dr. Pillari are conclusory. Plaintiff submits the affirmation of Mark Vaynkhadler, M.D., a board certified OBGYN. Dr. Vaynkhadler opines that the "force of impact from the accident cannot be ruled out as a direct causative factor in the loss of pregnancy as determined from the specimen collected" and that Plaintiffs "age ... cannot be viewed in isolation and the medical records do not document any instances of spontaneous blighted ovum ... prior to the January 2017 accident."

The Court found that the Defendants failed to make a prima facie showing that Plaintiff did not sustain a serious injury within the meaning of insurance Law § 5102(d) regarding her loss of a fetus. In order to meet their burden, Defendants were required to present evidence in admissible form establishing that Plaintiff did not suffer a serious injury causally related to the accident. The Court found that Dr. Pillari’s expert opinion that Plaintiff’s loss of fetus was not causally related to the accident is conclusory.

Specifically, the Court noted that Dr. Pillari opined that "most causes of a missed abortion results from severe genetic abnormalities of the female egg" and that "patients who are at the age of 43 have an extremely high incidence of genetic abnormalities." Using these broad medical principles, the Court found that, Dr. Pillari speculated that Plaintiff’s loss of fetus was '"much more likely" a result of her age. As Dr. Pillari failed to explain his conclusion with objective medical evidence, the Court found that his reasoning lacked probative value. As such, the Court found that Defendants failed to meet their prima facie burden requiring denial of the motion, regardless of the sufficiency of the opposing papers.

Accordingly, Defendants motion for Summary Judgment was denied.


Agnes A. Wilewicz

[email protected]

05/15/20       United States Liability Ins. Co. v. WW Trading Co., Inc.
U.S. Court of Appeals, Second Circuit
Insurer’s Untimely Two and a Half Year Delay in Notifying Insured of Decision to Rescind Precluded Rescission; Neither the Policy’s Employee Exclusion Nor Its Construction Operations Exclusion Barred Coverage

United States Liability Insurance Company (USLI) insured WW Trading under a general liability policy. When someone was injured at a building that WW Trading operated, they sought coverage from USLI. Upon review and eventual declaratory judgment action, USLI notified the insured of its intent to rescind the policy and void it ab initio.

Under New York law, when a carrier wants to rescind a policy based upon an insured’s misrepresentations, they must do so within a reasonable period of time. Any delay upon acquiring knowledge of the facts sufficient to rescind must be reasonable, as determined by the particular facts of any case. Constructive knowledge exists where the circumstances are adequate to put a party on notice of the material misrepresentations.

In this case, USLI clearly had knowledge of the insured’s potential misrepresentations no later than November 7, 2014 (the misrepresentation involved the claim that WW Trading did not use forklifts and did not engage in operations involving the warehousing of goods of others). Indeed, on that date USLI sent WW Trading a nonrenewal notice accusing the insured of violating the exact provisions of the insurance application that formed the basis of USLI’s rescission claim. Yet they did not notify the insured of the intent to rescind until April 12, 2017, after discovery was exchanged in the declaratory judgment action. Such delay was unreasonable as a matter of law.

The court also addressed the policy’s employee exclusion and construction operations exclusion. For the employee exclusion, the court found that since there were at least two possible interpretations of the provision (dealing with whether the employee of a contractor had to be in privity with the insured), it was thus ambiguous. Any policy language that is found to be ambiguous, like any contract, is interpreted against the drafter. Here, the drafter was the insurance company and the interpretation was held against them. With respect to the construction operations exclusion, at issue was whether the rust scraping and painting the injured employee was doing constituted “construction” or “renovation”. The court concluded that based upon the facts presented, such activity did not fit within those terms and therefore the exclusion did not apply.

Note: Please contact me if you would like a copy of the decision.


Jennifer A. Ehman

05/22/20       Arch Specialty Ins. Co. v. JMG Improvements Inc.
Supreme Court, Orange County

Hon. Catherine M. Bartlett

Trial Court Concludes Carrier, Who Defended Its Insured Through Trial, Was Estopped From Denying Coverage Based upon an Uninsured Subcontractor Exclusion Raised After Opening Arguments in Underlying Action

Arch Specialty issued a CGL policy to JMG Improvements, Inc.  On July 3, 2015, Omar Rene Chihuahua allegedly sustained injury on a construction site.  Mr. Chihuahua commenced a lawsuit against the property owner, John Doyle and JMG.  Despite naming JMG as a defendant, Mr. Chihuahua alleged that JMG, a subcontractor on the site, was his employer.  In an amended complaint, he alleged that Drywall King Corp. was in fact his employer.  The owner and Mr. Doyle then brought cross claims against JMG for common law indemnification and contribution.  JMG asserted that the claims were barred by the exclusive remedy provision of the Workers. Comp. Law.

Upon receipt of notice of claim, Arch issued an August 12, 2015 disclaimer of coverage to JMG citing its policy’s employer’s liability exclusion.  A month later, on September 29, 2015, the complaint alleging employment by JMG was filed; however, at that time, Arch was advised by the insurance carrier for John Doyle that Mr. Chihuahua may in fact have been a subcontractor retained by JMG.  By letter dated November 11, 2015, Arch issued a second disclaimer citing the employer’s liability exclusion and an uninsured subcontractor exclusion (which excluded coverage for bodily injury to any worker arising out of work performed by a subcontractor unless the subcontractor had liability insurance coverage meeting specified criteria and naming JMG as an additional insured and an agreement whereby the subcontractor agreed to defend, indemnity and hold harmless JMG).

The complaint was then amended.  As touched upon above, the amended complaint contained specific allegations that JMG was the general contractor or a subcontractor at the site, and that Mr. Chihuahua was injured in the course and scope of his employment for Drywall King.  In response, Arch issued a letter dated February 19, 2016, acknowledging its obligation to defend JMG based upon the allegations, but advising that it was undertaking the defense subject to a complete reservation or rights including, but not limited to, its right to disclaim coverage based upon the employer’s liability exclusion.  It also noted that setting aside the allegations in the complaint, Arch’s own investigation revealed that Mr. Chihuahua was employed by JMG and, in turn, it would not indemnify JMG.  No mention was made about the uninsured subcontractor exclusion in this letter.

The author apparently did not believe the exclusion was implicated based upon the allegations in the amended complaint, and an internal claims note contained a comment that “[s]ince Doyle only hired one contractor and because Plaintiff was the only person working at the time of his accident, [] he was either employed by JMG or else JMG was not present at the site and did not perform work on the date of the loss, and therefore cannot be liable.”

The factual issues were then litigated in the underlying matter.  There, the trial court denied JMG’s motion for summary judgment based upon the Workers Comp. bar holding that the Workers Comp. records were replete with references to Drywall King being the employer.  JMG, Drywall King and another entity were owned and operated by the same person although he had a distinct business or function.  The court found issues of fact between JMG’s assertions as to employment and the documents submitted on the motion.

Ultimately, the underlying proceeded to trial on the owner and Doyle’s claims for indemnification and contribution against JMG and on JMG’s workers’ compensation defense.  At that point, and apparently based upon a statement provided during openings that Mr. Chihuahua may have been working as an independent contractor at the time of the accident, Arch sent a letter raising the uninsured subcontractor’s exclusion and reserving its right to disclaimer on same.  The jury’s verdict ultimately determined that Mr. Chihuahua was not an employee of either JMG or Drywall King Corp. at the time of the accident.  However, they still found that JMG supervised, directed and/or controlled the work Mr. Chihuahua was performing at the time of the accident.  Arch then disclaimed coverage based on the uninsured subcontractor exclusion, and this action arose.

Ultimately, the court concluded that the allegations in the amended complaint directly implicated the uninsured contractor exclusion.  And, the court noted that as JMG advised Arch that it considered Mr. Chihuahua to be its own employee, Arch knew or should have known that JMG had not satisfied the condition necessary to avoid the uninsured subcontractor exclusion (i.e., it had not required Drywall King or Mr. Chihuahua to procure liability insurance naming JMG as an additional insured or to agree in writing to defend, indemnify and hold harmless JMG.  Thus, the court concluded that when Arch assumed control of JMG’s defense, it did so with knowledge of facts which constituted a defense to coverage for the claims therein asserted against JMG under the policy’s uninsured subcontractor exclusion.

The question then became whether Arch was equitably estopped from denying coverage based upon that exclusion by virtue of it having taken and controlled JMG’s defense without specifically reserving its right to disclaim on that basis until after the commencement of the trial in the underlying action.  The court concluded that any reservation by Arch was insufficient as a matter of law to prevent JMG’s detrimental reliance.  The court also highlighted what it viewed as an undisclosed conflict of interest and noted that Arch never advised JMG of its entitlement to an attorney of its own choosing.  It also found that JMG was prejudiced as Arch’s reservation of rights to disclaim based upon the uninsured subcontractor exclusion was unreasonably delayed until after opening statement at the trial, at which point it was obviously too late for JMG to secure independent representation or change the trajectory of the trial. The court also found fault in the Arch-appointed defense counsel’s promotion of the theory that Mr. Chihuahua was an independent contractor as opposed to a “special employee” of JMG, which would go against Arch’s coverage position.  Based upon this analysis, the court denied Arch’s motion for summary judgment, and concluded that it was equitably estopped from disclaiming coverage based upon this exclusion.

