Back to Top

Coverage Pointers - Volume XXI, No. 7

Volume XXI, No. 7 (No. 546)|
Friday, September 20, 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.

One of my greatest pleasures in life is teaching.  When I have the opportunity to spend time with law students, brother and sister lawyers or colleagues in the insurance industry, I do so for the purpose of empowerment.  I never enjoy being a talking head, but instead look to converse and share the wisdom of those who attend.  This has been a month of teaching.  I started my 34th year at the Buffalo Law School, teaching Insurance Law to second and third year law students and had the pleasure of being invited to speak to three different insurance companies on a variety of coverage-related topics.  I was also did the inaugural podcast in a newly launched PLRB podcast series, my presentation on the Child Victims Act.

If you need some assistance in continuing education programs for your company, just reach out.

NY, NJ, CT:

Remember, we’re able to help you in New York, New Jersey and Connecticut.  Reach out..

Newsletters a GoGo:

We welcome Charles “CJ” Englert to our editorial staff.  CJ is a recent graduate (and former student in my Insurance Law class) and joins the coverage team.  He awaits the results of the July Bar exam and in the meantime has taken over the “Serious Injury” threshold column from Rob Hewitt (thanks for several years of excellence, Rob).  CJ introduces himself in his cover note below.  Please welcome him!

Rob isn’t leaving the newsletter business; he is joining the staff of Premises Pointers.  And speaking of newsletters:

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!).  Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.

Products Liability Pointers:   Stay tuned!

Ride Sharing – 100 Years Ago:

The New York Times
New York, New York

20 Sep 1919

TAKE LONG TAXI RIDE FREE

Boys With No Money Arrested After Trip to Albany and Back

A tired looking chauffeur, who said he was Edward J. Tobin at 103 Bergen Street, Brooklyn, pulled his taxicab up to the curb at Broadway and 169th Street late yesterday afternoon, hailed a passing policeman and told him that he had two young men in his cab who were not able to pay their fare.  He wanted them arrested.  The policeman opened the door, looked in, and said to the chauffeur: “How much do they owe you?”

“One hundred and fifty dollars,” replied Tobin, who added that they had traveled to Albany and return.  The party went to the West 177th Street Station.  There the prisoners, who were charged with disorderly conduct, said they were George Woodward of 549 Seventy-eighth Street, Brooklyn, and Henry McNaughton of 154 West Ninetieth Street.  Both were extremely young.

Tobin said his fares engaged him Thursday night outside the Atlantic Avenue station of the subway and said they wanted to go at once to Albany on important business.  The trip took six hours.  They stopped at a hotel all night and yesterday morning the boys wanted him to drive to Troy.  He refused because he would not get any money from the boys, and they started back to New York.

On the way down he learned they had no money and had them arrested by the first policeman he saw.  The boys would say little except that they had gone to Albany to look for work.

Jen’s Gems:

Greetings!

Hope all is well.  We are wrapping up another super busy week around here.  I did want to highlight a great coverage seminar coming up this fall.  DRI is excited to present the Complex Coverage Forum.  The Complex Coverage Forum is FREE for all in-house and claims professionals!  The program will take place in Hartford, CT on November 6, 2019.

This conference is different from other educational opportunities because it was designed by the DRI Insurance Law Committee, in coordination with top Hartford-area carriers and insurance law experts, to update insurance industry professionals, in-house counsel, and outside counsel on recent developments in claims handling, coverage decisions, and extra-contractual exposure.  Nationally recognized speakers from around the country are presenting on topics certain to affect your day-to-day practice, such as the impact of the new laws eliminating statute of limitations for sexual abuse claims will have on the insurance industry.

Here is the link to register: 

https://members.dri.org/driimis/DRI/DRI/Events/Event_Display.aspx?EventKey=20190135&WebsiteKey=dff610f8-3077-475c-9db6-aea95c8e4136

I hope to see many of you there.  If you attend, you will also get to hear me speak with a fabulous panel on the topic of the elimination of the statute of limitations for sexual abuse claims, associated coverage issues and what we can expect moving forward.

Until next issue…

Jen
Jennifer A. Ehman

[email protected]

Love Potion Number 8:

We know the Searchers made the liquid version famous in 1969:

I took my troubles down to Madame Ruth
You know that gypsy with the gold-capped tooth

She's got a pad down on thirty-fourth and vine
Sellin' little bottles of love potion number nine…

But there was a powdered version back 50 years earlier:

Daily News
New York, New York

20 Sep 1919

BLOWN INTO COURT BY LOVE POWDERS

Magic powders at $10 an ounce failed to win husbands.  Hence the arrest of Mrs. Rose Campagno, of 214 East 116th street, who is alleged to have sold them to love-sick women.

Miss Rae Nicolette, a detective, visited Mrs. Campagno’s home, looking for evidence.  She says she was asked to buy the powders.  Mrs. Campagno was released under $300 bonds after promising to quit the love powder game.

Peiper on Property and Potpourri:

We offer only one case this week, but it is another installment in the ongoing debate about what constitutes a drain and a backup thereof.  In the Cohen case reviewed below, it appears uncontroverted that the loss was caused by a clogged toilet which overflowed.  The carrier, relying upon an exclusion that excluded coverage for a backup of a drain, unsuccessfully disclaimed coverage.  In a short opinion, the Second Department simply ruled that the drain backup exclusion did not apply.

There are two schools of thought on drain backups.  The first is that the water must originate from within the drain; that is to say water must actually come back up the pipe.  The second position argues that water which collects above a drain (but never actually entering) should be considered part of the backup.  The reality is that the courts around the State have not consistently applied a standard, and it seems that your mileage on a sewer/drain backup argument really depends on the specific language of the policy and the panel hearing arguments.  Score one for water needing to actually come out of the pipe in this case, but note that the game is far from over.

By the way, Friday, September 20, 2019, is National Pepperoni Pizza Day.  Please react accordingly.  Wednesday was National Cheeseburger Day.  Not sure if Monday is National Start a Diet Day, but perhaps it should be.

That’s unfortunately all we have for this week.  I’m off to Cleveland this weekend for a hockey tournament with my son.  The boys have games against teams from Michigan, Pennsylvania Ohio and Missouri this weekend.  Happy to hear any suggestions for local beers from our Clevelander contingent.   

See you in two weeks.

Steve
Steven E. Peiper

[email protected]

Mrs. Hill is Still Searching:

We have reported on Mrs. Hill’s add for many months.  Her fortune seems to change with the weather.  She has claimed being worth $40,000, $50,000 and even $100,000 in her past ads.  Remember that $100,000 in 1919 dollars is worth about $1.5 million in 2019 dollars.  Unfortunately, she can’t seem to find a husband. When I “Google Map” her home address, we see a Wells Fargo office.  Makes one wonder….

Great Falls Tribune
Great Falls, Montana

20 Sep 1919

PERSONAL

LONELY WIDOW—Age 30, worth $40,000, wishes to hear from honorable gentleman under 60.  Object matrimony.  Write Mrs. Hill, 14 E. 6th, Jacksonville, Fla.

Hewitt’s Highlights: 

I’ve passed my Serious Injury column onto CJ.  Thanks for reading!  You’ll find my writing for “Premises Pointers”.

Rob
Robert E.B. Hewitt III

[email protected]

Menu Recommendations for the Young Ones:

Lebanon Daily News
Lebanon, Pennsylvania

20 Sep 1919

YOUR BOYS AND GIRLS

To feed a child properly, that is, to keep it in a healthy condition, each class of food should be represented at some meal in the twenty-four hours. It is also necessary that these foods should be present in certain proportions and amounts. For the average child, from three to four times as much of the carbohydrates and fats as the proteins should be given as the right proportion. The following menus suggest a well-balanced meal for a child:

Breakfast—Baked apple with cream, well-cooked oatmeal with milk, one egg, toast and butter. Or sliced banana, well-cooked hominy, with milk, whole wheat raisin bread and butter.

Dinner—Broiled Hamburg Steak, spinach, baked potato, graham bread and butter and rice pudding. Or cream of chicken soup, cereal bread, poached egg, baked potato, mashed turnip, junket and molasses cake.

Supper—Cereal with milk, stewed fruit and a small piece of sponge cake. Or cereal with milk, baked apple, toast and orange marmalade.

Milk and cereals form such an important part of a child's diet because in these foods are represented all the elements necessary for the nourishment of the body.

Wilewicz’ Wide-World of Coverage:

Dear Readers,

This is my favorite time of year. I readily admit that I love the pumpkin-everything, the cooler sweater weather, and the opportunity to finally bust back out my massive scarf collection (no joke, I must have 100 scarves from around the world). The school year has already started off to a slightly rocky start, but I think that we’re getting into a good routine and 8th grade should be one for the books. We’ll see.

Now, diving right in, this week in the Wide World of Coverage, the Second Circuit didn’t venture into insurance decisions. So instead, as we often do, we turn a little further afield to other Federal Circuit Court cases. To that end, we bring you Arena v. Riversource Life Insurance, out of the Third Circuit/New Jersey. In a really heartbreaking case, an in-house attorney took her own life, following some financial setbacks and while undergoing pharmaceutical treatment for depression. In short, despite the contention that her antidepressant medications might have led to the suicide, her life insurance policies’ suicide exclusions precluded coverage since it was not shown that she could not form intent as a result. The decision is well-written and highly fact-specific, but an academically interesting read in the life insurance context.

Until next time, everyone.

Agnes
Agnes A. Wilewicz

[email protected]

Educational Malpractice Charged:

Buffalo Evening News
Buffalo, New York

20 Sep 1919

UNDERTAKER’S PROSECUTION SUGGESTED BY FRONCZAK

Health Commissioner Fronczak will recommend the prosecution of the undertaker who conducted the funeral of the daughter of Quincy Petrella, pupil at School 1, who died Wednesday from diphtheria, it was stated by the health authorities today.   It is said the undertaker permitted a public funeral and subjected several children and a number of grown-ups to the ravages of the disease. The health officials also contend that the undertaker did not seal the casket as required by law.

Health Commissioner Fronczak said this morning that the six children who acted as pallbearers have been taken from the schools and that 20 persons who came in contact with the child are being culturized.

The father of the child alleges that the child's illness was caused by the school authorities' laxity in allowing her to leave school during a rain storm. The charge Is denied by school authorities.

