Volume XXI, No. 4 (No. 543)
Friday, August 9, 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.
For those who know me best, or pay attention to any of my ramblings, you know that my summers are spent in my home in Canada, just across the border from Buffalo (about a 17-minute commute, including passing through customs). We live here from April 15 until Canadian Thanksgiving, the second Monday in October. We call our home, Crescent Dreams, a/k/a, the Land of the Blue Martinis. Lake Erie is in the background:
We hate to be away from our summer home in the summer but had the pleasure of attending the FDCC Annual Meeting in Sun Valley, Idaho last week. The FDCC is one of the select-member defense organization, with vetted members, excellent continuing education and wonderful fellowship. It was my 60th consecutive meeting. I salute my friend John Woodard, lawyer-extraordinaire from Tulsa, OK, who was attending his 72nd or so. John had the consecutive streak, but he missed one or two in the last couple of years so I have the opportunity to try to catch up! A salute to Don Myles, who finished his term as president and to Elizabeth Lorell, whose has taken the reins of leadership.
For the first time, all four defense organizations, the DRI, the FDCC, the IADC and the ADTA are being led by diverse attorneys, surely a wonderful milestone in the defense community.
Highlights:
Additional insured issues continue to dominate the appellate courts. We have a couple of interesting ones in this week’s issue, Don’t forget about Coverage Pointers Advance, on LinkedIn (under my name) if you can’t wait for your bi-weekly issue of Coverage Pointers.
Child Victim’s Act:
It’s D-Day for the New York Child Victims Act, as the lookback period (the one-year eradication of the statute of limitations for CVA civil lawsuits) takes effect on August 14. If you need any help on either the coverage or defense side of these cases, let us know.
Sister Publications:
Don’t forget to subscribe to our other publications:
Labor Law Pointers: Hurwitz & Fine, P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.
Premises Pointers: This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court, and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!). Contact Jody Briandi at [email protected] to be added to the mailing list.
One Hundred Years Ago – How to Gain Weight?
Daily News
New York, New York
09 Aug 1919
WOULD GAIN WEIGHT.
Myrtle writes: "I am asking your advice as to what I can do to gain weight or develop myself more. I am 5 feet 7 inches tall and weight (sic) 135, but I am hollow chested and large boned, and can stand a lot more weight. I work steadily, eat and sleep well, and feel well, but seem to be losing weight all the time. Would milk help me any? Does three or four cups of coffee injure one?"
REPLY.
Eat a bowl of milk and sugared rice, or bread twice a day in addition to your regular diet. Milk will help you. Three or four cups of coffee a day are injurious.
Jen’s Gems:
Asking again for dispensation.
Jen
Jennifer A. Ehman
[email protected]
Don’t Park by the Hydrant:
The Times
Munster, Indiana
09 Aug 1919
Autoists Take Heed.
Although there has been no noticeable violations, autoists are warned that there is a clause in the new Gary traffic ordinance prohibiting the parking of automobiles within a distance of twenty five feet of a water plug. This is necessary in the event of a fire, so there will be nothing in the way of a fire department reaching the fire plug.
John’s Jersey Journal:
It’s customary to tell folks to “stay cool” in summer. That expression must have been lost on Erin and me apparently. We decided to go the opposite way and bought a hot tub. What I didn’t realize was how much work went into it beforehand. I spent about 12 hours working to prepare the pad by digging up the sod and tree roots, adding fill, tamping it down, and using sand to level the pad. I then had to dig a trench for the electric and again ran into stubborn tree roots. But it was all worth it when we fired up the hot tub, cracked a beer, and cranked the tunes. Cheers to relaxing!
New Jersey Courts were just as busy. We have several New Jersey coverage offerings today. The first addresses material misrepresentation. The insured fibbed on her insurance application about prior insurance losses (but only because she didn’t like her premiums going up). When she later submitted a claim, she denied ever making an insurance claim because she thought the investigator had no business knowing. In fact, she had made a $6,000 claim for hurricane damage and $90,000 claim for a pipe-freeze. The carrier denied the claim citing material misrepresentation.
The insured sued for coverage and the carrier raised material misrepresentation as a defense. At trial, the insured admitted to the misrepresentations causing the trial court judge to dismiss her case. On appeal, the New Jersey Appellate Division ruled that the insurer failed to show why the misrepresentations were material. That is, the insurer did not show that if it had known about the prior claims, it would have affected issuing the policy or its claim handling. Thus, the Court revived the insured’s claim and remanded the case for a new trial.
The Third Circuit, from which we rarely hear a New Jersey coverage decision, spoke up this week. A teacher was sued by a former student alleging sexual abuse. The student also sued the school district alleging that it had notice of the teacher’s conduct. The school’s policy included Abusive Acts coverage, which would be triggered by a claim alleging an “abusive act”. The policy also included a Prior Known Acts Exclusion, which barred coverage if the policyholder was aware of the abusive act prior to the policy inception.
The school was caught in an interesting catch-22 so to speak. There had to be an “abusive act” alleged in order for the coverage to be triggered. However, an exclusion removed coverage for known “abusive act[s]”. Thus, if the complaint’s allegations did not rise to the level of being “abusive act[s]” within the Prior Known Acts Exclusion, they also do not fall within the Abusive Acts coverage at all. Put simply, either the allegations are such that both the Abusive Acts coverage and the Prior Known Acts Exclusion apply or neither applies. Either way, the result is the same: the insurer would not be obligated to defend the policyholder against the student’s lawsuit.
The school argued that the allegations in the complaint were ambiguous as to whether there was an “abusive act”. Specifically, the school argued that the complaint could merely allege the teacher allowed students to “platonically” sit on his lap. The Court wasn’t buying it. The Court found that the complaint expressly alleged sexual molestation – an abusive act – and that the complaint alleged the school had prior knowledge of the teacher’s conduct. Accordingly, the Third Circuit ruled that the insurer had no duty to defend the school.
Note the school could have potentially gotten a defense if they could have shown through extrinsic evidence that it was unaware of the teacher’s conduct. However, that was never raised at the trial level.
That’s all for now. Stay cool! Or stay hot! (whichever you prefer).
John
John R. Ewell
[email protected]
Bureaucracy was Just as Bad, a Century Ago:
San Francisco Chronicle
San Francisco, California
09 Aug 1919
War Veteran Must Prove He Isn’t Dead
James Q. O’Malley of Plymouth, California, cannot re-enlist until he satisfies the War Department that he was not dead, he learned yesterday when he applied to Colonel T. A. Pearce of the Army recruiting service. O’Malley was reported dead in France and his mother has been receiving the insurance payments regularly every month despite repeated letters to Washington to stop them. Colonel Pearce telegraphed to Washington for special permission to enlist O’Malley and got a reply that O’Malley still is dead. So the would-be soldier will have to wait until he can prove his death a mistake to the satisfaction of red-tape Washington.
Peiper on Property and Potpourri:
In trial in Brooklyn. Who wouldn’t want to be right there, right now?
Steve
Steven E. Peiper
[email protected]
Oops:
The Mammoth Record
Robinson, Utah
09 Aug 1919
Mistake In Verdict.
Portland, Ore.—When Judge Dayton read the verdict the jurors jumped to their feet and objected. They had signed a “not guilty” verdict by mistake.
Hewitt’s Highlights:
Dear Subscribers:
Hope your summer is going well. My children are at cub scout camp and thrilled to be playing in the lake, paddle boat riding, rock climbing and other scout-like activities. My wife is a teacher and cleaning our house from top to bottom while they are at camp. We take a trip to a farm in New Hampshire next week and are looking forward to it.
In this edition, there is only one case in which summary judgment was denied because the defense expert said there were no range of motion limitations and the plaintiff’s expert said there were significant range of motion limitations. Such a battle of the experts is left to the jury to decide credibility. Looks like the courts are in a summer lull, at least on the serious injury front.
Until next issue,
Rob
Robert E.B. Hewitt III
[email protected]
Tune in, Move In:
The Montgomery Advertiser
Montgomery, Alabama
09 Aug 1919
WANTED—Three or four nicely furnished rooms for housekeeping by young couple. Would prefer a musical home. Address P.H.C. care Y.M.C.A.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
Thus far, this has been the busiest summer I can recall. While the appellate courts have taken a respite from issuing dispositive decisions, claims keep coming in, situations keep arising, and court appearances keep on coming down the pike. I’m hoping that things calm down just a little bit by the end of August (or cool down a little, too?) as the family and I are taking a trip to Sweden and Poland for vacation. First we’ll visit Stockholm, the land of Pippi Longstocking and IKEA, and then my birthplace of Warsaw for my grandmother’s 80th birthday party. It should be momentous, with a major family reunion with visitors from around the world. I’ll be sure to report back thereafter to share how it all went.
