Coverage Pointers - Volume XXI, No. 3

Volume XXI, No. 3 (No. 542)
Friday, July 26, 2019
A Biweekly Electronic Newsletter  

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

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

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

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

Dear Coverage Pointers Subscribers:
Do you have a situation?  We love situations.

Prayers:
The insurance industry and most coverage lawyers around the country know Linda Weaver, formerly of CNA, who has created the Armadillos, an association of good-natured insurance coverage counsel from across the country.  There is nobody more generous with time and spirit than our friend Linda, who sponsors and organizes luncheons and activities all throughout the country,

We received word today that her husband was killed, and her two adult sons are still missing, as a result of a float plane accident, when the three of them, and others, were on a fishing trip in remote eastern Canada.

Please keep Linda in your thoughts and prayers and remember, as I always try to do, that every day we are on this Earth is a gift.

NFJE:
Just back from Chicago where I assumed the presidency of the National Foundation for Judicial Excellence, www.nfje.net.

The NFJE (www.nfje.net) is a foundation, created by DRI some 15 years ago, that has as its sole purpose, the strengthening, enlightenment and education of state court appellate judges and justices. It fights for an independent judiciary and the protection of the rule of law. Each year it conducts a judicial symposium, this year over 140 state court appellate jurists from 38 states attended in Chicago.

The NFJE is funded by donations from lawyers, law firms, foundations, state and local defense organizations, as well as contributions from the national defense organizations and others. The only ROI for those who donate is the knowledge that they are supporting an independent and engaged judiciary. Trust me, that is reward enough.

For those who believe in and understand the critical importance of independent and balanced state appellate judiciary, and particularly for the members of the civil defense bar who seek a level playing field for their clients, the NFJE is a worthy part of that mission. Please consider a donation at nfje.net.

Jen Ehman to Chair DRI ICCI in Chicago, for 2020:
We were so delighted to hear that our Jen Ehman was selected as Program Chair for the DRI Insurance Coverage and Claims Institute in Chicago.  Stay tuned!

Coverage Pointers Advance:
If you cannot wait for two weeks until your next issue of Coverage Pointers (and who can blame you), find me on LinkedIn and you’ll find Coverage Pointers Advance.  It’s early reports on cases you are likely to see in CP and some that you won’t, but you’ll be the first on the block to know about them.

First Child Victims Act Case Reported:
The one-year window for the commencement of Child Victims Act cases for those victims whose time to sue had expired, is coming up quickly:  August 14, 2019.  We expect a flood of lawsuits, interesting coverage disputes and related litigation.  The first such decision was released this week from Westchester County.  An application for pre-action discovery was denied.  While we don’t usually put cases in the cover note, this being the first of its kind and there being no specific place for it in the attached edition, we include it here:

07/23/19       Estate of Gallagher v. Catholic Foreign Mission Society of America

Supreme Court, Westchester County. Terry Jane Ruderman, J.

First Reported Child Victims Act Case – Application for Pre-Action Discovery Denied
The Estate alleged that its decedent, Ralph Stewart Gallagher (the "decedent"), was sexually abused by Flanagan during the 1960s, when the decedent was ages four to eleven years old.  Flanagan was a religious "brother" at Maryknoll, who was ultimately ordained as a priest. Flanagan died on or about September 25, 2016, and the decedent died in January 2019.

The Child Victims Act

On February 14, 2019, New York State enacted the Child Victims Act (L. 2019 c.11) ("CVA") which, inter alia, (1) extended the statute of limitations on criminal cases involving certain sex offenses against children under 18 (see CPL 30.10 [f]); (2) extended the time which civil actions based upon such criminal conduct may be brought until the child victim reaches 55 years old (see CPLR 208 [b]); and (3) opened a one-year window reviving civil actions for which the statute of limitations has already run (even in cases that were litigated and dismissed on limitations grounds), commencing six months after the effective date of the measure, i.e. August 14, 2019.

The Present Application

Petitioner sought certain pre-action discovery, including (a) the identity or identities, including contact information, of minors with whom Flanagan had access through Maryknoll and the Archdiocese who may have relevant information to this case; (b) the identity or identities, including contact information, of all of Flanagan's supervisors, subordinates and co-workers at Maryknoll and the Archdiocese; and (c) all relevant documents in the respondents' custody, possession, or control, in both physical and electronic formats, of relevant clergy personnel files; records; journals; notes; internal investigative memoranda; law enforcement or regulatory agency reports; public or private investigations, and complaints concerning any alleged misconduct by Flanagan. Petitioner also sought an order directing respondents to preserve and log all documents referenced in category (c), above, as well as directing respondents to prepare a report on the preservation and logging of this information. Lastly, petitioner asked for the appointment of a neutral master/referee to oversee and ensure compliance with the aforementioned preservation and logging of information, to identify any witnesses and minors to whom Flanagan had access through respondents, who may have relevant information to this case, and to provide notice to those minors of their rights under the CVA, and to order immediate discovery of elderly witnesses.

Contentions of the Parties

Petitioner alleged that Flanagan abused the decedent, as well as other boys, through his employment by Maryknoll and that such abuse occurred at respondents' facilities and under their auspices. Petitioner argues that pre-action discovery is necessary to aid in the prosecution of its forthcoming complaint, to frame the pleadings, ensure compliance with the one-year statute of limitations provided by the look-back provision of the CVA, and to preserve information.

Petitioner contended that the names of relevant fact witnesses, and documentation are necessary in order to investigate and to adequately frame the complaint. Additionally, petitioner argued, discovery of any other Flanagan victims would support petitioner's allegations that Maryknoll was on notice concerning Flanagan's alleged propensities to commit the alleged abuse. Because neither the decedent nor Flanagan is alive, and because witnesses who were adults at the time of the alleged abuse are now elderly, it was petitioner's position that an urgency exists concerning discovery of surviving fact witnesses, especially the deposition of Ament who petitioner believes to be living in Iowa. Petitioner asserted that Ament's deposition was necessary as he witnessed the alleged abuse during a family trip.

Respondents, in opposing the petition, contended that petitioner had failed to meet the standard required under New York law for pre-action discovery. They argue that petitioner has failed to demonstrate a meritorious cause of action in that petitioner, as represented by decedent's sister as the voluntary administrator of the decedent's estate, had no personal knowledge of the events, and that therefore petitioner's allegations amounted to nothing more than speculation and surmise, lacking any factual basis.

Respondents further argued that petitioner has failed to demonstrate that any of the pre-action discovery being sought is material and necessary to frame a complaint, since insofar as petitioner has identified the alleged abuser, the period of time when the alleged abuse occurred, how the decedent and the abuser knew each other, and the religious order the alleged abuser belonged to, petitioner's papers demonstrate that she has sufficient information to frame her complaint.

As to the information sought by petitioner concerning other people who may themselves have been victims of sexual abuse, Maryknoll argued that no reasonable explanation is provided as to why petitioner is entitled to that sensitive information. The Archdiocese agreed that the identities of other minors have no bearing on petitioner's potential causes of action.

Concerning petitioner's request for the preservation of documents, Maryknoll stated that on or about October 29, 2018, it received a letter from James Sheehan, Charity Bureau Chief of the Office of the New York State Attorney General, entitled "Litigation Hold for NYS Attorney General Investigation into the Catholic Church" (the "Litigation Hold"). This letter advised that its recipients were required pursuant to the Litigation Hold to preserve any and all documents concerning:

"1. allegations of improper sexual conduct by any personnel of your religious institute; 2. any response by your religious institute or any government agency to any allegation of improper sexual conduct by any personnel of your religious institute, including, without limitation, internal reports, findings, or determinations; 3. documents relating to improper sexual conduct held pursuant to the provisions of Canon Law; 4. payments made, or compensation of any kind, to alleged victims of improper sexual conduct, their family members, or anyone on their behalf; 5. the use or enforcement of non-disclosure or confidentiality agreements in connection with allegations of improper sexual conduct; 6. policies and procedures relating to improper sexual conduct; and 7. personnel files or the equivalent thereof of any person against whom any allegation of improper sexual conduct has been made."
The Litigation Hold letter required that all information, documents, and records contained or referred to in the letter be preserved from January 1, 1950, to the present, and continuing thereafter.

Analysis

CPLR 3102 governs the methods of obtaining disclosure. Relative to pre-action disclosure, subsection (c) provides in part: "Before an action is commenced, disclosure to aid in bringing an action, to preserve information or to aid in arbitration, may be obtained, but only by court order." Although this section may be used to preserve evidence or to identify potential defendants, it "may not be used to ascertain whether a prospective plaintiff has a cause of action worth pursuing". A petition under this section should be granted only when the petitioner has demonstrated a meritorious cause of action.  A petition for pre-action disclosure based entirely upon the affirmation of a petitioner's attorney without first-hand knowledge of the underlying facts is insufficient and should be denied, since an affirmation of an attorney which is not based upon personal knowledge of the facts is of no probative value or evidentiary significance.

The petition herein lacked support by anyone with first-hand knowledge of the allegations that the decedent was abused by Flanagan.

Even if petitioner had provided proper support for the petition, it appears, based upon the assertions made in support of this petition, that petitioner already has sufficient information to frame a complaint.

The Court further found that petitioner has failed to demonstrate a basis for granting pre-action discovery of the names of other children or witnesses who may have information relevant to petitioner's allegations. Nor had petitioner demonstrated a basis for pre-action discovery of the names of Flanagan's co-workers or supervisors.

One Hundred Years Ago:

Daily Arkansas Gazette
Little Rock, Arkansas
26 Jul 1919

NEGRO WILL BE HANGED

Is Convicted at Shreveport of Having Killed White Man

Shreveport, La., July 25.—Seven minutes after the jury had retired to consider the charge of murder against Ernest Hamlen, Negro, accused of killing John N. Nauman, station agent at Myrtis, La., June 24, it returned with a verdict of guilty in the District Court here yesterday.  Under the verdict Hamlen will be sentenced to hang.

Editor’s Note:        Justice was swift in those days.  Hamlen was hanged on September 20, 1919, less than two months after the conviction.

Jen’s Gems:

Greetings,

It is amazing how fast the summer is flying by.  I always make a list of things I want to do over the summer, and at this point, I only have a few things crossed off my list.  With that said, last week, I did take my kids to the new children’s museum that just opened in downtown Buffalo by Canalside (Explore & More).   The museum was great.  My girls’ favorite part was the top floor which was primarily devoted to showing kids where food comes from.  They even had a cow that the kids could milk.  Although my youngest didn’t really understand what was happening and, instead, told me that the cow peed, and she needed to wash her hands.

Beyond that, we are planning on taking a few more trips out to my husband’s family’s cottage on Lake Ontario in Sodus, New York, before the summer is over.  The cottage sits on a sandbar between Lake Ontario and Sodus Bay.  The last time we were there, the bay was up 13 feet, and water was under the front part of the cottage.  The last update I received from my mother-in-law was that the water has gone down some and is no longer under the cottage.   So, hopefully it will continue to recede, and we won’t have to park the boat on the front lawn anymore.

Hope everyone is enjoying their summer and until next issue…

Jen
Jennifer A. Ehman
[email protected]

Big Verdict, a Century Ago:

The News Journal
Wilmington, Delaware
26 July 1919

COMMON PLEAS DECISIONS

Judge Herbert L. Rice rendered three decisions in the Court of Common Pleas today.