Barnas on Bad Faith:

Hello again:

Just a short note from me this week in between preparing motions.  Things are super busy, but the Bills are 2-0 and coming home for the home opener so all is right in the world.  I have two cases where bad faith claims were dismissed on motions to dismiss in my column, one from New York and one from Pennsylvania.  Give them a read if you’re so inclined, two very nice decisions.

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

Brian
Brian D. Barnas

[email protected]

A Bet’s a Bet:

Star-Gazette
Elmira, New York

20 Sep 1919

Her Failure To Kiss Pershing Will Cost Washington Girl $100

Washington, Sept. 20.—One fair war worker faces the loss of $100 as the result of a wager that she would kiss General Pershing before he left Washington.  As he was leaving a hotel last night where he had attended a function in his honor, a comely young woman who had edged her way to the front of the crowd surrounding the entrance made a rush for him.  Members of the general’s staff grabbed her but not until she had an arm around his neck and was struggling to kiss him.  Her act was a signal for a grand rush on the part of their feminine members of the crowd and General Pershing literally had to dive into his waiting car.

In the meantime, the young woman, apparently thinking and explanation of her precipitate action was due, explained she had wagered $100, that she would kiss General Pershing before he left Washington.

Off the Mark:

Dear Readers,

The kids are back to school and seem to be enjoying it so far, other than the usual complaints about their homework and that it gets dark out too soon.  My oldest is now in middle school and is taking some interesting classes, including Chinese.  The only thing I know how to say in Chinese, besides in hao (hello), is “wo bu mang”, which means “I’m not busy”. Based on the last few editions of Off the Mark, it seems the courts have not been busy.  As many of you know, that changes quickly once the calendar rolls over to September.

Now that it is September . . ., we bring you a recent construction defect case from the US District Court for the Middle District of Florida, Jacksonville Division.   In KB Home Jacksonville LLC v. Liberty Mut. Fire Ins. Co., the US District Court examined the duty to defend an underlying construction defects action, including the applicability of the Continuous or Progressive Injury or Damage Exclusion.  The Court held that the defendant carrier owed a duty to defend its additional insured and that the CP Exclusion did not preclude all arguable or possible coverage under the policy at issue.

Until next time …

Brian
Brian F. Mark

[email protected]

Hare Today, Gone Tomorrow:

Star-Gazette
Elmira, New York

20 Sep 1919

MONTOUR FALLS

Montour Falls, Sept. 20. —Friday evening the Havana Rabbitry, owned by Elim Smith, was destroyed by fire.  About 72 rabbits were burned, only one being saved.  Mrs. Smith estimates his loss at $150, with no insurance.

Wandering Waters:

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

The USA Men’s team lost consecutive games, ending its dominant streak in international play. Although the USA Men’s team did not finish in the top three, FIBA still has the USA ranked number one in the world.

In the aftermath of the USA Men’s team surprising loss, critics are questioning whether USA basketball is still the juggernaut of international play.  Since the days of the 1992 Dream team, numerous international teams consist of NBA level talent. Not only are international teams made up of NBA serviceable players, international teams include NBA level superstars.  In fact, the 2018-2019 NBA MVP played on an international team.

While international play is competitive as ever, the calls for USA Men’s dominance are premature.  The USA Men’s team in the FIBA tournament did not consist of the “Super-star” players.  Indeed, the team was missing James Harden, Steph Curry, Russel Westbrook, LeBron James, etc.  If the USA Men’s team can obtain commitments from the USA’s top 15 players, they should have no problem achieving a gold medal in the 2020 Olympics.

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

Larry
Larry E. Waters

[email protected]

State Insurance Fund Manager Charged – 100 Years Ago:

New York Herald
New York, New York

20 Sep 1919

DENIES INSURANCE TIPS BOUGHT CAR

State Fund Manager Says It Was Gift From Wyncoop to His Wife.

GOT NO DATA PRIVILEGES

Baldwin Testifies Before Commissioner As to Leaks in His Office.

F. Spencer Baldwin, manager of the State Insurance Fund, was the chief witness at yesterday’s session of the investigation into the affairs of the State Industrial Commission.  When his examination was completed it had been shown that his wife received a brand new $3,400 motor car, a gift from G. E. Wyncoop, an insurance broker; that the car was listed with the Secretary of State as Baldwin’s own property, and that on at least one occasion Wyncoop had been able to possess himself of official data from the files of the State Insurance Fund, contrary to established regulations.

In explanation of what had been brought out, Mrs. Baldwin insisted that no impropriety had occurred.  He explained that the gift of the automobile to his wife was a personal matter—that it had been made with the knowledge of John Mitchell, late chairman of the State Industrial Commission—that no special favors had been granted to Wyncoop or his agents in consideration thereof, and that the suggestion that Wyncoop’s insurance agency had been “tipped off” to possible good insurance business was “susceptible other explanation.”

Editor’s Note:  Mr. Baldwin eventually admitted the wrongdoing and resigned.  We see no evidence of any prosecution.

Boron’s Benchmarks:

On holiday.

Eric
Eric T. Boron

[email protected]

For the Birds:

The Boston Globe
Boston, Massachusetts

20 Sep 1919

CARRIER PIGEON FALLS
DEAD ON TREMONT ST

Albert Hartman of 191 Warren Ave was walking along Tremont Street yesterday when a pigeon swirled down over the office buildings and fell dead at his feet.  The bird had a silver identification tag on its foot.  The number was 3998-18-N.U. Officers at the Army recruiting office took the bird’s body.

Barci’s Basics (On No Fault):

Hello Subscribers!

Gosh, it is only two days away from the official beginning of fall and 10 days from October. Where does the time go! I’m headed to my last art festival (The Purple Painted Lady) of the summer this weekend in Macedon, New York; which is a farm town east of Rochester for those who don’t know. Macedon, New York, is not the most exciting place in the world, but it is home to many apple orchards, the Erie Canal, and it shares a school district with Palmyra, New York, the birth place of the Mormon religion. Regardless, the festival is always very exciting, and I typically come away from it with some great new art. This year I am on the hunt for a nice piece of hand-crafted furniture for my living room, the type of which is yet to be determined.

On the no-fault front, the courts were pretty quiet these last few weeks. I only have one case for you out of the Civil Court of the City of New York, Kings County, and it really goes back to the basics of no-fault benefits entitlement – whether a provider is entitled to reimbursement depends on whether the injured person was involved in an accident.

Until next time,

Marina
Marina A. Barci

[email protected]

Back in the Day, reporting on the Race of Defendants was Commonplace:

The Monroe News-Star
Monroe, Louisiana

20 Sep 1919

Convictions Obtained In Race Riot Cases

Chicago, Sept. 20. —The first convictions resulting from trials for race rioting six weeks ago was obtained yesterday while the special grand jury was returning indictments against nine white men and four negroes.  Walter Colvin, 16 years old, and Charles Johnson, 18 years old, negroes, were found guilty of murdering an elderly peddler, whom they dragged from his wagon and stabbed to death without provocation and sentenced to life imprisonment.  Among those indicted were a policeman and a federal revenue agent charged with rioting.  The four negroes were charged with murdering three white men.

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Now that my Coverage Pointers column is old hat, welcome back! Greetings from H&F’s lesser known, 12th floor. Don’t know where that is? Neither does Dan.

It only took us a few years, but we finally drained the swamp. Not that swamp. The one in our backyard. Our dog can finally go outside in the springtime without reverse bathing. I can finally cut the grass whenever I want, without worry of the weekly forecast. Our son can finally venture outside, then come inside, then go outside, then come inside, then go outside, then come inside, yet again, without issue. Most importantly, my wife can breathe easy. Home ownership…

Also:

-Submissions by the Coverage Pointers Publishing Deadline: 2-0

-Buffalo Bills: 2-0

Coincidence? I think not.

Interesting column for you today. DFS has issued guidance for handling of claims filed under the Child Victims Act, and its exactly what you think it is. Also, “service contracts” under Article 79 of the Insurance Law gets a key fob related facelift, and finally, the legislature rolls back last year’s extension of grandfathering provisions in the small group reinsurance markets.

Until next time,

Ryan
Ryan P. Maxwell

[email protected]

CJ At the Threshold:

Hello subscribers and welcome to the first edition of “CJ At the Threshold”. My name is CJ Englert, and I am a recent graduate of the University at Buffalo School of Law, where I took a fascinating course on insurance law taught by the one and only Dan Kohane. During the first class Dan told us that it would be more likely than not that one of us would really enjoy insurance coverage and end up making a career out of it, he certainly wasn’t wrong. After clerking at a firm that handled insurance defense work throughout law school, I jumped on the opportunity to join the coverage team here at Hurwitz & Fine.

A little about me. I’m an avid snow skier, water skier, and general outdoor enthusiast, you’re bound to read about many of my adventures as time goes on. Aside from preparing for the New York State Bar exam this summer, I spent my time planning for my upcoming wedding on October 5th of this year. To say, 2019 has been a busy year for me would certainly be an understatement.

As excited as I was to begin a career working on coverage related issues, I just couldn’t leave the world of car accidents and No-Fault behind. I plan to continue Rob’s tradition of bringing you all a comprehensive report on the Court’s interpretation of 5102(d).

The Second Department seems to have been the only court working over the past two weeks, including a case where a defendant’s expert found limitations in plaintiff’s ranges of motion but failed to opine on why such findings were insignificant. I think the most important take away from this edition is to make sure your experts fully explain all their findings in their written reports. From this court watcher’s perspective, it seems that a little more explanation by IME physicians could have turned the tide on the final decision on appeal.

Until next time,

CJ
Charles J. Englert, III
[email protected]

The President Spend a Night in Someone Else’s Hotel, 100 Years Ago:

The Brattleboro Reformer
Brattleboro, Vermont

20 Sep 1919

PRESIDENT SPENT NIGHT IN A HOTEL
Broke Regular Schedule at Suggestion Of Physician—Reached
Los Angeles Today

LOS ANGELES, Sept. 20.—President Wilson is to arrive here today after a restful night spent at Del Mar, a resort on the shore of the Pacific Ocean about 20 miles north of San Diego.  His special train was held there last night, and he and Mrs. Wilson took a suite of rooms overlooking the ocean.  The deviation from the original plan to spend the night on the train was arranged at the suggestion of Rear Admiral Grayson, the president’s physician, who urged him to break his continued activities of the last few days as a precaution against fatigue.  The schedule for today calls for a parade through the down town streets at noon and two addresses.