Now, the Second Circuit appears to be on coverage vacation (makes sense, because coverage can be heady sometimes, and challenging in the hottest days of summer), but I was able to find a case out of our neighboring Third Circuit that might be of interest. In Transportation Insurance v. Heathland Hospitality, at issue was whether the allegations of a complaint triggered some liquor liability exclusions sufficiently to preclude coverage. Heathland managed a country club in New Jersey which allegedly provided a visibly intoxicated patron with alcohol and that resulted in a DWI fatality. Both potentially applicable policies contained liquor liability exclusions that precluded coverage for claims that stemmed from the furnishing or selling of alcohol. Since the underlying pleadings fit squarely within those exclusions, they applied. Moreover, since in Pennsylvania (like many other states) the four corners of a complaint determine whether a duty to defend was owed, with such broad allegations entirely stemming from the alleged provision of alcohol, neither a defense nor indemnification was owed. It’s a quick, but well-thought out read. Links in the attached edition of Coverage Pointers.
That’s all for now. Enjoy the rest of summer. See you in September!
Agnes
Agnes A. Wilewicz
[email protected]
That’s My Excuse and I’m Sticking to It:
Buffalo Evening News
Buffalo, New York
09 Aug 1919
LOSES CAP, THEN CONTROL OF AUTO: HITS WIRE POLE
Ignatz Retzer, 61 years old, 135 Bailey Avenue, was driving his automobile in Bailey avenue last night when his cap blew off. He turned to catch it when he lost control of the car, which crashed against a telegraph pole. He was thrown through the windshield, suffering cuts and bruises. Mrs. Theresa Weichman, 27 years old, Retzer’s daughter, who was riding in the back seat, suffered bruises and was shaken up.
Editor’s note: Theresa lived until age 69 in Buffalo
Edna Montano, three years old, 442 South Division Street, was run down and seriously injured by an automobile truck driven by Charles Calandi, 330 Katherine Street, near the child’s home last night. The wheel of the truck passed over the child’s abdomen. Surgeons at the Emergency Hospital say her condition is serious.
Barnas on Bad Faith:
Hello again:
These are usually the dog days of summer, but it’s hard to believe that it’s already August with the late start we got to the season up here. This weekend we already have the return of the English Premier League and preseason NFL games. These are welcome additions to my sporting calendar, as the Blue Jays season has long been over. Even though the Blue Jays record is awful, they have been much more fun to watch lately with the callup of Bo Bichette, who is off to a torrid start. The Jays’ roster now features the sons of former MLB players Dante Bichette, Vladimir Guerrero, and Craig Biggio, and they’re all contributing as rookies. It should be a fun group to watch grow and develop over the coming years. Hopefully we can find some pitching.
Dan recently returned from Idaho, so I have an Idaho bad faith case in my column this week. Plaintiff tried to argue that Idaho Code § 41-1839 supported his argument that Travelers acted in bad faith by not responding to his UIM claim within 60 days. That section states that an insurer of a UIM policy who fails to pay an amount “justly due” within sixty days of a claim must also pay the insured’s attorney’s fees in a legal action to recover the insurance payment. The court concluded that there was no support for Plaintiff’s argument that an insurer who exceeds sixty days in responding to a UIM claim has unreasonably and intentionally delayed payment – as is required in a claim for bad faith.
That’s all for now. Have a great weekend.
Brian
Brian D. Barnas
[email protected]
Post-War Inflation:
New York Herald
New York, New York
09 Aug 1919
LIVING COST UP 71 PER CENT
Industrial Conference Board Announces Increase Since 1914.
BOSTON, Aug. 8.—After a survey of conditions the country over the National Industrial Conference Board announced to-day that the cost of living for American wage earners was 71 per cent. higher in July,1919, than at the outbreak of the world war in 1914. This was said to represent an advance of 6 per cent. since March,1919, and of 12 per cent. since June, 1918.
The total increase for the five-year period on food was 85 per cent.; shelter, 28 per cent.; clothing, 100 per cent.; fuel, heat and light, 57 per cent.
Off the Mark:
Dear Readers,
So far, the summer has been going well. The kids just started their second and final camp of the summer. The first one was through their schools and they enjoyed all of the fun field trips. The current camp is at a local college. This first week they have been learning about magic and have been practicing their new craft on the wife and me. However, they are most excited about being able to buy their own lunches at a college dining hall. Despite requesting that they make healthy choices, it seems that they have settled on having pizza every day. I can’t blame them, I like pizza a lot too.
This edition of “Off the Mark” discusses a recent construction defect case from the US Court of Appeals for the Tenth Circuit. In Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt., the US Court of Appeals examined the faulty workmanship exclusion in the context of a negligent design claim and concluded that the faulty workmanship exclusion does not apply to damages caused by negligent design work.
Until next time …
Brian
Brian F. Mark
[email protected]
Imagine, Insurance Companies were Sued a Century Ago:
Press and Sun-Bulletin
Binghamton, New York
09 Aug 1919
FOURS CASES FILED FOR EARLY TRIAL IN SUPREME COURT
New York Realty Auctioneers Seek to Recover from Frederick W. Parsons
SUED INSURANCE COMPANY
Endicott Man Alleged Breach of Contract in Not Paying Fire Loss
Notes of issue in four cases for position On the calendar for the term of Supreme Court convening Sept. 15, have already been filed at the County Clerk’s office.
Chief among the cases so far noted is an action brought by the M. Morgenthau Co., New York realty auctioneers, against Frederick W. Parsons, of Port Dickinson, to recover for alleged fraud. The complaint charges that several years ago the defendant made a contract with the plaintiff to act as auctioneer for the sale of a block of lots near the Hillcrest location in Port Dickinson. The plaintiff alleges they expended a considerable sum in advertising and preparing for the sale and that just prior to the time set for the sale to pen, they learned that the defendant was without title to the property and that the block of lots could not be disposed of. The plaintiffs seek to recover the amount they claim to have expended in the preliminary preparations. The case has been noted at previous terms of Supreme Court, but has never been tried. Robert S. Wickham is attorney for the plaintiffs and Harry J. Hennessy for the defendant.
Wandering Waters:
I hope all of you had a wonderful week and welcome to another edition of Wandering Waters.
America continues to finalize its roster in preparation of the upcoming FIBA tournament in September. While America’s Men team usually puts forth a star-studded lineup, this year many of the “Superstars” are sitting out. Not to my surprise, the NBA Superstars are focusing on the upcoming NBA season. With the Warriors finally vulnerable, there are many teams with a chance to secure a championship in the summer of 2020. Let’s hope that the time off for these players will deter injuries and give NBA fans an exciting 2019-2020 season.
With that said, we have one case from the Northern District of New York. Until next time……
Larry
Larry E. Waters
[email protected]
You Steal’em and We’ll Find’em:
Democrat and Chronicle
Rochester, New York
09 Aug 1919
Stolen Automobiles To Be Located by Information Bureau
New York, Aug. 8—A plan to establish a central clearing house and information bureau to facilitate the tracing of stolen automobiles and protect the casualties and insurance companies which insure the machines against loss has been approved by many of these companies, it was announced to-day by Frank Oliver, chief clerk of the Magistrates Courts here, and the originator of the project.
The proposed bureau, which also has been indorsed by Secretary of State Hugo, would be placed at the disposition of all insurance companies and police chiefs of every city. A conference with insurance company and state automobile license bureau heads and police officials who will be invited to attend will be held soon to consider the plan.
Boron’s Benchmarks:
Dear Readers:
Welcome to Boron’s Benchmarks, coverage of reported decisions of the High Courts of the 49 states not named New York. I write this column on August 8, 2019, which happens to be the 45th anniversary of Richard M. Nixon’s televised address to the nation announcing he would resign the presidency. I was a rather naïve teenager back in 1974. I sat beside my parents, watching Nixon’s televised message, and afterwards wondered what was next for our nation. Or maybe what was for supper. Or maybe both. Perhaps you felt the same way that night. I was very naïve back in 1974 when it came to politics. Disinterested. Uninformed. Hank Aaron’s 715th home run hit exactly four months earlier that year to break Babe Ruth’s all-time career home run record was the historic, national event of 1974 that I cared most about that summer.
Speaking of history, the recent Virginia Supreme Court decision in Nationwide Mutual v Erie Insurance Exchange, which I have selected for your consideration in this issue, certainly has some. The parties have now been up to the Virginia Supreme Court twice in recent years, on two separate but related cases. Initially, there was a DJ action litigating an insurance coverage dispute between carriers over which liability insurance policies provided coverage for a wrongful death claim. The insurance coverage dispute made its way up through Virginia courts to the Virginia Supreme Court in 2017, where it was resolved. During the course of litigating the coverage dispute, Nationwide settled the underlying wrongful death claim for $2.9 million, without Erie chipping in any money. Then, Nationwide filed a separate suit seeking equitable contribution from Erie as to what Nationwide had paid to settle the underlying wrongful death claim. That’s what the recent Virginia Supreme Court decision in Nationwide Mutual v Erie Insurance Exchange concerns, the issue of equitable contribution, and whether or not Nationwide is allowed to pursue equitable contribution against Erie. I’ve provided analysis of the Virginia Supreme Court’s holding in the equitable contribution case in the attached edition, with a link to the actual decision, of Coverage Pointers.