In the case of Samuel Cohen and Mary Cohen vs. Daniel Lynch, holding over tenant, verdict was given for the plaintiff and $18 damages.

In the case of John P. Deputy and Mary A. Deputy vs. Delia Corliss verdict was given for the plaintiff and 6 cents damages.

In the case of Dora Grubb vs. William Hendrix, relative to the erection of a bungalow in Hamilton Park, the plaintiff was awarded $25.

John’s Jersey Journal:

New Jersey courts were quiet these past two weeks, which gives us a chance to update you on pending insurance legislation in New Jersey. Please note that these bills have not been signed into law and are not currently in effect.

Senate Bill 2429 – Disclosure of Policy Limits in Auto Cases
(full text here)

What is it?
Requires insurers to disclose their policy limits, and any excess/umbrella limits, to claimant’s counsel upon request within 30 days. Applies to private passenger auto policies only.

Anything unique?
While insurers would be required to respond within 30 days, no penalty set forth for non-compliance.

Only applies where the request is from an attorney admitted in New Jersey. So, as written, the insurer could lawfully reject a request from an attorney admitted outside New Jersey. Probably does not matter because if the attorney is not admitted in NJ, they are not suing there.

Who would benefit?
Personal injury attorneys. It would allow them to quickly determine how much coverage is in place and whether to pursue a claim. In multi-vehicle accidents, who has the deep pocket. Thus, a PI attorney could get the coverage before filing suit and frame up their complaint and case targeting the deep pocket.

How far has it gotten?
Passed the Senate in March 2019 by vote 27-9.

What’s next?
Assembly to review, comment, and vote. If Assembly passes, it goes to Governor Phil Murphy to be signed.

Last time it moved?
May 13, 2019. Received in the Assembly and referred to the Assembly Financial Institutions and Insurance Committee.

Jersey John’s take?

• The bill does not require insurers to provide a copy of their policy.

• While an inconvenience for insurers, I would still prefer it over New York’s 3420 requirement that defenses in bodily injury and death claims be raised within 30 days.

• What’s the penalty if an insurer takes 31 days? Probably nothing. 60 days or more? Still probably nothing. It’s not bad faith.

 

Assembly Bill 458 – Definition of “occurrence” to include faulty workmanship

(full text here)

What is it?
Would require commercial liability insurance policies to define “occurrence” to mean: (1) an accident, including continuous or repeated exposure to substantially the same general harmful conditions; and (2) property damage or bodily injury resulting from faulty workmanship.

Anything unique?
The bill’s sponsor says that there is “confusion” in the construction industry over whether faulty workmanship is covered by insurance.

Only applies to policies issued or delivered in New Jersey. So “occurrence” would have different meanings depending on the state where the insurance policy was issued or delivered. Includes faulty workmanship if policy issued or delivered in NJ. If issued and delivered outside NJ, it would not include faulty workmanship. That’s makes no sense.

Who would benefit?
Contractors who perform faulty workmanship primarily.

How far has it gotten?
Has not even left the Assembly.

What’s next?
Assembly Financial Institutions and Insurance Committee to review and make any amendments. Full Assembly then votes on it.

Last time it moved?
January 19, 2018. Introduced, and referred to the Assembly Financial Institutions and Insurance Committee. No movement since.

Jersey John’s take?

• Do we really want to encourage faulty workmanship? Do we want contractors to use less care because insurance would cover it anyway?

• Insurance wasn’t designed to cover business risk such as breach of contract and warranties. That’s the purpose of construction bonds/surety bonds. Insurance covers risk of bodily injury, death, and damage to property belonging to others.

• If contractors could get insurance coverage for their poor workmanship, the costs of CGL coverage would skyrocket

• Any confusion or purported ambiguity in an insurance policy should be decided by the courts. In 2016, the New Jersey Supreme Court declined to rule that faulty workmanship itself is an “occurrence”. It ruled that only consequential harm caused by contractor’s defective work is an “occurrence”.

• Even if faulty workmanship was defined as an “occurrence”, insurers could likely still avoid coverage through exclusions[1]. So where are we going with this?

If the courts keep quiet, we’ll just keep you up-to-date on Jersey insurance legislation. We track New Jersey insurance legislation, so you don’t have to.

John
John R. Ewell
[email protected]

Baseball Lore:

 

The Bismarck Tribune
Bismarck, North Dakota
26 July 1919

UNIFORM MAKES HIT

The Southern league rule that managers must not appear in uniform unless listed as active players doesn’t bother Carlton Molesworth.  The fat manager of the Birmingham team dons a flannel shirt and a pair of overalls before each game, puts his team through its hitting and fielding practice as an “active” participant, then retires to the bench when the game begins.  His workout rig is said to make a great hit with fans.

Editor’s Note:        Molesworth might have taught Yogi Berra a thing or two.  He once said” “if you see a good ball player, watch him and study him. You can learn a lot by observation”.

Peiper’s Peregrinate:       

This week’s note comes fresh off another beautiful drive down the New York State Thruway for a mediation in Albany.  While a settlement is not yet brokered, I’d submit that most mediations (settlement or not) are almost never unsuccessful.  Mediation can serve a broader purpose than just getting to yes.  It is an opportunity to probe strengths and weaknesses in arguments, further develop and refine overall strategy, and most importantly learn what other’s think of your (and their own) case.  We always go into mediation with the goal of resolution, but that can be a long and winding path.  We’d submit you can learn quite a lot along the way if you learn to listen and ask the right questions.

As for this week’s column, we highlight a contractual indemnity case.  For those who watch this space with some regularity, you will surely recall columns past which implore practitioners to read the indemnity clause closely.  Not all clauses are created equally, and under NY law if you want indemnity you had better make certain that contract so says…unequivocally.   The Second Department reminds this week that a subcontractor’s obligation to the general contractor DOES NOT automatically extend to a building owner. This is the case regardless of whether the general contractor owes its own obligations “up the chain.”  Relax, read the whole indemnity clause, and be guided accordingly.

We close this week with a shout out to Jen Ehman for being named top dog for DRI’s upcoming ICCI program.  That is always a top meeting, and will no doubt be elevated by Jen’s leadership throughout the coming year.

That’s it for now.  See you in two more weeks.

Steve
Steven E. Peiper
[email protected]

Just 100 Years Ago, in Buffalo, Racial Preferences Still in Ads:

Buffalo Evening News
Buffalo, New York
26 Jul 1919

 

PORTERS

WANTED—Porter, white man preferred.  C.A. Weed & Co., 416 Main Street

Hewitt’s Highlights:

Dear Subscribers:

We have had a lot of crazy rain, lightning, and thunder down here on Long Island, along with a heat wave over 100-degree heat index days. Hopefully Mother Nature will be getting back to normal now. In the meantime, my boys are enjoying camp, swimming, and going to carnivals and library programs. It is great to be a kid in the summer.

In this edition, we have several cases. One case involves a scar and the standard that to constitute a serious injury, a reasonable person viewing the injury would regard the scar as unattractive or objectionable or make the plaintiff an object of pity or scorn. In another case, the court held a plaintiff suing the NYC Transit Authority for a fall resulting from a sudden brake by the bus driver, must prove that the stop was unusual and violent, rather than merely one of the sorts of jerks and jolts commonly experienced in city bus travel.                                         

Until next issue,

Rob
Robert E.B. Hewitt III
[email protected]

Girdling the Strikers:

New-York Tribune
New York, New York
26 Jul 1919

One Corset Strike Over; Other Trouble Grows

Employees Win 44-Hour Week, More Pay and Union Recognition

BRIDGEPORT, Conn., July 25.—With the granting of the 44-hour week, the strike at the Crown-Bacheller Corset Company factory was settled to-day.  There is a pay increase and recognition of a shop committee to be chosen by the employees.

An agreement reached at the Birdseye-Somers Company’s offices is expected to be ratified to-night at an employees’ meeting.  The La Resista Corset Company refuses to grant the 44-hour week and the strike continues.

Employees of the Hawthorne Manufacturing Company were locked out today after they presented demands.  If the Columbia Graphophone Company does not come to an agreement with its 1,600 striking employees to-morrow the entire plant will be on strike, the employees say.  Sixty weavers of the Raybestos Company left work to-day and the Bryant Electric Company plant and the Remington-Yost factory were closed pending conferences on wage and other demands.

Editor’s Note:  The word “employee” was spelled “employe” in the original article.  I could not tolerate the spelling, so I altered it.

Wilewicz’ Wide-World of Coverage:

Dear Readers,

The summer has been a whirlwind thus far. Between the new dog, more travel that was anticipated, more yardwork that I ever thought possible, and an injury that has set my kid back quite a bit in her volleyball training, I don’t think we could have packed any more in the last few weeks. Hopefully the next few are quieter. To that end, as my column is indeed turning into a canine one, the rescue dog has acclimated more, in large part to doggy day care. She started attending and though she’s not super active there (I’m told), it has done the trick of socializing her more. I’ll continue to bring you updates as the latest news develops.

Now, in the Wide World of Coverage here, the Second Circuit recently issued a coverage decision of interest. It’s a brief brief, but well-written and informative. A case summary is attached in our edition, where a link to the written decision can be found. In United Financial v. Country-Wide, the court looked at a classic question – the timeliness of a disclaimer. Here, two carriers were potentially implicated in providing coverage to a driver of a business truck that was involved in a three-car accident. One carrier picked up and tendered to another, but then didn’t hear back for months. Interestingly, once the second carrier disclaimed and the first started a DJ action, at issue was whether the first carrier’s disclaimer (i.e. their DJ, which acts like a disclaimer) was even timely in the first place. While the DJ was filed 52-days after receipt of the 6-month overdue disclaimer, it was not until discovery started in the case that the first carrier even learned, categorically and definitively, of the grounds for the disclaimer. At that point, they had already started a DJ to elucidate coverage, meaning they had essentially disclaimed before they needed to. As such, they were not untimely (just very proactive, I suppose) and their disclaimer was not invalid.

Now back off to the dog, yard, and kid. Enjoy this beautiful summer, all. Until next time!

Agnes 
Agnes A. Wilewicz
[email protected]

Beer for Health:

Buffalo Truth
Buffalo, New York
26 Jul 1919

AN INSPIRATION TO WORK

If you want a drink that will give you an inspiration to do your daily work and incidentally be of a healthful benefit to you, why not try drinking Phoenix Bottled Beer, the famous Buffalo brew?  It is stimulating and gives one an inspiration to work that otherwise is not present.

It is known from one end of the country to the other as the most invigorating drink of all.  Being composed of nothing but high-grade malt and hops, it has become a source of great help to physicians, inasmuch as they recommend it to their patients who are worn down.  It is only necessary for those who are fully convinced as to its merits to try it.

Barnas on Bad Faith:

Hello again:

The nice summer weather is upon us in Western New York.  This year I’ve been trying to take advantage by getting back into golfing.  I played quite a bit of golf in years past, but I’ve been on a bit of a hiatus for the last four or five years.  The time off was not kind to my golf swing, but I’ve been working to get it back.  I’m, by no means, a good golfer at this point, but I’ve gotten back to the point where I can competently play a nice course without embarrassing myself.  It’s certainly a great way to spend a few hours outside enjoying the weather with friends and family.  Here’s hoping I can get a couple more rounds in while the weather is cooperating.