Note:  Thank you to Jim Haddad, Law Office of James M. Haddad, for bringing this decision to our attention.  If you would like a copy of the decision, just e-mail me or Jim at [email protected].


05/19/20       Strathmore Ins. Co. v. Utica First Ins. Co.
Supreme Court, New York County
Hon. Nancy M. Bannon
Contractor Must Defend Property Owner Based Upon Allegations in the Underlying Complaint

This decision arises out of a trip and fall on sidewalk adjacent to a property owned by Peldale Owners Corp. (“Peldale”).  At the time of the accident, Brothers Construction was performing construction on the sidewalk.  Plaintiff brought suit against both Peldale and Brothers.  The Complaint included explicit allegations that his injuries were the “result of the negligence, carelessness and recklessness of Brothers…”

This declaratory judgment action was then filed by Peldale’s insurer who contended that Utica First (Brother’s insurer) had a duty to defend Peldale as an additional insured and that Utica First improperly declined coverage under an agreement.  Under the Utica First policy an additional insured includes “[a]ny person or organization whom you are required to name as an additional insured on the policy under a contract or written agreement,” and provides coverage “with respect to liability arising out of A. ‘Your [Brother’s] work’ for that additional insured for or by you.”  Utica First argued that there was a lack of privity between Brothers and Peldale as there was no signed written contract between the two entities, and that the Indemnification and Insurance Requirement Agreement included in the motion papers was not properly authenticated.

In granting plaintiff’s motion for summary judgment, the court concluded that Utica First sold a policy that permitted is named insured absolute discretion and authority in deciding who qualifies as an additional insured thereunder. Inasmuch as the Indemnification and Insurance Requirement Agreement between Peldale and Brothers requires Brothers to name Peldale as an additional insured for jobs performed for Peldale, Peldale qualifies as an additional insured under the policy.

The court dismissed any argument based upon lack of authentication finding that the document was attached to an affirmation by an attorney in the general counsel’s office of the plaintiff who attested to the affirmation being based upon his personal knowledge of authenticity by virtue of the document being in the company’s possession and having read the claims file of his company.  Accordingly, the court found that Utica First had a primary, noncontributory duty to defend Peldale.


Brian D. Barnas
[email protected]

05/18/20       Hammons v. Barkdull
U.S. District Court, Eastern District of Kentucky
Plaintiff’s Bad Faith Claim was Dismissed where Negligence Claims against the Insured had been Dismissed

In March 2017, Plaintiff was in a car accident with someone driving Defendant Plenney Barkdull's car in Laurel County, Kentucky. Plaintiff claims the driver of Mr. Barkdull's car negligently caused the accident; that unidentified individual, however, fled the scene.  In the aftermath of the accident, Mr. Barkdull denied operating the vehicle and disclaimed responsibility for whoever was driving the car.  Relying in part on Mr. Barkdull's representations, his insurance company, Defendant Farmers Insurance, ultimately denied Plaintiff’s claim for bodily injury benefits.  Unable to recover from either Defendant, Plaintiff filed suit on April 18, 2019 against Mr. Barkdull and Farmers.

Plaintiff sought leave to amend his complaint.  First, he attempted to add claims for negligent entrustment and punitive damages against Mr. Barkdull.  The Court concluded that the negligence claims were barred by the applicable statute of limitations.

The amended complaint also alleged that Farmers acted in bad faith.  Farmers moved for judgment on the pleadings.  Plaintiff could not establish negligence against Farmers insured because the claims were time barred.  Since Plaintiff could not prove the negligence claims against Farmers’ insured, under Kentucky law, he could not establish bad faith against Farmers.  There was no possibility of an excess judgment against Farmers insured with the dismissal of the negligence claims.  Kentucky law requires a plaintiff to show that the insurer was obligated to pay the claim under the terms of the policy.  With the negligence claims dismissed Plaintiff had no way to show that and the bad faith claim was thus dismissed.


John R. Ewell

05/22/20       Falk v. Donovan and Allstate New Jersey
New Jersey Superior Court, Appellate Division
UIM insurer’s definition of “covered person” was Ambiguous. Nevertheless, since Step-Down Provision Reduced UIM Coverage to Same Amount of Tortfeasor’s Coverage, UIM Never Triggered.

Falk was operating an automobile owned by Hall, her fiancé. Donovan, a negligent driver, struck Falk causing her injury.  Donovan’s vehicle had $100,000 in liability coverage. Falk was insured by Allstate with a $100,000 in underinsured (UIM) coverage. Hall’s auto was insured with USAA with $500,000 in UIM coverage.

Falk sued Donovan for negligence. She added a claim against Allstate for UIM coverage and a claim against USAA for UIM coverage under Hall’s policy. USAA moved for summary judgment seeking a declaration that Falk is not entitled to UIM coverage under its policy.

USAA argued that Falk is not a "covered person" as that term is defined in the section of the policy pertaining to UIM coverage. USAA further argued that if Falk is deemed to be a "covered person" under the policy, the step-down provision in the policy applies and reduces her maximum recovery of UIM benefits to the amount of UIM coverage available under her Allstate policy. USAA argued, either way, Falk was not entitled to UIM coverage.

Falk opposed USAA's motion and filed a cross-motion for partial summary judgment. She argued that the relevant provisions of the USAA policy are ambiguous, and she should be deemed a "covered person" under the UIM provisions of the policy. Falk also argued that the step-down provision does not apply to UIM coverage. Falk therefore contended she was entitled to UIM coverage up to the policy limits of $500,000.

The trial judge ruled that the relevant provisions of the USAA policy are ambiguous, and Falk should be deemed a "covered person" under the UIM provisions of the policy. The judge also decided that the step-down provision in the policy is expressly limited to UM coverage. The judge therefore concluded that Falk was entitled to UIM coverage up to $500,000. USAA appealed.

The USAA policy defined a "covered person" to mean:

1. You and any family member.

2. Any other person occupying your covered auto but only if that person is not covered for UM under another auto policy.

3. Any person for damages that person is entitled to recover because of [bodily injury] to which this coverage applies sustained by a person described in 1. or 2. above.

(emphasis added).

The USAA policy defined an “underinsured motor vehicle” to mean:

1. With respect to a covered person who:

a. Is not the named insured under this policy; and

b. Is a named insured under one or more policies providing similar coverage,

an underinsured motor vehicle is a vehicle to which a New Jersey Basic Auto Policy issued pursuant to N.J.S.A. 39:6A-3.1. applies or which liability bonds and policies for [bodily injury] or [property damage] are available, but the sum of the limits of the bonds and policies is less than the sum of the limits for Underinsured Motorists Coverage afforded under this policy and all other policies identified in C.1.b.

(emphasis added).

On appeal, the Appellate Division reviewed both definitions and concluded that there was ambiguity. It reasoned:

… as applied to a person who was occupying a covered automobile, the term "covered person" only includes persons who do not have "UM" coverage. However, as used in the definition of "underinsured motor vehicle," the term "covered person" includes any person who is a named insured under a policy that provides "similar coverage," which presumably means both UM and UIM coverage. Therefore… the term "covered person" is ambiguous when applied to persons, like Falk, who were injured while occupying a covered automobile.

Since the Appellate Division found "covered person" to be ambiguous, it must be interpreted in favor of Falk, and therefore, Falk is a "covered person" under the policy.

USAA further argued that if Falk is deemed to be a "covered person" for UIM coverage, the step-down provisions of the policy apply. The policy contained the following step-down provision:

If there is other applicable insurance available under one or more policies or provisions of coverage:

1. Any recovery for [bodily injury] or [property damage] under all such policies or provisions of coverage may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing coverage on either a primary or excess basis:


a. If a covered person is

1. A named insured under one or more policies providing similar coverage; and

2. Not occupying a vehicle owned by that covered person, then any recovery for damages for [bodily injury] or [property damage] for that covered person may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing coverage to that covered person as a named insured.

The Appellate Division found that, when read in light of all the provisions and amendments to the policy, it was “readily apparent” that the stepdown provision applied to both uninsured and underinsured motorists coverage. In addition, the Appellate Division found that Falk “could not reasonably expect” that the step-down provision would not apply to UIM coverage (defeating the reasonable expectations rule).

Therefore, the Appellate Division concluded that the step-down provision applies to Falk. Meaning the UIM coverage under the USAA policy “steps-down” to the same limits as her Allstate policy—$100,000. Since her UIM coverage under the USAA policy is not greater than the $100,000 coverage available to her under the tortfeasor’s policy, the UIM coverage under the USAA policy is not triggered.