May you have a great next two weeks, and we look forward to your contacting us with questions and/or comments and/or situations.
Eric
Eric T. Boron
[email protected]
Bucking the trend for Higher Wages:
The Buffalo Enquirer
Buffalo, New York
09 Aug 1919
PAINTERS IN NEW YORK WILL STRIKE UNLESS THEY GET $1 HOUR DEMAND
(By the United Press.)
New York, Aug. 9.—Eighteen thousand painters, decorators and paperhangers will strike here August 15, unless their demands are met, union officials said today. The men ask $1 an hour for an eight-hour day and a five-day week.
Barci’s Basics (On No Fault):
Hello Subscribers!
In honor of our last softball game of the season tonight, I bring you a very bad summertime joke:
Q: What kind of animal is always at a softball game?
A: A bat.
On the no-fault front I have two cases for you that both discuss issues related to timely denial of claims. The first is out of the City Court of New York, Bronx County, that discusses whether failure to submit a timely notice of claim, making the claimant an unqualified person under the Insurance Law, is a lack of coverage defense or a defense that can be precluded by failure to timely deny.
The next case is a Second Department case that discusses the insurer’s responsibility to request verification of a claim and what the impact of its failure to do so may be.
That’s all folks,
Marina
Marina A. Barci
[email protected]
Editor’s Note: Stick to No Fault rather than stand up!
I’ve Never been a Fan of Neckties – Now I Know Why:
The Caledonian-Record
St. Johnsbury, Vermont
09 Aug 1919
Tempers and Tight Collars.
Dr. Leonard Williams, lecturing on "Common Sense" at a nursing conference and exhibition in London, said that people with tight collars did not drain their brains properly, and often suffered from bad tempers. He had noticed that since women had given up high collars and were wearing garments which gave complete freedom to the neck they had become sweeter tempered.
Lee’s Connecticut Chronicles:
I'm at the beach for some greatly needed rest and relaxation. Connecticut Chronicles will return next edition.
Lee
Lee S. Siegel
[email protected]
Baseball Debuts:
Tony Faeth played his first major league game as a Cleveland Indians, 100 years ago yesterday. He was a pitcher, playing in 19 games. He had no decisions credited to him and got on base once, on a walk (and he scored). When his baseball career fell apart, he became a boxer. He was knocked out in the first round of his only reported bout, in 1930, in an entertaining event, lasting two minutes, 10 seconds.
This week’s headlines from the attached issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Unclear whether Trade Contracts Required Additional Insured Coverage so No Declaration of AI Status could be Made
- Summary Judgment Denied to Insured who Claims that He Did Not Commit Arson. Only Conclusory Affidavit Offered
- Former Insurance Company Employee (Head of Claims) Can be Deposed on Custom and Practice undertaken by Insurer on Consent Provisions, Even if She has no Personal Knowledge of Particular Policy
- Duty to Defend Landlord as Additional Insured for Accident in Common Area where Broad Lease Provisions Require Coverage for Use of those Areas Even Though Not Leased Premises
- In a Direct Action Against Insurer to Secure Liability Insurance Coverage Complaint Alleges Sufficient Facts to Survive Motion to Dismiss
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
- Battle of Experts on Summary Judgment Results in Issue of Fact
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
-
In trial in Kings County. Taking a pass this week.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]
- Court Finds that Liquor Liability Exclusions Preclude Coverage, for both Defense and Indemnification, in DWI Case out of Pennsylvania
JEN’S GEMS
Jennifer A. Ehman
[email protected]
- Tenant’s Insurer Obligated to Afford Defense to Property Owner and Manager for Slip and Fall Accident on Abutting Sidewalk
BARNAS ON BAD FAITH
Brian D. Barnas
[email protected]
- Failure to Respond to UIM Claim within 60 Days as Was not Unreasonably and Intentional Delay Required for Bad Faith
JOHN’S JERSEY JOURNAL
John R. Ewell
[email protected]
- Despite Insured Admitting She Fibbed About Prior Claims on Insurance Application, New Jersey Appellate Division Re-Instates Insured’s Lawsuit Ruling Insurer Failed to Show Materiality
- Third Circuit Court of Appeals Rules Prior Known Acts Exclusion Bars Coverage to School for Sexual Abuse Allegations
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Connecticut Chronicles will return next edition.
OFF THE MARK
Brian F. Mark
[email protected]
- US Court of Appeals Holds that the Faulty Workmanship Exclusion does not Apply to Damages Caused by Negligent Design Work
WANDERING WATERS
Larry E. Waters
[email protected]
- Defendant’s Motion for Summary Judgment Granted as the Special Employee Theft Exclusion Applied as a Bar to Coverage
BORON’S BENCHMARKS
Eric T. Boron
[email protected]
- Circuit Court Erred in Dismissing Insurer’s Complaint Against Another Insurer in Equitable Contribution Action - Vacated and Remanded – Liability Insurance Coverage – Equitable Contribution to be Awarded Insurer Consistent With Prior Allocation of Coverage Liability
BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
[email protected]
- Failure to File Timely Notice of Claim Is a Lack of Coverage Issue
- Failure to Request Additional Verification Precludes Carrier from Asserting Lack of Sufficient Information as a Valid Defense
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- Flood and Water Damage Exclusion Strictly Construed (Against Insurer)
That’s all there is and there is no more.
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
Hewitt’s Highlights on Serious Injury
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
07/31/19 County of Nassau v. Technology Insurance Co., Inc.
Appellate Division, Second Department
Unclear whether Trade Contracts Required Additional Insured Coverage so No Declaration of AI Status could be Made
The County of Nassau commenced this action against Technology Insurance Co., Inc. (“TIC”), and Looks Great Services, Inc. (“LGS”). They claimed that LGS performed work for the County and was required to maintain general liability insurance naming the County as additional insureds. LGS produced evidence that it was insured under a policy issued by TIC. According to that insurance policy, the plaintiffs were additional insureds as "required by written contract." TIC, however, had refused to defend or indemnify the County in the claims related to the collision.
"When determining whether a third party is an additional insured under an insurance policy, a court must ascertain the intention of the parties to the policy, as determined from within the four corners of the policy itself. Here, the subject insurance policy provides that the plaintiffs were additional insureds as "required by written contract." Consequently, the plaintiffs' entitlement to defense and indemnification under the insurance policy depends on whether LGS was contractually required to maintain general liability insurance naming the County as an additional insured.
The question of whether LGS was contractually required to maintain general liability insurance naming the plaintiffs as insureds could not be resolved on the record.
The record includes multiple agreements between the County and LGS. A "Blanket Purchase Order" (hereinafter BPO), awarded under a formal sealed bid proposal and relating to tree pruning and stump removal, included provisions requiring LGS to procure liability insurance naming the County as insured and to defend and indemnify the plaintiffs. A "Debris Management Agreement" (hereinafter DMA), relating to "such professional services as may be required to effect disaster response and recovery," did not include these provisions. Four "Supplemental Agreement[s]" each provide, in part, that "[t]his Supplemental Agreement is entered into pursuant to the provisions of the original [DMA] . . . entered into in 2011 under the existing [BPO]."
Under these circumstances, triable issues of fact existed regarding whether the occurrences were covered by the DMA or the BPO, and thus the plaintiffs were not entitled to summary judgment on the cause of action seeking a declaration that TIC was obligated to defend and indemnify the plaintiffs.
07/31/19 DeVaul v. Erie Insurance Company
Appellate Division, Fourth Department
Summary Judgment Denied to Insured who Claims that He Did Not Commit Arson. Only Conclusory Affidavit Offered
Plaintiff owned a home that Erie insured. After the home burned down under suspicious circumstances, Erie denied the claim for coverage because, inter alia, it believed that plaintiff "intentionally caus[ed] the fire." Plaintiff thereafter commenced this breach of contract action.
DeVaul’s affidavit in support of his motion included only conclusory denials that he committed arson, which were insufficient to meet his initial burden on his motion for summary judgment.
Editor’s Note: I don’t know what he said or what he could have said.