Speaking of places with nice weather, in Florida, and many other states, we frequently see “bad faith setups.”  These are situations where the injured party and his/her attorney handle the case in such a way that it sets the insurance carrier up to commit bad faith during the claims handling process.  This often happens in a case where the injuries are severe, and the policy limits are low.  Plaintiffs try to induce the carrier into committing bad faith to open up the policy and obtain damages to compensate the injured party well beyond the limits of the policy.

Such a situation is present in the case in my column today.  However, in this case, the federal court in Florida wasn’t buying it.  Five people were injured in a car accident, and the tortfeasor had coverage of $250,000/$500,000.  One of the injuries was a fatality to a child, and the other injuries were severe.  Liberty investigated and tendered its policy limits within a month of the accident.  However, Plaintiff’s counsel tried to set Liberty up by not returning phone calls and demanding that it settle one of the five claims without consideration of the other four.  The Court granted summary judgment to Liberty Mutual.

In so doing, the Court offered this great line: “the Court cannot ignore Plaintiff’s counsel’s hand in manufacturing the delay Plaintiff now complains about. The Court will not tolerate the use of bad faith claims as a sword for claimants in insurance litigation.”  That’s what we like to hear!

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

Brian
Brian D. Barnas
[email protected]

A Good Bit of Money in 1919:

The Times Recorder
Zanesville, Ohio
26 Jul 1919

SOME LADY under 60 write lonely gentleman, worth $200,000.  Object matrimony.  Address Box 683, Allentown, Pa.

Editor’s Note:  That’s $3,000,000 in 2019 dollars.

Off the Mark:

Dear Readers,

The summer slowdown seems to have arrived.  There are no noteworthy construction defect decisions to report on this edition.

Until next time …

Brian
Brian F. Mark
[email protected]

 

Hungry:

The Evening World
New York, New York
26 Jul 1919

NEW YORK CAN GET BENEFIT OF BIG ARMY GOOD SURPLUS BY EVENING WORLD PLAN

Method for Efficient and Inexpensive Distribution Suggested to Baker

BIG SAVING TO PUBLIC.

Plan includes Distribution of 3,000,000 Pounds of  Roasting Checking

By P. Q. Foy

Special Food Expert for The Evening World

Another plan is to have the food distributed through a number of reputable trade house who will  give bonds to the Government

 

The food is here.  It’s a big supply.  It’s lying in warehouses.  It belongs to the Government.  It is wholesome food that was stored up for the use of our army and navy.  It should be released, and immediately.  This is imperative if the victory of The Evening World is calling attention to this huge surplus supply of food-stuffs is to be realized by giving the general public the benefit of the lower prices that must result from the proper distribution of these excellent and wholesome foods.

This surplus supply is composed of millions of pounds of bacon, canned meats, cereals, and other items in the column of human necessities.  Unless the consumers get the whole benefit out of this abnormal supply the victory gained by The Evening World will be incomplete.

Wandering Waters:

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

While the weather has been heating up in Buffalo, the NBA offseason has finally cooled down.  With all the big free agency moves completed, the NBA is finally in a lull.

NBA news has begun to slow down in the news cycle, and attention now turns to the FIBA Basketball Tournament. Team USA has dominated in the last few years.  However, with many of the top superstars withdrawing their name from consideration, a gold medal is no longer a sure thing for Team USA.  Further, with the expansion of the NBA’s global influence, foreign teams are more equipped to take on Team USA.  In fact, many of the top foreign teams sport at least one current or former NBA player.  The great thing about the FIBA tournament is seeing how much basketball has improved around the world.  

With that said, we have one case from the Eastern District of New York and one case from the Southern District of New York. Until next time……

Larry
Larry E. Waters
[email protected]

Pricey Ticket for 30 MPH:

Middletown Times-Press
Middletown, New York
26 Jul 1919

 

Speeder Pays $20 Into Treasury

Joseph Finatis, a Russian manufacturer of New York city, was arraigned before Recorder Starr by Officer Ludlum this morning on a charge of violating the city speed ordinance.  Finatis ran his Buick car from the Erie North street crossing to the North end city limits at 30 miles an hour.  He testified that he had driven a car for the past three years.  Finatis was reprimanded and a fine of $20 imposed.

Boron’s Benchmarks:

A tad under the weather.

Eric
Eric T. Boron
[email protected]

Products Liability Claim a Century Ago:

 

The Brooklyn Daily Times
Brooklyn, New York
26 Jul 1919

L.I. FLYER KILLED IN TEXAS; CLAIM PLANE DEFECTIVE

Lieut. Anderson, Richmond

Hill Boy, Fell in Nose Dive

Two weeks before he was to have been discharged from the service, First Lieut. Edward Martin Anderson, 24, whose home is at 448 Greenwood avenue, Richmond Hill, was instantly killed yesterday when he fell with his airplane while flying from Wichita Falls to Dalla, Texas.  According to a dispatch, the right wing of his machine collapsed and fell in a nose dive.  It was declared at his home today that he lost his life because his plane was defective.

“We believe he was flying in a plane that had been condemned,” said a cousin.  “We received a letter from him only yesterday, in which he said he was in charge of clearing out the flying field at Wichita Falls, and taking the planes from that field to Dallas, Tex.  He wrote that the planes were in terrible condition, and that most of them had been wrecked, and condemned by the Government, but that they had to be flown to Texas, there being apparently no other way to get them there.  He wrote that the condition of the planes was such that their pilots had to descend every few miles to make repairs, and he intimated that the piloting of one of the planes was a very dangerous proposition.”

Barci’s Basics (On No Fault):

Hello Subscribers!

I told you last issue that July was my favorite month but didn’t tell you why! Well, it’s because my birthday is today, and I always look forward to time spent with family and friends, as well as the chance to reflect on the year past (plus there are always a lot of great festivals and concerts). This past one was a big year for me, having graduated law school, passed the bar, and started working as an attorney at H&F. I started my 25^th year off with a bang; I’m currently in NYC having just seen Harry Potter and the Cursed Child on Broadway at the newly renovated Lyric Theatre. It was an amazing spectacle of a show, and I highly recommend it for anyone to see, even if HP wasn’t an integral part of your childhood as it was mine. If any of you have seen it, send me a note! I’d love to hear your thoughts.

On the no-fault front I have two cases for you. The first is out of the Second Department and discusses the standard for confirming compulsory arbitration decisions. The second is out of the City Court of the City of New York, Queens, and is a rather involved decision about the relationship between MVAIC and the No-Fault regulations. Ultimately, the court concludes that MVAIC is to be treated the same as any other insurance carrier under the No-Fault regulations, at least as it relates to denial timeliness. I’ll keep my eyes peeled for any higher court decisions on this, as I would expect it to be affirmed if MVAIC ends up appealing the City Court’s decision.

That’s all folks,

Marina
Marina A. Barci
[email protected]

Watch Out for the Marshal:

 

The Buffalo Enquirer
Buffalo, New York
26 Jul 1919

‘Ware Offer by Stranger To Buy Drink

‘Ware the affable stranger, who asks you to have a drink, saying he knows where some real “hard stuff” may be obtained!

Ten chances to one, he is a United States marshal, charged with the enforcement of the war time prohibition law, looking for a disinterested witness to his arrest of some unsuspecting—if any there be left—saloonkeeper on a charge of violation of the dry law.

Witness the craft by which United States Marshal Aker yesterday obtained a man, not connected with the service, as a witness in the arrest of the bartender at the White Elephant.

Meeting a former army companion on the street, the deputy marshal casually enquired:

“Have a drink?”

          The former Bunkie would.

          The two stepped into the cafe.

          “High ball,” said the marshal.  They were served.

“You’re pinched,” (or words to that effect, perhaps couched in more elegant English) were his next utterance.

And there you are!

The former Bunkie was Marshal Anker’s witness, the bartender was held in $1,000 bail for Untied States grand jury action.

But perhaps today the marshals have a new stunt!

Lee’s Connecticut Chronicles:

Nutmeg Newsies:

Like many political junkies, earlier this week I had one eye on my work and the other glued to the Mueller hearings. No matter your political preference, I think we can all agree that it was a bit of a circus. Just like this edition’s Connecticut honoree – PT Barnum. Known for the circus bearing his name, less known is that Barnum served two terms in the Connecticut legislature immediately after the Civil War. He was an ardent supporter of the ratification of the Thirteenth Amendment, abolishing slavery. Addressing the Connecticut Legislature, Barnum argued: "A human soul, that God has created, and Christ died for, is not to be trifled with. It may tenant the body of a Chinaman, a Turk, an Arab, or a Hottentot—it is still an immortal spirit." Later, Barnum was elected mayor of Bridgeport, where he improved the water supply, supported gas streetlights, and was instrumental in founding Bridgeport Hospital. Even a circus man can accomplish great things for his fellow man. Maybe our representatives in Washington could take a lesson from the other page from Barnum’s playbook.

In insurance-related news, the Hartford Superior court addressed whether an insurer has an equitable right of subrogation in order to recoup defense costs from an insurer that rejected its duty to defend a mutual insured. Read on for all the details.

Lee
Lee S. Siegel
[email protected]

Travel Insurance:

The Evening World
New York, New York
26 Jul 1919

INSURANCE FOR AIR TRAVEL.

Company Approached by U. S. South American Dirigible Promoters.

HARTFORD, Conn., July 26. —A proposition made to an insurance company having its home office here, it was announced to-day, was that of insuring lives of passengers who may use dirigibles as a means of travel between the United States and South America.  This came from a company now being organized to maintain airline travel between the American continents.  The idea advanced is to have an insurance policy issued with the passage ticket.

Headlines from this issue, attached:

KOHANE’S COVERAGE CORNER
 Dan D. Kohane
 [email protected]

• Failure to Copy Additional Insured’s on Policy Disclaimer Based on Policy Exclusions Renders Disclaimer Ineffective as to those Parties
   The Lease Obligations and the Additional Insured Obligations Need to be Separately Determined.  That the Accident Did Not Occur in the Leased Premises is Not Dispositive of the Tenant’s Insurance Carrier’s Additional Insured Responsibilities

• Even Voluntary Reformation of Auto Liability Policy Limits was Unenforceable as to Injured Party

• Framed Issue Hearing Needed to Determine whether Hit-and-Run Vehicle Properly Identified

 

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]

• Against a Common Carrier Plaintiff Must Prove that the Stopping of the Bus Was Unusual and Violent Rather than the Normal Sort of Jolts and Jerks a Bus Experiences

• One Side’s Expert’s Opinion Is No More Probative than the Other Side

• Scar Must Be Viewed as Unattractive or Objectionable or the Object of Pity or Scorn to Be considered a Serious Injury

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

Property

• One Suit Limitation Clause Upheld Where Policy Expired Twenty-One Months Prior to Lawsuit

Potpourri

• No Contractual Indemnity for Owner, nor Tenant, Where Neither were Expressly Referenced in the Indemnity Agreement

• Collusion of Trump Organization Established…for Insurance Procurement

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]

• Second Circuit finds Disclaimer of Coverage Timely Where Insurer started Declaratory Judgment Action Shortly After Receiving Other Carrier’s Policy, as DJ Action Constitutes Unambiguous Written Notice of Disclaimer Position

 

JEN’S GEMS
Jennifer A. Ehman
[email protected]

• Where Subcontract Incorporates Prime Contract and the Prime Contract Required Additional Insured Status, the Subcontract’s Intention to Require the Same is Evidence, even Without Direct Privity

• Court Grants Carrier Summary Judgment; Carrier Met its Burden of Establishing Damage was the Result of Long-Term Wear and Tear

 

BARNAS ON BAD FAITH
Brian D. Barnas
[email protected]

• Insurer’s Decision to Seek Global Settlement was not Bad Faith

 

JOHN’S JERSEY JOURNAL
 John R. Ewell
[email protected]

• Courts were quiet this week. New Jersey Legislative Update in Cover Letter.