John’s Jersey Journal

Dear Subscribers:

Happy Fall!

On October 4, I am excited to be speaking at the New York State Bar on insurance issues in premises liability cases. Right here in Buffalo. I will be walking through the homeowners and CGL policy, discuss notice and cooperation requirements, and additional insured issues that typically arise in premises liability cases. More information here.

As many of you know, I handle both New York and New Jersey coverage matters. We routinely handle the full gamut of New Jersey coverage matters including casualty claims brought under auto, homeowners, and CGL policies, construction defect claims, additional insured issues, uninsured and underinsured motorists claim (UM/UIM), first-party claims, and risk transfer issues to name a few. If you have situation in New Jersey or think New Jersey law might apply, give us a call or drop us a note, we would be happy to help.

In this column, John’s Jersey Journal, I report on insurance law decisions and legislative changes in the Garden State. Each issue you will typically find recently decided insurance cases from New Jersey state and federal courts. They are summarized in the attached issue and their import usually discussed in what you are reading right now, the cover note. We also track insurance bills that are pending in the New Jersey legislature, summarize them for you, discuss their impact, and keep you apprised as they move through the House, Senate, and cross the Governor’s desk to become law.

Today we have a case from the New Jersey Appellate Division where the primarily issue on appeal was whether the driver of a non-owned auto was a resident relative for the purposes of insurance coverage. Cases where there are lengthy and complicated facts often give rise to material issues of fact. Today’s case is no exception.

The driver had moved several times over a relatively short period. As such, he had listed various addresses as his home address during that time. He initially lived with his mother and her husband—the named insured. The driver moved out of the named insured’s household and took all his belongings with him. At the time of the accident, the driver, age 35, was renting a house and his girlfriend resided with him. Despite this, the Appellate Division found a material issue of fact on whether he was a resident relative of his mother’s husband. The Appellate Division focused on the fact that under New Jersey law, a person can have dual residences for the purposes of insurance. This is often called the “dual residency doctrine”. The Court found it significant that the driver occasionally received mail at his mother’s house. Therefore, the case will now go to trial on whether the driver had two residences. If you’d like to read more the case is discussed in more detail in the attached issue.

The dual residency doctrine makes sense in cases where a son or daughter goes off to college. A person does not seem to have dual residency where the son or daughter is in their thirties/forties, maintains a household of their own, and lives with their significant other. At some point, a person has in fact moved out of their parent’s house. In such cases, we’ve argued that they “left the nest” and ceased having dual residences. That one is still pending, and we will undoubtedly report back once we receive a decision.

John
John R. Ewell

[email protected]

First Party Claims, a Century Ago:

The Gazette
Montreal, Quebec, Canada

20 Sep 1919

FIRE INSURANCE COMPANIES  WIN CASE IN APPEAL

Liable for Fire Losses Only Resulting From Rigaud Explosion in 1917

$622,000 INVOLVED

First Judgment Reversed — Curtis’s and Harvey Now to Prove Actual Loss From Fire

A decision of great importance to fire insurance companies was given yesterday, when the Court of Appeal reversed a judgment of the superior Court that had condemn4ed the North British and Mercantile Insurance Company, and the Guardian Assurance Company, Limited, of London, England, to pay to the Curtis and Harvey (Canada) Co. $126,891.80, which the lower court found was due on three fire insurance policies after the explosion which wrecked the Curtis and Harvey Powder plant at Dragon, near Rigaud, on August 18, 1917.

The judgment on appeal affects twenty-six other companies who, with the ones just mentioned, were insurers of the Curtis & Harvey manufacturing establishment at Dragon.

The records in the North British and Guardian cases are ordered back to the superior court in order that proof may be made as to the amount of the loss resulting from fire only, allowing the companies to make the proof, which was refused, namely, that they had not made any contract against explosion loss, had no power to do so, and had not asked or received any premium for such risk, with costs in the court of appeal against the respondent, cots in the Superior Court being reserved.

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies,

Just back from PLRB in Minneapolis and what a great program and I met so many wonderful, dedicated insurance professionals. Special thanks to Ned, John, Jonathon, Lisa, Jess, and Alissha for such a great experience. I hope to see some of our readers at the North Carolina conference next month. In this edition, we look at Connecticut’s take on one of my favorite coverage rules – the Objective-Subjective Test for prior knowledge in a claims-made policy. Insureds need to remember to submit those notices of circumstances or risk losing coverage.

Send along those Connecticut coverage cases.  We’d love to help you.

Lee
Lee S. Siegel
[email protected]

Headlines from this week’s issue, attached:

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

  • Late Notice to Carrier, in Pre-Prejudice Case – Defeats Insured’s Right to Secure Liability Coverage
  • Insurer’s Late Disclaimer Excused because It Did Not Know of Grounds for Disclaimer until Deposition and then Promptly Disclaimed

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Sewer/Drain Exclusion Not Applicable to Toilet Overflow

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz

[email protected]

  • Third Circuit Finds Suicide Exclusions in Policy Apply, Despite Possible Contributing Pharmaceutical Factors, Because Those Factors did not Preclude Intentional Act on Decedent’s Part (NJ Law)

 

JEN’S GEMS
Jennifer A. Ehman

[email protected]

  • Catch up with you next issue.

 

BARNAS ON BAD FAITH
Brian D. Barnas

[email protected]

  • Plaintiff’s Bad Faith Claim was Dismissed as Duplicative of her Breach of Contract Claim
  • Uninsured Motorist Bad Faith Claim Dismissed for Lack of Factual Allegations of Bad Faith

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

  • In Auto Case, New Jersey Appellate Division Finds Issue of Fact Whether Driver Was a Resident Relative

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

  • Prior Knowledge Condition Knocks Out Coverage for Illegal Surcharge Claim

 

OFF THE MARK
Brian F. Mark
[email protected]

  • US District Court in Florida Finds Duty to Defend Where Underlying Complaint is Silent as to When the Faulty Workmanship Began to Damage Other Parts of the Project or When the Property Damage was Discovered

 

WANDERING WATERS
Larry E. Waters

[email protected]

  • Defendant’s Motion for Summary Judgment granted Dismissing Each of Plaintiff’s Claims

 

BORON’S BENCHMARKS
Eric T. Boron

[email protected]

  • On Roman holiday.

 

BARCI’S BASICS (ON NO FAULT)
Marina A. Barci

[email protected]

  • Intentional Act Found When Step-Father Hit Step-Son with His Car After an Argument, Precluding Step-Son’s Chiropractor from Collecting No-Fault Benefits

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]

  • New York State Department of Financial Services Issues Industry Guidance for Handling of Claims Filed Under the Child Victims Act
  • Governor Signed into Law New Legislation Relating to Motor Vehicle Key and Key Fob Replacement Contracts
  • Governor Signed into Law Amending Legislation Reducing the Duration of 2018 Grandfathering Provisions for Certain Small Group Catastrophic or Reinsurance Coverages

 

CJ At the Threshold
Charles J. Englert III

[email protected]

  • An Expert Must Identify the Objective Tests Utilized to Measures A Party’s Ranges of Motion
  • Defendant’s Own Experts Found Limitations in Range of Motion and Radiculopathy
  • Defendant Failed to Address All of Plaintiff’s Contentions Set Forth in Their Bill of Particulars
  • Defendant Never Shifted the Burden to Explain Plaintiff’s Gap in Treatment

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • New Jersey Insurance Claim Dismissed, as Plaintiff Not Proper Assignee

 

That’s all there is and there is no more.  Keep those cards and letters coming in. Remember, if bi-weekly just isn’t good enough, read my Coverage Pointers Advance postings in LinkedIn.

Hurwitz & Fine, P.C. is a full-service law firm providing legal services throughout the State of New York and provide insurance coverage advice and counsel in New Jersey and Connecticut.

In addition, Dan D. Kohane is a Foreign Legal Consultant, permit no. 000241, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.


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’s 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)

Ryan’s Capital Roundup

CJ At the Threshold

Earl’s Pearls

 

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

09/11/19       Henaghan v. State Farm Fire and Casualty Company
Appellate Division, Second Department
Late Notice to Carrier, in Pre-Prejudice Case – Defeats Insured’s Right to Secure Liability Coverage

On September 15, 2007, Henaghan was injured when the defendant Algie hit him in the head with a barbell during an altercation between the two of them. Algie was 19 years old and resided in the household of nonparty Freeman-Garcia who was insured by the defendant State Farm Fire and Casualty Company (hereinafter State Farm). By letter dated October 31, 2007, the plaintiffs' counsel requested that Freeman-Garcia direct her insurance carrier to contact the plaintiffs' counsel to discuss the subject occurrence.

In February 2008, Henaghan sues Algie to recover damages. On or about March 13, 2008, State Farm received a copy of the summons and complaint and on April 3, 2008, State Farm disclaimed coverage to Algie on the ground, among others, that notice of the occurrence was untimely. Henaghan and his wife tried the underlying case to verdict and were awarded $715,000. When State Farm refused to pay it, judgment was entered against Algie.

Henaghan then commenced an action to enforce the judgment against State Farm.

This was a pre-prejudice case; the policy having been issued before 1/17/09.

State Farm established its prima facie entitlement to judgment as a matter of law declaring that it is not obligated to pay the judgment in the underlying action by demonstrating that it did not receive notice of the occurrence giving rise to the underlying action until approximately six months after the accident.  Henaghan offered nothing in response.  Judgment for State Farm.

Editor’s Note: Remember, the rules change for policies issued after 1/17/09 – State Farm would have been required to demonstrate material prejudice in its ability to investigate or defend the claim.