07/31/19 Matter of Barber v. Borgwarner Morse Tec, LLC
Appellate Division, Fourth Department
Former Insurance Company Employee (Head of Claims) Can be Deposed on Custom and Practice undertaken by Insurer on Consent Provisions, Even if She has no Personal Knowledge of Particular Policy
Barber commenced this proceeding seeking to quash nonparty subpoenas served on her pursuant to CPLR 3119 by respondents, which are out-of-state corporations involved in pending litigation in Illinois against TIG Insurance Company (TIG). In the Illinois action, respondents seek recovery from TIG of defense costs they incurred in defending thousands of asbestos claims. TIG is the successor in interest to International Insurance Company (International), for which Barber worked between 1994 and 1998. TIG contends in the Illinois action that it is not obligated to reimburse respondents for defense costs because it did not consent to such costs, as required by the relevant excess liability insurance issued to Borgwarner and others.
"CPLR 3101 (a) (4) allows a party to obtain discovery from a nonparty, and provides that [t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof'". The phrase "material and necessary" must be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity.
Barber argued that her testimony is not material or necessary to the Illinois action because she has no personal knowledge of the underlying asbestos claims and no personal knowledge of the underlying policies or the insureds. A witness's sworn denial of any relevant knowledge, however, is insufficient, standing alone, to establish that the discovery sought is utterly irrelevant to the action or that the subpoena, if honored, will obviously and inevitably fail to turn up relevant evidence. Even if she doesn’t know about these policies, her deposition testimony is still potentially relevant because she has personal knowledge of how International interpreted and enforced similar "consent" provisions of other excess policies while she was employed by International.
She was the head of claims at International, handling claims made on excess liability insurance policies with respect to asbestos cases, among other things. We note that the court in the Illinois action has ruled that evidence relating to the "custom and practice" in the insurance industry of interpreting and enforcing consent provisions of excess policies is admissible at trial.
07/31/19 Pixley Development Corp. v. Erie Insurance Company
Appellate Division, Fourth Department
Duty to Defend Landlord as Additional Insured for Accident in Common Area where Broad Lease Provisions Require Coverage for Use of those Areas Even Though Not Leased Premises
Pixley commenced this action seeking a declaration that defendant Erie Insurance Company (“Erie”) is obligated to provide a defense and indemnification for Pixley, as an additional insured, in an underlying personal injury action. Pixley also demanded judgment against defendant Candy Apple Café (Café) for contractual. The plaintiff in the underlying action (tort plaintiff) alleged that he sustained injuries when he slipped and fell on ice in the delivery driveway behind a plaza owned by Pixley while delivering supplies to the Café, a tenant of the plaza.
An insurer's duty to defend is exceedingly broad and an insurer will be called upon to provide a defense whenever the allegations of the complaint suggest a reasonable possibility of coverage. The duty to defend is derived from the allegations of the complaint and the terms of the policy. Here, the court found, allegations of the personal injury complaint and the terms of the policy created a reasonable possibility that the tort plaintiff's claims are covered under the terms of the policy.
Pursuant to the provisions of the lease, the premises leased to the Café was defined as "a ground floor store approximately 5600 square feet, (the Premises'), together with . . . the right to use the driveway designated for delivery purposes in common with other tenants." Although the delivery driveway was deemed a common area under the terms of the lease, the Café was required to pay its proportionate share of common area maintenance charges and was further obligated to provide "for the benefit of Pixley, a comprehensive liability policy of insurance protecting Pixley against any liability whatsoever, occasioned by accident, on or about the Premises, or any appurtenances thereto".
The Café obtained the requisite insurance policy, which named Pixley as an additional insured, but that additional insured endorsement insured Pixley "only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to the Café and shown in the Schedule." The supplemental declarations to the policy identified the leased premises only by its address.
The court concluded that the allegations in the complaint suggest a reasonable possibility of coverage inasmuch as the tort plaintiff's claims arguably "arise out of" the Café's maintenance or use of that part of the premises leased to it”.
Pixley established on its motion that the use of the delivery driveway was included in the scope of the demised premises and there are triable issues of fact whether the Café " assumed some responsibility for maintenance of that area, including snow removal.
Other factors relevant to our determination that the claims arguably arise out of that part of the premises leased to the Café are that the lease required the Café to procure insurance against any liabilities "on or about the demised premises or any appurtenances thereto and required the Café "to pay its proportional share of the common area costs' incurred in operating and maintaining the subject property"
However, the court found premature any ruling on the obligation to indemnify.
Editor’s Note: A trend seems to be developing which is broadening additional insurer’s obligations to defend with respect to common-area claims. Carriers that want to narrow that obligation need to carefully script policies. The courts seems to be separating, as they should, decisions AI defense and indemnity.
07/31/19 S.P v. Dongbu Insurance Company
Appellate Division, Second Department
In a Direct Action Against Insurer to Secure Liability Insurance Coverage Complaint Alleges Sufficient Facts to Survive Motion to Dismiss
This was a direct action claim.
Dongbu Insurance Company (“insurer”) issued to Kosher Food Depot, Inc. (hereinafter KFD or the insured), a "Businessowners Policy" covering the period from March 11, 2013, to March 11, 2014. The defendant York Risk Services Group (hereinafter York) is the claims administrator for the policy.
The policy includes an endorsement entitled "Limitation of Coverage to Designated Premises or Project" (hereinafter the endorsement), which added the following provision to "Section II - Liability": "This insurance applies only to bodily injury', property damage', personal and advertising injury' and medical expenses arising out of: 1. The ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises; or 2. The project shown in the Schedule." The endorsement's schedule and the "Businessowners Policy Declarations" identified the premises as 1279 42nd Street in Brooklyn, and the declarations described the insured's business as "Grocery."
On March 6, 2014, the underlying “plaintiff” allegedly was injured in front of 1215 44th Street in Brooklyn, when he was struck by a flatbed pushcart or hand truck operated by an employee of KFD during the course of employment. The plaintiff subsequently commenced a personal injury action against KFD, and the insurer disclaimed coverage on the principal ground that the accident site was not a covered location under the policy. The plaintiff later moved for leave to enter a default judgment against KFD. The motion was granted, and a judgment ]was entered in favor of the plaintiff and against KFD. A copy of the judgment with notice of entry was served upon KFD, as well as the insurer and York.
Subsequently, the plaintiff commenced this direct action against the insurer and York pursuant to Insurance Law § 3420(a)(2) to recover the amount of the unsatisfied judgment entered in the personal injury action.
Pursuant to Insurance Law § 3420(a)(2), an injured person who has obtained an unsatisfied judgment against a tortfeasor may commence an action against the tortfeasor's insurer to recover the amount of the unsatisfied judgment, up to the policy limit.
Contrary to the defendants' contention, the complaint sufficiently stated a cause of action pursuant to Insurance Law § 3420(a)(2) against the insurer to recover the amount of the unsatisfied judgment in favor of the plaintiff and against the insured. The evidence submitted by the defendants did not demonstrate that a fact alleged in the complaint insofar as asserted against the insurer was undisputedly not a fact at all. The complaint against the insurer stands.
However, the complaint against the TPA, York, is dismissed. The evidence submitted by the defendants conclusively established that York did not have independent authority to issue the disclaimer and only did so at the direction of the insurer; that York is not an insurance company and did not participate in any way in the underwriting, issuance, or binding of the policy; and that York has no contractual privity with KFD or the plaintiff.
Editor’s Note: Coverage has not yet been conclusively established. If it is, the insurer will not be able to contest the findings of liability or the amount of damages established in the default under the authority of Lang v. Hanover, 3 NY3d 350 (2004). That is the danger inherent in not defending and allowing a default to be entered.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
07/31/19 Chichester v. Chichester
Appellate Division, Second Department
Battle of Experts on Summary Judgment Results in Issue of Fact
On November 7, 2013, the plaintiff was a passenger in the defendant's car when that car was involved in a motor vehicle accident while merging onto the Southern State Parkway. In the bill of particulars, the plaintiff alleged injuries to her right shoulder. The defendant moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. In support of her motion, the defendant submitted the affirmed report of an orthopedic surgeon who examined the plaintiff on October 20, 2016. The defendant's orthopedic surgeon measured the range of motion of the plaintiff's right shoulder, using a goniometer, and compared his results to what would be considered normal range of motion. He found the results to be normal.
In opposition to the defendant's motion, the plaintiff submitted the affirmation of an orthopedic surgeon who examined her on June 23, 2017. The plaintiff's orthopedic surgeon measured the range of motion of the plaintiff's right shoulder, using a goniometer, and compared his results to what would be considered normal range of motion. He found restrictions of up to 63%.
The Appellate Division held the defendant met her prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injury to the plaintiff's right shoulder did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, the plaintiff raised a triable issue of fact as to whether she sustained a serious injury to her right shoulder under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) due to the findings of her expert.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]
07/26/19 Transportation Ins. Co. v. Heathland Hospitality Group LLC
United States Court of Appeals, Third Circuit
Court Finds that Liquor Liability Exclusions Preclude Coverage, for both Defense and Indemnification, in DWI Case out of Pennsylvania
Transportation Insurance Company and Continental Casualty insured Heathland Hospitality Group LLC and Heathland Hospitality Group LP (collectively “Heathland”). In 2008, a fatal car accident occurred involving a drunk driver, Whittingham, and another driver, decedent Serratore. Following the incident, the decedent’s estate sued the Heathland entities for having provided Whittingham with alcohol, despite his alleged visible intoxication at their country club.