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]

• Carrier’s Right of Equitable Subrogation Against Non-Paying Carrier Confirmed

 

OFF THE MARK
 Brian F. Mark
[email protected]

• Quiet on the construction defect front this week.

 

WANDERING WATERS
Larry E. Waters
 [email protected]

• Court Denies the Parties’ Cross-Motions for Summary Judgment Because Applying the Windstorm Definition to the Policy’s Coverage-Granting Clauses Creates an Ambiguity with respect to the Policy’s Flood Exclusion

• Defendant did not Initially Have a Duty to Defend its insured but Triggered a Contribution Obligation by Actively Participating in the Insured’s Defense

 

BORON’S BENCHMARKS
Eric T. Boron
[email protected]

• A tad under the weather today, sorry! Back next issue.

 

BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
[email protected]

• ATIC Owes Benefit Reimbursement to Hereford

• MVAIC is Subject to the Same No-Fault Regulations and Strict Time Frames Set Forth in the Regulations as Any Other Insurer

 

EARL’S PEARLS
Earl K. Cantwell
 [email protected]

• What Does Something’s Rotten Mean in the State of Washington (not Denmark)?

All the best.  We’re here for you.

[1] Such as j(5); j(6); “your work” and “your product”; damage to impaired property or property not physically injured; and recall of products, work, or impaired property.

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]

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

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Lee S. Siegel

Brian D. Barnas

Brian F. Mark

John R. Ewell

Larry E. Waters

Eric T. Boron

Marina A. Barci

Diane F. Bosse

Joel R. Appelbaum

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Eric T. Boron

Brian D. Barnas

Larry E. Waters

NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
[email protected]

Marina A. Barci

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

Diane F. Bosse

Topical Index

Kohane’ Coverage Corner

Hewitt’s Highlights on Serious Injury

Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith

John’s Jersey Journal

Lee’s Connecticut Chronicles

Off the Mark

Wandering Waters

Boron’s Benchmarks

Barci’s Basics (on No Fault)

Earl’s Pearls

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

07/24/19       AVR-Powell C Development Corp. v. Utica First Insurance Co.
Appellate Division, Second Department
Failure to Copy Additional Insured’s on Policy Disclaimer Based on Policy Exclusions Renders Disclaimer Ineffective as to those Parties

AVR-Powell was the owner of and general contractor at a construction site and entered into a written agreement with Vinny Construction Corp. (“Vinny”) for masonry work. Vinny was required to procure and maintain a commercial general liability insurance policy naming AVR-Powell and the Powell Cove as additional insureds. Vinny was insured by Utica First and the policy included a "Blanket Additional Insured" endorsement specifying that an "insured also includes . . . a Ny person or organization whom you are required to name as an additional insured on this policy under a written contract or written agreement." AVR-Powell and Powell Cove were also named as insureds under a general liability insurance policy issued to AVR-Powell and Powell Cove by nonparty Mt. Hawley Insurance Company (“Mt. Hawley”).

An employee of Vinny Construction allegedly was injured while working at the construction site. In March 2009, Mt. Hawley wrote to Utica tendering a claim on behalf of the plaintiff AVR Realty Company, LLC (“AVR Realty”), and Powell Cove for defense and indemnification in connection with any claim by the injured employee. The following day, Utica sent a letter to Vinny disclaiming coverage based on the policy exclusion for bodily injuries sustained by an employee of the insured in the course of his or her employment (“employee exclusion”). The claim was retendered to Utica and again, the employee exclusion formed the basis for denial

In February 2015, Powell Cove and AVR Realty, through counsel, advised Utica that its disclaimer of coverage was ineffective inasmuch as it was not sent directly to the additional insureds, and they renewed their demand for coverage. Utica rejected the position that its disclaimer was invalid, and, after receiving a copy of the contract between AVR-Powell and Vinny Construction, it sent a letter dated March 20, 2015, directly to the plaintiffs, disclaiming coverage.

Pursuant to Insurance Law § 3420 (d), an insurer is required to provide its insured and any other claimant with timely written notice of its disclaimer or denial of coverage on the basis of a policy exclusion and will be estopped from disclaiming liability or denying coverage if it fails to do so.

On their motion for summary judgment, the plaintiffs established their prima facie entitlement to judgment as a matter of law by demonstrating that Utica did not give timely written notice of its disclaimer directly to its additional insureds

In opposition, Utica failed to raise a triable issue of fact. There is no merit to Utica's contention that its obligation to comply with Insurance Law § 3420(d) did not begin until it received the contract documents in March 2015. Utica did not need to receive those documents in order to provide a disclaimer directly to the additional insureds based on the employee exclusion. An insurer may not delay issuance of a disclaimer on a ground that the insurer knows to be valid while investigating other possible grounds for disclaiming.

07/23/19       Paramount Insurance Company v. Federal Insurance Co.
Appellate Division, First Department
The Lease Obligations and the Additional Insured Obligations Need to be Separately Determined.  That the Accident Did Not Occur in the Leased Premises is Not Dispositive of the Tenant’s Insurance Carrier’s Additional Insured Responsibilities
In an underlying personal injury action, plaintiff alleges that she fell at or near premises owned by Ellis and leased to Blue Water Grill. Paramount issued a policy to Ellis, and Federal issued a policy to Blue Water Grill, covering David Ellis as an additional insured.

Upon review of the amended complaint in the underlying action, the lease between Ellis and Blue Water Grill, and the Federal policy, that the allegations in the complaint triggered defendant's duty to defend since they gave rise to a reasonable possibility of recovery under the policy

The finding in the underlying personal injury action that the accident did not occur in the demised premises is not dispositive of the coverage issue under Federal's policy and, as such, is not determinative of its duty to defend Ellis as an additional insured.

Editor’s Note:
The court did, in a separate decision, vacation a peculiar decision we wrote about, in our March 8, 2019 issues of CP:

03/07/19       Paramount Insurance Company v. Federal Insurance Company
Appellate Division, First Department
Facts not to be Considered When Duty to Defend Determined.  Thousands Ponder

In an underlying personal injury action, the injured plaintiff alleges that she fell at or near premises owned by Ellis and leased, managed and controlled by its tenant, Blue Water Grill. Paramount issued a policy to Ellis, and defendant Federal issued a policy to Blue Water Grill, covering David Ellis as an additional insured.

The court held that based upon a review of the amended complaint in the underlying action and the lease between Ellis and Blue Water Grill, and the Federal policy, that the allegations in the complaint triggered defendant's duty to defend since they "give rise to a reasonable possibility of recovery under the policy".

The court below had declined to consider facts adduced in the underlying action and the Appellate Division agreed.  It held that "the courts of this State have refused to permit insurers to look beyond the complaint's allegations to avoid their obligation to defend”.

The court could not rule on primacy since all of the policies that provide coverage were not before the court.

Editor’s Note:  Surely, if the named insured’s carrier was able to establish, from extrinsic facts, that it could have no obligation to indemnify, it should have been allowed to do so.  An insurer’s obligation to defend would end if the insurer establishes that there is no obligation to indemnify.  Your editor suggests this precedent, with most citations omitted:

An insurer's duty to defend is broader than its duty to indemnify, such that an insurer may be obligated to defend its insured even if, at the conclusion of an underlying action, it is found to have no obligation to indemnify its insured … An insurer must defend its insured whenever the allegations of a complaint in an underlying action “‘suggest ... a reasonable possibility of coverage’ ”

The duty to defend is not triggered, however, when, “as a matter of law ... there is no possible factual or legal basis upon which the insurer might eventually be held to be obligated to indemnify the claimant under any provision of the insurance policy” (Bruckner Realty, LLC v. County Oil Co., Inc., 40 A.D.3d at 900, … or when the only interpretation of the allegations against the insured is that the factual predicate for the claim falls wholly within a policy exclusion ….

Glob. Const. Co., LLC v Essex Ins. Co., 52 AD3d 655, 655-56 [2d Dept 2008]

07/17/19       McGuckin v. Privilege Underwriters Reciprocal Exchange
Appellate Division, Second Department
Even Voluntary Reformation of Auto Liability Policy Limits was Unenforceable as to Injured Party

In December 2011, the McGuckin allegedly was injured when a vehicle in which he was a passenger was involved in a collision. At the time of the collision, the vehicle was driven by Douglas Gambon and owned by Carol Giambrone (hereinafter together the Giambrones) and was insured by the defendant under a liability policy providing for bodily injury coverage up to $250,000 per person/$500,000 per occurrence. In May 2012, the plaintiff commenced an action against the Giambrones to recover damages for personal injuries he sustained in the accident.

When PURE, the insurer, investigated the accident, it concluded that the Giambrones had made substantial misrepresentations in securing the policy.  Recognizing that there was case law that prohibited retroactive rescission of the auto policy, PURE and the Giambrone ’s, represented by counsel negotiated a modification and reformation of the policy, reducing the bodily injury coverage to a single $80,000 limit.

Thereafter, the Giambrones notified the plaintiff that the coverage limit applicable to the accident was $80,000. The plaintiff subsequently obtained a judgment against the Giambrones in the amount of $300,000 in the underlying personal injury action and assigned the judgment to McGuckin.

McGuckin then then commenced the instant action seeking a determination that the purported reformation of the subject insurance policy was invalid and unenforceable, that the PURE was bound by the full bodily injury coverage limits stated in the original policy, and that PURE was obligated to satisfy the full amount of the judgment obtained in the personal injury action. McGuckin also a sought to recover his attorneys' fees and expenses incurred in connection with this action.

The lower court ruled that the reformation was lawful and binding and McGuckin appealed.  The Second  Department reversed, holding that an auto insurer may not retroactively reform a policy to reduce the stated bodily injury coverage limits after a loss caused by its insured occurs, even if the reduced limits still meet or exceed the statutory minimum As such, by demonstrating that the policy in effect at the time of the accident provided for a bodily injury coverage limit of $250,000 per person, and submitting the $300,000 judgment he obtained against the defendant's insureds in the underlying personal injury action, the plaintiff demonstrated his prima facie entitlement to judgment as a matter of law on his causes of action for a judgment declaring that the purported reformation of the policy was invalid and unenforceable and that the defendant is bound by the full bodily injury coverage limits stated in the original policy.