Lee S. Siegel

[email protected]

04/25/20       Westchester Fire Ins. Co. v. Schorsch
Appellate Division, First Department
Action by Creditors Trust Overcomes I v. I Exclusion

The Appellate Division held that directors and officers are entitled to coverage for a breach of fiduciary duty action brought against them by the named insured via a Creditor Trust. The bankruptcy exception to the insured vs. insured (“IvI”) exclusion restores coverage, the panel determined, for the D&Os because the exception’s broad language "comparable authority" encompasses an action against the D&Os brought by a Creditor Trust that functions as a post-confirmation litigation trust, given that a Creditor Trust is an authority comparable to a "bankruptcy trustee" or other bankruptcy-related or "comparable authority" as listed in the bankruptcy exception.

RCS Capital Corporation (“RCAP”) purchased a tower of D&O liability insurance. Westchester Fire Ins. Co., sitting at $5 million x $35 million, balked at defending the D&Os in the breach of fiduciary duty action. RCAP was a wholesale broker-dealer and investment banking and advisory business. The RCAP D&Os formed AR Capital LLC to create and manage REITs. AR Capital LLC grew to become one of the largest creator and sponsor of REITs in the US. But, rocked by a financial scandal, the empire collapsed, leaving RCAP in Chapter 11 Bankruptcy proceedings with a bottomed-out stock price.

As is oft the case in these circumstances, the D&Os were sued for breach of their fiduciary duty to the shareholders. Here, the allegations included claims that the D&Os exercised dual control of the entities to enrich themselves at the expense of the shareholders. The complicating question for coverage was not the claims themselves, although issues of insured capacity remain, but rather by whom they were brought. The litigation was brought by a Creditor Trust that was formed in the bankruptcy proceedings to, among other things, enforce all claims for the benefit of RCAP’s unsecured creditors.

Westchester (and the layers above it) denied coverage to the D&Os, relying on the IvI Exclusion. A typical exclusion, the IvI prohibits coverage for “any Claim made against [the D&Os] by, on behalf of, or at the direction of the Company or Insured Person.” RCAP and all past, present, and future D&Os qualify as an Insured Person. Generally, this provision exists to avoid coverage for collusive actions and intramural squabbles.

The insurers argued the IvI precluded coverage because the fiduciary duty action was brought on behalf of RCAP (an Insured Person) against the D&Os (also Insured Persons). The Appellate Division agreed but only up to a point. It found that the bankruptcy exception to the IvI returned coverage. The bankruptcy trustee exception restores coverage excluded under the IvI exclusion for claims "brought by the Bankruptcy Trustee or Examiner of the Company or any assignee of such Trustee or Examiner, or any Receiver, Conservator, Rehabilitator, or Liquidator or comparable authority of the Company." The court reasoned that the Creditor Trust is readily equivalent to a bankruptcy trustee.

Importantly, the court found that the exclusion and exception both focus on the identity of the party asserting the claim, not on the nature of the claim. “Thus, when read together, the bankruptcy exception restores coverage for bankruptcy-related constituents, such as the bankruptcy trustees and comparable authorities…The D&O claims here, however, are not prosecuted by the debtor corporation or by individuals acting as proxies for the board or the company. On the contrary, the D&O claims are prosecuted by the post-confirmation Creditor Trust, a separate entity.”

The panel also found the carriers’ arguments against coverage irrational. “First, we perceive no valid rationale for excluding D&O claims from D&O coverage when asserted by a post-confirmation litigation trust where coverage would otherwise exist for identical claims asserted by a Chapter 11 trustee, liquidator or creditors' committee.” The court further reasoned that withholding coverage would defeat the rational for the creation of the post-confirmation litigation trust, which generally allows an entity other than the debtor in possession to pursue claims that the management may be reluctant to pursue. Finally, the panel rejected the insurers’ interpretation of “comparable authorities” as overly narrow and “ignores the reality of insolvency.”


Brian F. Mark
[email protected]

05/20/20       Owners Ins. Co. v. GTR, Inc.
U.S. District Court, Middle District of Alabama
Alabama Federal Court Finds No Duty to Defend, but Holds Duty to Indemnify Must Await Determination of the Underlying Action

This declaratory-judgment action arises out of an underlying construction defects action related to Graham's Total Restoration, Inc.’s ("GTR") repair of Eddie and Catherine Gooden’s home and personal property after the property was damaged by a lightning incident in May 2012.

Owners Insurance Company ("Owners") issued a Tailored Protection Policy of insurance, which included Commercial General Liability ("CGL") coverage, to GTR. The policy was effective from January 5, 2012 to January 5, 2013, and from January 5, 2013 to September 7, 2013.  The Owners policy applies to 'bodily injury' and 'property damage' only if: (1) the 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory' and (2) the 'bodily injury' or 'property damage' occurs during the policy period."  The policy also contains a "Fungi or Bacteria" exclusion.   

In March 2016, the Goodens filed an underlying action against GTR and several other defendants asserting various state law claims, including negligence and wantonness and mold/nuisance.  The Goodens alleged that GTR negligently and/or wantonly performed the repairs, resulting in the existence and presence of toxic mold in their home and on their personal property and causing a mold nuisance in their home.

Owners agreed to defend GTR in the underlying action subject to a reservation of rights.  Owners filed a declaratory-judgment action against GTR and the Goodens seeking a declaratory judgment that it did not owe a defense or indemnity to GTR.  Owners then filed a motion seeking judgment on the pleadings or, in the alternative, summary judgment against all defendants.

Owners argued that the policy did not cover the Goodens' claims against GTR in the underlying action because the Goodens' alleged injuries occurred outside of the applicable policy period.  In response, GTR claimed that there was insufficient evidence that the Goodens' damages occurred outside of the policy period, and thus a duty to defend existed.

The Court found GTR's argument to be both incorrect and a misunderstanding of its own burden to establish potential coverage, noting that under Alabama law, it is the insured's burden to establish coverage by showing that a claim potentially falls within the policy.  GTR failed to present evidence—either based on the Goodens' Complaint or through other facts—that the Goodens' alleged bodily injury or property damage occurred before the policy expired in September 2013.  The Court confirmed that the underlying complaint did not allege that the Goodens' damages occurred or potentially occurred within the policy period.  Although GTI attempted to argue it performed and concluded its work on the Goodens' home during the policy period, the Court pointed out that the policy issued to GTR clearly states that it only covers bodily injury or property damage that "occurs during the policy period."  This means that the "injury, and not an occurrence that causes injury, must fall within the policy period for it to be covered."  Thus, the fact that GTR performed the repair work within the policy period was not dispositive as to whether the Goodens' alleged damages occurred within the policy period.  Further, the Goodens' discovery responses in the underlying action—which were submitted to the Court by GTR—confirmed that their alleged injuries occurred outside the policy period.  For these reasons, the Court determined that Owners did not owe a duty to defend GTR in the underlying action.

Next, the Court turned to the applicability of the policy's Fungi or Bacteria exclusion, determining that even if the alleged damages had occurred within the policy period, such damages fell squarely within the exclusion. The exclusion expressly defines "Fungi" to include mold and "applies whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.  In reviewing the underlying complaint and the Goodens’ discovery responses in the underlying action, the Court held that the alleged damages arose "in whole or in part" from the presence and existence of mold.  As the subject exclusion precluded coverage, the Court found that Owners did not owe a duty to defend GTR in the underlying action.

Lastly, the Court examined the duty to indemnify.  Owners argued that because no duty to defend was owed, it likewise owed no duty to indemnify GTR as the duty to defend is more extensive than the duty to indemnify.  The Court noted that courts in the Eleventh Circuit have consistently held that whether an insurer has a duty to indemnify is not ripe for adjudication until the underlying lawsuit is resolved.  As the underlying action was still ongoing, the Court held that the issue of indemnity was unripe for adjudication and, as such, dismissed Owners’ claim for declaratory relief as to its duty to indemnify without prejudice.


Eric T. Boron

[email protected]


05/14/20       Joseph Tambellini, Inc. v. Erie Insurance Exchange
Supreme Court of Pennsylvania
Pennsylvania High Court Denies Restaurant’s Emergency Application for Extraordinary Relief Seeking COVID-19 Business Income Coverage

By its May 14, 2020 Order, the Pennsylvania Supreme Court denied without explanation the Application for Extraordinary Relief of Petitioner Joseph Tambellini, Inc. D/B/A Joseph Tambellini Restaurant (“Tambellini Restaurant”) filed April 29, 2020.

Tambellini’s Petition (available here) asserted Tambellini Restaurant’s lawsuit instituted in the Court of Common Pleas of Allegheny County against Erie Insurance Exchange (“Erie”) seeking declaratory, compensatory and injunctive relief and coverage for losses, damages and expenses caused by “the COVID-19 pandemic and the governmental Orders entered in connection therewith” presented issues involving “matters of immediate public importance which call for the exercise of jurisdiction by [the Supreme Court of Pennsylvania]”.  Tambellini’s Restaurant contended through its Petition that its lawsuit against Erie was “ripe” for the exercise of the Supreme Court of Pennsylvania’s  “extraordinary jurisdiction power” under a Pennsylvania statute providing Supreme Court may “assume plenary jurisdiction” of any matter pending in Pennsylvania Courts “involving an issue of immediate public importance.”

The restaurant’s attorneys argued in the Petition that exercise of the extraordinary jurisdiction power here was “warranted by the immediate needs of the citizens of the Commonwealth who need resolution of the legal insurance coverage issues facing them in attempting to re-start their businesses and their lives in the face of the losses, damages and expenses caused by the COVID-19 pandemic and the related governmental Orders.”  The specific “legal insurance coverage issues” referenced were not briefed or even recapped in any detail in the Petition.

The restaurant’s attorneys broadly asserted in the Petition that “[A]ll insurers in the Commonwealth have denied all claims and have disclaimed coverage for the losses, damage and expenses suffered by businessowners as a result of the COVID-19 pandemic and the related governmental Orders.”  The Petition requested the Pennsylvania Supreme Court exercise plenary jurisdiction over “the COVID-19 litigation in Pennsylvania” as follows:

(a) by coordinating the handling of “these cases” in one County before a judge or group of judges;

(b) by establishing a system for the expeditious resolution of “any and all other legal insurance coverage issues which may arise in any COVID-19 lawsuits”;

(c) by exercising consistency and fairness in the implementation of the rulings of the Supreme Court on “the COVID-19 legal coverage issues”; and

(d) by establishing a system for the prompt and fair resolution of “the COVID-19 claims” in a manner consistent with the rulings on “the legal insurance coverage issues by the Supreme Court”. 

According to Law360: “[O]ther businesses filing in Pennsylvania’s federal courts have asked for [a] multidistrict litigation to be formed in Philadelphia.” Cite.

Hurwitz & Fine, P.C. continues to closely monitor, analyze, and report to the insurance industry major trends in COVID-19-related business income and loss litigation and claim handling, as well as pertinent legislative proposals and developments related to the COVID-19 pandemic.  To date this has primarily been thanks to the splendid collaborative work of Dan Kohane, Steve Peiper, Lee Siegel, Ryan Maxwell at this firm.  No doubt COVID-19-related business income and loss litigation and claim handling will be a “situation” that will continue developing over the months to come, but, as our loyal readers know, we never stop loving helping you with your “situations”, pandemic-level or otherwise.


Marina A. Barci

05/13/20       Nationwide Affinity Ins. Co. of Am. v. George
Appellate Division, Second Department
Receipt of EUO Scheduling Letter is Presumed with Proof of Mailing Unless Evidence is Submitted to the Contrary

Nationwide brought a declaratory judgment action seeking an order that it was not obligated to pay claims for no-fault benefits submitted by various medical providers on behalf of three individuals who were involved in a motor vehicle accident after the individuals failed to appear for two scheduled examinations under oath (EUOs). It is well established that failure to comply with a policy condition, such as submitting to an EUO, is a material breach of the policy, precluding recovery. Here, Nationwide established that letters scheduling the EUOs were timely and properly mailed by submitting an affidavit from an individual who had personal knowledge of the standard office practice for ensuring that the letters are properly addressed and mailed, that the individuals failed to appear at two scheduled EUOs by submitting the affidavits of individuals with personal knowledge that they failed to appear at the location of the EUOs on the dates they were scheduled, and that the claims of the medical providers were timely denied as a result. A mere denial of receipt of a letter is insufficient to rebut the presumption that the letter was received. Thus, the Court granted Nationwide’s motion that they were not obligated to pay no-fault benefits related to the individuals.


05/21/20       Unitrin Advantage Ins. Co. v. Dowd
Supreme Court, New York County
Timely Verification Request Imperative When Denying Claim for Failure to Appear at Examination Under Oath

Mr. Wright was allegedly involved in a motor vehicle accident that caused him to suffer injuries that were treated by Dr. Dowd. Dr. Dowd ended up performing two surgeries on Mr. Wright and submitted a claim for reimbursement of no-fault benefits to Unitrin. Unitrin was skeptical that Mr. Wright was involved in a legitimate, rather than staged, collision and that, even if he was, that he had sustained any injuries requiring surgery. Rather than sending an EUO notice to Mr. Wright, Unitrin sent its first EUO to Dr. Dowd requesting that he appear to answer questions about the medical necessity of the first surgery. The first surgery occurred in July 2011, the bill for which was received on August 1, 2011, and the first EUO notice was sent on September 22, 2011. Dr. Dowd failed to appear for the first scheduled EUO on October 6, 2011, so Unitrin sent a second notice out on October 11, 2011. Dr. Dowd again did not appear, so Unitrin denied Dr. Dowd’s claims for both surgeries.

Dr. Dowd disputed the denials, so Unitrin sought a declaratory judgment that he is not entitled to benefit and Dr. Dowd moved for summary judgment on the basis that he properly submitted claims for medical services rendered and that Unitrin failed to issue a timely denial of those claims. Related to the first surgery, Dr. Dowd’s motion was granted as the EUO requests were submitted well beyond the 15-day period following the August 1 receipt of claim for the first surgery. Under 11 NYCRR § 65-3.5, once an insurer receives the verification forms for a pending claim for benefits, the insurer then has 15 business days to seek further verification – for example, by requesting a claimant appear for an EUO. However, related to the second surgery Unitrin’s motion was granted as the EUO request was timely since the claim for the second surgery was received on October 7, 2011. Thus, Unitrin was required to reimburse Dr. Dowd for only the first surgery Mr. Wright had, not the second.


Ryan P. Maxwell
[email protected]

Legislative List
Proposed Pandemic Risk Insurance Act of 2020
United States House of Representatives
U.S. House of Representatives Introduces Bill to Create a Pandemic Risk Reinsurance Program Creating a Federal Backstop for Pandemic-Induced Business Interruption and Event Cancellation Losses

After weeks of kicking the tires on proposed language for legislation modelled after the (untested) Terrorism Risk Insurance Act Federal “backstop” for acts of terror, on Tuesday, Representative Carolyn Maloney of New York introduced H.R. 7011 entitled the “Pandemic Risk Insurance Act of 2020”, which would establish, among other things, a Pandemic Risk Reinsurance Program.

The bill proposes a Federal program that would provide a shared public and private compensation system “for business interruption losses resulting from a pandemic or outbreak of communicable disease.” § 2. The bill contemplates both protection of consumers to ensure the continued availability of affordable business interruption coverage for losses resulting from pandemics or other outbreaks, while allowing carriers a transitional period in order to stabilize, resume pricing models for such insurance, and prepare for future absorption of such losses. § 2(1),(2).

Unlike many of the bills being introduced in states across the country, this one explicitly provides that it “may not be construed to affect any policy for business interruption insurance in force on the date of the enactment of this Act.”

Interestingly, the proposed legislation provides an expansive definition of “business interruption insurance” to include “event cancellation”:

The term ‘‘business interruption insurance’’ means commercial lines of property and casualty insurance coverage, including event cancellation insurance or other non-property contingent business interruption insurance, provided or made available for losses resulting from periods of suspended business operations, including losses from a covered public health emergency, or a civil order related to a covered public health emergency, whether provided under broader coverage for property and casualty losses or separately.

Under Section 4 of the proposed legislation, a Pandemic Risk Reinsurance Program would be established, whereby carriers may voluntarily enroll in a program which requires such carrier to make available “business interruption insurance coverage for insured losses that does not differ materially from the terms, conditions, amounts, limits, deductibles, or self-insured retentions and other coverage grants, limitations, and exclusions applicable to losses arising from events other than public health emergencies.” The bill defines “insured loss” to include “any loss resulting from a covered public health emergency that is covered by primary or excess business interruption insurance issued by a participating insurer if such loss occurs within the United States [and] during the period that the covered public health emergency for such area is in effect.”

Once the Pandemic Risk Reinsurance Program is triggered (i.e., the aggregate insured losses for a pandemic exceeds $250 million), the Federal government will account for 95% of insured losses that exceed the insurer deductible, up to a $750 billion program cap for Federal compensation, and if losses exceed the cap, authorizes the Treasury Secretary to determine the pro-rata share of compensation beyond the cap. Each participating insurer’s deductible is set at 5% of the value of the insurer’s direct earned premiums during the preceding calendar year.


05/18/20       Letter Penned By Several States’ Attorneys General Opposing Federal Imposition of Retroactive Business Interruption Insurance Coverage
Department of Financial Services
State Attorneys General Appeal to President Trump to Honor the Plain Language of Business Interruption Insurance Policies

By letter to President Donald J. Trump, dated May 18, 2020, State Attorneys General from Oklahoma, Alabama, Alaska, Indiana, Nebraska, South Carolina, and Texas offer their perspective that “the federal government should not take any action that expands insurance company liability beyond the plain terms of those policies because such redrafting of insurance contracts would cause more harm than good.”

The letter indicates that “[t]he risk of pandemics is typically not included in the price of business interruption insurance policies,” which accounts for “the cost of the covered harms, the probability of those harms occurring, and the number of contracts likely to be sold covering those harms.” In fact, explicit coverage for pandemics under a policy, its asserted, “is such an expensive addition to business interruption insurance premiums that some insurance companies have never offered to cover it” and view it as “fundamentally uninsurable”.

Interestingly the letter outlines the pricing of insurance products on the market that do, in fact, explicitly provide coverage for pandemics:

Other insurance companies viewed pandemics as insurable and have calculated a commensurate high premium for customers that wanted to add that coverage to their agreement. See Wimbledon Shows How Pandemic Insurance Could Become Vital for Sports, Other Events, Insurance Journal, Apr. 13, 2020. As you are no doubt aware, such a policy was purchased by the organizers of the Wimbledon tennis tournament, who paid the high premium of $2 million per year for seventeen years of coverage. See id. Both they and their insurance company allocated the risk between them, and now the insurance company will pay almost $142 million to honor that agreement. See id.

By paying business interruption claims through insurance policies not meant to coverage pandemics, the drafters believe such action would “devastate the capital stores for paying other insurance claims”, and within two-months could require “more than the entire $800 billion surplus cash of all U.S. home, auto, and business insurers.”

Appealing to the President’s sensibilities, the letter indicates that the drafters

recognize that certain business interruption insurance policies may not fall into a clear category. While most insurance companies have explicit exclusions regarding communicable diseases, some businesses have indicated their policies do not explicitly address communicable diseases or pandemics. If that is true, we trust that those few cases can be resolved in view of the price paid and a fair reading of the policy language at issue, as one normally would engage in contract interpretation.


The pandemic harmed everyone, and all of society should work together on the recovery rather than placing unjust and financially crippling burdens on one industry. Altering past agreements to favor some industries over others will ultimately harm our economy as a whole. We believe that the federal government should focus on solutions that help the entire economy. The federal government should not attempt to force insurance companies to the brink of insolvency by expanding their liability beyond the plain terms of business interruption insurance policies.

Regulatory Wrap-Up

05/21/20       New York Supplements Insurance Licensing Extension
Department of Financial Services
Insurance Producer Licensing Extension Amended to Span an Additional Forty-Five Days

On March 25, 2020, DFS issued Insurance Circular Letter No. 9 (2020) which “suspended the expiration of licenses for all individual producers for 60 days, from March 25, 2020 through May 24, 2020; waived any late fees resulting from, and accruing during, this 60-day period; and suspended the requirement that a monitor be present to complete producer continuing education and pre-licensing course exams online during this 60-day period.” This most recent Supplement extends that relief through July 8, 2020.

A note of caution: Do not wait. “At the end of this 45-day period, all licenses that would have expired but for this extension will automatically expire unless the producer has submitted a license renewal application, including completion of all necessary continuing education credits, before that date.” This is not a toll and producers will not be granted additional time. Giddyup and get moving now, or risk falling short on the backstretch come July.

05/20/20       Kentucky Guidance Pauses Commercial Policy Vacancy Clauses
Kentucky Department of Insurance
Department of Insurance Recognizes Compliance with Governor’s Order May Trigger Certain Policies’ Definition of Vacancy

Last week Wednesday, Kentucky’s Commissioner of the Department of Insurance issued guidance to remain in effect for sixty (60) days acknowledging that “[b]usinesses complying with Governor Beshear’s Executive Orders may inadvertently meet their commercial insurance policy’s definition for vacancy by leaving an otherwise covered building temporarily unoccupied.” Those Orders, part of the State’s “Healthy at Home initiative” and “Healthy at Work initiative”, have called for the cooperation of businesses by limiting business operations during the declared State of Emergency. 

The Department noted that these clauses come in various flavors:

for example, while some policies define vacancy by a lack of people occupying the premises, other policies define vacancy by amount of time without activity, amount of a building’s square footage not in use by business operations, or other factors to signify a premises is unoccupied.

Relying upon authority granted by Executive Order 2020-220, all insurers were put on notice that

the Department shall enforce a limited waiver of commercial policy vacancy clauses. Vacancy clauses shall be waived to the extent claims denial, policy cancellation, or policy nonrenewal would occur based solely on the insured’s business location being temporarily unoccupied because the insured complied with Executive Orders related to the COVID-19 pandemic. The waiver applies to denial, cancellation, and nonrenewal decisions occurring during the period between the closure of nonessential business on March 23, 2020 and the time this guidance is no longer in effect. The waiver shall only apply to businesses that are temporarily unoccupied at the location(s) specified as covered under the commercial policy. The Department reiterates that the waiver is limited only to circumstances where the sole basis of denial, cancellation, or nonrenewal is related to a business’s compliance with Executive Orders issued because of the COVID-19 pandemic. This limited waiver does not affect claims denials, cancellations, and non-renewals due to nonpayment of premium.

An interesting change of temporary duration that certainly impacts insurers in their ability to account for increased risks associated with vacancies. But, a far cry from mandating coverage for COVID-19 business interruptions. Premium reductions and refunds are another avenue taken by various insurance departments across the country to aid ailing businesses while the future remains uncertain. Do you know of other unique measures taken elsewhere? Let us know—we’d love to hear about it.


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

04/28/20       Green Technology Lighting Corp. v. Liberty Surplus Ins.
U.S. District Court, Southern District of New York
Plaintiff’s Failure to Purchase Product Recall Liability Insurance Precludes Coverage for the Replacement of a Customer’s Product, as Replacement is Not Included as a “Product Recall Expense”

Plaintiff, in late 2015, sold certain lightbulbs to the Mid-Western hardware chain Menards which did not work as advertised and were forced to be recalled. Plaintiff, having purchased a Product Recall insurance Policy (the “Policy”) form Defendant sought coverage through the Policy for costs related to the recall. Defendant said that the Policy did not cover Plaintiff’s claim. Plaintiff then filed a declaratory judgment action against Defendants and an Idaho insurer in the District of Idaho. Defendants moved to transfer the case to the Southern District of New York based on the forum selection clause in the Policy, the motion was granted with the Idaho court retaining jurisdiction over the Idaho insurer.

In November of 2014 Plaintiff’s insurance broker sent it a "Product Recall Insurance Application" (the “Application”) seeking coverage for the period from November 30, 2014 to November 30, 2015. Defendant then issued a binder of coverage for the 2014-2015 policy period that did not include product recall liability coverage. In November of 2015 Plaintiff applied for insurance and the Policy now at issue was bound for the period of November 30, 2015 through November 30, 2016.  The Policy contained the following definition of "product recall expense":

Product recall expense means any of the following reasonable and necessary costs, provided such costs are incurred during the 12 month period commencing on the first day you become aware of the applicable covered incident:

1. costs to notify others of such covered incident, including but not limited to print, radio, television and internet notifications;

2. costs to recover your product(s) back to you from any purchaser, distributor, or user including handling charges;

3. costs to dispose of or destroy your product(s), less any salvage or scrap value recovery, but only to the extent such disposal or destruction exceeds your standard disposal or destruction methods and is necessary to avoid bodily injury or property damage;

4. costs to rent additional temporary warehouse or storage space;

5. costs to utilize personal (sic) other than your employees to assist with such covered incident

6. costs for wages including overtime if any paid to your non-exempt hourly regular employees for work devoted exclusively to such covered incident; and

7. costs incurred by such personnel and/or your such employees, including without limitation transportation and accommodations costs, in connection with such covered incident.

The Policy defines "product recall liability damages" as "any sums that you become legally obligated to pay as compensatory damages and your defense costs resulting from the investigation, negotiation, settlement or defense of a claim or suit." The Policy also restricts “compensatory damages” to “commercial economic loss, and does not include liquidated, punitive or penalty damages. Importantly the Policy includes the following limits of insurance:

  (a) Product Recall Expenses

      $3,000,000                    Each Covered Incident

      $3,000,000                    Aggregate Limits of Insurance

  (b) Product Recall Liability

      NOT COVERED                   Each Covered Incident

      NOT COVERED                   Aggregate Limits of Insurance

  (c) Policy Aggregate

      $3,000,000                    Each Covered Incident

      $3,000,000                    Aggregate Limits of Insurance

In early 2016, Menards informed Plaintiff that certain light bulbs were defective, and Menards demanded that Plaintiff make it whole. To do so, Plaintiff replaced the defective lightbulbs with new product. Plaintiff than made a claim against the Policy for the expenses incurred in replacing the recalled bulbs, which Defendant denied because Plaintiff’s claim was for the cost of replacement bulbs it had delivered to Menards, not a “sum that [Plaintiff] becomes legally obligated to pay as compensatory damages and your defense costs resulting from the investigation, negotiation, settlement or defense of a claim or suit” relating to the defective bulbs. Plaintiff then filed its declaratory judgment action alleging causes of action sounding in breach of contract, bad faith, estoppel, and agency. Defendant now moves for summary judgment on the grounds that the unambiguous language of the policy does not cover Plaintiff’s claim.