At issue in the coverage declaratory judgment action was whether Heathland’s policies would provide a defense and indemnification, where they contained liquor liability exclusions. To wit, Transportation’s policy included an exclusion that read that “this insurance does not apply to bodily injury for which any insured may be held liable by reason of: (1) Causing or contributing to the intoxication of any person; (2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or (3) Any statute, ordinance, or regulation relating the sale, gift, distribution or use of alcoholic beverages. This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages”. (internal punctuation omitted; emphasis supplied by the court). Moreover, Continental’s umbrella policy included a Liquor Liability Limitation which read: “this insurance does not apply to bodily injury for which any insured may be held liable by reason of: (1) Causing or contributing to the intoxication of any person; (2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or (3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages. Unless, and then only to the extent that coverage is provided by ‘scheduled underlying insurance’”.
The managers of country club (Heathland) argued that they were not in the business of selling, serving or furnishing alcoholic beverages, they just managed the club. Based upon the allegations asserted against them, the courts disagreed. The allegations of the complaint (which would trigger a defense at least) stated that they were running a business establishment that served alcohol, they managed the club’s food and beverage sales/service, and they allegedly sold the alcohol that intoxicated the driver, which caused the death. Thus, the complaint unequivocally alleged that Heathland was in the business of at least selling, serving, or furnishing alcohol. Given that under Pennsylvania law, like in many other states, the four corners of the complaint determine whether there is a duty to defend, and all of the allegations fell within the exclusion, there was no duty to defend nor indemnify the DWI negligence complaint.
JEN’S GEMS
Jennifer A. Ehman
[email protected]
07/23/19 207 Sherman Assoc. v. United States Liab. Ins. Co.
Supreme Court, New York County
Hon. Carol R. Edmead
Tenant’s Insurer Obligated to Afford Defense to Property Owner and Manager for Slip and Fall Accident on Abutting Sidewalk
This decision arises out of a February 14, 2014 incident in which the underlying plaintiff slipped and fell on a sidewalk. She brought suit against the property owner (207 Sherman Associates, LLC (“Sherman”)), the property manager (SDG Management Corp. (“SDG”)) and the tenant alleging negligent snow removal. The incident occurred on the sidewalk in front of the premises.
Based upon the terms of the relevant lease, it stated that “[t]enant shall, at its own cost and expense, keep the sidewalks, curbs, entrances, passageways and areas adjoining or appurtenant to the Premises in a clean and orderly condition, free of snow, ice rubbish and obstructions…Tenant hereby agrees that it is liable for any accidents occurring on said outside areas due to tenant’s failure to comply with this Section.” The lease further contained an indemnification clause which provided that the tenant would indemnity the owner for all claims “arising from any accident, injury or damage occurring outside of the Premises but anywhere within or about the Property, where such accident, injury or damage results from an act or omission of Tenant.” The lease also required that insurance be purchased in favor of the owner for claims “occurring in or upon the demised premises.”
At the time of the incident, the tenant was insured by defendant. Pursuant to the terms of the policy issued “Managers or Lessors of Premises” were listed as additional insureds on the policy. In what appeared to be a scrivener’s error, SDG was listed as “SDC Management Corp.”
Sherman and SDG eventually tendered their defense in the lawsuit to defendant who declined to pick it up. This declaratory judgment action then followed.
Sherman and SDG moved for summary judgment, and defendant cross-moved. Defendant first argued that Sherman was not listed as an additional insured. The court considered this argument and found that since the policy clearly stated that the lessor and the managing agent were insureds, it was unpersuasive.
Next, defendants argued that the policy does not cover the sidewalk abutting the lease premises. The specific endorsement stated that coverage would be provided only if bodily injury is “caused by an ‘occurrence’ that takes place on or within the perimeter of the premises, site(s) or location(s) scheduled above that are owned by, occupied by or leased to any ‘insured.’” In considering this language, the court held that the ambiguity in the phrase “premises, site(s) and location(s)” in the premises limitation must be interpreted to include the abutting sidewalk, especially since that area was contemplated by the lease as being within the ambit of rights and responsibilities that the tenant took on through the agreement. Accordingly, the court granted plaintiffs’ motion for partial summary judgment, and held that defendant must defend plaintiffs, and reimburse them for past defense costs.
Note: This decision is consistent with what seems to be the new normal in these types of cases (see Pixley above). The courts are finding a defense obligation for losses on the sidewalks or in common areas but making the parties to wait on indemnity.
BARNAS ON BAD FAITH
Brian D. Barnas
[email protected]
07/30/19 Lete v. Travelers Casualty Insurance Company of America
United States District Court, District of Idaho
Failure to Respond to UIM Claim within 60 Days as Was not Unreasonably and Intentional Delay Required for Bad Faith
In October 2015, Simon Lete was driving his dump truck when it was struck by an uninsured motorist. Lete suffered injuries to his right shoulder and his dump truck was damaged. On June 20, 2018, Lete filed a claim under his UIM insurance policy for the injuries and damages he suffered. Lete claimed total damages of $385,336.27. His claim demanded a response from Travelers within sixty days.
Travelers agent Juli Morrow evaluated Lete's claim. On September 13, 2018 Morrow called Lete's phone and left a voicemail offering to settle the claim for $20,938.47. At the time she left the voicemail, Lete had already initiated this lawsuit against Travelers. Travelers had not yet received notice or service of the suit.
On October 25, 2018,Lete's counsel demanded that the $20,938.47 settlement offer be paid as the “undisputed” portion of Lete's claim. Travelers agreed to pay the amount but maintained the position that the payment represented a fair and appropriate resolution on Lete's UIM claim.
Lete alleged that Travelers handled his UIM claim in bad faith. He argued that Travelers did not respond until 85 days after the claim was submitted and did not tender the $20,938.47 payment until five months after claim submission. Since the $20,938.47 offer represented the “undisputed portion” of his claim, Lete argued that Travelers acted in bad faith by delaying payment.
Travelers’ motion for summary judgment dismissing the bad faith claim was granted. Travelers did not intentionally and unreasonably deny or delay payment to Lete. Ms. Morrow evaluated Lete's claims and requested additional information about Lete's medical insurance payments so that she could properly assess damages. The settlement offer of $20,938.47 was made to Lete before Travelers was aware that a lawsuit had been initiated, within 90 days of the claim submission.
Lete also argued that Travelers violated Idaho Code § 41-1839, which states that an insurer of a UIM policy who fails to pay an amount “justly due” within 60 days of a claim must also pay the insured's attorney's fees in a legal action to recover the insurance payment. The court concluded that there was no basis to conclude that an insurer who exceeds 60 days in responding to a UIM claim has unreasonably and intentionally delayed payment – as is required in a claim for bad faith.
JOHN’S JERSEY JOURNAL
John R. Ewell
[email protected]
07/30/19 Pokhan v. State Farm
New Jersey Superior Court, Appellate Division
Despite Insured Admitting She Fibbed About Prior Claims on Insurance Application, New Jersey Appellate Division Re-Instates Insured’s Lawsuit Ruling Insurer Failed to Show Materiality
Following a fire that severely damaged her home in Newark, Pokhan made a claim under her homeowners' policy issued by State Farm. State Farm investigated and ultimately denied the claim based on Pokhan’s "[v]iolation of the fraud provisions of the policy." Pokhan sued State Farm alleging breach of contract. State Farm answered and raised affirmative defenses including Pokhan’s misrepresentations on her insurance application and during the claims investigation.
Pokhan testified at trial that in 2012, Hurricane Sandy ripped shingles from the roof. Pokhan made a claim under her policy for which she received payment of $5000 or $6000. In early 2013, a frozen pipe burst on the second floor causing extensive water damage throughout the residence. According to Pokhan's trial testimony, she received $90,000 from insurance on that claim. After the second claim, Pokhan started shopping around for new insurance because her premium was going up. Pokhan applied for coverage with State Farm and was approved for coverage after speaking with an agent by telephone.
In January 2015, a fire caused extensive damage to plaintiff's home, rendering it uninhabitable. State Farm sent an investigator to take a recorded statement. Although recorded, the statement was not under oath and the investigator explained at the outset it was being taken "strictly to gain information about [Pokhan] and about [her] loss." When the investigator asked about prior losses at the property, Pokhan acknowledged a "frozen pipe" but denied she sustained any damage, and said she did not "believe any payments were made." Pokhan further told the investigator she had not had any other losses at the property, omitting the roof damage from Sandy. In an examination under oath in April, however, Pokhan corrected her misstatements, detailing the flood loss and the prior insurer's payments.
Asked on cross-examination why she initially told the investigator she had not made a claim for the flood loss, Pokhan replied "[b]ecause I didn't feel like she needed to know that." Pokhan continued, "she's not telling me what's going on. So I'm new to this. I mean, being recorded by an agent that's not telling me anything." Pokhan's response prompted State Farm's counsel to ask: "So you gave her the wrong information?" prompting Pokhan to reply: "If that's what you want to call it."
After plaintiff rested, State Farm moved for involuntary dismissal pursuant to Rule 4:37-2(b), arguing Pokhan admitted there was a $90,000 flood loss "prior to taking out insurance with State Farm," and acknowledged she had not been truthful to State Farm's investigator when asked about it directly.
Pokhan's counsel claimed that Pokhan was misled by the investigator telling her the inquiry was limited to the fire loss. Pokhan contended that she did not think the investigator had any business asking her about questions that touched on the accuracy of her insurance application. The trial court judge ruled that the investigator was entitled to explore whether there were material misrepresentations on the application, calling it a “legitimate concern”. The trial court then dismissed the complaint. Pokhan appealed.
The Appellate Division agreed that Pokhan's admissions at trial satisfied State Farm's burden to prove her misstatements were willful. The Appellate Division framed the issue on appeal as whether State Farm had shown the materiality of those misstatements.
Under New Jersey law, “[a]n insured's misstatement is material if when made a reasonable insurer would have considered the misrepresented fact relevant to its concerns and important in determining its course of action.” The Appellate Division ruled: “There was absolutely no evidence in this record that would permit a fact-finder to judge the materiality of Pokhan's misstatements to State Farm under that test.” The Court noted the insurance application was not part of the record and that the investigator deposition did not address how Pokhan’s statements were relevant to State Farm’s concerns or important in determining a course of action. In addition, the Appellate Division deemed the trial judge’s discussion on materiality to be “only speculation.”
Since the insurer had not sufficiently shown the materiality of the misrepresentation, the Appellate Division ruled the involuntary dismissal of plaintiff's complaint was in error and remanded the case for a new trial.
Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.
07/26/19 Montville Township Board of Education v. Zürich Am. Ins. Co.
United States Court of Appeals, Third Circuit
Third Circuit Court of Appeals Rules Prior Known Acts Exclusion Bars Coverage to School for Sexual Abuse Allegations
Montville Township Board of Education (“Montville”) hired Jason Fennes (“Fennes”) as a first-grade teacher and track coach in 1998. After several reports and investigations of his alleged sexual abuse against students, Fennes resigned in 2010. Months later, Cedar Hill Prep School (“Cedar Hill”) hired him as a teacher. While still employed by Cedar Hill, Fennes was arrested and indicted on charges of sexually abusing a number of Montville students and a Cedar Hill student.
A student at Cedar Hill (“Child M”) sued Fennes and Cedar Hill for injuries resulting from Fennes’s sexually abusing her in February 2012. In an amended complaint, Child M added Montville as a defendant, specifically alleging that the school district knew about Fennes’s sexual abuse, failed to notify the authorities, and agreed to withhold Fennes’s history of sexual abuse from his prospective employers. The lawsuit (“Child M Action”) thus claimed that Montville enabled and facilitated Fennes’s sexual abuse at Cedar Hill.
During the relevant time, Montville held an insurance policy (“Policy”) with Zurich American Insurance Co. (“Zurich”). The Child M Action potentially implicates two coverage parts of the Policy. The first (“Commercial General Liability Part”) generally excludes coverage for “bodily injury . . . arising out of or relating in any way to an abusive act”. The second (“Abusive Acts Part”)—the only part at issue in this appeal—obligates Zurich to defend Montville against any lawsuit for “loss because of injury resulting from an abusive act to which th[e] [Policy] applies.”
The Abusive Acts Part also includes a “Prior Known Acts Exclusion”. Under that exclusion, there is no coverage under the Abusive Acts Part for “[a]ny claim or suit based upon, arising out of[,] or attributable, in whole or in part, to any abusive act of which any insured, other than any insured actually committing the abusive act, has knowledge prior to the effective date” of the Policy. As pertinent here, the Policy took effect in July 2011.
Approximately a week after Child M filed the Complaint, Zurich sent Montville a letter disclaiming coverage and reserving its rights under the Policy. According to Zurich, it had no obligation to defend Montville under either part of the Policy. As to the Commercial General Liability Part, Zurich determined that Child M’s bodily injury arose from Fennes’s abusive acts, thereby excluding coverage. As to the Abusive Acts Part, Zurich concluded that the allegations in the Complaint brought the Child M Action within the Prior Known Acts Exclusion, therefore also barring coverage.
Montville sued Zurich seeking a declaration that Zurich owed Montville a duty to defend it in the Child M Action. The parties filed summary judgment cross-motions for summary judgment. The trial judge granted summary judgment to Zurich and declared it had no duty to defend Montville.
Montville conceded there was no coverage under the Commercial General Liability Part. The sole issue on appeal is whether a duty to defend was owed under the Abusive Acts Part. Montville contends that the Complaint is rife with ambiguity, precluding its allegations from definitively falling within the ambit of the Prior Known Acts Exclusion.
Montville acknowledged that Child M made the following allegations:
(1) Fennes, while employed by [Montville], “engaged in various negligent, careless, reckless[,] and/or intentional conduct, including but not limited to inappropriate abusive and/or sexual conduct with his infant students” and [Montville] was “on notice of said conduct.”
(2) [Montville] was “on notice” “of said reckless and/or intentional conduct, including child abuse, both sexual and nonsexual” so as to trigger a requirement to report . . . .”
(3) [A]s a result of the “negligence, carelessness, recklessness[,] and/or intentional conduct” of the defendants [in the Child M Action], Child M suffered “injuries.”
(4) Fennes “engaged in various acts of sexual molestation and/or child abuse against other infant students.”
(5) [Montville] was “on notice of said conduct.”
(6) Fennes “engaged in various acts of sexual molestation and/or child abuse against . . . his infant students.”
Montville’s only argument attempting to elude operation of the Prior Known Acts Exclusion is that Child M’s use terms like “abusive” is “vague, undefined, and subject to multiple interpretations,” as Complaint lacks an “enumeration of specific abusive acts.” For example, Montville posited that the Complaint could be read as simply alleging that Montville only knew Fennes had students sit on his lap in a “platonic manner,” presumably outside the ambit of the Prior Known Acts Exclusion. Montville claimed that this “ambiguity” demands interpretation in its favor.
The Third Circuit found that a plain reading of the allegations in the Complaint unequivocally brings them within the ambit of the Prior Known Acts Exclusion. That exclusion relieves Zurich of the duty to defend only if the Child M Action (1) is attributable, even in part, (2) to abusive acts (3) about which Montville had knowledge (4) prior to July 2011. Montville did not contest first, third, and fourth elements of the exclusion. The only question therefore was whether Child M’s allegations of “abuse,” rise to the level of “abusive act[s]” as defined in the Policy. The Third Circuit ruled they did.
The Abusive Acts Part defines an “abusive act” as being, as relevant here, “any act . . . of actual . . . abuse or molestation done to any person, resulting in ‘injury’ to that person, including any act . . . of actual . . . sexual abuse or molestation . . ., by anyone who causes or attempts to cause the person to engage in a sexual act . . . if that person is incapable of appraising the nature of the conduct or is physically incapable of declining participation in or communicating unwillingness to engage in the sexual act.” The Third Circuit held that the allegations squarely fell within the ambit of the Prior Known Acts Exclusion. Accordingly, the Court ruled that the insurer had no duty to defend the school.
Disclaimer: This decision is labeled as a “not precedential” opinion and does not constitute binding precedent.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
Connecticut Chronicles will return next edition.
OFF THE MARK
Brian F. Mark
[email protected]
07/24/19 Rockhill Ins. Co. v. CFI-Global Fisheries Mgmt.
United States Court of Appeals, Tenth Circuit
US Court of Appeals Holds that the Faulty Workmanship Exclusion does not Apply to Damages Caused by Negligent Design Work
This declaratory-judgment action arises out of an underlying construction defects and negligent design action related to the construction of a river enhancement project. In 2012, Heirloom I, LLC., ("Heirloom") owned property in Colorado and contracted with CFI-Global Fisheries Management ("CFI") to design and construct a fisheries enhancement project on the property. CFI completed the project, but its work was defective and the project was destroyed by natural processes four times in three years.
In July of 2015, Heirloom initiated arbitration proceedings against CFI for breach of contract and negligence related to the design and execution of the project. CFI requested that Rockhill Insurance Company ("Rockhill"), its professional and general liability insurer, defend it in the arbitration. Rockhill issued an insurance policy to CFI, which included three coverage parts: commercial general liability coverage; contractor’s pollution liability coverage; and professional liability coverage. The professional liability coverage form applies to damages arising from a "[p]rofessional services incident," defined as "any negligent act, error or omission" in "your rendering, or your failing to render, 'professional services'" that "results in injury or damage." It also states that "your work" means: "(1) Work or operations performed by you or on your behalf; and (2) Materials, parts or equipment furnished in connection with such work or operations."
On August 21, 2015, Rockhill sent CFI a letter agreeing to defend the arbitration but reserving its right to deny coverage. In outlining Rockhill's coverage position, the insurer implied some of the damages could fall within the policy, but discussed several exclusions that might apply. Rockhill identified Exclusion M of the professional liability policy, which reads in full:
M. Faulty Workmanship
Based upon, arising out of or for any loss, cost or expense incurred to withdraw, recall, inspect, repair, replace, adjust, remove or dispose of "your work". This includes, but is not limited to, the cost to investigate "your work", or the cost of any materials, parts, labor or equipment furnished in connection with such withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal.
Rockhill also noted Exclusion P of the professional liability policy, which states:
P. Expressed or Implied Warranties
Based upon, as a consequence of or arising out of:
(1) Any expressed or implied warranties or
guarantees, or
(2) Any cost or other estimates for construction, renovation, removal or demolition being exceeded or inaccurate.
However, this exclusion does not apply to a warranty or guaranty by you that your "professional services" are in conformity with generally accepted architectural or engineering standards.
The letter states that Heirloom's "allegations relative to
CFI's designs potentially implicate a 'professional
services incident' that would trigger coverage" but "[t]o
the extent that the damages sought arise out of . . .
faulty workmanship apart from your professional
services . . . the [Professional Liability] Form will not
provide coverage for such damages."
The arbitrators awarded Heirloom $609,994.91 plus prejudgment interest. The parties subsequently stipulated to an additional $265,000 award of attorney's fees and costs. Neither party requested the arbitrators' decision be accompanied by an explanation of reasoning. However, attached to the final award is a spreadsheet identifying invoices paid to third party contractors who worked on the river enhancement project following CFI's failures, and a line item for remaining construction.
Rockhill filed a declaratory-judgment action against CFI and Heirloom prior to the issuance of the arbitration award. It sought a declaration that it had no duty to defend and indemnify CFI in connection with the arbitration. CFI and Heirloom asserted counterclaims for declaratory judgment and breach of contract. The district court granted summary judgment for Rockhill, holding the entirety of the damages awarded to Heirloom were excluded under the policy's Faulty Workmanship exclusion, along with the attorneys' fees and costs. Thereafter, CFI and Heirloom filed appeals.
In reviewing the district court’s decision, the US Court of Appeals agreed with the district court that the damages awarded by the arbitrators resulted from a "professional services incident." As such, the only issue to be determined by the Court was whether an exclusion places the damages award outside of otherwise available coverage. The Court noted, that exclusions must be clear and specific to be enforceable.
In determining whether the Faulty Workmanship exclusion barred coverage, the district court focused on a broad definition of "work" as an "activity involving mental or physical effort done in order to achieve a purpose or result." It thus held that the Faulty Workmanship exclusion's references to "your work" applied to both design and construction.
The Court of Appeals disagreed with the district court and concluded that the district court failed to assess the context in which the term work is used. The Court relied on three contextual guideposts and held that the Faulty Workmanship exclusion was not intended to cover design failings.
First, the clause appears in a professional liability policy. As a general matter, such policies cover damages arising from professional services rendered, in the matter at bar, CFI's professional design service in providing a plan for the stream modification. Professional services are those "arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual. Thus, the Court determined that the overall purpose of the professional liability coverage was for CFI to obtain insurance for its "mental or intellectual" undertakings rather than its "physical or manual" work. Accordingly, the Court found the cases construing similar exclusions in commercial general liability policies to be inapplicable to their interpretation of a professional liability policy.
Second, the Court found that the heading "Faulty Workmanship" clearly evinced the narrower scope of the exclusion. The Court noted that Rockhill itself stated to CFI: "To the extent that the damages sought arise out of . . . faulty workmanship apart from your professional services . . . the [Professional Liability] Form will not provide coverage for such damages." The term "workmanship" typically refers to "the art or skill of a workman," which is an individual "employed or skilled in some form of manual, mechanical or industrial work." Consistent with the general purpose of professional liability coverage, the term distinguishes manual and physical work from professional undertakings.
Finally, the Court noted that the words in the body of the exclusion are more naturally read as relating to construction, rather than design. The exclusion removes coverage for the costs to "withdraw, recall, inspect, repair, replace, adjust, remove or dispose of" work, including "any materials, parts, labor or equipment furnished." Read as a whole and in the context of the coverage agreements, the Court concluded that the parties intended the Faulty Workmanship exclusion to distinguish non-covered construction work from covered professional services.
Accordingly, the Court held that the district court should not have granted summary judgment to Rockhill as to the design components of CFI's work for Heirloom. Because the district court concluded otherwise, it did not consider whether the entire arbitration award (including attorney's fees and costs) was covered under a correct reading of the exclusion or whether the damages should or could be apportioned between design and construction. As such, the Court left that issue for the district court to consider in the first instance.
WANDERING WATERS
Larry E. Waters
[email protected]
08/07/19 Albany Airport HIE, LLC v. Hanover Insurance Group, Inc.
District Court, Northern District of New York
Defendant’s Motion for Summary Judgment Granted as the Special Employee Theft Exclusion Applied as a Bar to Coverage
Defendant issued an insurance policy to Plaintiff. The Policy contained eight named insureds including Albany Airport HIE, LLC D/B/A Albany Airport Hotel and Bullock Hospitality, LLC. The Policy contained a “GOLD FORM BROADENING ENDORSEMENT”, which provided in part:
(8) Special Employee Theft Exclusions
We will not pay for:
(a) Loss resulting from “theft” or any other dishonest act committed by:
(i) You; or
(ii) Any of your partners or “members”;
Whether acting alone or in collusion with other persons.
The Policy also defined “you” and “your” to mean “the Named Insured shown in the Declarations”. Further, the Policy defined “member” to mean “an owner of a limited liability company represented by its membership interest who, if a natural person, may also serve as a manager.”
In February 2015, Plaintiffs reported to Defendants that its former hotel manager had stolen over $700,000 from them by depositing checks into his own bank account. In support of its claim, Plaintiffs provided W2-s from 2010 through 2014, indicating that during those years the former manager was receiving wages from Bullock Hospitality.
At some time during the claims investigation, Defendant retained an outside coverage opinion. The outside coverage opinion concluded that the Special Employee Theft Exclusion excluding coverage for theft by “You” or “Any of your partners or ‘members’ did not apply to exclude coverage for the instant alleged theft. Nevertheless, on May 18, 2016, Defendant denied coverage to Plaintiffs based on the Policy’s Special Employee Theft Exclusion.
Thereafter, Plaintiffs commenced this current matter which was removed to Federal Court. During discovery of the matter, Plaintiffs produced evidence that the former hotel manager was the sole member and manager of the named insured Bullock Hospitality.
Now, Defendants have moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) and Summary judgment pursuant to Federal Rule of Civil Procedure 56.
In its motion, Defendants argued that the second cause of action alleging breach of contract must be dismissed because the Special Employee Theft Exclusion applies. In contrast, Plaintiffs argued that the because the outside counsel opinion was in conflict with the Defendant’s ultimate coverage position, the terms of the policy are capable of more than one meaning when viewed objectively by a reasonably intelligent person and the contract is therefore ambiguous.
The Court rejected Plaintiffs’ argument. The Court found that it was undisputed that the former hotel manager was a member of Bullock Hospitality at the time of the stolen monies from Plaintiffs. In addition, the Court found that it was undisputed that Bullock Hospitality was a named insured under the policy.
Further, the Court found that the fact that the outside counsel found that exclusion inapplicable does not render the policy subject to other reasonable interpretation when such conflicting information is based upon incorrect information. The court reasoned that outside counsel’s opinion as to the applicability of the Special Employee Theft Exclusion was unreasonable because it found Bullock Hospitality as an “additional insured.” Here, the court emphasized that it was undisputed that Bullock Hospitality was a named insured under the Policy. Therefore, the Court determined that the outside’s counsel opinion was based upon incorrect information.
In sum, the Court found that Defendants have carried their burden to show that the Special Employee Theft Exclusion applies as a bar to coverage. Accordingly, the Court granted Defendants’ motion for summary judgment dismissing the second cause of action for breach of contract.