09/11/19       Matter of Foremost Insurance Co. v. Beiter
Appellate Division, Second Department
Insurer’s Late Disclaimer Excused because It Did Not Know of Grounds for Disclaimer until Deposition and then Promptly Disclaimed

Foremost’s insured, Beiter, was involved in a motor vehicle collision with Diaz, who, at the time of the collision, was insured by the respondent Country-Wide. Beiter sued Diaz. At his deposition in that action, Diaz testified that he had two passengers in his vehicle at the time of the collision whom he had picked up and was transporting elsewhere, at the request of an acquaintance who ran a taxi service. Country-Wide notified Diaz that it was disclaiming coverage of the accident pursuant to the livery-vehicle exclusion under Diaz's insurance policy. Beiter then made a claim for uninsured motorists benefits against Foremost

Foremost moved for a stay of the proceedings, alleging that Country-Wide should have disclaimed much earlier and that its failure to do so violated the provisions of Insurance Law § 3420(d).  Foremost claimed that Country-Wide had waived its right to rely upon the livery exclusion.

The timeliness of an insurer's disclaimer of coverage under Insurance Law § 3420(d) " is measured from the point in time when the insurer first learns of the grounds for disclaimer.  Here, Country-Wide first learned about the possible grounds for disclaiming coverage under the livery-vehicle exclusion when Diaz was deposed, and sent a notice disclaiming coverage six days later. Thus, as a matter of law, Countrywide provided timely notice of its disclaimer.

Editor’s Note:  This reminds you that the “30-day” rule for disclaimer is not absolutely tied to the first notice of the accident or lawsuit, but from the time when the insurer first learns of grounds to disclaim.

 

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

09/11/19       Cohen v. Tri-State Consumer Ins. Co.
Appellate Division, Second Department
Sewer/Drain Exclusion Not Applicable to Toilet Overflow

Plaintiff’s home sustained water damage after a toilet clogged and overflowed.  The insurer denied coverage on the basis of an exclusion which removed coverage for “water which backs up through sewers or drains.”  After filing suit, Cohen moved for summary judgment therein arguing that the exclusion was not applicable to this situation.

In affirming the trial court’s decision, the Second Department held that the policy covered the loss at issue and Tri-State failed to establish the application of the drain back up.

 

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

09/18/19       Gianfranco Arena v. RiverSource Life Insurance Co.
United States Court of Appeals, Third Circuit
Third Circuit Finds Suicide Exclusions in Policy Apply, Despite Possible Contributing Pharmaceutical Factors, Because Those Factors did not Preclude Intentional Act on Decedent’s Part (NJ Law)

Following the tragic suicide death of his wife Christine, Gianfranco Arena sought life insurance coverage from her carrier RiverSource. She had been insured with them under two policies, a term life policy and a “Flexible Premium Adjustable” policy. Both policies contained a suicide exclusion which limited the insurer’s liability in instances of suicide. The term policy provided that “If the insured, whether sane or insane, dies by suicide within 2 years from the Policy Date, Our liability is limited to an amount equal to the total premiums paid.” The Flexible Premiums Adjustable policy stated that “Suicide by the Insured, whether sane or insane, within two years from the Policy Date is not covered by this policy. In this event the only amount payable by Us to the beneficiary will be the premiums which You have paid, minus any Indebtedness and partial surrenders.”

Just prior to her death, the Arenas had a number of financial setbacks, amidst what otherwise appeared to have been successful lives. Christine was an in-house attorney for Time Warner, was active in her church, and had four healthy children. When they found that they owed considerable back taxes and then the sale of their house fell through (after they had closed on a new house), Christine saw a psychiatrist for symptoms of anxiety and depression. She was put on medications, with subsequent increases in dosage. About three weeks later, while Christine was working from home, she made some calls, write some emails, and while her mother went to pick up the children from school, she hung herself with two of her husband’s leather belts. The manner of death was eventually ruled a suicide, but neither the police nor medical examiner made any inquiry into her state of mind at the time.

Once claims for coverage were made, RiverSource disclaimed on the basis of the suicide exclusions, citing the death certificate and policy provisions. The lower court granted to carrier summary judgment on the issue, but it was appealed. On appeal before the Third Circuit, the court again sided with the carrier. Suicide exclusions only apply if the decedent intended to cause her own death. Here, given the specific facts of the case, and the time it would have taken her to go through with the act, “those actions are sufficient circumstantial evidence to establish not only that Christine had ‘awareness’ that those actions would end her life but also that she intended to do so. While such intent may have arisen suddenly on an otherwise relatively normal morning, taking those actions is strong circumstantial evidence that at the time she took her own life, she intended that result”. While there was some evidence that her use of antidepressants may have precipitated the death, this was not enough to undermine the undisputed facts that “whether sane or insane” (as per the policy terms), she intentionally acted.

 

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

Catch up with you next issue.

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

09/17/19       Lohnes v. Liberty Mutual Insurance Company
United States District Court, Northern District of New York
Plaintiff’s Bad Faith Claim was Dismissed as Duplicative of her Breach of Contract Claim

On or about August 11, 2013, Mr. Terrance was operating a 2006 Chevy Tahoe which struck Plaintiff causing her severe and serious personal injuries.  Prior to the accident, Mr. Terrance’s mother, Louise Jacobs, purchased an insurance policy from Liberty. Liberty was timely notified of the accident but disclaimed coverage for Mr. Terrance.

Plaintiff started a lawsuit against Mr. Terrance, but Liberty refused to contribute or provide in any way to Mr. Terrence’s defense.  An Arbitration Agreement was entered into authorizing Plaintiff to pursue, as assignee of Mr. Terrance, an action against Liberty for its breach of the duty to defend and indemnify Mr. Terrance in the state court action.  An Arbitration Award in favor of Plaintiff and against Mr. Terrence in the amount of $336,500 was issued and the court awarded judgment in that amount against Mr. Terrance.

Plaintiff commenced an action against Liberty arguing that its failure to defend and indemnify Mr. Terrance exposed him to personal liability of $311,500.34.  Plaintiff made blanket allegations of bad faith against Liberty, alleging that it breached its duties to Mr. Terrance in denying him defense and indemnification.  Liberty moved to dismiss arguing that New York law does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim is based on the same facts.

The court agreed, holding that Plaintiff’s bad faith claim was duplicative of her breach of contract claim.  Plaintiff’s bad faith allegation arose out of Liberty’s failure to defend and indemnify Mr. Terrance.  There was no specific allegation or conduct by Liberty that was different from the breach of contract claim.  Thus, the claim for bad faith was dismissed as it did not make out a different claim.

09/09/19       Ream v. Nationwide Property & Casualty Insurance Company
United States District Court, Western District of Pennsylvania
Uninsured Motorist Bad Faith Claim Dismissed for Lack of Factual Allegations of Bad Faith

On December 5, 2017, Jason Ream was driving on Pennsylvania State Route 51 when he was struck by another driver, Philip E. Lint. The accident resulted in various injuries and damages to Ream and his property.  At the time of the accident, Plaintiffs were insured under a vehicular insurance policy issued by Defendant which provided $250,000.00 in UIM coverage stacked by multiple vehicles.

Lint was insured by Nationwide Insurance Company with bodily injury liability limits in the amount of $25,000.00.  Plaintiffs settled their claim with the tortfeasor for his $25,000.00 liability limits and with the consent of Defendant.  However, Lint’s policy limits were not adequate to compensate Plaintiffs for the injuries sustained as a result of the accident.

Plaintiffs submitted a claim for UIM benefits to Defendant in January 2018.  Since that time, Plaintiffs have provided various medical and economic reports and documents to Defendant for review.  On March 26, 2019, Plaintiffs made a written demand for the stacked policy limits of UIM coverage due under the subject policies and have continued to demand payment since that date.  According to the Complaint, Defendant failed to objectively and fairly evaluate Plaintiffs' claim, promptly offer reasonable payment to the Plaintiffs, reasonably and adequately investigate Plaintiffs' claim, among other things.  Plaintiffs alleged breach of contract and insurance bad faith under 42 Pa. C.S. § 8371.  Defendant moved to dismiss the bad faith claim.

Plaintiffs allegations of bad faith consisted of a long list of conclusory acts and omissions.  The complaint was devoid of facts explaining the “who, what, where, when, and how” of Defendant failed to handle Plaintiff’s claim in good faith.  The Complaint detailed that Jason Ream was injured in a motor vehicle accident, the tortfeasor’s liability limit was insufficient to remedy the associated injuries, a claim was submitted to Defendant, and that the claim remains outstanding. While such facts might be sufficient to plead a claim for breach of contract, they are insufficient to support a claim of bad faith under the Pennsylvania statute.   Simply put, requiring the Court to infer bad faith through Defendant’s failure to immediately accede to a demand under an insurance policy cannot, without more, amount to bad faith.

However, Plaintiffs were given leave to file an amended complaint.

 

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

08/29/19       Allstate New Jersey v. Estate of Sean McBride et al.
New Jersey Superior Court, Appellate Division

In Auto Case, New Jersey Appellate Division Finds Issue of Fact Whether Driver Was a Resident Relative

Prior to this accident, Sean McBride had resided with his mother, Colleen Kurz, and her husband, John Kurz, in Egg Harbor Township (the Kurz residence) since December 2010. In January 2013, McBride moved to John's rental property in Northfield (the Northfield residence). In addition to living in John's house, McBride also worked at a diner owned by John. When Gabrielle Lynnes was hired at the diner, McBride and Lynnes began a dating relationship.

In June 2014, McBride moved out of the Northfield residence and moved in with Lynnes in Marmora (the Marmora residence). The Marmora residence was owned by Lynnes' mother, Julie Gunn, and was listed on the market for sale while the couple lived there. Despite his new living arrangement, McBride's driver's license, voter registration profile, and child support/probation account listed the Kurz residence as his address of record. McBride continued to receive mail at the Kurz residence on occasion.

Colleen believed McBride's stay at the Marmora residence was a temporary arrangement that would end once the house was sold. She confirmed that despite having a falling out with McBride in November 2014, after both McBride and Lynnes were fired from the diner due to chronic lateness and unexcused absences, she would have allowed McBride to resume living with her if necessary. In contrast, initially, John expressed reluctance to allowing McBride to return to the Kurz residence. However, ultimately, he acknowledged that he may have allowed it.

In January of 2014, while McBride was still living at the Northfield residence, John applied for an automobile insurance policy with Allstate. Although McBride had moved from the Kurz residence to the Northfield residence when John applied for the policy, John testified that he still listed McBride as a resident of his household "because [McBride] lived in [his] other house right around the corner" and "[he] wanted [McBride] to be insured." Allstate ultimately issued a policy to John.