However, the plaintiff failed to demonstrate his prima facie entitlement to judgment as a matter of law declaring that the defendant is obligated to satisfy the full amount of the judgment, he obtained against the Giambrones. Contrary to his contention, the plaintiff failed to identify any basis on which the defendant was obligated to pay the additional $50,000 beyond the original policy's bodily injury coverage limit. As such, the plaintiff was entitled to summary judgment on that cause of action, but only to the extent of declaring that the defendant is obligated to satisfy the first $250,000 of the judgment.

McGuckin did not justify a claim for any damages in excess of $250,000 nor does he recover legal fees.

Editor’s Note:  I represented PURE in this matter.  The difference between this case and the precedent cited by the court is that in this case, the policyholder and the carrier agreed to the reformation and that agreement was assigned to the injured party.  He stood in the shoes of the policyholder. The policyholder AGREED to the reformation and the McGuckin should have no greater rights than PURE’s policyholder.  We will see about an application for leave to appeal.

07/17/19       Government Employees Insurance Company v. Williams
Appellate Division, Second Department
Framed Issue Hearing Needed to Determine whether Hit-and-Run Vehicle Properly Identified

Williams and Shields were sitting in Williams's parked vehicle when it was struck by a vehicle, which subsequently fled the scene of the accident. Williams and Shields reported a license plate number for the hit-and-run vehicle to the police.

That license plate number was registered to a vehicle owned by McRae and insured by Liberty Mutual. After discovering that the McRae vehicle was purportedly undergoing repair at Bical Chevrolet on the date of the accident, Williams and Shields demanded arbitration of their claim for uninsured motorist benefits from Williams's insurer, GEICO).

GEICO commenced this proceeding pursuant to CPLR article 75 to permanently stay and the lower court and directed a hearing to determine whether the McRae vehicle was involved in the accident. GEICO moved to amend the petition by joining Bical Chevrolet as a respondent. In support, GEICO submitted evidence that Bical Chevrolet was insured by Merchants.

GEICO met its burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay by submitting evidence that on the date of the accident, the McRae vehicle was insured by Liberty Mutual.

The burden then shifted to Williams and Shields, as the parties opposing the stay, to rebut that prima facie showing. Williams and Shields submitted evidence that the McRae vehicle was being repaired at the time of the accident, raising an issue of fact as to whether the McRae vehicle could have been involved in the accident. Since an issue of fact was raised, arbitration should be temporarily stayed, the putative hit-and-run parties joined as respondents, and a framed-issue hearing conducted, before a determination is made on that branch of the petition which was to permanently stay arbitration.

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]

07/24/19       Brown v. NYC Transit Authority
Appellate Division, Second Department
Against a Common Carrier Plaintiff Must Prove that the Stopping of the Bus Was Unusual and Violent Rather than the Normal Sort of Jolts and Jerks a Bus Experiences

The plaintiff alleges that, shortly after boarding a bus owned by the defendant New York City Transit Authority, she fell after the bus driver applied the brakes. The Transit Authority moved for summary judgment dismissing the complaint insofar as asserted against it on the ground that the stop was not unusual and violent or, in the alternative, that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident.

To prevail on a cause of action alleging that a common carrier was negligent in stopping a bus, a plaintiff must prove that the stop was unusual and violent, rather than merely one of the sorts of jerks and jolts commonly experienced in city bus travel. Moreover, a plaintiff may not satisfy that burden of proof merely by characterizing the stop as unusual and violent. However, in seeking summary judgment dismissing such a cause of action, common carriers have the burden of establishing, prima facie, that the stop was not unusual and violent. The Appellate Division found Transit Authority failed to establish, prima facie, that the stop was not unusual and violent. In support of its motion, the Transit Authority submitted, among other things, transcripts of the plaintiff's testimony at her hearing pursuant to General Municipal Law § 50-h, the deposition testimony of the plaintiff, and the deposition testimony of the bus driver. According to the plaintiff's testimony, shortly after she paid her fare, the bus "took off" and then came to a quick stop, causing her to fall. According to the testimony of the bus driver, he was operating the bus at about 15 miles per hour when a vehicle cut in front of him, causing him to apply the brakes and stop the bus. Under the circumstances, a triable issue of fact existed as to whether the stop of the bus was unusual and violent.

07/24/19       Rangimarie v. Wayne Noel Drywall, Inc.
Appellate Division, Second Department
One Side’s Expert’s Opinion Is No More Probative than the Other Side

Defendant’s motion for summary judgment must be denied. The defendants did not dispute that the plaintiff had significant range of motion limitations in the cervical and lumbar regions of her spine, but only whether those limitations are causally related to the subject accident or due entirely to pre-existing conditions. Contrary to the defendants' contention, the Appellate Division found the probative value of their expert's causation opinion was no greater than the probative value of the causation opinion expressed by the plaintiff's expert. Under these circumstances, a triable issue of fact was presented.

07/24/19       Mnatcakanova v. Elliot
Appellate Division, Second Department
Scar Must Be Viewed as Unattractive or Objectionable or the Object of Pity or Scorn to Be considered a Serious Injury

The plaintiff commenced this action to recover damages for personal injuries she allegedly sustained in a motor vehicle accident. Contrary to the plaintiff's contention, the moving defendants established, prima facie, that she did not sustain a serious injury under the significant disfigurement category of Insurance Law § 5102(d). The plaintiff sustained a laceration to her neck as a result of the accident and received three stitches at the hospital. The moving defendants submitted, inter alia, the affirmed report of a plastic surgeon who opined that the resultant scar, which measures 1.3 centimeters in length by 2 millimeters in width, was "cosmetically acceptable" and "is flat and blends in very well with the surrounding skin and soft tissues." A photograph taken by the plastic surgeon depicts no discernable disfigurement. Under these circumstances, the moving defendants established that a reasonable person viewing the injury would not regard the scar as unattractive or objectionable, or as the object of pity or scorn".  In opposition, the plaintiff, who submitted no photographic evidence to rebut the prima facie showing of the moving defendants, failed to raise a triable issue of fact.

Further, the moving defendants established, prima facie, that the alleged injuries to the cervical and thoracolumbar regions of the plaintiff's spine, and to the plaintiff's right knee, were degenerative in nature and were not proximately caused by the accident. In opposition, the plaintiff failed to raise a triable issue of fact. Although the plaintiff submitted, inter alia, an affirmed medical report in which her expert opined that her injuries were causally connected to the accident, the evidence submitted by the plaintiff failed to address the findings of the moving defendants' expert that the injuries to her spine and knee were degenerative in nature.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

 

Property

07/17/19       Piliaskas v. Mountain Valley Indemnity Company
Appellate Division, Second Department
One Suit Limitation Clause Upheld Where Policy Expired Twenty-One Months Prior to Lawsuit

Plaintiff sustained damage due to a neighboring construction project which began on or about January of 2015.  Plaintiff appears to have alleged the damage continued through the Fall of 2016 when the instant suit was filed.  At the time of the initial issue, plaintiff was insured under a policy of insurance issued by CastlePoint.  That policy expired on February 14, 2015, and plaintiff obtained a different policy which incepted on the same date.  The second policy, issued by Mountain Valley, was in effect from February 14, 2015 through February 14, 2016.

With the lawsuit being filed in November of 2016, both CastlePoint and Mountain Valley moved for dismissal by application of a one-year suit limitation clause found in both policies.  The Court affirmed the lower court’s decision granting CastlePoint’s motion based upon the fact that the last possible covered damage under the CastlePoint policy occurred in February of 2015 (21 months earlier).

On the other hand, with the ongoing damage being alleged, the Court reasoned it was possible for the last possible date of loss under the Mountain Valley to have occurred as of February 14, 2016.  With suit filed nine months later, it follows that the action insofar as asserted against Mountain Valley was timely commenced.

Potpourri

07/24/19       Huang v. 57-63 Greene Realty, LLC
Appellate Division, Second Department
No Contractual Indemnity for Owner, nor Tenant, Where Neither were Expressly Referenced in the Indemnity Agreement

Plaintiff sustained injury when he fell from a scaffold while employed with LTI.  In turn, he sued the owner and tenant of the premises seeking to recovery for injuries sustained in the fall.

The owner/tenant then commenced a third-party action against Fahey (as general contractor) and LTI seeking contractual indemnification.  LTI moved for summary judgment arguing that its contract with Fahey did not require it to indemnify the owner/tenant. The argument was based upon a plain reading of the provision which did not unambiguously and expressly extend to owner/tenant.  Citing the lack of any direct connection to the contract, the Court agreed that LTI did not have an obligation to either owner or tenant. 

07/24/19       Sandoval v. Trump Plaza Owners, Inc.
Appellate Division, Second Department
Collusion of Trump Organization Established…for Insurance Procurement

Plaintiff commenced the instant action after suffering a workplace accident while at one of defendant’s buildings.  Mr. Katsihtis rented space at the building, and was named as a defendant along with Trump.  Mr. Katsihtis allegedly hired plaintiff’s employer, Alcon, to perform work at the premises.

At the time of its appearance, Trump asserted a cross-claim against Katsihtis seeking recovery for Katshitis’ failure to procure insurance.  Katsihtis moved to dismiss the claim arguing that the lease did not contain an enforceable insurance procurement provision.  The trial court disagreed, and on appeal, the Appellate Division affirmed noting that Trump had established an enforceable insurance procurement provision.

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]

07/01/19       United Financial Cas. Co. v. Country-Wide Insurance Company
United States Court of Appeals, Second Circuit
Second Circuit finds Disclaimer of Coverage Timely Where Insurer started Declaratory Judgment Action Shortly After Receiving Other Carrier’s Policy, as DJ Action Constitutes Unambiguous Written Notice of Disclaimer Position

Two insurers were potentially responsible for providing Juan Pineda with a defense and indemnification in connection with a three car accident in which he was involved while hauling goods for International Trucking Group (ITG). Either he was entitled to coverage under Country-Wide’s motor carrier liability policy issued to ITS or by a non-trucking liability policy issued by UFCC to Pineda’s employer and owner of the truck he was driving at the time. UFCC’s policy contained an exclusion, applicable only when other insurance was available, for autos being used to carry property in any business or while such property was being loaded onto or unloaded from the insured auto. In other words, it applied when a truck was being used for business purposes.

UFCC assumed Pineda’s defense and immediately tried to get in touch with Country-Wide to tender and have them pick up. While they did not have a copy of the Country-Wide policy, UFCC suspected that it should be primary over UFCC’s non-trucking policy. Repeatedly, over the course of months, UFCC attempted to reach Country-Wide, to no avail. Finally, some six months after their initial attempts at contact, UFCC received a denial letter and disclaimer of coverage. About 52 days later, UFCC filed a declaratory judgment action seeking a declaration that it did not owe coverage and that Country-Wide did. Country-Wide then argued that UFCC was estopped from disclaiming because it had failed to timely serve a notice of its own disclaimer. The lower court determined that the DJ action filed 52-days after receipt of UFCC’s position letter was untimely as a matter of law and pursuant to statute, and the Second Circuit took up the appeal.

New York Insurance Law Section 3420 states: “If under a liability policy issued or delivered in this state, an insurer shall disclaim liability of deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.” (emphasis added by the court in its decision). Thus, UFCC had to disclaim once it had sufficient knowledge of the facts entitling it to disclaim. Indeed, timeliness “is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage”.

The added wrinkle here was that UFCC’s policy was a non-trucking policy. These policies in general exclude from coverage any accident occurring while an insured auto or attached trailer is being used to carry property in any business. There is also a state statutory requirement in New York that all insurance policies issued “to the owner of any vehicle” must contain “a provision for indemnity or security against the liability and responsibility” for “death or injuries to a person or property resulting from negligence in the use or operation of such vehicle”. (NY Vehicle and Traffic Law Sect. 388(1), (4)). Gaps in coverage under this statute are not allowed. Indeed, New York courts have deemed non-trucking policies invalid unless they contain a provision making it clear that the exclusion of accidents occurring during business applies only if some other insurance plan fills in the “gap in policy coverage for any loss incurred” in the furtherance of the business.

While UFCC tendered to Country-Wide in 2016, they did not receive Country-Wide’s disclaimer until January 2017. They then started a declaratory judgment action 52-days later (and a DJ action constitutes an unequivocal notice of a disclaimer, without the need for a further letter or writing). However, they did not actually even learn of or have sufficient knowledge of the facts that Country-Wide’s policy actually covered Pineda until they received a complete copy of the Country-Wide policy in the discovery process in the DJ action. As such their disclaimer, i.e. the DJ action, was not untimely. They had already disclaimed when they learned the sufficient knowledge of the facts required. Thus, the Second Circuit overturned the district court’s determination and found for UFCC.

JEN’S GEMS
Jennifer A. Ehman
[email protected]

07/12/19       Damon G. Douglas Company v. Arch Specialty Insurance    
Supreme Court, New York County
Hon. Arthur F. Engoron, JSC
Where Subcontract Incorporates Prime Contract and the Prime Contract Required Additional Insured Status, the Subcontract’s Intention to Require the Same is Evidence, even Without Direct Privity

Adelphia University (“Adelphia”) hired Damon G. Douglas Company (“Douglas”) as a general contractor for an Adelphia construction project.  Douglas subcontracted with Pravco, for structural steel work.  Pravco sub-subcontracted with Island Structures (“Island”), which then sub-sub-sub-contracted with Iron, Inc.  Giattino, an Iron, Inc. employee was injured on the job.  All parties, but for Iron, were sued by Giattino in the underlying action.

So, the order was:

Adelphia (owner)

Douglas (GC)

Pravco (sub)

Island (sub-sub) (Arch Specialty Ins.)

Iron, Inc. (sub-sub-sub)

Arch insured Island.  Adelphia and Douglas, neither in direct privity with Island, sued Arch, seeking additional insured coverage.  Arch moved to dismiss, asserting that Adelphi and Douglas were not additional insured on the Arch policy. No privity.

The Pravco-Island sub-sub contract required Island to provide a policy with additional insured coverage to the owner and GC (Adelphia and Douglas).

The court held noted that the sub-sub contract, incorporated by reference the Prime Contract into its terms and the Prime Contract required the Contractor (Douglas) to name the Owner (Adelphia) as an additional insured.  The court found an “intent of the parties to require all contractors to add the owner and the GC as additional insureds.

05/20/19       200 Court Street, LLC v. Wesco Ins. Co.
Supreme Court, Queens County
Hon. Darrell L. Gavrin, JSC
Court Grants Carrier Summary Judgment; Carrier Met its Burden of Establishing Damage was the Result of Long-Term Wear and Tear

This decision arises out of a claim by plaintiff that the parapet walls of its premises were damaged by wind.  Upon receipt of the claim, defendant assigned an independent adjustment firm who inspected and photographed the building.  The independent adjustment firm recommend that defendant also retain an engineering firm to inspect the building.  The engineer concluded the sheet metal cornice atop the front façade was in poor condition as a result of normal wear and tear caused by long terms rust and corrosion of the sheet metal.  The advanced rust and corrosion observed would have taken decades to manifest.  Ultimately, the engineer found no evidence that the alleged damage was caused by a sudden or accidental event, as a one-time exposure to wind.

Based on these findings, defendant denied coverage for the claim because it was caused by wear and tear, rust, corrosion and faulty maintenance, all explicitly excluded by the terms of the policy.  Plaintiff commenced this action alleging one cause of action for breach of contract.  Defendant then moved for summary judgment.

The Court granted the motion finding that photographs of the damage taken do not support plaintiff’s claim of sudden and accidental wind damage.  Moreover, the engineering report revealed that the sheet metal cornice atop the front façade was in poor condition, and the deterioration was so advanced that the sheet metal had completely disintegrated and could easily be pulled apart by hand.  Accordingly, the court found that defend had made prima facie showing for summary judgment, and in opposition plaintiff did not provide any evidence to rebut the facts or affidavit of the engineer or other causal expert to refute those finding.  The court was clear that plaintiff’s dependence on completing discovery was misplaced especially when the record reflects that it hadn’t complied with defendant’s requests.

BARNAS ON BAD FAITH
Brian D. Barnas
[email protected]

07/23/19         Montanez v. Liberty Mutual Fire Insurance Company
United States District Court, Southern District of Florida
Insurer’s Decision to Seek Global Settlement was not Bad Faith

On January 30, 2010, Jason Brown rear-ended Nya Yanitza Montanez (“Ms. Montanez”) and her two minor children, Yanely Gonzalez and Eduardo Gonzalez, Jr.  Three-month-old, Yanelis Gonzalez, was killed; eight-year-old, Eduardo Gonzalez, Jr., was ejected from the vehicle, suffering head trauma; and Ms. Montanez was injured.  After hitting the Gonzalez family, Brown’s vehicle spun into another car occupied by Jose Ramos (38 years old) and Maria Carmona (3 years old), both of whom were also injured.

On February 1, 2010, Douglas Brown (“Mr. Brown”), Jason Brown’s father, contacted Liberty Mutual to report that his son had been involved in an accident in West Palm Beach and that a child had been killed.  Jason Brown was driving his father’s vehicle at the time of the accident, and Mr. Brown had a Liberty Mutual automobile insurance policy, which provided liability limits of $250,000 per person and $500,000 per accident. Upon learning of the accident, Liberty Mutual assigned a claims adjuster to the case and sent the insureds “other insurance” affidavits and excess exposure letters.  On February 2, 2010, Liberty obtained an “events report” from the policy department and advised Brown to obtain counsel.  A potential coverage issue was identified, and a reservation of rights letter was issued.

Liberty learned that Plaintiff had retained counsel.  Liberty’s adjuster made multiple telephone calls over the course of a month but was unable to speak with counsel.

On March 4, 2010, Liberty Mutual sent a letter to counsel for all claimants, stating that it was making its full $250,000 per person and $500,000 per accident policy limits available to settle the claims arising from the accident.  Liberty Mutual noted that it would be arranging a settlement conference to assist all claimants in reaching an apportioned settlement.  That day, an attorney contacted Liberty and advised that he would be representing Plaintiff.  He declined to take the contact information for defense counsel.

On March 31, 2010, Plaintiff’s counsel rejected the opportunity to settle Plaintiff’s wrongful death claim on grounds that Defendant should have immediately tendered the $250,000 policy limit, rather than attempt to settle all claims at a settlement conference.  The letter also requested that Liberty Mutual tender $125,000 for Ms. Montanez’s claims and $125,000 for Eduardo Gonzalez Jr.’s claims.  On April 6, 2010, counsel for Liberty Mutual sent Plaintiff’s counsel a letter, noting that Defendant had issued checks to resolve the claims of Ms. Montanez and her son in accordance with Plaintiff’s March 31, 2010 letter.  In addition, the letter noted that because Liberty Mutual was settling Ms. Montanez and Eduardo Gonzalez Jr.’s claims, it was able to offer the remaining available policy limit of $250,000 to settle and resolve the claim of the Estate of Yanelis Gonzalez. 

To that end, on April 8, 2010, Liberty Mutual delivered the two $125,000 checks to settle Ms. Montanez and her son’s claims.  Similarly, on April 13, 2010, Liberty Mutual attempted to deliver a check in the amount of $250,000 to Plaintiff’s counsel to settle the wrongful death claim, but Plaintiff’s counsel refused to accept it.

On April 14, 2010, attorney Lewis Jack filed a lawsuit against the Browns asserting a wrongful death claim, two personal injury claims, and a loss of consortium claim.  All claims were eventually dismissed except for the wrongful death claim against Jason Brown, which resulted in a consent judgment in the amount of $8,250,000.  A bad faith lawsuit was then filed, and Liberty moved for summary judgment.

The Court granted the motion for summary judgment.  Plaintiff argued that Liberty Mutual had an obligation to settle the most egregious claim—the wrongful death claim—before apportioning the remainder of the policy.  However, this contention was unsupported by Florida law.  In contrast, Florida law provides that an insurer is entitled to reasonable time to investigate a claim.  In this case, approximately one month elapsed between February 1, 2010 (when Liberty Mutual first learned of the accident) and March 4, 2010 (when Defendant offered all claimants its full policy limits).  In that time span, Liberty Mutual investigated a potential coverage issue, obtained a police report and “events report” from the Palm Beach County Sheriff, contacted Plaintiff’s PIP adjuster, sent the insureds “other insurance” affidavits and excess exposure letters, and advised Mr. Brown to retain an attorney.  In addition, Liberty’s adjuster called Plaintiff’s counsel five times in one month to speak about the accident and never received a response.

In response, Plaintiff’s counsel waited almost one month, until March 31, 2010, to reject Liberty Mutual ’s offer to settle Plaintiff’s wrongful death claim.  While Plaintiff argued that Liberty delayed settling the claim unreasonably, she ignored the fact that her counsel’s decision not to return Liberty’s calls contributed to the delay.  The Court stated that “even under the most favorable construction of the facts, the Court cannot ignore Plaintiff’s counsel’s hand in manufacturing the delay Plaintiff now complains about. The Court will not tolerate the use of bad faith claims as a sword for claimants in insurance litigation.”

The Court also rejected Plaintiff’s argument that Liberty did not put the insured’s interests on par with its own.  It reasoned that this case was complex and involved multiple parties and competing claims.  An infant was killed, and four people were injured, including two additional children, one of whom was ejected from the vehicle, sustaining head trauma.  Under these circumstances, a reasonable juror could not find that Defendant’s decision to exercise its discretion and proceed to a global settlement conference evinces bad faith.  On the contrary; such a decision was properly motivated by a desire to determine the proper apportionment of policy limits and avoid indiscriminately settling selected claims, thereby extinguishing any notion that Liberty Mutual put its interests ahead of its insureds.

JOHN’S JERSEY JOURNAL
John R. Ewell
[email protected]

Courts were quiet this week. New Jersey Legislative Update in Cover Letter.

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]

06/13/19       Charter Oak Fire. Ins. Co. v. Liberty Mut. Ins. Co.
Superior Court, Hartford
Carrier’s Right of Equitable Subrogation Against Non-Paying Carrier Confirmed

UB Litchfield, LLC is the owner of an office building, insured by Charter Oak Fire Insurance Company. UB’s tenants included Private Eye Vision Center, insured by Liberty Mutual Insurance Company. A Private Eye patient suffered a crush injury when her index finger was caught in a door. The patient sued UB, the building owner. Charter Oak undertook the owner’s defense after tenders to Liberty pursuant to the landlord and tenant’s lease agreement went unanswered. Liberty ultimately rejected the tender and Charter Oak successfully tried the underlying action to a defense verdict. Charter Oak then commenced this action to recover its defense expenses from Liberty. Charter Oak alleged that, pursuant to the lease agreement, Private Eye agreed to indemnify and hold the landlord harmless from all claims, and to maintain liability insurance adding the landlord as an additional named insured. Accordingly, Charter Oak claims that UB was owed a defense by Liberty.

Liberty moved to dismiss Charter Oak’s action, claiming that it lacked standing to pursue contractual indemnity. Liberty argued that Charter Oak was suing to enforce obligations under a lease to which it is not a party and to which it is not a third-party beneficiary. Charter Oak, however, argued that its complaint stated a cognizable claim for equitable subrogation. The court agreed with Charter Oak.

The court wrote that the common-law doctrine of equitable subrogation enables an insurance company that has made a payment to its insured to substitute itself for the insured in order to proceed against the responsible third party. The object of equitable subrogation is the prevention of injustice. “[T]he right of [legal or equitable] subrogation is not a matter of contract; it does not arise from any contractual relationship between the parties, but takes place as a matter of equity, with or without an agreement to that effect.” Citing Wasko v. Monello, 269 Conn. 527, 532, 849 A.2d 777 (2004). “[I]nsurers that are obligated by a preexisting contract to pay the losses of an insured proceed in a subsequent action against the responsible party under the theory of equitable subrogation, and not conventional subrogation.” Id., 533.

Charter Oak, the court concluded, has standing because it is equitably subrogated to the rights of its insured. Therefore, as the insurer, Charter Oak need not be party to the lease. Moreover, when it defended UB, Charter Oak was not doing so as a “volunteer.” “Charter Oak's specific legal interest based on the pleadings is the equitable recovery of the costs that it incurred in defending the [underlying] action; the specific alleged injury to that interest alleged is Liberty Mutual ‘s failure to litigate that action on UB Litchfield's behalf,” the court concluded. Accordingly, the court upheld Charter Oak’s right to seek to recoup the defense costs incurred on behalf of a mutual insured where a corresponding insurer allegedly failed to do so.

 

OFF THE MARK
Brian F. Mark
[email protected]

Quiet on the construction defect front this week.

WANDERING WATERS
Larry E. Waters
[email protected]

07/19/19       Madelaine Chocolate Novelties v. Great Northern Ins. Co.
District Court, Eastern District of New York
Court Denies the Parties’ Cross-Motions for Summary Judgment Because Applying the Windstorm Definition to the Policy’s Coverage-Granting Clauses Creates an Ambiguity with respect to the Policy’s Flood Exclusion

This decision stems from Plaintiff’s breach of contract claim against defendant Great Northern Insurance Company.  Plaintiff’s manufacturing facility sustained damage resulting in substantial inventory and business income losses.  Subsequently, Plaintiff submitted an itemized proof of loss to Defendant.  In turn, Defendant paid under $4 million and disclaimed coverage for the remaining losses pursuant to the Policy’s Flood Exclusion.

The Policy at issue contained several exclusions including a “Flood Exclusion” which eliminates coverage for “loss or damage caused by or resulting from: waves, tidal water or tidal waves; or rising, overflowing or breaking of any boundary, of any. . .oceans or any other body of water or watercourse, whether driven by wind or not, regardless of any other cause or event that directly or indirectly contributes concurrently to: or contributes in any sequence to, the loss or damage, even if such other cause or event would otherwise be covered.”  Importantly, the Policy’s at issue “Flood Exclusion” contained an Anti-concurrent causation (“ACC”) clause. The Policy contained several endorsements including a “Windstorm Endorsement.”

On September 26, 2017, the Second Circuit on appeal concluded that the “Windstorm Endorsement adds an ACC clause to the definition of a covered peril for the entire Policy.”  The Second Circuit also noted that “it is undisputed that, for purposes of the Policy, a ‘windstorm’ is a covered peril.”  Based upon its decision, the Second Circuit directed the Eastern District on remand to “(i) assess whether the Windstorm Endorsement’s ACC clause conflicts with other provisions and otherwise creates an ambiguity is-à-vis the Policy’s Flood Exclusion,” and (ii) to the extent this Court concludes an ambiguity exists, to consider “interpretive materials relating to the Windstorm Endorsement and its relationship with the Policy’s coverage provisions.”

Now on the current motion for summary judgment before the Court, Plaintiff contends that the Windstorm Definition’s ACC clause creates an ambiguity that cannot be resolved in Defendant’s favor because (i) the Windstorm Definition’s ACC clause supersedes the Flood Exclusion’s ACC clause as an “added or attached” change to the “basic insurance contract” and (ii) the record is otherwise devoid of any relevant extrinsic evidence supporting an interpretation that would foreclose coverage.

In contrast, Defendant argued that that (i) the Flood Exclusion unambiguously precludes coverage because “applying the definition of ‘windstorm’ throughout the policy has no impact on the scope of coverage afforded under the Policy,” and (ii) even if the Windstorm Definition creates an ambiguity vis-à-vis the Flood Exclusion, extrinsic evidence favors Great Northern because it reveals that Madelaine had no reasonable expectation of receiving flood coverage, under any circumstances, when it purchased its Great Northern insurance policy.

The Court began its analysis on whether the Windstorm definition’s ACC Clause creates an ambiguity vis-à-vis the “Flood Exclusion.” The court found that the Windstorm Definition applied to where the term “windstorm appeared through the Policy in bold and to the definition of a “covered peril,” and to the stand-alone term “peril” in the Policy at issue.  As such, the Court concluded that based upon the Windstorm definition as applied to the Policy’s coverage granting clauses, the Policy at issue covered (i) Applying the Windstorm Definition to the Policy’s coverage-granting clauses, which encompasses damage caused by “covered perils” and “perils,” the Policy covers (ii) “direct physical loss or damage to: building; or personal property, caused by or resulting from a windstorm...regardless of any other cause or event that directly or indirectly: contributes concurrently to; or contributes in any sequence to, the loss or damage, even if such other cause or event would otherwise be covered not otherwise excluded” and (iii) “actual or potential impairment of operations...caused by or resulting from direct physical loss or damage by a windstorm...regardless of any other cause or event that directly or indirectly: contributes concurrently to; or contributes in any sequence to, the loss or damage, even if such other cause or event would otherwise be covered to property, unless otherwise stated.”

Next, the Court considered whether there is ambiguity when viewing the coverage-granting clauses in their entirety, including the Windstorm Definition, and the Flood Exclusion side-by-side.  In its analysis, the Court noted that when it applies the Windstorm Definition to the Policy’s coverage grants for damage caused by a “peril not otherwise excluded” it cannot ignore the exclusionary clauses.  To do so the Court determined that it would result in ignoring the Policy’s coverage grants and leave them without force and effect.  As such, the Court found to reconcile the coverage-granting clauses with the Windstorm Definition, it would need to add language.  Therefore, the Court determined that the “need to supply a missing term” established that applying the Windstorm Definition to the Policy as a whole, creates an ambiguity vis-à-vis the “Flood Exclusion.”

Thereafter, the Court considered whether the ambiguity in the Policy could be resolved as a matter of law.  On this point, Plaintiff argued that the Policy’s ambiguity must be resolved as a matter of law because “when an endorsement potentially conflicts with other provisions of the policy, the plain language of the endorsement is controlling.” While the Court generally agreed with Plaintiff’s statement of the law, the Court nonetheless disagreed with Plaintiff’s application of the rule of law to the facts of the matter at hand.  In its reasoning, the Court noted that “where one provision is executed simultaneously with a conflicting provision, the former does not supersede the latter just because it is styled as an “endorsement.”

In sum, the Court found that the extrinsic evidence revealed triable issues of fact and therefore the Court need not resort to the doctrine of contra proferentem to resolve the Policy’s ambiguity as a matter of law.

Please let me know if you want a copy of this decision.

07/12/19       Allstate Insurance Company v. Hartford Insurance Company
United States District Court, Southern District of New York
Defendant did not Initially Have a Duty to Defend its insured but Triggered a Contribution Obligation by Actively Participating in the Insured’s Defense

This decision stems from a 2010 motor vehicle accident between Kenneth Couillard and April Clark.  At the time of the accident, Ms. Clark was operating her mother’s, Christine Comparetti, car to make a delivery on behalf of her employer, Women’s Health Professionals, LLP (“WHP”).  Following the accident, Mr. Couillard initiated a personal injury action against MS. Clark, Ms. Clark’s mother and WHP.

Prior to the accident, Allstate issued an auto insurance policy to Ms. Comparetti.  Likewise, prior to the accident Hartford issued two insurance policies to WHP.  Ms. Clark qualified as an insured under the Policy.

Both insurance companies agreed in the beginning to provide defense to their respective insureds. However, from August 2011 to April 2012, Harford repeatedly sent tender letters to Allstate, tendering WHP’s defense.  In the letters, Hartford contended that WHP qualified as an “additional insured” under the Allstate Policy.  Nonetheless, during Hartford’s subsequent correspondence about where to send defense of counsel’s invoices, there was no mention of any reservation of rights to reimbursement.

Thereafter, Allstate paid the law firm that Hartford had hired at the rates Hartford had negotiated.  In addition, Allstate reimbursed Hartford for over $19,000 in defense costs that Hartford incurred before the summer of 2012. 

Following unsuccessful settlement talks, by letter dated August 12, 2016, Allstate requested that Hartford contribute pro rata towards WHP’s past and future defense costs.

Subsequently, the underlying case settled, and Allstate filed this current action against Hartford seeking: (1) a declaratory judgment that Hartford provided coincidental primary coverage for purposes of the duty to defend WHP, and (2) an award of 97.5% of the defense costs incurred, plus interest.

The Court began its analysis on whether Hartford’s policy terms and conduct triggered a duty to contribute to WHP’s defense.  In its analysis, the Court noted that “[w]here one ‘other insurance’ clause provides for pro rata sharing of coverage (a pro rata clause) and the other deems its coverage excess to other valid insurance (an excess clause), the company that issued the former policy becomes the primary insurer.”  In addition, the court noted that a “carrier whose coverage is rendered excess via its “other insurance” clause does not have its duty to defend triggered until the coverage of the policy containing the pro rata clause has been exhausted.”  Further, the Court noted that while under no obligation, an excess insurance carrier may choose to participate in an insured’s defense to protect their interest but doing so may trigger its duty to defend.  Moreover, the Court determined that the standards established in General Motors Acceptance Corp. v. Nationwide Ins. Co. (GAMC), applied in this matter.

Applying the relevant rule of law, the Court rejected Hartford’s argument that the excess clause at issue was narrower in scope than the policy clause at issue in GMAC because it only applied to non-owned cars.  In support of its rejection of Hartford’s argument, the Court noted that “[b]ased on the fact that Hartford and the primary policy at issue in GMAC “other insurance” clauses were substantively indistinguishable.  Moreover, in support, the Court noted that Hartford admitted in another action involving identical “other insurance” clause language that such a policy is not a “true excess policy.”  As such, the Court agreed with Allstate that Hartford’s policy provided coincidental primary insurance that was rendered excess to primary coverage by its “other insurance” clause.

Next, the Court considered the second factor under GMAC on whether Hartford chose to participate in defending WHP.  The Court highlighted that Hartford selected WHP’s counsel, set the rates of payment, and alone played a role in WHP’s litigation strategy.  Further, the Court recognized that in contrast to Sport Rock Int’l, Inc. v. Am. Cas. Co. of Reading, both Allstate and Hartford voluntarily took part in WHP’s defense.  Therefore, the Court concluded that since the Hartford policy was a primary one rendered excess rather than a true excess policy and because Hartford participated in WHP’s defense, it must share pro rata in defense costs.

Next, the Court considered whether Allstate waived its right to seek contribution.  Hartford argued that Allstate waived any right to have Hartford contribute to the defense costs because Allstate did not assert its right to receive contribution until August 2016. The Court began by noting that “in an insurance context, a contractual right may be waived by knowing, voluntary, and intentional abandonment of that right.”

In this matter, the Court found that Allstate did not waive its right to seek contribution.   The Court reasoned that given Allstate’s clear expression of its intent to later seek reimbursement, Allstate’s payment of defense, costs, standing alone, was insufficient to establish waiver.

However, the Court found that because there was no waiver by Allstate does not mean that Allstate could recover pro rata for the entirety of the defense costs incurred over its years of silence.  In support, the Court noted that Allstate had long been aware that Hartford had far greater exposure due to the higher limits of its policies and that Hartford was the driving force behind WHP’s defense.  Furthermore, the Court noted that because Allstate acquiesced—without reservation—in fully funding WHP’s defense for most of the underlying litigation, Allstate could only recover for legal expenses incurred after its first reserved its right to contribution in its letter of August 12, 2016.

BORON’S BENCHMARKS
Eric T. Boron
[email protected]

A tad under the weather today, sorry!  Back next issue.

BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
[email protected]

07/24/19       Matter of Hereford Ins. Co. v American Tr. Ins. Co.
Appellate Division, Second Department
ATIC Owes Benefit Reimbursement to Hereford

Hereford insured a vehicle that was in an accident with a vehicle insured by ATIC. As a result of that accident, Hereford paid out over $70,000 in benefits to the injured party. Thereafter, Hereford sought to recover $50,000 (the general no-fault limit) from ATIC in a compulsory arbitration under Insurance Law §5105. ATIC disputed that it owed Hereford the full $50,000 because some of the services rendered to the injured party were in New Jersey (which has a different fee schedule than NY). At the compulsory arbitration, the arbitrator found that ATIC’s insured was 100% at fault for the accident and that Hereford had proved all damages and so awarded them the $50,000.

Hereford moved to confirm this award under CPLR Article 75. ATIC opposed this petition and requested that the award be vacated. Article 75 allows for judicial review of arbitration awards and requires that compulsory arbitration awards have evidentiary support and not be arbitrary and capricious in order to stand. Specifically, in mandatory no-fault arbitrations, the standard is whether any reasonable hypothesis can be found to support the questioned interpretation of the arbitrator. The court here found that the arbitrator's determination that Hereford was entitled to recoup $50,000 for the benefits paid to the injured party was not arbitrary and capricious and was supported and not contrary to any settled law.

07/15/19       Sama Physical Therapy v. MVIAC
Civil Court of the City of New York, Queens County
MVAIC is Subject to the Same No-Fault Regulations and Strict Time Frames Set Forth in the Regulations as Any Other Insurer

Sama PT provided services to assignor Heather Thomas for injuries she sustained in a motor vehicle accident. Sama PT submitted two bills to MVIAC, one for $677.60 received on 10/12/2011 and one for $246.40, received on 11/11/2011. MVIAC then sent to Ms. Thomas a request for an examination under oath mailed on 12/9/2013 and in January 2014. Considering this action was commenced, Ms. Thomas never appeared for the requested EUO’s and MVIAC denied payment of benefits for services provided by Sama PT as a result of Ms. Thomas’ failure to appear.

The major issue discussed here is whether or not the examination under oath was required to be requested within 15 business days of receipt of the medical bills under the No-Fault regulations.

Sama PT argues that MVIAC’s EUO requests were untimely since they were sent over two years after the bills were received and that, because the requests were made untimely, MVIAC is precluded from asserting the failure to appear defense. Sama PT also argues that because MVAIC failed to pay or timely deny the bills that they are entitled to the $924 plus interest and fees.

MVAIC argues that the 15-day rule for EUO requests has several exceptions that apply here. It argues that there is an exception for defenses based on lack of coverage and that that there is an exception when that the applicant for MVAIC coverage is not a qualified person and therefore would not be covered under MVAIC guidelines, and that this defense can be raised at any time. While MVAIC admits that the EUO request to Ms. Thomas was made over two years after receiving the bills from Sama PT, it argues that this is irrelevant because the requests were made based on the MVAIC qualification process, not the No-Fault verification process. There is no dispute that the EUO notices were mailed properly.

The No-Fault regulations have strict time frames, to ensure prompt payment to those injured parties. MVAIC has their own specific guidelines, as it is the provider that pays out to NY residents involved in motor vehicle accidents who have no other automobile insurance. As it is undisputed that MVAIC’s EUO requests were made outside the 15-day time frame requirement, the issue here is whether MVIAC is subject to the No-Fault requirements, and if so, whether there is an exception to the 15-day rule for a no-coverage defense due to the injured party not being a qualified person.

The Legislature has made it clear that MVAIC is indeed subject to the No-Fault regulations and is subject to the Insurance law the same as any other insurance company. Because they are to be treated as any other insurance carrier under the law,

MVAIC's defense that the injured party is not a 'qualified person' is subject to preclusion if not presented in a timely denial or if not investigated through timely verification requests, including requests for an examination under oath. Unlike the defense of no coverage, determining whether the injured party is a "qualified person" is not a condition precedent to coverage, and must be presented as an affirmative defense and is subject to preclusion.

Here, MVAIC is not asserting that the injuries claimed did not arise out of a covered accident, but that the injured party may not be a 'qualified person' under MVAIC guidelines. This defense is based upon a breach of a policy condition, not a lack of coverage defense, which may be raised at any time on the founded belief or fact that an injury does not arise out of the claimed accident, and therefore is subject to preclusion if not timely asserted. Since it is undisputed that MVAIC’s EUO requests were made over 2 years after receipt of the bills, it is precluded from asserting a lack of coverage based upon the injured party not being a qualified person now.

Thus, the court found that MVAIC failed to pay or timely deny Sama PT’s bills and therefore Sama PT is entitled to judgment in its favor in the amount of $924 with statutory interest and fees.

EARL’S PEARLS
Earl K. Cantwell
[email protected]

04/08/19       Feenix Parkside, LLC v. Berkley North Pacific
Court of Appeals of Washington 
What Does Something’s Rotten Mean in the State of Washington (not Denmark)?

Feenix owned a single-story commercial building, and in July 2015 part of the roof truss failed causing a portion of the roof to collapse. The carrier and insured retained experts to review the loss, with the insured’s expert opining that the roof trust failure was due to the combined effects of elevated temperatures in the attic space, as well as a heavy moisture content over an extended period of time which weakened the truss bearing ends. The carrier nonetheless denied coverage because its expert found, inter alia, that there was little or no evidence of actual decay in the failure surface/area.

Litigation ensued, and each side filed cross motions for summary judgment with the trial court granting the insurance company’s motion and denying the insured’s motion. On appeal, Feenix made two arguments. First, it argued that the trial court erred in finding that the term “decay” was unambiguous in the insurance policy. Second, it argued that the trial court erred by construing the concept and identity of a “system” against Feenix and in favor of Berkley. The insured was able to get the no coverage decision reversed on appeal based on the first argument.

The Appellate Court began with standard insurance coverage concepts that insurance policies must be construed as an average person purchasing insurance would, giving the language fair, reasonable, and sensible construction. The courts should enforce the contract as written if the language is clear and unambiguous. If the language on its face is fairly susceptible to two different but reasonable interpretations, the contract may be ambiguous, and courts should attempt to discern and enforce the contract as the parties intended. If the language is truly ambiguous, the insurance policy may be construed in favor of the insured.

The insured must generally show that the loss falls within the scope of the policy’s insuring provisions. To avoid coverage, the insurer must then show the loss is excluded by specific policy language. This policy provided coverage for collapse of the building if the collapse was caused by “decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse.”. The question before the court was what did the word “decay” mean and, for example, was it limited to essentially wood rot.

The insured argued that the word “decay” has other recognized general meanings as a gradual decline in strength and soundness.  The trial court had rejected such a general term, essentially limiting the word “decay” in this specific instance of wood to mean rot. On appeal, the insured continued to assert this more general definition of decay as a gradual decline in strength or soundness from several dictionaries. The insured was also able to cite other court decisions which had adopted this more general meaning and broader view of “decay” in interpreting similar insurance policy language. Other cases had accepted the “dictionary” definition of decay as encompassing both organic rot and a broader reference to a general decline or degeneration in strength over time. Other courts had looked at these definitions and concluded that decay certainly included organic rot, but also could include a gradual loss of strength or integrity. At least one court had also noted the anomaly that many policies use the word “rot” in various other coverages and exclusions, so if in this case the policy wanted to limit “decay” coverage only to rot that was certainly possible because elsewhere in the policy specific coverages or exclusions for rot were named.

The insurance company further contended that the insured’s definition of “decay” would make it nearly identical to the word “deterioration”, a term elsewhere defined and used in the policy. However, parsing the language, the Appellate Court believed that there is a difference between those terms, and that “deterioration” was not exactly the same as “decay”, essentially arguing that decay was the active process leading to the result or outcome of deterioration.

In short, the Appellate Court concluded that defining “decay” as a gradual decline in strength or soundness was certainly a reasonable, and even the more reasonable manner, in which to construe the term. The trial court therefore erred in concluding that the only reasonable interpretation of “decay” was one indicating some kind of decomposition or rot of the material and rejecting the insured’s broader definition.

The insured in this case did a good job of offering reasonable other definitions in a dictionary sense of the word “decay”, which had been accepted by other court decisions reviewing the same or similar policy language. Therefore, the insured’s argument was both plausible and had some actual legal authority behind it. In the policy, the word “decay” was not defined or limited to decomposition or “rot”, leaving a way open to a broader interpretation such as that offered by the insured.

In this case, too, the insurance company was not helped by the fact that in other coverages and exclusions the word or subject of “rot” was specifically referenced, leading to the conclusion that, if the insurance company wanted to limit the word “decay” to mean only rot, that was something it could have surely done as was done elsewhere in the policy.

If a policy does not self-contain its own definitions or restrictions on language, this leaves the way open for claimants and courts to look for broader industry or dictionary definitions of words which may, in this case, have broader or more general meanings than perhaps intended by the coverage.

The policy also covered “collapse” if caused by “insect or vermin damage”. The carrier could have argued that insect and vermin damage would be a form of “rot” or “decay” and the policy was specific that it would only cover “decay” in those situations. The could respond that since “rot” caused by “insect or vermin damage” did not provide any specific limitations or better definitions of “decay”, its broader meaning and definition of “decay” was all the more applicable and warranted and was not limited only to “rot”. In short, the insured could argue that when it wanted the policy used very specific terms and definitions but did not so do with respect to the word or concept of “decay”.

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