BORON’S BENCHMARKS
Eric T. Boron
[email protected]
07/18/19 Nationwide Mutual Fire Ins Co v Erie Ins Exchange
Supreme Court of Virginia
Circuit Court Erred in Dismissing Insurer’s Complaint Against Another Insurer in Equitable Contribution Action - Vacated and Remanded – Liability Insurance Coverage – Equitable Contribution to be Awarded Insurer Consistent With Prior Allocation of Coverage Liability
Nationwide paid $2.9 million to settle a wrongful death claim in full. This occurred shortly after a ruling of the Circuit Court in “Nationwide I”, an insurance coverage action, holding Nationwide was going to be liable for the first $3 million of coverage on the wrongful death claim, and that Erie’s coverage kicked in only after that. After the $2.9 million settlement payment was made by Nationwide, an appeal to the Virginia Supreme Court (still in “Nationwide I” here folks), resulted in Nationwide getting reversal of the trial court’s allocation of coverage. Supreme Court ruled in “Nationwide I” in 2017 that one of three Nationwide policies making up the aforementioned “first $3 million of coverage” didn’t apply. Supreme Court’s ruling as to the insurance coverage disputes was that each insurer (Nationwide and Erie) had primary coverage of $1 million, with the companies sharing excess liability over that figure on a pro rata basis.
Despite Nationwide’s victory in 2017 at the Virginia Supreme Court in “Nationwide I”, Erie refused to reimburse Nationwide any of the $2.9 million Nationwide had paid to settle the underlying wrongful death action. Erie’s position was that Nationwide settled the underlying claim voluntarily, without Erie’s consent, and Erie was protected by a consent-to-settle provision in its policies.
So, Nationwide commenced the instant equitable contribution action. The Circuit Court bought into (see what I did there?) Erie’s argument on the equitable contribution issue, and held Nationwide is fully liable for its voluntary settlement payment. Nationwide appealed, bringing us to the second time around for these parties at the Virginia Supreme Court. And a second-straight reversal of the ruling of the Circuit Court. The majority opinion which is but a mere click away holds that Erie, by denying coverage, waived its right to fall back upon its consent-to-settle provision in its policy.
BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
[email protected]
07/29/19 Vision Rehab PT PC v. MVAIC
Civil Court of the City of New York, Bronx County
Failure to File Timely Notice of Claim Is a Lack of Coverage Issue
MVAIC moved for summary judgment dismissing the complaint under the theory that the assignor, Lewis, was not a qualified person under the Insurance Law because he failed to file a timely notice of claim and as such, Vision was not entitled to payment of any no-fault benefits. Vision cross-moved, asserting that MVAIC failed to timely deny the claims, therefore precluding them from asserting the qualified person defense. MVAIC argues that failure to file a notice of claim is a lack of coverage defense that is not precluded by the failure to timely deny coverage.
MVAIC presented evidence that the assignor did not submit their notice of intent to make a claim until seven months after the accident, after multiple attempts from MVAIC obtain this notice, which is well after the 90-day statutory requirement to make the claim. Thus, the Court determined that MVAIC established that the assignor, and by extension Vision, were not qualified persons under the statute and therefore Vision was not entitled payment for medical treatment provided to Lewis with no-fault benefits.
08/07/19 Bronx Acupuncture Therapy, P.C. v. Hereford Ins. Co.
Appellate Division, Second Department
Failure to Request Additional Verification Precludes Carrier from Asserting Lack of Sufficient Information as a Valid Defense
Bronx Acupuncture Therapy (BAT) treated the assignor with moxibustion therapy (heat therapy using dried plant materials burned on or near the skin) and billed Hereford $727.36 for the services. Hereford answered BAT’s complaint and asserted the defense that moxibustion therapy, billed under CPT code 97039, was an unlisted modality that required documentation of the type and description of the services.
It is incumbent upon an insurer within 30 days of a receipt of a proof of claim for no-fault benefits to either pay the claim, deny the claim, or seek verification. If an insurer seeks verification of the claim, and receives a completed verification form, additional verification may be requested and the 30-day time period may be tolled until it receives the relevant information requested. However, an insurer’s failure to seek verification or object to the adequacy of the claims forms precludes it from defending based on such deficiencies.
Here, Hereford argues that it properly denied payment because BAT failed to provide the relevant information about the services it provided. The Court found that Hereford failed to request additional verification in the first place, so the denial of the claim for lack of sufficient information was without merit.
EARL’S PEARLS
Earl K. Cantwell
[email protected]
04/24/19 Sosa v. Massachusetts Bay Insurance Company
Superior Court of New Jersey, Appellate Division
Flood and Water Damage Exclusion Strictly Construed (Against Insurer)
In September 2015, a municipal watermain pipe broke and water flowed from the street into the Plaintiff’s driveway, and then into his garage and basement. About one foot of water filled the downstairs floor. The Plaintiff claimed approximately $75,000 for work done to remediate the damage to real and personal property. The insurance company denied the claim on the basis that the damage resulted from “surface and groundwater intrusion”. The Plaintiff’s claim was denied by the trial court on the basis of the exclusions, but this was reversed on appeal.
The underlying policy excluded losses caused by “water damage”. In turn, water damage included flood and surface water. The policy did not define surface water, but elsewhere in the policy defined a flood as meaning a general and temporary condition of partial or complete inundation of normally dry land.
Under New Jersey law, the courts look first to the plain language of the policy, and if it is unambiguous they will not strain to provide a “better policy” than the one obtained. Coverage provisions are generally read broadly, exclusions are to be read narrowly, potential ambiguities should be resolved in favor of the insured, and the policy is to be read in a manner that fulfills the insured’s reasonable expectations. Here, the insurance company relied on the exclusion that the water that caused the damage was a flood or surface water. They also cited another exclusion for below-ground water pressuring or seeping through a building, sidewalk, driveway, or other structure.
Flood does not mean any inundation of water, but rather a general and temporary condition of partial or complete inundation of normally dry land area. In this case, the watermain break was not a “general inundation”. A flood must affect a wide area, and does not include the limited water condition that specifically damaged Plaintiff’s property.
The Court cited decisions in other jurisdictions that a “flood” is a general inundation or deluge affecting a broad area, and not the kind of localized water damage that a water main break would cause. A “flood” as an overflow of inland or tidal waters was described elsewhere in the policy, providing some interpretive guidance for the court as to what is or is not a flood. In addition, a flood is commonly understood to involve the overflow of a body of water, whether natural or not, and leakage from a watermain is not from a body of water. Therefore, the Appellate Court ruled that the “flood” exclusion was not applicable because it was not a general flood condition of overflow from a body of water.
The next question was whether the water flow constituted “surface water”, another form of water addressed in the exclusion. Plaintiff argued that surface water means natural water that has not penetrated below the surface of the ground, whereas the insurance company argued that surface water meant any water found on the surface of land regardless of its source or properties. The Appellate Court ruled that, at the very least, the term surface water was ambiguous and that the watermain break did not qualify as surface water and therefore the exclusion did not apply.
The last exclusion dealt with damage from water below the surface of the ground exerting pressure on or leaking through a structure. However, the water that damaged the Plaintiff’s home was no longer below the surface of the ground when it reached his property, it was above ground. Therefore, by a plain reading, that exclusion did not address or cover the damage caused by above-ground water, and that exclusion did not apply.
Therefore, the exclusions for flood and surface water did not bar the Plaintiff’s claim, and summary judgment in favor of the insurance company was reversed.
However, the Appellate Court also affirmed the trial court’s denial of Plaintiff’s cross motion for summary judgment. A question remained as to whether his personal property damages were covered as one of the named perils in the policy. Secondly, the Court felt that the plaintiff’s proof of claimed damages was insufficient. Therefore, the case was reversed and remanded to the trial court for further proceedings.
This case represents a good example of exclusion language being resolved or interpreted against the insurance company. The core analysis is to determine what caused the loss, and then apply the policy language to the known/established cause of loss. Here, there was no flood as commonly understood, the overflow was not from surface water from a natural body of water, and the water did not seep into the Plaintiff’s dwelling underground but rather from above ground.
The New Jersey court was influenced by decisions in other states that a flood was a general overflow from a body of water, not a localized watermain or pipe leak. The insured was also able to cite language from respected insurance treatises such as Appleman and Couch to support its definition of a “flood”
This case also represents an example of the courts attempting to give meaning and effect to all the terms in a policy, and elsewhere in the policy flood had been defined as a general, widespread inundation, and this interpretation had been upheld in other court cases. The Plaintiff’s real and personal property was damaged by water, but it was not a flood, it was not surface water, and it was not seepage, and therefore the cited exclusions did not apply, and therefore there was coverage.
It could also be argued that the “flood” and “surface water” exclusion did not apply to a watermain break because the rest of that clause included tidal waves, tides, storm surge, etc. which would all be general overflows from a body of water, not a localized watermain or pipe break.
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