Over the next eighteen months, the policy was automatically renewed every six months. During that time, on two separate occasions, John requested the removal of two vehicles on the policy, including the vehicle primarily used by McBride. Based on these requests, Allstate issued a new declarations sheet reflecting these changes.

Although the Declarations no longer listed McBride's vehicle, it still identified McBride as a listed driver on the policy. However, John testified at his deposition that he had also requested the removal of McBride from his policy since he no longer resided at the Kurz residence. Although two Allstate representatives testified during depositions that there was no record of any request by John to remove McBride from the policy, John testified he was under the impression that McBride had been removed from the policy given the premium reduction, and only learned otherwise after the accident.

The declarations sheet listed John as the "[n]amed [i]nsured[]" at the Kurz residence address, and John, Colleen, and McBride were identified as "[l]isted drivers on [the] policy."

McBride was operating a vehicle owned and insured by Lynnes, when he lost control of the vehicle, veered off the highway, struck as disabled vehicle belonging to Scott Lerario, who was then tending to his vehicle. As a result McBride and Lynnes were killed when their vehicle went down an embankment and became engulfed in flames. Lynnes Estate and Lerario (“plaintiffs”) sued McBride’s Estate for causing the accident.

After plaintiffs filed separate tort actions, Allstate filed a complaint for declaratory judgment against McBride's Estate, plaintiffs, and others. Allstate sought a declaration that it was "not obligated to provide liability insurance coverage to [McBride's Estate] for the claims arising out of the [a]ccident," not obligated to provide "a defense of the [t]ort [a]ctions," nor "indemnification against any judgments . . . entered." In the complaint, Allstate alleged the vehicle McBride "was operating at the time of the accident was furnished and available for his regular use and, therefore, was not a 'non-owned auto' nor an 'insured auto' as defined in the [p]olicy." Allstate alleged further that "McBride was not a resident of the [Kurz] household . . . at the time of the accident," and, therefore, his estate was "not entitled to liability insurance coverage under the [p]olicy."

Following discovery, plaintiffs moved for summary judgment and dismissal of Allstate's complaint with prejudice. According to the Lynnes Estate, it was undisputed that "McBride was a listed insured person under the policy issued by Allstate" at the time of the accident and "met the definition of a 'named insured'" as defined in the policy. Further, McBride would have been permitted to move back into the Kurz residence.

Allstate opposed plaintiffs' motions, and cross-moved for summary judgment. In support, Allstate submitted numerous documentary exhibits evidencing his change of address after he moved out of the Kurz residence. Among those documents were a phone service contract, a utility bill, and an invoice addressed to McBride at the Marmora residence; a credit card statement and change of address acknowledgement addressed to McBride at a Woodbine, New Jersey, address; and a repair shop invoice addressed to McBride at the Northfield residence. In Allstate's counter-statement of material facts, Allstate recounted John's deposition testimony, during which John testified that McBride "took all of his belongings with him" when he moved out of the Kurz residence, and, similarly, removed "all of his belongings" when he moved out of the Northfield residence.

The trial court judge ruled that McBride was not a resident of John and Collen Kurz’ home. She further ruled, despite the fact that McBride was listed as a driver on the Declarations, John Kurz believed that McBride was removed from his Allstate policy, and as such, John had no expectation that McBride was insured under the policy. As such, the trial court granted summary judgment to Allstate. The Estates appealed, contending, principally, that there were issues of fact of McBride’s residency which precluded summary judgment.

The Appellate Division agreed there was strong evidence McBride no longer physically resided in the Kurz residence, the Appellate Division reasoned that McBride could have had dual residency for the purposes of insurance coverage.

New Jersey courts recognize that “a person may have more than one residence but may not have more than one domicile" and "a person may be a resident of more than one household for purposes of the availability of insurance coverage." The concept of "dual household residency" has arisen in insurance cases to expand insurance coverage to children who are residents, if not domiciliaries, of their parents' homes.

The Appellate Division reviewed the Record and found that the facts showed that in the years preceding the accident, McBride was in a state of transition, having lived in at least four different residences over that time period. The appellate court noted:

Even his occupancy at the Marmora residence was temporary, given the fact that the house was listed for sale. Indeed, Colleen acknowledged the temporary nature of the arrangement and testified she would have permitted McBride to return to her residence when the house sold. Likewise, John grudgingly made the same acknowledgement. Although Colleen produced documents showing alternate addresses, McBride continued to receive mail at the Kurz residence on occasion, and his driver's license, voter registration profile, and child support/probation account listed the Kurz residence as his address of record.

Based upon the above, the Appellate Division found that there was a genuine issue of material fact regarding whether McBride maintained dual residency, entitling him to coverage under the Allstate policy as a resident relative of the Kurzes.

The Appellate Division further found that the trial judge erred in determining the ordinary and reasonable expectations of an insured. Specifically, the judge credited the disputed subjective expectation of John, rather than the objectively reasonable expectation of the typical automobile policyholder. The Appellate Division reversed the grant of summary judgment to the insurer and remanded the case back to the trial court for a trial on residency.

Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.
 

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

09/06/19       Metropolitan District Commission v. QBE Americas, Inc.
United States District Court, District of Connecticut
Prior Knowledge Condition Knocks Out Coverage for Illegal Surcharge Claim

The District Court found that there was no coverage for the Water District improperly charging customer surcharges under a public officials errors and omissions policy. The Water District, making up several member and non-member towns in the greater Hartford County region, was charging residents of non-member towns a surcharge for its water services. In a suit brought by one town in 2014, the trial court held that the surcharge was not authorized by the Water District’s enabling legislation and, therefore, was improper. The Connecticut Supreme Court affirmed. That litigation only resulted in a declaration of lawfulness; it did not seek damages. But the next one did.

A proposed class action of customers who paid the improperly issued surcharges was commenced in 2018. The Water District tendered the action to QBE for coverage, which was denied. QBE argued that the current action failed to state a negligent act, and that the action was precluded by the prior knowledge and illegal profit exclusions.

The district court found that the class action complaint triggered coverage for a wrongful act, being defined as a “negligent act, error, or omission . . .” QBE protested that the act of charging the customers an illegal surcharge was intentional. However, the court was persuaded that the allegation that the Water District “mistakenly believed” it had the right to do so rendered the conduct negligent.

Notwithstanding that the district court found a trigger of coverage, it still concluded that coverage was excluded. The E&O policy had a standard claims-made prior knowledge condition, disallowing coverage where, pre-inception, an insured had knowledge of any circumstance likely to result in a claim. Applying the subjective-objective test, the court found that the Water District was not entitled to coverage. The insured was subjectively aware of an adverse trial court decision prior to the inception of the policy. Applying an objective test, the court concluded that any reasonable insured with knowledge of the adverse decision would have reasonably foreseen that a claim might be made. The court also found that the policy’s Illegal Profit Exclusion barred coverage. The provision excludes coverage for “any damages arising out of …. gaining profit or advantage to which an Insured is not legally entitled.” The Water District argued that as a non-profit municipal corporation it could not retain a profit. The court rejected this argument finding that the exclusion clearly applied to the allegations and, in part, reasoned that in any event the term “advantage” is broader than “profit.” 

 

OFF THE MARK
Brian F. Mark
[email protected]

 

09/05/19       KB Home Jacksonville LLC v. Liberty Mut. Fire Ins. Co.
United States District Court, Middle District of Florida, Jacksonville
US District Court in Florida Finds Duty to Defend Where Underlying Complaint is Silent as to When the Faulty Workmanship Began to Damage Other Parts of the Project or When the Property Damage was Discovered

This declaratory-judgment action arises out of underlying construction defect actions related to the development of six residential developments in Florida.  KB Home Jacksonville LLC (“KB Home”) was the general contractor on the project and hired various subcontractors.  As part of the project, in 2006, KB Home subcontracted with Florida State Plastering, LLC (“FSP”) to install stucco.  According to KB Home, many of the complaints in the underlying litigation implicate FSP's stucco work on the project.  Rather than submit all of the substantially similar underlying complaints to the Court, KB Home submitted two representative complaints.

In the underlying complaints, the homeowner plaintiffs asserted claims of vicarious liability against KB Home for the negligence of its stucco subcontractor.  In particular, the plaintiffs alleged that the stucco subcontractor's work failed to comply with the Florida building code and, as a result, the plaintiffs' homes suffered from construction defects.  They further alleged that the stucco subcontractor's defective work caused "damages not only to the exterior stucco, but also the underlying wire lath, paper backing, house wrap, wood sheathing, interior walls, interior floors, and/or other property."  Although the plaintiffs did not name FSP as a defendant in the underlying complaints or specifically state that FSP performed the stucco work at issue, KB Home has identified FSP as the stucco subcontractor that performed that work.

Notably, the underlying plaintiffs did not allege when the property damage occurred or when it was discovered.  Instead, the plaintiffs alleged that "[s]ubsequent to construction of the Home, certain design and construction deficiencies were observed at the Home, which include, but are not limited to, an inadequately and improperly installed stucco system."  The plaintiffs further alleged that "[t]he existence or causes of the defects are not readily recognizable by [p]laintiffs," and that "[t]he defects are hidden by components or finishes, are latent in nature, and are defects that require special knowledge or training to ascertain and determine the nature and causes of the defects."  Although the plaintiffs did not allege when FSP completed its work on the Project, KB Home has acknowledged that FSP completed its work in 2008.

Liberty Mutual insured FSP under two consecutive CGL insurance policies, which provided coverage from February 1, 2007 to February 1, 2009, and named KB Home as an additional insured.

Ironshore insured FSP under a CGL policy, which provided coverage from December 1, 2009, to December 1, 2010.  The policy provides coverage for "those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies."  For the insurance to apply, the "property damage" must be "caused by an 'occurrence' that takes place in the 'coverage territory.  An "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."  In addition, the property damage" must "occur[ ] during the policy period."  The policy defines "property damage," in relevant part, as "[p]hysical injury to tangible property, including all resulting loss of use of that property.  All such loss of use shall be deemed to occur at the time of the physical injury that caused it."  The policy provides that Ironshore "will have the right and duty to defend the insured against any 'suit' seeking . . . damages for . . . "property damage."