In opposition to Defendant’s motion Plaintiff argued that, as a matter of law the Defendant cannot use the fact that a separate policy existed covering Product Recall Liability as an "exclusion" that permits it to reject Plaintiff's claim under the Product Recall Expense coverage in the Policy. Relying on Lionel Freedman, Inc. v. Glens Falls Ins. Co., 27 N.Y.2d 364 (1971), Defendant argued that in New York, an insurer is not required to defend or indemnify a party who could have bought specific coverage but failed to.

Plaintiff then argued that because Menards made the demand for a cash payment, the claim falls within coverage as that should have been found to be one of the “reasonable and necessary costs” related to the product recall. The court disagreed finding that the nature of several of the enumerated covered expenses makes clear that the coverage extends to costs that accrue from the execution of the recall itself. For example, the Policy specifies that covered product recall expenses include "costs to notify others" of the recall, "including but not limited to [by] print, radio, television and internet notifications."  The Policy also specifies that product recall expenses include costs involved with destroying the recalled products once recovered, and wages for overtime and some other personnel expenses involved in effectuating the recall itself. “The reasonable reading of these provisions is that they cover costs incidental to effectuating a recall (e.g., regaining physical custody of the defective product, paying workers to carry out the recall, informing the public); it is clear that none of these provisions deal with the recalled products themselves.” The court, in finding for the Defendant on the breach of contract branch of its motion found:

To stretch the language that far to encompass the costs for which the Plaintiff sues "would strain [] the contract language beyond its reasonable and ordinary meaning.” Reading the Policy as a whole, and specifically in the context of the other provisions defining "product recall expense," it is clear that the word "costs" in the operative provision cannot reasonably read to embrace the demand Menards made that GTLC make it whole before releasing the recalled light bulbs…. Specifically the words "including handling charges" make clear that a reasonable commercial party purchasing Product Recall Expanse coverage would understand that this particular clause provides insurance against costs arising from the physical return of recalled products. To read this one word "costs" in isolation in the manner the Plaintiff suggests would erase any limit whatsoever on the coverage provided—and reading the Policy as a whole it is clear that such a result is not reasonable.

The dismissed the cause of action against defendant sounding in bad faith, as Plaintiff was not thwarted by a bad faith breach of an express promise, nor was Plaintiff deprived the fruits of its bargain with Defendant. In New York where a party [to a contract] is merely seeking to enforce its bargain, a tort claim will not lie." Likewise, Plaintiff’s causes of action sounding in estoppel and agency liability were dismissed as Plaintiff failed to show sufficient proof of the same. 


Cara A. Cox

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]


Coverage for COVID-19 Supply Chain Disruption

A Look at the Impact of COVID-19 Disruption at Canadian Beef Processing Plants

We take for granted that Alberta’s grocery stores will have ample stock of ground beef, steak, ribs and roasts when we want it. After all, Alberta is home to almost 42% of Canada’s beef cattle herd. When the cattle are ready, they are trucked to one of Alberta’s 149 feedlots ,where they are finished for market. Alberta has three large beef processing plants and several small abattoirs. Together, two of the largest plants, Cargill in High River and JBS in Brooks, produce 70% of Canada’s beef. Cargill, alone, supplies one third of Canada’s beef.

The Canadian beef cattle industry produces approximately 1.3 million tonnes of beef annually. In 2018, (which was the most current statistics that I could find), 35% of that beef was consumed by the Canadian domestic market and the remaining 44% was exported to five other countries. Of the beef that was exported, 74% goes to the United States. Of the remaining 26% of the exported beef, 8% goes to Japan; 7.7% to China and Hong Kong and 4% to Mexico. The remaining 1-3% of the exported beef goes to Southeast Asia and South Korea.

The beef processing plants are classed as essential businesses and they have continued to operate as the COVID-19 pandemic spread.  The Cargill plant is divided into two parts:  the kill floor (self-explanatory) and the ‘fabrication’ line where the carcasses are manually cut into different cuts and packaged. For each nine-hour shift, employees wearing white lab coats over their insulated clothing, stand shoulder to shoulder, on the fabrication line, cutting the meat that arrives by conveyor belt to where they are standing. Running two shifts a day (6:00 a.m. to 4:00 p.m.; 7 p.m. to 7 a.m.), Cargill processes 4,500 head of cattle daily.

At least, that is the way it was until the COVID-19 outbreak occurred at the Cargill plant, leading to a two-week shutdown to allow for sanitization and the construction of physical barriers between positions on the fabrication lines, amongst other measures to control person to person transmission of the virus. That shut down has revealed the intricacy of Canada’s beef supply chain and how quickly that supply chain can unravel, squeezing the earnings of each link in the chain, threatening their ability to continue. 


The April 20, 2020 Cargill Shutdown

At first it was one, then two, then, soon it was five and then a dozen. Members of Cargill’s  2,000 employee workforce started missing shifts due to cold symptoms. Almost all of them eventually tested positive for COVID-19. At the beginning of April, Cargill started taking multiple precautions to prevent the spread, including the April 13 elimination of one shift, reducing processing to 1,500 head of cattle a day. By April 20, the situation had reached a breaking point. The Union was pressuring management to close the plant for two weeks for the sake of the workforce. Public health and occupational health and safety were investigating the plant. Management was very closed as to their position. Regardless of the reasons, the plant closed for two weeks. Deep cleaning was carried out, employee protection procedures that had been instituted as of April 13 were reduced to policies and additional physical employee protections were installed. Over the objections of the Union, but with the consent of public health officers and occupational health and safety inspectors, production resumed May 4 with two shifts on the kill floor. Fabrication began May 6.

By the time Cargill re-opened, 950 Cargill workers had confirmed positive tests for the virus. Two employees died of the virus. The father of one of the infected workers who was exposed to the virus through contact with his son also died. The outbreak at the plant has been linked to 550 cases amongst those who are not employed at the plant.

Then on May 13, 2020 came a report that 18 of the 37 federal meat plant inspectors at the Cargill plant have tested positive for the virus. One of the inspectors has been placed on a ventilator. The plant cannot operate without federal inspectors on site and the ranks of inspectors are thinning. For the time being, Cargill continues to operate, but there are fears that operations will either be reduced or suspended in the weeks to come, either because of the Union’s unfair labour practice complaint presently before the Alberta Labour Relations Board, or a further outbreak.

Cargill is not alone. Other Alberta meat processing plants have been impacted.  The JBS plant in Brooks has not closed, but it too has experienced a COVID-19 outbreak. As of April 21, JBS had reduced production to one shift. I don’t know if that is still the case. On May 5, a COVID-19 outbreak was reported at the Harmony meat processing plant in Balzac.

In the meantime, the Cargill plant has been back in operation for 10 days and there are no new reports of infection in the news. Perhaps the infection control measures are working, and the plant will not have to reduce production or shutter completely.


The Implications of the Shutdowns and Slow Downs

In an April 27, 2020 interview, Jacob Buekert, the Vice-Chair of the Alberta Cattle Feeders’ Association and owner of a feedlot, Driland Feeders, in Warner, Alberta, explained the ramifications of reduced or stopped production at the meat processing plants. His feedlot ships to four meat processing plants depending upon the month: JBS, Cargill and two in Washington State. All four have been either shutdown or experienced slowdowns due to the presence of COVID-19 infection in meat plant workers. In order to understand his points, it is important to review the links in the chain that bring cattle to market

Cattle breeders are farming operations that breed the cows that populate Canada’s herd. Cow-calf producers are ranchers that buy a bull and cows from the breeders, then raise cow-calf pairs on pastureland until the calves are 270-400 kg or (600-900 lbs). The ranchers then wean the calves, castrate the male calves and sell the male calves, now steers, at regional cattle auctions as feeder cattle. Some female calves (heifers) are kept for breeding, but others are also sold at auction as feeder cattle. Feedlot operators buy the steers and heifers at cattle auctions and take them to their properties, called feedlots, where they are fed a high energy feed for 60-220 days until they slightly more than double their weight. In Alberta, the feedlots use barley with other forage grains to finish the cattle. When the cattle reach their desired weight, they are sold to meat packers such as Cargill. Cargill slaughters and dresses the carcasses. The meat producer then sells the meat to exporters and distributors. Distributors sell to grocery chains and the hospitality industry.

Buekert’s April 27, 2020 interview emphasizes the balance that goes on downstream from the meat processing plants to consistently deliver quality beef at the right time and not enter an over-supply situation. He points out that if the meat packers like Cargill are not processing the cattle, then the feedlots have to keep their cattle longer, and as they grow heavier, they consume more feed. The feedlots cannot buy new cattle at auction, which affects calf sales and prices. Calves would have to stay longer on ranches creating a feed burden. The truckers who move cattle to and from auction and to the meat processors lose income.

The JBS plant in Brooks processes about 2500 head of cattle a day, seven days a week.  Cargill, as mentioned above, processes about 4,500 head of cattle daily. Together, these two plants supply about 70% of Canada’s beef. With the two-week shut down and going through “… a period of half-kill or three-quarter kill… you start to back cattle up”. “It does not take long to be backing up … cattle.” “Meat is a perishable item and so the whole system is designed to put the right amount on the shelf so that the consumer uses it so that it doesn’t expire. And so you can’t store it and so you just can’t make it up. It’s not like a grain bin full of wheat where you’ve been waiting for the market, now we put the auger in and go.”

Buekhert added that his feedlot has 7-8,000 cattle that need to leave in the next 60 days. It costs about $3.50 CDN per head per day to feed the cattle that are not moving which is about a $28,000 a day of loss that will not be made up in sales, for at one point, cattle don’t get much bigger (sale price to the meat processors is based upon weight) and the cattle are eating for maintenance.

The slowdown in meat processing is impacting the upstream food distribution network. In a May 13, 2020  CBC news article, Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University in Halifax, Nova Scotia, said interruptions at the processing plants will have some grocery stores looking to new suppliers for meat, or ration per-customer meat sales.  In the same article, Bryon Feener, director of national merchandising, meat and seafood for Sobeys, is quoted as saying that as a result of the recent closures and reduced operations across Canada's beef and pork suppliers, grocers are experiencing an interruption to their usual Canadian supply.

On May 12, 2020 Sobey’s stores posted notices that U.S. beef is supplementing their regular stock, as meat plant interruptions have affected the supply of Canadian products. Warnings have issued that higher beef prices are to be expected over the coming months.


Insurance Coverage for Supply Chain Disruption

The links of each chain in the beef cattle supply chain work so seamlessly with each other that consumers are oblivious to how each part interacts with the other.  However, when one-piece breaks, or slows down, the entire chain is affected.  This supply chain is no different than the supply chain that provides other food products, such a potatoes, or the engine of the economy, fuel.  There are news stories indicating how each one of those supply chains have been stressed due to the COVID-19 pandemic controls.

The Buekert interview detailed the losses that his feedlot has sustained due to the shutdowns and slowdowns at the meat processors.  Is there insurance coverage that will cover the losses?

Feedlots can access specialized insurance cover geared to their operations that usually uses the unimaginative title "feedlot cattle insurance".  Those policies have unique coverages on the property side for things like “smothering caused by blizzard”, flood coverage causing death or injury to cattle, as well as the usual perils.  Business interruption coverage can be added by endorsement.  Similarly, farm policies can be customized through the addition of business interruption coverage. The difficulty is that as farming and cow-calf operations have such narrow profit margins, only the largest operations would look at that type of coverage.

But it is important to understand that typical business interruption coverage is not sufficient to cover supply chain disruptions.  Contingent business interruption (CBI) coverage is the cover that could potentially apply. This type of cover applies when loss or damage to someone else's property causes your business interruption.  Like business interruption coverage generally, CBI coverage issued in Canada does not have standard wording, meaning that each insurer’s offering is unique.

In order to initiate a CBI claim, an insured that has a supply chain loss must prove that the claim falls within the coverage of the policy. A key question is whether in order to trigger the coverage, must there be a complete stoppage of production or work at the insured property? Or, is coverage simply triggered by a provable reduction in earnings? Some of the wordings require a “suspension” of operations. Some wordings require an “interruption” of operations. These words are not identical and different coverage considerations apply to coverage agreements using them.

However, the most problematic coverage issue that any insured faces is that under most forms of CBI coverage, the suspension or interruption of earnings at the insured property must be due to a peril or issue that would constitute a covered loss if it had occurred at the insured business. The issue in these cases is whether the closure of the meat processing plants due to the public health requirements to halt the transmission of COVID-19 is “physical damage or loss” within the meaning of commercial property policies.


The Requirement to Prove “Physical Loss or Damage” under CBI Policies:

How MDS v. Factory Mutual diverges from Canadian Authorities

The March 30, 2020 Ontario trial level decision in MDS Inc. v. Factory Mutual Insurance Company 2020 ONSC 1924, is the most recent case that deals with the meaning of “physical loss or damage” in an insuring agreement. That case interpreted CBI coverage against a very involved fact pattern arising from the 15-month shut down of the Nuclear Research Universal (NRU) Reactor at Chalk River, Ontario that occurred in May of 2009.

MDS bought radioisotopes produced by the NRU and sold them worldwide. Radioisotopes are used in medical imaging, cancer care and sterilizing medical equipment.  The reactor that produced the isotopes was not damaged. It was shut down as a public welfare precaution. The court was first tasked with determining if the loss of use of an undamaged reactor due to the danger posed by a leak of heavy water is “physical loss or damage” within the meaning of a coverage agreement that read “… directly resulting from physical loss or damage of the type insured by this Policy….”. The court considered some of the cases discussed in the April 2, 2020 edition of this newsletter and, in particular, the Nova Scotia Small Claims decision, Jessy’s Pizza v. Economical Mutual Insurance Co., 2008 NSSM 38, which found that the presence of oil fumes made the continued use of premises as a pizza restaurant untenable. Citing the principles enunciated by the Supreme Court of Canada in the Ledcor decision, the court in MDS held at para. 518 that “…a broad definition of resulting physical damage is appropriate in the factual context of this case to interpret the words in the Policy to include impairment of function or use of tangible property caused by the unexpected leak of heavy water…”.

There is a possibility that MDS will be appealed and, therefore, this decision may not be the final word on this coverage for the litigants in MDS.  Nonetheless, MDS is a recent exploration of what “physical loss or damage” means where there is an absence of corporeal change to the property in issue.  Canadian insureds will be citing this case in attempts to establish coverage under various forms of business interruption coverage arising from the COVID-19 pandemic. However, courts outside of Ontario would do well to consider whether to follow MDS, as the conclusion that “loss of use” is “physical loss or damage” is contrary to other Canadian cases.

What has to be remembered when looking at the losses arising from the imposition of public health pandemic control measures is that the COVID-19 virus harms people, but does not cause physical changes to property.  Where there is a factual basis demonstrating that the virus was present, then there is an arguable loss of use of the property until it is sanitized. However, that loss of use does not arise from corporeal damage to the property requiring sanitization.  There is no visible or apparent change to the property; it is the same shape, colour and weight. Further, there is no change to the property at the molecular level. Therefore, how can the presence of virus on property be considered “physical” loss or damage?  The loss is the inability to make money using the property. Perhaps “loss of use” is “damage” to property or “injury” to property. But, if so, how can it be “physical” loss or damage?

It is notable that the MDS analysis that elevates loss of use to the status of “physical loss or damage” cited the Nova Scotia Small Claims decision in Jessy’s Pizza (amongst other cases, admittedly), but did not include a discussion of the implications of the noted and often-discussed decision of the British Columbia Supreme Court in Privest Properties Ltd. v. Foundation Co. of Canada Ltd. (1991), 57 B.C.L.R. (2d) 88.

The facts of Privest are relevant to the debate as to whether the presence of COVID-19 at an insured property is “physical loss or damage” to that property. In Privest, Foundation Co. of Canada was the general contractor on a building renovation project.  One of its sub-contractors applied a spray fire-proofing material to parts of the building. The renovation was completed in 1977 and the building was rented out to tenants. In 1987, the building owners were in the course of renovating to accommodate a new tenant when it was discovered that the fireproofing material contained asbestos, which by then, was a known carcinogen. As a result of the discovery of asbestos, allegedly for the first time, the Workers’ Compensation Board issued a stop work order. The building owners sued Foundation and its sub-contractors stating that until the asbestos was removed, they were prevented from completing the renovations. Damages for the losses that they sustained were claimed.

Multiple insurers had issued liability insurance policies to Foundation from the time the asbestos was applied until it was discovered, allegedly for the first time. Foundation demanded that each of those insurers defend. One of Foundation’s arguments (which echoes the anticipated argument regarding coverage for COVID-19 losses) was that the presence of asbestos in the building constituted an inherently dangerous health hazard, as a consequence of which the building owners could not renovate it.

The insurers refused to defend on the basis that there was no “property damage” to the building as that term was defined in the policies. The policies were not the same. Some of the policies defined “property damage” using the now familiar definition found in most CGL policies which reads “physical injury to or destruction of tangible property including the loss of use thereof … and loss of use of tangible property that has not been physically injured…”. Other insurers used the older wording “damage to or destruction of property”. The definition containing the word “physical” was introduced in the United States in 1973 and began to be used in Canada at about the same time. The difference in wording between the newer, post 1973 wording, and the older wording, was one of the central issues in Privest. The court in Privest thoroughly reviewed Canadian and American law on the issue and held that

“[T]he … [building owners] …have not made any express allegation of any physical loss or damage to any part of the building or of damage to or loss of any other tangible property. I find that none of the claims that have been advanced against Foundation … even when given the broadest possible interpretation, can be construed as allegations of a state of facts, which if proven, would constitute physical injury or damage to or loss of use of tangible property.”

On that basis the insurers that used the word “physical” in the definition of “property damage” were not obliged to defend Foundation against the claims of the building owners. The Court continued, saying:

“However, I find that the decisions to which I have referred do support a finding that the claims advanced by the …[building owners]…allege facts which, if proven, would constitute “injury to property” in the sense of an infringement of  intangible property or an incorporeal right. As such they fall within the terms of the …[insuring agreements that did not contain the word “physical”]…”

Arguing by analogy and, in rebuttal to the holding in the MDS decision, a building containing a virus of any kind is not physically injured; it may be “injured “or “damaged” in an incorporeal sense, but that injury or damage is not “physical” injury or damage.  Although the Privest decision is a trial level decision, it has been cited with approval by the Supreme Court of Canada (Ledcor Construction v. Northbridge Indemnity Insurance Company, 2016 SCC 37, para. 80) and by several Canadian Courts of Appeal.

Privest is not “a lone wolf crying in the wilderness”. There are several Canadian decisions similar to Privest.

In Alie v. Bertrand & Frère Construction Co. (2002), 62 OR (3d) 345 (Ont. C.A.)., the insurer argued that the incorporation of a defective fly ash into concrete created a future structural integrity issue and did not constitute physical injury to tangible property. It was argued that the defective fly ash created the possibility that the foundations of houses built with the concrete would not perform their intended function in the future. Only a few of the foundations in question had actually been replaced by the time of trial. This “future danger”, it was argued, constituted economic loss and not property damage within the meaning of the several policies issued by various insurers that were considered in that case.  There was evidence before the court that the defective fly ash caused mildew, mould and crumbling concrete. The Ontario Court of Appeal upheld the trial decision which decided that the incorporation of defective fly ash into concrete changed the structural integrity of the concrete which constitutes physical damage to the foundations of homes that used the concrete. This was determined to be physical damage. Alie was not considered in MDS.

The decision of the Alberta Court of Appeal in International Radiography & Inspection Services (1976) Ltd. v. General Accident Assurance Co. of Canada, [1996] A.J. No. 1053 (AB CA) is another decision that is neither cited, nor discussed in MDS. The insured in that case conducted radiographic hardness tests on new steel piping and flanges at a plant. The tests were improperly performed and did not reveal noncompliant hardness levels. Following completion of these tests, the plant was restarted but quickly shut down because of a compressor failure. During this shutdown, other hardness tests disclosed readings that conflicted with those provided by the insured. The problem was remedied at significant expense, due to production delays. At trial, the Court found that while there was no physical injury to tangible property, there was a loss of use of tangible property that was not physically injured (the plant shutdown), which triggered the second part of a two part “property damage” definition that included “loss of use of tangible property”.  For this reason, the damage claimed would, if proven, fall within the policy’s insuring agreement. This decision was upheld on appeal. The essential point of this case for this discussion is that both at trial and on appeal, it was determined that the faulty hardness testing did not cause physical injury to tangible property. The Court of Appeal stated at para. 14:

“It is common ground between these parties that nothing done by IRIS in the course of conducting the tests it was hired to do affected or could have affected the hardness or the chemical properties of the fittings or have physically damaged them in any way.”

It would be wrong to leave this discussion without mentioning the interesting comment (what lawyers call obiter) in the Supreme Court of Canada’s decision, Progressive Homes Ltd. v. Lombard General Insurance Company of Canada, 2010 SCC 33, at para. 39, where the court considered the two-part definition of property damage commonly found in the post-1973 CGL policies discussed above in the Privest case. The court states through double negatives that a defect in property can cause loss of use of property as well as physical damage to property. The Court suggests that physical damage is damage that is visible and apparent:

While this point was not contested and nothing turns on it in this appeal, it is not obvious to me that defective property cannot also be “property damage”.  In particular, it may be open to argument that a defect could not amount to a “physical injury”, especially where the harm to the property is “physical” in the sense that it is visible or apparent (see, e.g., Annotated Commercial General Liability Policy, vol. 1, at p. 10-10).  Moreover, where a defect renders the property entirely useless it may be arguable that defective property may be covered under “loss of use”, the second portion of the definition of “property damage”.

The comments in Progressive are in keeping with the Ontario Court of Appeal decision in Smith v. Inco, 2011 ONCA 628, discussed in the April 2, 2020 edition of this newsletter. In that case, the Ontario Court of Appeal was very clear that physical damage to property, a necessary element to support a cause of action in nuisance founded on physical damage to land, requires proof of change to property, which produces a detrimental effect on the land itself, or rights associated with the land. The missing element when applying that argument to the COVID-19 scenario is (and pardon the repetition) is that the presence of the virus that causes COVID-19 does not damage property. Until the property is sanitized, there may be a loss of use of that property. However, on the basis of these authorities, loss of use, on its own, does not constitute physical damage to property.

A final point: The court reports in the MDS decision that it was cautioned against using liability cases to interpret property policies; that the two types of policies are different, and they should not be interpreted the same way. The Supreme Court of Canada seems to disagree. In Ledcor Construction v. Northbridge Indemnity Insurance Company, 2016 SCC 37, a property case, the court referred to and relied upon its earlier decision, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, a liability case. As a result, there is a basis to use liability cases to interpret property policies, particularly as illustrated in Privest, where the liability cases have worked through the change in coverage brought about by the introduction of the word “physical” to the definition of “property damage”.

The analysis in MDS and variations of that analysis will be before Canadian Courts determining whether the economic losses stemming from the COVID-19 transmission precautions requiring a cessation of public facing services constitute “physical loss or damage”.

Cara’s Cross-Border Connection: Lantheus v. Zurich, the Second Circuit’s Approach

Well, that didn’t take long… Only a couple months into this new column and we already have a Canadian and American case arising from the same alleged loss or damage: a shutdown resulting from a heavy water leak at the NRU reactor facility. Although the fact pattern is the same, the policy language in each respective insured’s policy resulted in different outcomes. The Second Circuit (only an 8-hour drive from the Ontario Superior Court of Justice) came to a very different decision when it affirmed the trial court decision[1]. In MDS, the Ontario Superior Court of Justice held that the corrosion exclusion in MDS’s policy did not apply. Conversely, the Second Circuit held the corrosion exclusion in Lantheus’s policy did apply and affirmed the trial court’s holding that “[t]he plain language sets the stage for a narrow inquiry: whether the ‘corrosion,’ as established in the foregoing, ‘result[ed] in’ a covered ‘cause’ of loss.” (Emphasis added). (We will discuss how the courts arrived at such different conclusions in the next Coverage Pointers issue where we will explore anti-concurrent and direct vs. indirect causation language.)  However, in the CBI context, the Second Circuit affirmed the trial court’s decision regarding the total cessation issue:

In sum, both sides offer cogent reasons for and against interpreting the CBI provision to require total cessation of operations at the Billerica Facility. Zurich offers considerable (if not 100% apposite) case law requiring total cessation, as well as abundant factual evidence that Lantheus continued to operate the Billerica Facility during the relevant time period. It also notes the size and sophistication of Lantheus and its insurance broker, which, Zurich argues, speaks to the likelihood that Lantheus misperceived the coverage it received. Lantheus counters with logical explanations why the parties could not, and did not, contemplate a requirement of total cessation. Because the Court ultimately finds that the corrosion exclusion operates to foreclose coverage under the Policy, it declines to resolve this issue, and assumes for purposes of this motion that Lantheus is entitled to claim under the CBI provision.

Although not a satisfying answer to the CBI issue, insureds must remember to look at their respective policy to avoid presuming coverage where there is none… as evidenced by these cases with similar fact patterns but ended up with vastly different results. 


Concluding Thoughts

An interesting paradox is that there is the potential that if the economic losses from the public health orders controlling the COVID-19 pandemic are losses arising from “physical loss or damage” (which is highly arguable, based upon the Privest, Alie and the International Radiography decisions), there could be coverage under CBI forms, but no coverage under the business interruption form that covered the insured’s supplier that was crippled or shut due to the COVID-19 pandemic. The insured’s supplier may only be able to establish physical loss or damage during the period of time that virus was actually present at that property. Sanitization could be accomplished within the waiting period of those policies eliminating the presence of the virus, such that the property is “no longer directly affected by the physical loss or damage”. The wording of the CBI policy may simply require one to establish “physical loss or damage” triggering coverage that would not be available to the supplier.

In the meantime, Canada’s beef cattle industry will be able to find some economic relief in the recently announced $252-million government aid package for Canada’s agricultural industry. This is said to be a starting point. There is a long road ahead of all us before we emerge from the economic losses inflicted by the indiscriminate and pervasive COVID-19 virus.


[1] Lantheus Medical Imaging, Inc. v. Zurich American Ins. Co., 650 Fed.Appx. 70 (2016) (affirming Lantheus Medical Imaging, Inc. v. Zurich American Ins. Co., 255 F.Supp.3d 443 (S.D.N.Y. 2015)).

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

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