KB Home is an additional insured under the policy, 'but only with respect to liability for 'bodily injury' or 'property damage' caused, in whole or in part, by 'your work' at the location designated and described in the schedule of this endorsement performed for that additional insured and including in the 'products completed operations hazard.'"  The policy defines "your work" to include "[w]ork or operations performed by you or on your behalf" where "[t]hroughout this policy the words 'you' and 'your' refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy."

Of note, the policy includes a Continuous or Progressive Injury or Damage Exclusion (CP Exclusion) which provides as follows:

This insurance does not apply to any "bodily injury"

or "property damage":

1. which first existed, or is alleged to have first

existed, prior to the inception of this policy.

"Property damage" from "your work", or the work of

any additional insured, performed prior to policy

inception will be deemed to have first existed prior

to the policy inception, unless such "property

damage" is sudden and accidental and takes place

within the policy period); or

2. which was, or is alleged to have been, in the

process of taking place prior to the inception date of

this policy, even if the such "bodily injury" or

"property damage" continued during this policy

period; or

3. which is, or is alleged to be, of the same general

nature or type as a condition, circumstance or

construction defect which resulted in "bodily injury"

or "property damage" prior to the inception date of

this policy.

On March 19, 2018, KB Home commenced a declaratory judgment action seeking declarations that Liberty Mutual and Ironshore were obligated to defend KB Home in the underlying actions.  Specifically, KB Home asserted that because the plaintiffs in the underlying alleged that FSP's defective stucco installation resulted in property damage to other parts of the project, both insurers had a duty to defend KB Home as an additional insured.  On August 20, 2018, the parties informed the Court that Liberty Mutual "agree[d] that its defense obligation was triggered" by the allegations of the underlying complaints.  However, in its motion for partial summary judgment, Liberty Mutual argued that its duty to defend KB Home ended on June 2, 2017, when Liberty Mutual offered its policy limits to settle an unrelated class action against other insureds in South Carolina state court.

In its motion for summary judgment, KB Home requested an order finding, as a matter of law, that the allegations in the underlying complaints trigger Ironshore's duty to defend KB Home in the underlying actions.  In response, Ironshore argued that KB Home was not entitled to partial summary judgment because there were material facts in dispute and therefore the motion was premature.  Additionally, Ironshore maintained that it had no duty to defend KB Home because Liberty Mutual had already agreed to do so, and because the policy's CP Exclusion barred coverage.

The Court applied Nevada law to its analysis as the Ironshore policy was issued there, but noted that the outcome would be the same if Florida law was applied.  The Court concluded that the record established that the underlying complaints sufficiently alleged "property damage," caused by the "occurrence" of FSP's allegedly faulty workmanship.  In addition, the Court found that the underlying complaints included allegations of damage to property other than FSP's own work.  Finally, the Court concluded that the underlying complaints could be fairly read to allege potentially covered property damage that occurred within the policy period.  Pursuant to the additional insured endorsement, KB Home was also potentially covered for the claims against it relating to the damage allegedly caused by FSP's faulty workmanship, unless the Court determined that Liberty Mutual's defense obligations relieved Ironshore of its obligations, or that the CP Exclusion applied to preclude coverage.

Next, the Court turned to Ironshore's contention that it did not have a duty to defend KB Home because "Liberty Mutual had already agreed to defend KB Home and there is no right to contribution in Florida."  Ironshore argued that based on caselaw regarding the right to contribution between insurers "and Liberty Mutual's explicit acceptance of the full duty to defend KB Home, it would be inappropriate and not possible for Ironshore to take on the duty to defend Ironshore in this matter . . . ."  Upon review, the Court found that Ironshore's reliance on Florida law regarding the right to contribution between insurance companies to be unavailing.  First, although not applicable to the matter at bar, the Court noted that the Florida Legislature recently created a right of contribution among liability insurers for defense costs.  More importantly, even though Florida law has not always allowed contribution "between insurers for expenses incurred in defense of a mutual insured," that does not mean that Florida law permitted an insurer to shirk its contractual defense obligations simply because another insurer had already recognized its duty to defend.  The Court pointed out that the presence of multiple insurers has never excused any single insurer from fully defending the insured.  Accordingly, the Court concluded that Liberty Mutual's recognition of its defense obligations did not relieve Ironshore of its own.

Finally, the Court considered whether the CP Exclusion barred any potential for coverage and therefore negated Ironshore's duty to defend.  As stated above, this provision bars coverage for "continuous or progressive injury or damage" that "first existed, or is alleged to have first existed, prior to the inception of" the policy.  The CP Exclusion further provides that damage resulting from the insured's work "performed prior to policy inception will be deemed to have first existed prior to the policy inception, unless such 'property damage' is sudden and accidental and takes place within the policy period."  In its response, Ironshore argued that because it is undisputed that FSP completed its work in 2008, and that the policy was not effective until December 1, 2009, the alleged property damage caused by FSP's defective work is deemed to have first existed before the inception of the policy and, as such, there was no potential for

coverage.  KB Home does not dispute that FSP completed its work in 2008 before the policy's inception date.  Instead, KB Home argued that, regardless of when the property damage resulting from FSP's work first existed, the sudden and accidental exception to the CP Exclusion applies, because the underlying complaints do "not specifically identify when or how the deficiencies and damages occurred."  As such, KB Home contended that the underlying complaints potentially sought covered damages, which triggered Ironshore's duty to defend.

To support their respective positions, the parties cited to two opinions of the Nevada District Court, which both addressed the CP Exclusion in similar circumstances but reached different results.  Upon its analysis of the cited case law, the Court concluded that the reasoning of the case relied on by KB Home was more persuasive based on the relevant Nevada case law examined by the Court regarding the duty to defend.  The Court noted that, Nevada law is clear that "an insurer's duty to defend is triggered whenever the potential for [coverage] arises," and a potential for coverage "exists when there is arguable or possible coverage."  In this matter, the underlying complaints asserted that "[s]ubsequent to construction of the Home, certain design and construction deficiencies were observed at the Home, which include, but are not limited to, an inadequately and improperly installed stucco system."  The underlying plaintiffs further alleged that "[t]he existence or causes of the defects are not readily recognizable by plaintiffs," and that "[t]he defects are hidden by components or finishes, are latent in nature, and are defects that require special knowledge or training to ascertain and determine the nature and causes of the defects."  However, the underlying complaints are silent as to when FSP's allegedly faulty workmanship began to physically damage other parts of the project or when that alleged property damage was discovered.  Nor are there any allegations regarding the nature of the property damage caused by FSP's allegedly faulty workmanship from which the Court could infer that the property damage was more likely gradual and nonaccidental, as opposed to sudden and accidental.  As such, the Court determined that the CP Exclusion did "not preclude all arguable or possible coverage under the Ironshore Policy."

Because the Court was required to resolve any doubts as to a duty to defend in favor of the insured, and because an insurer must defend if the allegations against the insured allege facts potentially and even only partially within coverage, the Court determined that Ironshore had a duty to defend KB Home in the underlying litigation with respect to the underlying complaints at issue.

 

WANDERING WATERS
Larry E. Waters
[email protected]

09/10/19       Marc Irwin Korn v. Federal Insurance Company
District Court, Western District of New York
Defendant’s Motion for Summary Judgment granted Dismissing Each of Plaintiff’s Claims

This matter stems from Plaintiff filing and action against Defendant in New York State Court on December 30, 2016. Plaintiff’s action arises out of a dispute regarding defense cost under an insurance policy issued by Defendant.

Prior to the suit, Plaintiff was the sole owner of Senior Associates, LLC, Fairchild Manor Nursing Home, LLC and Healthcare Alliance, Inc. Defendant issued a ForeFront Portfolio Insurance policy to Senior Associates, LLC bearing policy number 8209-6069 (the “Policy”).  The Policy had effective dates of January 23, 2011 to January 23, 2012 with Batavia, Fairchild Manor, and Healthcare Alliance Insured Organizations thereunder. In addition, the Policy afforded a maximum aggregate limit of $1,000,000 for Directors & Officers Liability coverage, inclusive of Defense Costs, and an additional $500,000 limit of liability for a covered loss resulting from a Directors & Officers Claim against any “Executive”, inclusive of Defense Costs.

Following the issuance of the Policy, a criminal indictment charged Plaintiff with in the Western District of New York with four counts of wire fraud and one count of making a false statement to special Agents of the FBI and IRS (the “Criminal Action”). Defendant acknowledged receipt of the indictment as an event under the Policy, which gave rise to a duty to defend. On December 27, 2011, Defendant’s representatives explained to Plaintiff in detail “the rate situation and emphasized that it was likely that either way the insured would likely use the entire Policy limit and would be left paying for the remainder.”

In January 2012, Defendant agreed to provide Plaintiff with a defense in the Criminal Action subject to a reservation of rights. Further, Defendant informed Plaintiff that because the indictment was a criminal proceeding, pursuant to Section III(c) of Plaintiff’s Policy, only Plaintiff’s Defense Costs would be covered in accordance with the Policy’s terms and conditions.

Following the January 2012 correspondence, a grand jury returned a superseding indictment (the “Superseding Indictment”) in the Criminal Action against Plaintiff on June 28, 2012.  On July 2, 2012, Defendant acknowledged receipt of the Superseding Indictment and affirmed that it would continue to provide Plaintiff with a Defense in the Criminal Action.  Defendant determined that a non-panel member would be retained to provide Plaintiff’s defense as Defendant’s regular panel of defense counsel should not handle the Criminal Action.  Further, Defendant advised that the total amount of Defense Costs paid to date under the Policy was $228,909.88 with $771,090.12 remaining. 

On or about November 9, 2018, Plaintiff resolved the Criminal Action by pleading guilty.  As part of the plea agreement, the Indictment and Superseding Indictment were dismissed.

The current decision follows from Defendant’s motion for summary judgment on each of Plaintiff’s claims and seeking declaratory judgment pursuant to its counterclaim on December 27, 2018.

The Court began with a discussion on whether Plaintiff’s claim for vicarious liability/breach of fiduciary duty fails as a matter of law.  Plaintiff argued that Defendant owed him a fiduciary duty based on a special relationship of trust, and confidence and that Defendant’s failure to monitor his criminal defense attorneys, audit legal fees they incurred, and replace counsel “when Plaintiff made Defendant aware that the firm was wasting the finances available for coverage” constituted a breach.

The Court acknowledged that generally under New York law, a liability insurer may not be held vicariously liable for the lapses of retained counsel exercising independent judgment on behalf of the insured.   However, the court noted that there are instances where a fiduciary relationship springs into existence under circumstances where there is a special relationship of trust and confidence between the parties.  Nevertheless, the Court found that such instances are the exception rather than the rule.

Applying the relevant law, the Court disagreed with Plaintiff’s argument.  In support the Court noted that “given the insurer’s inability to provide or control the legal services in issue, and the existence of a remedy for incompetence against counsel, ... the imposition of vicarious liability in the circumstances is unwarranted.” As such, the Court granted Defendant’ motion for summary judgment on Plaintiff’s claim for breach of fiduciary duty/vicarious liability as “this is not one of those rare cases in which a fiduciary duty may be found.”

Next, the Court considered whether Plaintiff’s claim for breach of the Policy fails as a matter of law.  In response to Defendant’s motion for summary judgment, Plaintiff contended that Defendant breached the Policy by failing to ensure that his defense in the Criminal Action progressed at a proper rate to each resolution before the Policy limits were exhausted; failing to follow its own Guidelines; and failing to appropriately staff his defense team. 

In analyzing Plaintiff’s first contention, the Court recognized that “[b]y its plain language, the Policy requires no ‘reasonable rate of progression.’” As such, the Court found Defendant was not required to ensure a swift resolution of the Criminal Action, nor could it reasonably impose such a burden unless Defendant assumed responsibility for Plaintiff’s criminal defense.  The Court found from the undisputed record that Defendant advised Plaintiff that he would “likely use the entire Policy limit and would be left paying for the remainder.” Therefore, the Court granted Defendant’ motion for summary judgment on the aspect of Plaintiff’s breach of contract claim as Plaintiff failed to establish a contractual obligation under the Policy to ensure a “reasonable rate of progression” so as to avoid exhaustion of the Policy limits.

 Next, the Court considered Plaintiff’s contention that Defendant’s breach based on failure to comply with its Guidelines.  The Court began by noting that Plaintiff identified no obligation in the Policy requiring Defendant to follow its own Guidelines for Plaintiff’s benefit. In addition, the Court recognized that “Courts in New York . . .  have expressly disavowed a cause of action based . . . on failure to follow internal guidelines.  Further, the Court noted that even if Plaintiff could establish a contractual obligation, he fails to proffer admissible evidence of its breach.” As such, the Court held because Plaintiff fails to establish a promise by Defendant to follow its own Guidelines for Plaintiff’s benefit and a breach thereof, summary judgment in Defendant’s favor is granted on Plaintiff’s contention.

Next, the Court considered whether Defendant breached its promise regarding the staffing of Plaintiff’s Defense team. Plaintiff argued that Defendant breached the Policy by adding attorneys and law firms to Plaintiff’s defense team without his approval.  In its analysis, the Court looked to the Policy which provided that Defendant “shall have the sole right and duty to select counsel for the defense of any . . . [c]laim.” Based upon the language in the Policy, the Court held that in construing the evidence in the light most favorable to Plaintiff, no rational jury could interpret this provision as requiring Plaintiff’s consent to any additional representation.” As such, the Court granted Defendant’s motion for summary judgment on this component of Plaintiff’s breach of contract claim.

Thereafter, the Court considered Plaintiff’s claim for breach of the implied covenant of good faith and fair dealing.  Plaintiff claimed the defendant breached the implied covenant of good faith and fair dealing based on the same facts alleged in support of his breach of contract claims.  The Court found Plaintiff failed to establish any legal duty separate from Defendant’s contractual duties under the Policy and therefore his claim based on the implied covenant of good faith and fair dealing failed as a matter of law.  Therefore, the Court granted Defendant’s motion for summary judgment on Plaintiff’s breach of the implied covenant of good faith and fair dealing.

Lastly, the Court considered Plaintiff’s claim for emotional damage.  The Court began by acknowledging that “it is generally held that emotional and mental distress is not compensable in a breach of contract action. . .Bad faith alone is insufficient to justify an exception to the general rule.”  Further, the Court noted that “damages for emotional distress for breach of contract are available only in certain limited circumstances, such as a willful breach accompanied by egregious and abusive behavior. Applying the relevant case law, the Court found that there no breach of contract has been established, no legal duty independent of the Policy existed, and Plaintiff has proffered no admissible evidence of bad faith. As such, the Court held summary judgment with regard to Plaintiff’s request for emotional distress and damages is thus mandated.  

In sum, the Court granted Defendant’s motion for summary judgment and entered judgment in Defendant’s favor on each of Plaintiff’s claims. 

 

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

On Roman holiday.

 

BARCI’S BASICS (ON NO FAULT)
Marina A. Barci

[email protected]

09/04/19       ACH Chiropractic P.C. v. Geico Ins. Co. 
Civil Court of the City of New York, Kings County
Intentional Act Found When Step-Father Hit Step-Son with His Car After an Argument, Precluding Step-Son’s Chiropractor from Collecting No-Fault Benefits

ACH brought this action recover no-fault benefits from Geico for treatment it provided to Cenevil. ACH moved for summary judgment and Geico opposed and cross moved for dismissal on the grounds that the injuries suffered by Cenevil were caused as a result of an intentional vehicle assault by Geico’s insured, Foy, when Foy used his vehicle as a weapon to deliberately strike Cenevil.

Geico argues that Cenevil’s injuries were not the result of an accident, but rather an intentional act, which is not a covered loss and therefore does not obligate Geico to pay ACH for services rendered to the injured party. Under NY Insurance Law (11 NYCRR § 65-2.2(a) to be exact), no-fault insurance benefits must be provided for injuries caused by an accident arising out of the use and operation of a motor vehicle. In order to get out of paying no-fault benefits, an insurer must set forth evidence to demonstrate that the injuries were a result of an intentional or deliberate action that is based on a “founded belief” shown through a preponderance of the evidence. The insurer can meet its burden to show an intentional action with circumstantial evidence.

Here, Geico showed that Foy’s actions were intentional by introducing a police report, criminal complaint and arrest report, and an affidavit from its SIU (special investigation unit of an insurance company) investigator. The police report stated that Foy hit Cenevil deliberately with his car and that a third-party witness saw Foy have an argument with Cenevil (his stepson), use his vehicle to hit Cenevil, and then flee from the scene. The arrest report showed that Foy was arrested after fleeing on several charges including felony assault with intent to cause serious physical injury and felony assault for using his vehicle as a weapon.

The court found that this documentary evidence was consistent with and supported a clear finding that the incident leading to Cenevil’s injuries was not an accident, but instead the result of an intentional act. Thus, Geico was not required to pay no-fault benefits to ACH for its treatment of Cenevil. Ultimately, ACH’s motion was denied and Geico’s cross motion to dismiss was granted.

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell
[email protected]

09/12/19       Insurance Circular Letter No. 11 (2019)
Department of Financial Services
New York State Department of Financial Services Issues Industry Guidance for Handling of Claims Filed Under the Child Victims Act

As H&F and others have chronicled over recent weeks and months, sweeping changes for insurers were expected as Governor Andrew M. Cuomo signed the Child Victim’s Act (“CVA”) into law on February 14, 2019 as Chapter 11 of the Laws of 2019. This past week, the New York State Department of Financial Services (“DFS”) issued guidance to all authorized property/casualty insurers, licensed insurance producers, adjusters, and reinsurers to inform them that DFS expects full cooperation with the intent of the CVA. And what constitutes “full cooperation”? Mostly, just business as usual. But for those in need of a review, I have provided just a taste below.

First, insurance professionals are reminded “to act promptly and in utmost good faith and to exercise best practices with their prior and current policyholders, and their respective claimants, including properly performing any and all duties to defend CVA-related claims.” If this isn’t standard procedure in your practice already—and it should be—now’s the time to make that adjustment. Under 11 NYCRR § 216.0, insurers are required to guide action pursuant to several principles. With those principles in mind, DFS notes that insurance professionals should:

  1. act promptly, not extending unnecessarily to the maximum time periods permissible;

  2. exert diligence to seek out copies of relevant policies of current and prior policyholders that the addressee knows or has reason to know may be subject to CVA-related legal claims;

  3. fairly review such policies, interpreting such contracts so as to resolve any ambiguities in the policyholders’ favor;

  4. assess the applicable coverage, including any applicable exclusions or other limitations;

  5. affirmatively contact the relevant policyholders with such assessments promptly (even before a claim is filed, whenever possible) to assist policyholders in considering their coverage, such that the addressee and policyholders can cooperate in addressing complaints as they are filed; and

  6. perform on its duties to defend policyholders.

Moreover for this first point, I note without additional comment that, as always, under Insurance Law § 2601 and Insurance Regulation 64, insurance professionals are reminded to avoid misrepresentations of pertinent facts or policy provisions to CVA claimants, and attempt in good faith to reach prompt, fair and equitable settlements for those clearly meritorious claims.

Second, given the age of these claims, lost policies were expected and are, in fact, frequently occurring already. Insurance professionals with relevant records are encouraged “to act in utmost good faith to preserve and provide any relevant records to policyholders and other entitled persons, whether in connection with any lawful discovery process or otherwise.” Under Insurance Regulation 152 (11 NYCRR § 243.2(b), insurance professionals are reminded that policy records, including at a minimum the details to reconstruct any policy issued must be maintained for the later of six years after the effective policy period or “until the filing of the report on examination in which the record was subject to review.” In light of the CVA, DFS encourages the avoidance of citation by insurance professionals to “the minimum requirements set forth in the Insurance Law and regulations as a basis for destroying potentially relevant records, when they know or have reason to know they have potential liability with respect to CVA-related claims.” This includes encouragement to apply best efforts to locate and provide copies of relevant policies and other relevant information.

In addition, DFS cites a 2007 records retention directive that carriers “should maintain records at least until the expiration of the applicable statute(s) of limitations, and where an action or claim is pending, for such period of time until the matter is resolved” for the proposition that because “the CVA revised the applicable statute of limitations, [it] has the effect of extending the applicable records retention requirements.”

Finally, DFS notes that insurance professionals “with exposures to CVA-related legal claims promptly to assess their exposures and adjust their loss and loss expense reserves accordingly pursuant to Insurance Law § 1303 if they have not already done so, as should all reinsurers, and Retrocessionaires.”

06/06/19       “Service Contracts” and Key Fobs, Chapter 247, Laws of 2019
Governor Signed into Law New Legislation Relating to Motor Vehicle Key and Key Fob Replacement Contracts
On September 6, 2019, Governor Andrew Cuomo signed bill number A07080A into law, and it’s the bill we’ve all been waiting for! Its title: “An act to amend the insurance law, in relation to motor vehicle key and key fob replacement contracts.”

With this bill, the bill’s sponsor, Jonathon Jacobson, became your quintessential “man of the people.” The law itself is simple, expanding the products covered under a “service contract” as that term is defined in Article 79 of the New York Insurance Law to include motor vehicle keys and key fobs.

The expanded definition will allow for service contract reimbursement insurance to extend to lost or damaged keys and key fobs pursuant to Insurance Law § 7904. No longer must we live in constant fear of ridicule as we overpay for a key replacement at the dealership.

This bill took effect immediately. Let’s all breath one big, collective sigh of relief! Now where did I put my keys…?

Maxwell’s Minute: Be on the lookout for bill no. A00268 (same as S03631), which is working has passed the Assembly already. The definition of “service contract” under Insurance Law § 7902 may soon change yet again—this time with respect to “the availability of meaningful service contracts to protect New Yorkers leasing automobiles for their personal use from unanticipated ‘lease-end’ charges related to excess use or wear and tear of the leased vehicle.” (See Kevin Cahill Sponsor Memo).

08/29/19       Small Group Catastrophic Coverages, Chapter 202 of 2019
Governor Signed into Law Amending Legislation Reducing the Duration of 2018 Grandfathering Provisions for Certain Small Group Catastrophic or Reinsurance Coverages

On August 29, 2019, Governor Andrew Cuomo signed bill number A04947 into law as an amendment to Chapter 457 of the Laws of 2018, which now calls for a two, rather than five-year extension of the grandfathering of catastrophic or reinsurance coverage issued to certain small groups and the exemption for certain municipal corporations from small group rating standards.

Chapters 588 & 589 of the laws of 2015 were passed in consideration of the contemporaneous expansion of the Affordable Care Act’s "small group" market from 2-50 to 2-100 employees, effective January 1, 2016. The ACA served to place downward pressure on premiums by including larger firms within the group and required the sale of community-rated policies. However, that expansion also meant a prohibition on the sale of stop loss, reinsurance or catastrophic coverages to groups with between 51-100 members or employees for the first time, including private sector firms and members of municipal cooperatives and schools which are members of municipal cooperative associations under the General Municipal Law.

Chapter 589 of the Laws of 2015 in part provides that stop-loss, catastrophic and reinsurance coverage may only be sold in the small group health market to groups which already had such coverage as of January 1st, 2015, effectively grandfathering coverage for those groups.

Additionally, Chapter 588 of the Laws of 2015, concerned the impact on Article 5-G of the General Municipal Law, which, at the time of the ACA’s prohibition on the sale of stop loss, reinsurance or catastrophic coverages, would have caused the provisions of Insurance Law § 4317 applicable to the rating of small group policies to apply to every member of the cooperative. In essence, the ACA would have had the effect of forcing 51-100 member municipal out of such cooperatives had it not been for the passage of Chapter 588 of the Laws of 2015. That bill allowed such cooperatives to retain these 51-100 member municipal and school groups without triggering small-group rating provisions to the overall consortium, grandfathering 51-100 member groups that had been self-insured with stop-loss coverage as long as they kept their coverage in effect and allowing such groups additional time to transition into the small group market.

Chapter 202 of the Laws of 2019 reduces the length of time that Chapter 457 of the Laws of 2018 extends the sunset period for the above grandfathering provisions of Chapter 588 & 589 of the Laws of 2015. The effect is a reduction in the extension of these provisions from five-years to two-years after concern was raised that repealing the small group extensions after five more years provided too long of an extension under the original formulation in Chapter 457 of the Laws of 2018.

This act took effect immediately.

 

CJ At the Threshold
Charles J. Englert III
[email protected]

09/11/19       Cho v. Demelo
Appellate Division, Second Department
An Expert Must Identify the Objective Tests Utilized to Measures A Party’s Ranges of Motion

The defendant moved for summary judgment on both negligence and serious injury. The lower court denied the motion as to negligence but affirmed as to serious injury. On appeal the 2nd Department overturned the lower court and denied the defendant’s motion on the serious injury grounds. The Court held that Defendant did not meet their prima facie burden on the underlying motion because they did not provide objective proof that plaintiff did not sustain a serious injury. The defendant’s orthopedic expert report stated that “[a]ll ranges of motion are done visually and/or with use of a hand held goniometer.” The Court did not find that this was sufficient to prove that plaintiff’s ranges of motion were determined by objective means. Thus, the expert report did not meet the objective standard set forth in Toure v. Avis Rent A Car Sys. 

09/11/19       Mondesir v. Ahmed
Appellate Division, Second Department
Defendant’s Own Experts Found Limitations in Range of Motion and Radiculopathy

The defendant failed to present competent medical evidence establishing, prima facie, that the plaintiff did not sustain a serious injury to this cervical spine under either the consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). One of defendant's experts found significant limitations in the range of motion of plaintiff’s cervical spine. The expert then concluded that the plaintiff’s limitations were self-imposed but failed to explain that conclusion with competent medical evidence. As such there was a triable issue of fact.

09/11/19       Rosenblum v. Schloss
Appellate Division, Second Department
Defendant Failed to Address All of Plaintiff’s Contentions Set Forth in Their Bill of Particulars

Defendant moved for summary judgment on the ground that plaintiff did not sustain a serious injury, which was granted by the trial court. Plaintiff then appealed on the grounds that defendant had not met their prima facie burden on the issue of serious injury, specifically the 90/180-day category. In defendant’s initial moving papers, he only lays out the standard of what constitutes a 90/180-day claim, he does little in the way of arguing against plaintiff’s assertion of the same. The 2nd Department did not agree with the lower court in finding that simply mentioning the standard for finding whether or not an injury existed and stating that plaintiff did not sustain such an injury was sufficient to meet their prima facie burden.

09/18/19       Cortez v. Nugent, et al.
Appellate Division, Second Department
Defendant Never Shifted the Burden to Explain Plaintiff’s Gap in Treatment

Defendant moved for summary judgment and met their prima facie burden by submitting competent medical evidence that plaintiff did not sustain a serious injury in the subject accident, citing among other factors, a gap in treatment by the plaintiff. The defendant’s expert report submitted in support of his motion showed that the plaintiff’s injuries, although resolved at the time of his examination, were casually related to the accident. The Court then opined that because the defendant’s expert concluded that plaintiff’s injuries were related to the underlying accident, the burden to raise a triable issue of fact never shifted to the plaintiff. Accordingly, the Court upheld the trial court’s denial of defendant’s motion for summary judgment.
 

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

07/15/19       AII1, LLC, LLC v. Pinnacle Insurance Solutions, LLC
New Jersey Appellate Division
New Jersey Insurance Claim Dismissed, as Plaintiff Not Proper Assignee

In July 2013, Automotive Innovations, Inc. suffered a fire at one of its locations, and later discovered its insurance coverage was inadequate to cover property losses and business interruption claims. It eventually assigned its assets to the Plaintiff who then brought an action against Pinnacle Insurance, the insurance broker, for underinsurance. The Plaintiff claimed that Pinnacle failed to exercise the requisite skill or diligence with respect to ascertaining Automotive’ s coverage needs and precuring appropriate coverage. The Plaintiff also alleged a claim for consequential damages allegedly suffered as a result of inadequate business interruption insurance.

The Trial Court dismissed the second cause of action for consequential damages arguing that, under New Jersey law, the Plaintiff could not recover consequential damages for losses proximately caused by alleged inadequate business interruption insurance. The first claim went to trial and resulted in a verdict in the Plaintiff’s favor for $500,000. Pinnacle Insurance consistently argued that the Plaintiff could not prosecute the claims because under New Jersey law tort claims may not be validly assigned prior to judgment. This position was rejected, and a Judgment was eventually entered against Pinnacle on the first count.

However, on appeal, this verdict was reversed, and it was held that the Plaintiff did not have standing to sue the claims as an assignee of Automotive. Under New Jersey law, a tort claim is not subject to assignment prior to judgment. The Appellate Court ruled that the Plaintiff could not prosecute the claims asserted in the complaint because Automotive could not lawfully assign them to the Plaintiff.

On appeal, the Plaintiff first argued that the prohibition against the assignment of tort claims was not applicable because the claims asserted were not tort claims but were rather contract claims. The Appellate Court acknowledged that a malpractice claim against an insurance broker might support both contract and tort claims. However, in this case, the Complaint exclusively alleged negligence and professional malpractice claims–tort claims– against Pinnacle.

The Plaintiff next argued that the prohibition against the assignment of tort claims should only apply to personal injury claims, but the Appellate Court ruled that there was no such distinction in the governing statute, and cases had likewise prohibited assignment of property damage tort claims.

Therefore, the first claim should not have been submitted to the jury, the court should have granted the motions to dismiss, and the claims against the broker were dismissed and denied.

This case is another in a series of recent cases where the “standing” of the claimant to pursue an insurance claim is under question, such as whether the original property owner has sold the property with a claim pending, and whether there was a valid assignment of the claim to the Plaintiff. It is necessary and useful to continually evaluate whether a claimant on a loss is in fact and law a valid claimant, and whether they are the sole claimant under the policy.

This case also represents the importance of pleadings in coverage cases. The Defendant almost lost its argument because it failed to raise the non-assignment claim as an affirmative defense in its answer. On the Plaintiff’s side, the claim was exclusively pleaded as a tort claim and therefore subject to the non-assignment statute, whereas such a claim alleging insufficient procurement of coverage might also be pleaded as a breach of contract claim. Pleading the claim solely as a tort claim made the first count invalid since tort claims were subject to the New Jersey non-assignment statute.

Hurwitz & Fine, P.C.
1300 Liberty Building

Buffalo, NY 14202
Phone: 716-849-8900
Fax: 716-855-0874

Long Island Office:
535 Broad Hollow

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

www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2019
All rights reserved

Newsletter Sign-up

Fill in the form to register to receive any of our free electronic newsletters: