Coverage Pointers - Volume XXI, No. 9
Volume XXI, No. 9 (No. 548)
Friday, October 18, 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.
I was welcomed with a new grandson this week, and mother and son are fine. What could be better?
Greetings from New Orleans, where I am attending the DRI Annual Meeting. Lots of great educational programs and networking among colleagues and friends.
[Note to Bill Wilson and Dave Thompson – you were mentioned, favorably, in Erie Boron’s column, below. Didn’t want you to miss it.]
NFJE – The National Foundation for Judicial Excellence
The National Foundation for Judicial Excellence held its Board Meeting here as well. I serve as President of the NFJE this year.
For insurers, members of corporate America, for law firms and lawyers alike, for Foundations and trade organizations, if you do not know the NFJE, let me spend just a moment introducing it.
Imagine, if the defense community could speak directly to state court appellate judges, offering them educational programming with a fair and balanced approach to the rule of law and legal principles. That is what the NFJE has been doing for the past 15 years.
The National Foundation for Judicial Excellence supports a strong, independent, responsive judiciary by providing officers of the courts with educational programs and other tools that enable them to perform at their highest level.
We do so, by offering an annual symposium in Chicago, and sponsoring judicial attendance. Last year, we hosted 145 appellate judges from 39 states and that included some 17 presiding judges or justices.
Please consider a donation.
Our website, www.njfe.net gives you a place to do so.
Products Liability Pointers Announced:
We have exciting news. Products Liability Pointers is coming soon. We are excited to announce the development of a new Hurwitz & Fine newsletter that will be devoted entirely to products liability. Let us know if you want to be added to the distribution list. We expect to release our first edition in January 2020 and will provide more information in the coming months.
Premises Pointers: This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!). Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.
Labor Law Pointers: Hurwitz & Fine, P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.
Products Liability Pointers: Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving. Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up-to-date with the latest developments and trends, and providing useful practice tips and litigation strategies. This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework and governmental agencies. Contact Brian F. Mark at [email protected] to subscribe.
2019 I-3 – Don’t miss it!
Please join us in attending the Federation of Defense & Corporate Counsel’s …
2019 I-3 INSURANCE INDUSTRY INSTITUTE
NOVEMBER 6-8, 2019 | NEW YORK, NY
ENSURING OPPORTUNITIES IN UNCERTAIN TIMES
WHY SHOULD YOU ATTEND?
Please join us for our 2019 symposium for and by insurance leaders, professionals and insurance counsel to equip, empower and offer you new solutions to the challenging issues you face each day in the insurance industry. The industry and insurers are in uncertain times, and the future appears murky and difficult to navigate. We will help you identify and address emerging risks, new regulations and legal developments that affect you, your team and your company. We have assembled a stellar array of insurance industry leaders, regulators, and lawyers to offer their expertise and insight on issues tailored to senior level insurance company representatives, their outside counsel, and officers and directors. This program is designed to address the challenges and solutions presented by changes in the industry, as well as the impact of these changes on underwriting and claims in the coming decade.
Included in the program:
War Crimes Exclusion
Acts of domestic terrorism, workplace violence and mass shootings have breathed unexpected life into a seldom cited exclusion. International coverage experts will reflect on the court’s historical approach to the “war exclusion” and reflect on its applicability to recent events, including cyber-terrorism and attacks by nation-states.
Moderator Dan D. Kohane - Hurwitz & Fine, P.C., Presenters Rick Welsh - Waratah Underwriting, Richard Traub - Traub Lieberman Straus & Shrewsberry LLP
“In today’s fast changing world, it is critical to keep on top of emerging risks, regulatory challenges, and legal developments. But the best part of I-3 is that the attendees are industry leaders and top-notch coverage lawyers.” Kate Browne, Senior Vice President, Claims Corporate Solutions Westport Insurance Corporation.
“As a seasoned coverage lawyer, but a newcomer to the insurance industry, I found the content of the program incredibly useful. I also met some industry members with whom I developed relationships that have benefitted my company since the conferences.” Jennifer Eubanks, Corporate Counsel, Canal Insurance Company.
“Venue was terrific, but presentations exceeded expectations, especially in the area of cyber risks.” James McNamara, Senior Vice President, Head of Claims, Aspen Re America, Inc.
Overcharging for the Newspaper:
The Brooklyn Daily Times
Brooklyn, New York
18 Oct 1919
If your news dealer charges you more than Two (2) Cents for The BROOKLYN DAILY TIMES he is profiteering, as the price to the news dealers in Nassau and Suffolk Counties had not changed in the past twenty years.
The management of The BROOKLYN DAILY TIMES will deem it a favor if Our Readers will send the name and address of any news dealer charging more than Two (2) Cents, to the CIRCULATION MANAGER of this paper.
Greetings from New Orleans.
Jennifer A. Ehman
Desperate Times Called for Desperate Measures:
The Daily Signal
18 Oct 1919
NEGROES WANT SEPARATE STATE
Every State Represented in Body Now in Washington
Washington, Oct. 18.—Plans for the establishment of a free and independent Negro State, partly within the boundaries of the United States has been presented to the Senate foreign relations committee and the House committee on foreign affairs by Dr. M. M. Madden, a negro attorney of Oklahoma City, and a special subcommittee is to be named to investigate the plans. Delegates, representing each of the forty-eight states, are here in support of the project.
Peiper on Property and Potpourri:
We start this week by confessing I am not in New Orleans (though I’m sure it’s nice), nor am I in Hawaii (though I am sure it’s quite nice as well), nor am I even at a hockey rink (though I’m sure it would be significantly less nice than N.O. or HI). I am at my desk, in Buffalo, where it is raining and cold. And, I’m happy about it.
Another fairly light week on the reporting end of things this issue, but we do highlight a case from the Appellate Division, Fourth Department, which addressed a dispute over a lessee’s obligations to procure certain kinds of coverage. This included, apparently, the need to procure fire insurance. Or, so the lessor thought.
The lesson learned here should be a simple one. Provisions of contracts which potentially create liability for one party must be strictly construed. This includes both insurance procurement and indemnity clauses, respectively. If you’re left with saying “this was what we intended,” you’ll lose every time.
When analyzing either type of provision, we’d suggest being guided by this simply rule … “if you want it, you’d better have asked specifically for it.” This means the person, coverage, limit, etc., has to have been specified within the four corners of the document. If not, your chances of a successful risk transfer are drastically diminished.
That’s it for this week. See you on Halloween.
Steven E. Peiper
Universal Pay for Women – Not a New Idea:
Olean, New York
18 Oct 1919
AGAINST WAGES FOR WIVES
Gathering of Women Ridicule the Idea, Labeling it as “Commercializing the Home.”
Wages for wives were turned down by an audience largely of women here the other night after a debate on whether husbands should be required to pay such wages, says the Philadelphia Evening Bulletin.
One speaker drew a dismal picture of the future of romance with wives working for wages.
“Imagine a scene like this,” he said:
“Honey, do you love me?”
“Of course, I love you.”
“Then will you marry me?”
“Well, maybe. How much do you pay?”
“Suppose the wives were to join the soviet of waiters-up and charge triple wages for waiting up nights for husbands,” he said.
“Imagine a wife going into society and being labeled a $15-a-week wife. A woman can take a lost-year hat and make it look like new. But when she signed a contract for $15 a week there would be no hiding it from the neighbors.”
Another speaker pleaded that “woman shall not be brought down from her pedestal as a queen and made a mere employee of man.” In depicting the future of romance under the wage system he said the marriage ceremony would have to be revised to read:
“With this ring I here thee and will pay thee $15 a week by the aid of the world, the flesh and the devil.”
Notices like the following he predicted would be published:
“Married—John Brown and Mary Smith, by Rev. Russell H. Conwell. They will live in Logan and the wife’s wages will be $15 a week.”
Scenes like the following in court were forecast:
“Judge, he hired me for $20 a week and he is now two weeks overdue in my pay. I’m going to get a new boss.”
Wilewicz’ Wide-World of Coverage:
Aloha from Maui! As reported in the last edition, I’m here at the ABA Tort Trial & Insurance Practice Section Leadership Conference. The various TIPS committees meet annually to coordinate efforts for the year to come, and as a leader in both the Insurance Coverage Litigation Committee, as well as the Excess, Surplus Lines & Reinsurance Committee, there is plenty to do amidst this near-perfect weather and the locale. On the long way over here, we stopped by Honolulu for a day and made a day trip to the Big Island of Hawai‘i, and I must say I now understand all the hype. This island chain is really tropical, accessible, and magical. I only wish I had more time to explore the place and see more of it. I suppose I’ll have to come back!
Now, for the Wide World of Coverage here, I’ve searched high and low to bring you a case from Hawaii, or at least the Ninth Circuit in which it sits. Alas, my search was for naught. Instead, as soon as I left the jurisdiction, our own Second Circuit finally put out a coverage-related decision of interest.
In Old Republic General v. Century Surety, the Second Circuit was faced with whether a disclaimer based upon an action over exclusion barred coverage in a carrier versus carrier case. The decision assumed the parties’ familiarity with the facts, so it is brief, and details are scant, but in short it found that the action over exclusion was unambiguous. Where such exclusion clearly bars coverage for injuries suffered by the employee of the named insured, sustained during his employment, there is no coverage. Though one of the other issues in the case was whether Insurance Law 3420 (i.e. statutory requirement for disclaimers to be issued within 30 days of knowledge of grounds for disclaimer) applied to a carrier v. carrier case, the court side-stepped that issue and assumed it did, particularly since the disclaimer at issue was otherwise detailed and compliant with specificity and particularity requirements.
Until next time, Aloha!
Agnes A. Wilewicz
German Propaganda and Insurance:
The Brooklyn Daily Eagle
Brooklyn, New York
18 Oct 1919
GERMAN PROPAGANDA AIDS INSURANCE BILL
Dr. Houghton So Charges at Professional Guild Meeting.
F. S. Crum Speaks.
German propaganda in favor of the passage of a compulsory health insurance bill was exposed last night at a meeting of physicians, dentists and pharmacists, held in Shubert Hall, Monroe St. and Broadway, under the auspices of Professional Guild of Kings County, 20th A. D. Chapter. Dr. Harris E. Houghton was the speaker. With a mass of authentic documents, he proved to the satisfaction of his audience that German propaganda is active in the legislative affairs of the State.
Dr. Houghton's talk was on the "Relationship of the Davenport-Donahue Bill to German Propaganda." He sketched the rise of the system of international congresses in socialism, tuberculosis, hygiene, labor and other international meetings of like nature, in which German delegates preponderated, in the last two decades, and made of them instruments of German propaganda.
Barnas on Bad Faith:
A little over a year ago, the Washington Court of Appeals’ decision in Keodalah v. Allstate was reported on in this space. That decision sent shockwaves around the insurance industry, as the appellate court concluded that individual adjusters could be held liable for bad faith and violations of the Washington Consumer Practices Act. The decision and its ramifications have been the subject of conference presentations, papers, and articles around the country.
The Washington Supreme Court recently issued an opinion overturning the key holding in Keodalah. The high court reversed and held that RCW 48.01.030 does not provide a basis for a bad faith and Consumer Protection Act claim against an employee claim adjuster. First, the court concluded that RCW 48.01.030 does not create a private cause of action for an insured. Second, the court concluded that Plaintiff could not establish a violation of the Consumer Practices Act based on alleged Washington Administrative Code violations by the adjuster because those code provisions only apply to the insurer. They do not apply to employees of the insurer.
The dissent would have upheld the decision of the Court of Appeals but would have taken it one step further. The dissent would have concluded that there is not only a statutory bad faith claim against an insurance adjuster but also a common law tort claim for an insurance adjuster’s bad faith.
This is certainly a major decision by the Washington Supreme Court and one that is great news for insurers and insurance adjusters in Washington. However, as the dissent noted, there are a small number of other states that recognize at least some form of bad faith liability for adjusters. This is an area of law that bears watching going forward.
That’s all for now. Have a great weekend.
Brian D. Barnas
Baseball Booked, a Century Ago:
18 Oct 1919
Hammond Secures Cub Park For Games Against Big Teams
Chicago, Ill., Oct. 18. —President Veeck of the Cubs spent part of yesterday planning a gridiron on the north side baseball park to furnish the arena for a series of Sunday football games, the contract for which had just been signed with C. J. (Paul) Parduhn, Manager of the Hammond professional eleven.
Beginning a week from tomorrow with, a game between Hammond and the Minneapolis Marines, a schedule of eight contests has been booked by Manager Parduhn. including dates with teams from Cleveland, Detroit, Massilon and Canton, the last named being the eleven led by Jim Thorpe of the New York Giants.
To Test Pro Game Here.
The idea is to test the popularity of professional football in Chicago and endeavor to establish it on some such basis as in other western cities. The Hammond eleven is composed entirely of former college football players and will stick to the collegiate style of play.
It's in the contract between the Chicago club and Manager Parduhn that the games must be clean and free from the rough stuff that has characterized some of the games between professional eleven in Chicago in previous years. The visiting eleven will be made up almost entirely of former college men and Walter Eckersall has been selected to officiate as referee at all the games.
Off the Mark:
Last weekend we took the kids to a farm in Pennsylvania with a huge corn maze. Friends of ours met us there with their two children and all four of the kids had a great time getting lost in the maze. I enjoyed the pumpkin cannon, which uses compressed air to fire pumpkins into nearby trees, causing them to explode. After our adventures, everyone ate and slept well.
This edition of “Off the Mark” brings you a recent construction defect case from right here in New York. In East 111 Assoc. LLC v. RLI Ins. Co., the New York County Supreme Court examined the duty to defend an additional insured for damages arising out of a named insured's activities related to the development of a residential condominium project. The Court held that as the uunderlying complaint carried the possibility that the subcontractor’s allegedly faulty workmanship damaged other parts of the building—which was not, as a whole, the subcontractor’s work—an "occurrence" giving rise to "property damage" may exist under the defendant’s policy issued to the subcontractor. Having shown allegations of at least one "occurrence" causing "property damage," the plaintiff developers sufficiently alleged that the complaint in the underlying action bore a "reasonable possibility" of coverage under the defendant’s policy. Furthermore, the Court determined that the defendant carrier failed to demonstrate that the allegations in the underlying action "cast that pleading solely and entirely within the policy exclusions" and "are subject to no other interpretation". Accordingly, the Court found a duty to defend.
Until next time …
Brian F. Mark
Justice was Swift, 100 Years Ago:
Buffalo, New York
18 Oct 1919
FITZGERALD, CHILD MURDERER, PAYS PENALTY BY HANGING
Chicago, Oct. 17.—Thomas Fitzgerald, who on July 22 murdered Janet Wilkinson, aged six, was hanged today. He said he killed her because she screamed when he took her into his room to give her candy.
I hope all of you had a wonderful week and welcome to another edition of Wandering Waters.
The moment we (I should say me mostly) have been waiting for. The NBA season officially starts next Tuesday with the defending champions playing the first game of opening night against the rising Pelicans. Last season, the Pelicans had a down season on the court and in the front office. Following a slow start to the season last year, Anthony Davis made a public demand for a trade. Despite the entire world knowing that Anthony Davis wanted out of New Orleans, the Pelicans held fast and did not give in to a trade. As a result, the Pelicans essentially tanked the season by refusing to play Davis.
Now, the 2019-2020 Pelicans have sense of hope and renewed excitement. The current Pelicans have the most hyped #1 overall pick since LeBron in Zion Williamson. The Pelicans also have a bevy of young talent, proven playoff veterans in, and a proven Executive Vice President of Basketball Operations, David Griffin. The Pelicans are certainly poised to have a rebound season.
While the Pelicans have a new renewed sense of hope, the Raptors season does not look as promising. After winning its first title in 2019, the Raptors lost Kawhi Leonard to the Clippers during free agency. Without arguably the best player in the NBA, it seems improbable that the Raptors could repeat as NBA Champions once again.
Nevertheless, it will be a special moment for the NBA on opening night. As a resident of Buffalo, there are a few Raptors fans who were very excited about the Raptors winning the NBA championship and will have one last moment to celebrate as the Raptors receive championship rings on opening night.
With that said, we have one case from the Southern District of New York. Until next time……
Larry E. Waters
Alcohol Banned – Now the Cigarette:
The Buffalo Enquirer
Buffalo, New York
18 Oct 1919
AND NOW THE CIGARETTE
Just as has been predicted ever since prohibition was forced upon the people by the legislators who bowed to the threats of the reformers, the cigarette is to be next. Dr. Clarence True Wilson, temperance secretary of the Methodist Episcopal church, yesterday told the international convention of the Disciples of Christ that the cigarette must go as one of the next moves of the reformers.
A few days ago a dispatch told of the formation of an organization in Oregon which is behind a movement to have legislation adopted where by it will be unlawful to sell tobacco in any form within the boundaries of the state. Oregon was no doubt selected because there are no tobacco growers there and a firm foothold may be gained by the reformers before their real activities become obnoxious.
The crowd that is behind the cigarette movement to ban tobacco is the same crowd that circulated the report that the boys of the American Expeditionary forces were degenerating into moral lepers as the result of smoking, drink and from association with lewd women. This report, which was circulated through the medium of millions of printed pamphlets, was emphatically denounced by General Pershing.
Greetings Subscribers –
I am doing well. Thank you for asking. I hope the same is true for each of you.
I am doing well in part because I enjoy my job as a coverage attorney, and, because it is fun to report to you via Boron’s Benchmarks on decisions issued by the high courts of the states not named New York, and because I am enjoying just about everything the season of autumn has so far offered this year (although it is admittedly a gloomy, wet afternoon here in Buffalo as I type this column)
Last Sunday afternoon, our Buffalo Bills had a bye week, so my wife and I headed out to our local Chestnut Ridge Park to hike the Boy Scout Trail and take in the changing leaf colors. After doing so, we agreed we ought to do something like this far more often on Sunday afternoons. And we surely would, but for the near-hypnotic power the National Football League has on we Western New Yorkers.
In any event, a notable en banc ruling of the Supreme Court of Washington was issued on October 10, 2019, though you may have missed it - given that the New England Patriots played the New York Giants that very night. It was a ruling that held, under the specific facts of that case and applying Washington state law, that an ACORD 25 Certificate of Liability Insurance issued by an insurance agent listing T-Mobile USA as an additional insured bound Selective Insurance, issuer of the policy in question, to provide T-Mobile USA additional insured status on the policy in question, even though the actual policy was entirely devoid of evidence that T-Mobile USA was in fact an additional insured covered by the policy. See http://www.courts.wa.gov/opinions/pdf/965005.pdf
We heartily thank our friends, David Thompson and Bill Wilson, for snapping us out of our NFL-induced stupor to alert us to the issuance of this high court ruling from the State of Washington. Many of you can I am sure vouch for the fact that insurance agents and insurers alike would be well-advised to heed the sage advice Bill Wilson has been preaching for years – keep any verbiage entered into the Description of Operations field of the ACORD 25 Certificate of Liability Insurance form to an absolute minimum. As Selective presumably contemplates whether to sue the agent in light of the Washington Supreme Court’s ruling, can we all agree the Description of Operations field is not the place on the ACORD 25 to notate who is an additional insured on the policy?
I hope my write-up of the case found in the attached pdf is helpful to your work. Have a great next two weeks, folks.
Eric T. Boron
Are Uniforms for Everyone?
New York Herald
New York, New York
8 Oct 1919
A Job for the Mouse That Would Bell the Cat
From the University Kansan.
Editor University Kansan: I think your suggestion that the freshman women be required to wear some distinguishing mark is very appropriate. I suggest that the freshman women be required to wear their hair braided in the back. This will enable them to save the extra time required to fluff their hair. The men will not object, I am sure, for it will enable them to learn whether the modern woman really has a forehead and two ears. R.E.M.
Barci’s Basics (On No Fault):
Honestly folks, there is nothing new and exciting that has happened in my life over the last two weeks that I can tell you about. If you read Premises Pointers in addition to this newsletter, you’ll know that the big news I’m talking about is when to turn the heat on in my house. We have held off so far, although it is getting increasingly difficult to resist as the house has been a steady 59-62Fº. Alas, we will continue to try and power through the chillier temperatures in the house until November, purely for the sake of being stubborn. I am not complaining about the cooling temperatures outside though! I love Fall and all the activities that come with it – apple picking, pumpkin carving, pie baking, sitting by the fire, and, most importantly, wearing sweaters again! Yesterday I had to drive to Jamestown and back, and the colorful leaves on the trees throughout the drive were a lovely, comforting sight.
On the no-fault front, I have three cases for you. All are out of the Second Department, with Country-Wide Insurance Company as the defendant, each evolving out the same issue – when a master arbitrator can overturn an arbitration award. Each case, however, has its own nuggets of advice to take away. The first case is a reminder of the fraudulent incorporation defense that I covered in an edition over the summer. The second case is a fun reminder about timely submissions, and the last case is a comment on the master arbitrator’s power. Although, all of these nuggets really apply to all the cases in this edition, as well as every other no-fault arbitration matter that exists out there in the real world.
That’s all folks,
Quitting Made Sense, 100 Years Ago:
The Ithaca Journal
Ithaca, New York
18 Oct 1919
No Jury Would Convict This Lad of Quitting
A boy went to see a farmer about getting a job. The farmer asked the boy if he had had any experience on a farm. “Oh, yes,” the boy answered, “but I quit my last job.” Perhaps the hours were too long or they didn’t pay you enough, eh?” inquired the farmer. “Naw,” returned the boy, “it was this way. A pig died and for a long time afterwards we had ham for breakfast—ham at dinnertime and ham for supper. Then a sheep died and we had mutton and mutton stew and we finished up with tripe. Then the farmer’s wife died and I quit—no sir, I ain’t no cannibull.” B.R.M.
Ryan’s Capital Roundup:
Hello Loyal Coverage Pointers Subscribers:
It’s a BOY! My second child, Logan Cooper Maxwell, was born on October 14, 2019, at 11:23 a.m., weighing in at 9lbs 11ozs. I know, a little on the lighter side when you compare him to his older brother’s 10lbs 11ozs. Mother and baby Logan are home and doing well. Phillip’s first order of business in his new position as an older brother—“Logan, let’s watch trucks.”
I could not be more thrilled than I am today. There will be nothing better than watching my children grow and develop alongside one-another. Except that I get to do so alongside my wife, Lorraine, who is my love, my best friend and an even better mother.
I look forward to sharing the adventures of Phil and Logan with you on the biweekly.
In this week’s Legislative List, Albany provides us with a new law that expands the scope of applicable “consumer contracts” under New York’s plain language law to contracts under $250,000. Also, in another edition of From the Filings Cabinet, DFS discusses the limits of dual-purpose application forms designated for inclusion in the policy.
Until next time.
Ryan P. Maxwell
Same Woman, Back to $100,000:
The Bristol Herald Courier
18 Oct 1919
LONELY WIDOW, WORTH $100,000, wishes to hear from honorable gentleman under 60. Object matrimony. Write Mrs. Hill, 14 E. 6th, Jacksonville, Florida.
CJ At The Threshold:
After a whirlwind wedding weekend, a week of fun in the sun, and some unfortunate flight delays I’m happily back in the office. I am glad to report that everything went off without a hitch and married life has been quite wonderful so far! This upcoming weekend marks the official end of summer for the Englert family, as the boats will get pulled out of the water, cleaned, and winterized for storage. It is always a sad weekend, but on the bright side, the Mount Washington Observatory in New Hampshire has been reporting close to freezing temperatures for the past week or so meaning snow skiing in the East is right around the corner.
The Fourth Department makes an appearance for the first time since I’ve taken over the column and the always working Second Department provided a decision for our review as well. The theme this edition is that conclusory statements do not create an issue of fact.
Until next time,
Charles J. Englert, III
President Wilson Continues to Ail:
The Standard Union
Brooklyn, New York
18 Oct 1919
PRESIDENT PASSED COMFORTABLE NIGHT
No New Symptoms Have Developed, States To-day’s Formal Bulletin.
NEW CONSULTATION TO-DAY.
Gland Trouble Continues to Respond to Treatment.
WASHINGTON, Oct. 18—A statement issued by President Wilson’s physicians at 11:20 to-day said:
“The President rested well last night. There is no material change to note in his general condition. No new symptoms have developed.”
The statement was signed by Doctors Grayson, Ruffin, and Stiff.
Dr. Grayson said Dr. Young, of Johns Hopkins University, would again visit the White House to-day. The President’s gland trouble responded to treatment, Grayson said, and there are no indications at present that an operation will be required.
Grayson said the President showed improvement to-day and he is hopeful the gland swelling will not further retard his slow progress toward recovery.
Dr. Francis X. Dercum, Philadelphia neurologist, is also to examine the President today.
John’s Jersey Journal:
I enjoy UM/UIM coverage work. It is, in my view, very much its own world of coverage. Was an underlying policy exhausted? Does a policy issued to a corporate insured cover an UM claim by an employee? Should the carrier consent to the settlement with the tortfeasor? Did the claimant destroy the carrier’s subrogation rights? These are some of my favorite UM/UIM issues. Not to mention the subtle differences between New York SUM rules and New Jersey UM/UIM rules. There is always some interesting issue to be hashed out.
In the attached issue, you’ll find my write-up of an interesting uninsured motorist case from New Jersey. A city fire inspector, with red lights and sirens on, ran a red light and collided with another vehicle. The police report indicated that the inspector’s inattention was an “apparent contributing circumstance” of the accident. The inspector disputed liability asserting that the other driver failed to yield to an emergency vehicle.
Shortly after the accident, the inspector, a city employee, reviewed city surveillance video showing the accident. After which, he took no steps to preserve the video. The video was then destroyed as part of the city’s routine destruction policy that preserved such video for only 30 days. Did the video show him causing the accident?
The other vehicle was not insured with liability coverage and so the inspector looked to UM coverage for his recovery. The inspector discovered that the city does not have UM coverage on its vehicle. He later notified his personal auto insurer of his intent to make an UM claim—three years after the accident. He did not file a lawsuit against the tortfeasors and by the time his UM carrier received notice, the statute of limitations had expired for any claim against the alleged tortfeasors—the driver and owner of the other vehicle. This included any subrogation claim by the UM carrier. The surveillance video of the accident was also long gone.
Needless to say, Travelers, the UM carrier, was not too happy to learn of the accident so late. Travelers denied coverage stating that, due to the late notice, the inspector had effectively destroyed the carrier’s subrogation rights.
Litigation ensued. The trial court agreed with the carrier that because notice was given after the statute of limitations had expired, Travelers’ subrogation rights were inadvertently destroyed. The New Jersey Appellate Division affirmed, ruling that the UM claim was barred. The claimant’s intent did not matter. The carrier did not have to show “appreciable prejudice”. What mattered was that the UM claimant had prejudiced his carrier’s subrogation rights. Feel free to read on in the attached issue.
As for me, I was thrown into a local volleyball tournament this past weekend. I have never played volleyball other than pool volleyball at an all-inclusive. I met our team captain who had just finished an all-day tournament the previous day and plays on numerous leagues so he can play five nights a week. Despite my inexperience at volleyball, I had a blast. I had a slight advantage due to height and just stood at the net and blocked spikes. We played 11 games and ended up advancing to the semi-finals. I’m just glad I can finally lift my arms again.
John R. Ewell
Tobacco Rows 100 Years Ago:
Buffalo Morning Express and Illustrated
Buffalo, New York
18 Oct 1919
Cigarette must go, new slogan of the reformer
Methodist temperance secretary promises war on tobacco.
By the Associated Press.
Cincinnati, O., Oct. 17.—Dr. Clarence True Wilson, temperance secretary of the Methodist Episcopal church, told the International convention of Disciples of Christ today that the cigarette must go as one of the next moves of the reformers, which was his subject. Others given are Sabbath observances and world prohibition.
Dr. Arthur Holmes, president of Drake university, Des Moines, Ia., said college degrees are worth $40,000 at 5 per cent every year, and high school diplomas are valued at $18,500 at the same ratio. The preacher’s salary is below the average because preachers are not paid according to their earning powers. Dr. Holmes explained. When the church pays more, the ministry will be more attractive and the present dearth of preachers will be more nearly met, he stated.
Lee’s Connecticut Chronicles:
Dear Nutmeg Newsies:
Look, it’s the baseball playoffs and the Jewish High Holidays, so who really has time to research another edition of famous Connecticut jurists? I mean there were literally four games in one day—four often! We’re not talking March Madness, over in two-hour contests. No, the baseball playoffs are marathons, requiring commitment and dedication, late nights and sleep deprivation. Let’s just say that there’s been a lot of praying and atoning lately, and some going to synagogue too.
Oh, and, by the way, the Connecticut Supreme Court just issued a massive, ground-breaking, first of its kind in the nation opinion that’s only been two years in the making. If you deal with coverage or liability claims for pollution, occupational diseases, asbestos, construction defects, or other long-tail claim, you’re going to need to read about R.T. Vanderbilt v. Hartford Accident & Indemnity.
So, hey, it’s not like anything is happening here in Connecticut.
Lee S. Siegel
Compare and Contrast Verdicts:
18 Oct 1919
Jury Gives Verdict For $25.59 Against Doctor
Reading, Pa., Oct. 18.—Testifying that the doctor grabbed her by the arms and said she was a “a young chicken” and that he raved, Mrs. Irene Lucas, a prepossession woman of 20 years, won a verdict of $25.59 from Dr. John Ege, a local physician, against whom she brought suit for damages.
Two Grey Squirrels Cost Two Hunters $101.40
Middleburg, Pa., Oct. 18.—For shooting two grey squirrels on Sunday, out of season and without hunting licenses, J. A. Shell and H. O. Walter were arrested by Game Warden Braucher. They pleaded guilty before Justice John H. Willis and paid fines and costs amounting to $101.40.
This week’s headlines, from the issue attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
- Additional Insured Coverage Required by Contract is Available
- Clarity Needed in Framed Issue Hearing to Determine whether Underinsured Coverage Exists
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- Ambiguity in Insurance Procurement Clause Derails Claims for Breach of Contract
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
- Second Circuit Affirms Denial of Coverage Based Upon an Unambiguous Action Over Exclusion
Jennifer A. Ehman
Trial Court Denies Additional Insured Status Based Upon Absence of Proof of Named Insured’s Negligence
BARNAS ON BAD FAITH
Brian D. Barnas
- RCW 48.01.030 does not Provide a Private Cause of Action for Bad Faith against an Employee Claims Adjuster
JOHN’S JERSEY JOURNAL
John R. Ewell
- Policyholder Destroyed His UM Carrier’s Subrogation Rights, Barring His UM Claim
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
- Claims of Non-Employees Precluded by Occupational Disease Exclusion
OFF THE MARK
Brian F. Mark
- New York County Supreme Court Finds a Duty to Defend an Additional Insured for Damages Arising out of a Named Insured’s Activities Where the Underlying Allegations Demonstrated the Possibility that Damages Arose from such Activities
Larry E. Waters
- Travelers’ Motion for Partial Summary Judgment Granted in Part as Travelers’ was Entitled to Contribution for Defense and Indemnity Cost
Eric T. Boron
- The Supreme Court of Washington Answers “Yes” to the Following Certified Question of Law Posed by the Ninth Circuit: Whether an Insurance Company is Bound by Its Agent’s Written Representation – Made in a Certificate of Insurance – That a Particular Corporation is an Additional Insured Under a Given Policy
BARCI’S BASICS (ON NO FAULT)
Marina A. Barci
- Original Arbitration Award Upheld After Master Arbitrator Exceeds Power to Vacate
- Insurer’s Failure to Timely Submit Arbitration Papers Gives Claimant Easy Win
- Master Arbitrator Acted in Excess of Power to Vacate Arbitration Award
RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell
The Legislative List
- New York General Obligations Law § 5-702 Increases Scope of Applicable “Consumer Contracts” to Cover Amounts Up to $250,000
From the Filings Cabinet
- Form Filings for Applications that Appear to Bind Coverage and Provide Rating Information Must Abide by Form Requirements of Insurance Law § 3404(b)(2)
CJ At the Threshold
Charles J. Englert III
- Conclusory Statements by Plaintiff’s Doctor Does Not Raise a Triable Issue of Fact
- Plaintiff Must Respond to Defendant’s Argument in Order to Raise a Triable Issue of Fact
- Conclusory Statements by Plaintiff’s Physician Does Not Raise an Issue Of Fact
Earl K. Cantwell
- Although it May be “Boring” You Need to Read and Follow the Policy
Hope all is well with you and yours.
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.
Dan D. Kohane
Agnes A. Wilewicz
Jennifer A. Ehman
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
Steven E. Peiper, Co-Chair
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
Michael F. Perley
Eric T. Boron
Brian D. Barnas
Larry E. Waters
Jennifer A. Ehman, Team Leader
Marina A. Barci
Jody E. Briandi, Team Leader
Diane F. Bosse
10/15/19 Chelsea Piers L.P. v. Colony Insurance Company
Appellate Division, First Department
Additional Insured Coverage Required by Contract is Available
The language of the purchase order between EPS, the defendant in the underlying action, and Chelsea made explicit reference to Chelsea and required EPS to add Chelsea as an additional insured on its respective policies by virtue of language stating that contractor EPS's "general liability insurance shall apply on a primary and non-contributing basis with respect to all protection provided to Chelsea Piers thereunder". To find otherwise "renders a portion of the contract meaningless and fails to read all contractual clauses together contextually".
Editor’s Note: I peeked at the underlying decision, affirmed by this court, and Colony’s argument against AI coverage was strained, at best. It focused on extrinsic evidence, in part, to try to suggest that the contract did not require what it appeared to require. Creative but unsuccessful.
10/09/19 Elco Administrative Services v. Bones-Rojos
Appellate Division, First Department
Clarity Needed in Framed Issue Hearing to Determine whether Underinsured Coverage Exists
A hearing must be directed to determine whether there was personal jurisdiction over respondent insurer MGA.
A request to arbitrate an uninsured motorist claim may be stayed to establish the threshold issue of the insurance status of the alleged offending vehicle on the date of the accident. Here, the term "STATUTORY," which appeared on the declaration page of the policy issued by MGA to the offending vehicle in connection with personal injury coverage, raised issues as to compliance with New York's financial responsibility law, including uninsured motorist coverage.
10/04/19 Haggerty v. Steitiz d/b/a Premier Tire Co., Inc.
Appellate Division, Fourth Department
Ambiguity in Insurance Procurement Clause Derails Claims for Breach of Contract
Plaintiff leased a building to defendant under a formal written lease agreement. After the building sustained a loss, plaintiff sought coverage under a policy of insurance that defendant was allegedly required to procure as part of the underlying lease. Defendant opposed plaintiff’s claims, and apparently argued that the lease was unclear as to what kinds of coverages he was required to procure.
At the conclusion of a bench trial, the court determined that the insurance clause was “susceptible to more than one interpretation.” As such, the parties were permitted to introduce extrinsic evidence to establish the intent of the clause. Because plaintiff did not meet his burden of establishing the intent of the agreement, the lease could not be construed to create an obligation for the defendant.
Peiper’s Point - Remember that insurance procurement clauses and indemnity clauses must be strictly construed to avoid reading an obligation into them that was expressly clear.
10/04/19 Old Republic General Ins. Co. v. Century Surety Co.
United States Court of Appeals, Second Circuit
Second Circuit Affirms Denial of Coverage Based Upon an Unambiguous Action Over Exclusion
In a carrier against carrier case involving an insured’s employee’s injury, Century disclaimed coverage and denied Old Republic’s tender based upon the action over exclusion. This decision does not cite the full language of the exclusion, but where such provision unambiguously bars coverage for injuries suffered by the employee of the named insured sustained during his employment, and such facts were met here, there is no coverage.
The Court further assumed the applicability of Insurance Law 3420, which states in pertinent part: “If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.” This, despite the fact that it was a carrier seeking coverage via tender as to another carrier. The court just assumed arguendo that the section applied and that the disclaimer at issue constituted a valid disclaimer of coverage. It was specific enough, had stated in detail the factual basis, the relevant policy provisions, and why they applied. This was sufficient to meet the statutory mandate in any event.
10/03/19 WDF Inc. v. Harleysville Ins. Co. of N.Y.
Supreme Court, New York
Hon. Margaret A. Chan
Trial Court Denies Additional Insured Status Based Upon Absence of Proof of Named Insured’s Negligence
This decision highlights some of the confusion we are seeing relative to the Burlington Ins. Co. v. NYC Transit Auth. case. The decision doesn’t reveal a lot of facts about the case, but we know that Vamco Sheet Metal, Inc. (“Vamco”) was retained by plaintiff to perform some work on a construction site. An employee of Vamco sustained injuries on the site and sued plaintiff and others. It appears that the underlying action moved more quickly than the DJ, and Vamco had already successfully defended a motion by plaintiff for contractual indemnification based upon the hold harmless language of the agreement. Apparently, in the agreement, Vamco only agreed to defend and indemnify plaintiff for loses “arising out of Vamco’s ‘use of any of [plaintiff’s] tools or equipment or any combination of them.’” The underlying court determined that it was undisputed that the underlying incidents did not involve WDF’s tools.
With that background in mind, plaintiff moved for summary judgment in the DJ seeking additional insured status under the policy Harleysville issued to Vamco. The trial court initially expressed its view that plaintiff’s motion for summary judgment in the DJ action based upon the AI endorsement was an end run around the decision already rendered in the underlying action. Plaintiff disagreed arguing that dismissal of its claim for indemnification against Vamco does not require a dismissal of this claim in this action. The trial judge found that argument meritless.
Plaintiff next argued that the court can still rule on the applicability of the AI endorsement because the trial judge in the underlying never ruled on Vamco’s negligence, and contended that the court may determine whether plaintiff is an additional insured based upon the framework set out in Burlington (i.e., whether the named insured was a proximate cause of the loss). The judge disagreed finding that proximate cause need not be addressed since the underlying court already determined that the indemnification provision contained in the policy was not triggered. And, the court finally noted that there was no evidence in the records indicating negligence on Vamco’s part.
Note: This decision highlights some of the confusion we are see when courts apply the Burlington decision to different sets of facts. The Court of Appeals in Burlington held that in order to trigger the relevant additional insured endorsement which requires that the loss was “caused, in whole or in part, by” the named insured’s acts or omission, it needs to be determined whether the named insured’s work was a proximate cause of the loss. The Court of Appeals was also clear, contrary to the holdings of the court in this matter, that proximate cause is not a negligence standard, and that there can be a non-negligent proximate cause. I am also in agreement with plaintiff in this case that merely because the contractual indemnification language was not triggered does not mean that additional insured status is likewise not owned. Rather, it depends on the actual language on the contractual indemnification provision and whether it in facts mirrors the language of the AI endorsement.
Plaintiff was driving his truck when he collided with an uninsured motorcyclist in April 2007. After Plaintiff stopped at a stop sign and began to cross the street, the motorcyclist struck his truck. The collision killed the motorcyclist and injured Plaintiff. Plaintiff carried auto insurance with Allstate that included underinsured motorist (UIM) coverage. The Seattle Police Department (SPD) investigated the collision and determined that the motorcyclist was traveling between 70 and 74 mph in a 30 mph zone. SPD also reviewed Plaintiff’s cell phone records, which showed that he was not using his cell phone at the time of the collision.
Allstate also investigated the accident. It retained an accident reconstruction firm, which found that the plaintiff was stopped at the stop sign, the motorcyclist was traveling at least 60 mph, and that the motorcyclist’s excessive speed caused the collision.
Plaintiff asked Allstate to pay him the UIM policy limit of $25,000. Allstate refused and offered $1,600 to settle the claim based on its assessment that Plaintiff was 70% at fault. After Plaintiff asked Allstate to explain its evaluation, Allstate increased its offer to $5,000.
Plaintiff sued Allstate, asserting a UIM claim. Allstate designated claims adjuster Tracey Smith as its CR 30(b)(6) representative. Although Allstate possessed both the SPD report and its own accident reconstruction analysis, Smith claimed that Plaintiff had run the stop sign and had been on his cell phone. Smith later admitted, however, that Plaintiff had not run the stop sign and had not been on his cell phone. Before trial, Allstate offered $15,000 to settle the claim. Plaintiff again requested the $25,000 policy limit, and the case proceeded to a jury trial. The jury determined the motorcyclist to be 100 percent at fault and $108,868.20 for injuries, lost wages, and medical expenses. The trial court entered judgment against Allstate for $25,302.95.
Plaintiff filed a second lawsuit against Allstate and included claims against Smith. These included alleged violations of the Washington Insurance Fair Conduct Act (IFCA), chapter 48.30 RCW; insurance bad faith; and Consumer Practices Act (CPA) violations. Allstate and Smith moved to dismiss the complaint.
The statute in question states that “the business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.” Smith argued that the statute did not create a private cause of action against an insurance adjuster in tort for bad faith.
The court concluded that the statute did not create an implied cause of action. The plain language of the statute indicates it was designed to benefit the general public, and an actionable common law duty of good faith had already been established when the statute was adopted. Further, if the statute was read to imply a cause of action against insurers and adjusters, it could arguably also be read to provide a cause of action to sue insureds. This would be inconsistent with the legislature’s purpose.
The CPA claims against Smith were also dismissed. Plaintiff alleged that Smith committed “per se CPA violations” by committing specific unfair claims settlement practices as defined by the Washington Administrative Code. However, all of the alleged violations found in the code were preceded by the language “the following are hereby defined as unfair methods of competition and unfair or deceptive acts or practices of the insurer in the business of insurance, specifically applicable to the settlement of claims.” The court held that Smith did not owe Plaintiff a duty under that regulation because Smith was not the insurer. Accordingly, Plaintiff could not seek to enforce the regulations against Smith directly.
The dissent argued that the majority did not address whether Plaintiff could bring a common law bad faith claim against the individual adjuster. It advocated for recognition of a common law bad faith claim against adjusters.
10/04/19 DiMaria v. Travelers Insurance Group
New Jersey Superior Court, Appellate Division
Policyholder Destroyed His UM Carrier’s Subrogation Rights, Barring His UM Claim
On January 4, 2014, plaintiff James DiMaria, a Paterson fire inspector, collided with a vehicle operated by Michelle Rodriguez, and owned her mother Arianna Rodriguez. DiMaria claimed the accident caused permanent neck and head injuries. Michelle Rodriguez's fault was disputed. According to the police report, which referenced city video surveillance footage, DiMaria collided with the Rodriguez vehicle after he proceeded through a red light into an intersection. DiMaria was driving his city vehicle. Although his siren and emergency lights were activated, the police report stated that plaintiff's inattention was an "apparent contributing circumstance" of the accident. DiMaria contended that Rodriguez was at fault, for failing to yield to an emergency vehicle.
Assisted by counsel, DiMaria sought workers compensation benefits in the months following the collision. Although DiMaria viewed the surveillance footage, it was not preserved, and was erased as a matter of course after thirty days. In June 2014, Farmers Insurance – which counsel apparently believed may have insured the Rodriguez vehicle or driver – denied coverage. Counsel discovered no other insurance and Travelers failed to identify any after a subsequent investigation.
The city's insurance did not provide UM coverage. DiMaria's personal policy with Travelers provided $500,000 of UM coverage. Nonetheless, it was not until September 9, 2016 that new counsel for DiMaria notified Travelers of his UM claim.
The Travelers policy contained a provision requiring the insured to “do nothing” to prejudice the carrier’s subrogation rights. When Travelers received notice, the statute of limitations as to the Rodriguezes had run. As a result, it was too late for Travelers to pursue subrogation against them. On May 8, 2017, Travelers denied the UM claim because its "right of subrogation [had] been foreclosed due to the failure to file suit against the alleged tortfeasor within the two-year statute of limitations."
DiMaria sued Travelers and the parties cross-moved for summary judgment. DiMaria argued that Travelers suffered no prejudice from his delay. He alleged that Michelle Rodriguez was then an unemployed eighteen-year-old student who lacked assets and had educational and credit card debt.
Travelers responded that Michelle Rodriguez's debt was minimal. Travelers also alleged that Arianna Rodriguez, the vehicle owner, owned real estate, although it may have been encumbered by a loan exceeding its value. Travelers contended that it would have been futile to fully assess the Rodriguezes' assets because the statute of limitations had already run. Travelers argued it suffered prejudice from DiMaria's delay because its subrogation action was barred, and the failure to preserve the surveillance video impaired its ability to assess fault for the accident.
The trial court judge ruled that DiMaria's delay in notifying Travelers of the accident resulted in its irretrievable loss of subrogation rights against the alleged tortfeasor or others potentially responsible. Accordingly, the trial judge held that DiMaria’s UM claim was barred.
On appeal, DiMaria, argued, among other things, that Travelers was obliged to show that it suffered appreciable prejudice as a result of his duties under the policy, and that it failed to do so.
The Appellate Division ruled that Travelers was not obliged to demonstrate prejudice. The Court noted that, because this was a UM claim, “[i]f prejudice were relevant at all, it was DiMaria's burden to show that Travelers suffered none.” Under New Jersey law, in an uninsured motorist case, the burden is on the insured to show a lack of prejudice to his carrier where he failed to provide appropriate notice.
The Appellate Division focused on that fact that Travelers never had the opportunity to exercise its subrogation rights. DiMaria notified Travelers of his claim after Travelers’ subrogation rights were entirely lost. Since DiMaria failed to timely notify his UM claim and destroyed the carrier’s subrogation rights, the Appellate Division affirmed that his UM claim was barred.
Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.
10/08/19 R.T. Vanderbilt Co. v. Hartford Accident & Indemnity Co.
Connecticut Supreme Court
Claims of Non-Employees Precluded by Occupational Disease Exclusion
In a case of national first impression, the Connecticut Supreme Court unanimously held that the Occupational Disease Exclusion barred coverage to an insured for claims brought by non-employees. Vanderbilt mined and sold industrial talc, and now faces thousands of personal injury actions due to exposure to its product. Many of the actions allege that Vanderbilt’s talc contained asbestos, causing asbestos-related diseases. In this marathon coverage battle, Vanderbilt sued its general liability insurers, about thirty of them, to defend and indemnify the personal injury actions. The carriers, both primary and excess, were variously on risk between 1948 and 2008.
The highlight of the 25-page opinion, which affirmed a 98-page opinion from the Appellate Court, is the holding on the occupational disease exclusions. The Supreme Court found that the Appellate Court correctly concluded that the occupational disease exclusions applied not only to claims brought by Vanderbilt’s own employees, but clearly and unambiguously excluded from coverage claims brought by nonemployees claiming asbestos-related diseases from using Vanderbilt’s talc while working for other employers.
Two versions of the exclusion were considered: ‘this policy shall not apply . . . to personal injury (fatal or nonfatal) by occupational disease;’ and ‘This policy does not apply to any liability arising out of: Occupational Disease.” Vanderbilt argued that the term occupational disease was undefined and since it is so interwoven with the concept of workers’ compensation and other claims by an employee against his employer, as to be meaningless outside of that context. The Court disagreed, siding with the Appellate Court’s analysis that the term is clear and unambiguously applies to non-employees as well as employees. The Court noted that many exclusions were expressly limited to employees of an insured, but that the occupational disease exclusion contained no such limitation. The Court wrote:
Given the lack of any verbiage in commonly used dictionary definitions expressly limiting the definition of occupational disease to the workers’ compensation context, it is significant that the text of the occupational disease exclusions does not contain language expressly limiting their application to the employees of the insured. In contrast, other exclusions in the relevant policies, namely, for employer’s liability and workers’ compensation, expressly contain such language. This omission is significant because it indicates that, when the drafters of the policy desired to limit the application of an exclusion to a certain group of individuals, they did so. It renders all the more unambiguous the lack of any such express limitation in the occupational disease exclusions.
(Citations omitted.) In order to reach the outcome advocated by Vanderbilt, the Court determined that it would have to add “otherwise nonexistent” language to the exclusions, which it declined to do.
The Court also made additional significant findings for purposes of Connecticut jurisprudence. First, the Court adopted the “continuous trigger” rule for asbestos-type claims. Second, the Court adopted the unavailability of insurance exception to a time on the risk, pro-rata allocation. Specifically, for any period in which coverage was unavailable in the marketplace, then defense and indemnity costs are not to be allocated to such a period. And, third, the Court ruled that the various versions of the carriers’ pollution exclusions, even the modern absolute pollution exclusion, applied only to traditional environmental pollution and not to asbestos-caused diseases.
10/04/19 East 111 Assoc. LLC v. RLI Ins. Co.
Supreme Court, New York County
New York County Supreme Court Finds a Duty to Defend an Additional Insured for Damages Arising out of a Named Insured’s Activities Where the Underlying Allegations Demonstrated the Possibility that Damages Arose from such Activities
This declaratory-judgment action arises out of an underlying construction defect action related to the development of a residential condominium project in Manhattan. The various plaintiff entities (collectively referred to as “Developers”), developed and sponsored the residential condominium project. The underlying complaint alleged that the Developers sold units in the condominium pursuant to an offering plan. In the underlying action, La Celia Owners Corp. (Owners) sought $881,450 in damages, alleging that the Condominium, completed in mid-2013, had numerous design and construction defects, and asserting causes of action for, among other things, breach of contract, specific performance and negligence.
The Developers commenced a declaratory-judgment action seeking a declaration that the defendant insurance carriers had a duty to defend Developers in the underlying action pursuant to a CGL policy issued to Developers by Mt. Hawley and CGL policies issued to Developers' subcontractors by the other defendant insurance carriers and under which Developers are allegedly covered as additional insureds. The DJ complaint asserted that "the underlying action alleges 'property damage' stemming from an 'occurrence' associated with work performed by Developers' subcontractors" Following dismissal in the underlying action of all but the breach of contract and specific performance causes of action, the underlying action settled for $350,000, which Developers sought as damages from the defendants.
In examining the duty to defend, the Court relied on well settled New York law holding that "a duty to defend exists whenever the allegations in the complaint in the underlying action, construed liberally, suggest a reasonable possibility of coverage, or where the insurer has actual knowledge of facts establishing such a reasonable possibility."
Three of the four insurance carrier defendants successfully demonstrated that the underlying claims fell entirely within the scope of policy exclusions contained in their respective policies. Selective Insurance Company of America (“Selective”) was unsuccessful in its motion to dismiss.
Selective argued that the damages in the underlying action either did not stem from an "occurrence" and/or otherwise fell entirely within the "damage to property" exclusion to its policy issued to subcontractor Walsh Glass & Metal (“Walsh”).
Selective conceded, solely for purposes of its motion to dismiss, that Developers were additional insureds under the Selective policy pursuant to the language of the additional insured endorsement. The policy defines "you" and "your" as "the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy". While Walsh was a Named Insured, none of Developers were named by or qualified as a "Named Insured" under the Selective policy; thus, "you" and "your" do not include Developers.
The Court noted that the New York Court of Appeals has held that the duty to defend an additional insured for damages arising out of a named insured's activities does not require a determination of the named insured's liability, but requires only allegations giving rise to the possibility that damages arose from such activities. In the grant of coverage, the Selective policy provides that "[t]his insurance applies to ... `property damage' only if: (1) The ... 'property damage' is caused by an 'occurrence'". The policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions".
Selective argued that there was no "property damage" caused by an "occurrence" because the damage alleged in the underlying action arose from faulty work performed by Developers or their subcontractors and not "an accident." Developers responded that the complaint in the underlying action alleges that Developers failed to remediate defects, such as entry points for water infiltration, causing water damage to portions of Owners' building and the units of the constituent owners. Selective cited to a number of cases for the proposition that there is no covered "occurrence" because the damage occurred solely to the building—i.e., Developers' work. However, as noted by the Court, none of the cases cited addressed whether property damage to other work of a plaintiff additional insured caused by its subcontractor's faulty work was an "occurrence" under a policy issued to that subcontractor.
The Court held that as the underlying complaint carried the possibility that Walsh's allegedly faulty workmanship damaged other parts of the building—which was not, as a whole, Walsh's work—an "occurrence" giving rise to "property damage" may exist under the Selective policy issued to Walsh. In support of its holding, the Court cited applicable case law holding that a liability policy insures against "faulty workmanship in the work which creates a legal liability by causing ... property damage to something other than the work product". "[I]n the absence of unambiguous contractual language to the contrary," Developers, as additional insured under the Selective policy, have "the same protection as the named insured". Accordingly, the Court determined that the alleged water damage triggered Selective's duty to defend Developers.
Selective also argued that the claims in the underlying action fell within exclusions (j)(1), (j)(5) and (j)(6) of the policy, which state that the insurance does not apply to damage to:
(1) Property you own, rent, or occupy,
including any costs or expenses incurred by you, or
any other person, organization or entity, for repair,
replacement, enhancement, restoration or
maintenance of such property for any reason,
including prevention of injury to a person or
damage to another's property; ...
(5) That particular part of real property on which
you or any contractors or subcontractors
working directly or indirectly on your behalf
are performing operations, if the "property damage"
arises out of those operations; or
(6) That particular part of any property that must
be restored, repaired or replaced because "your
work" was incorrectly performed on it.
As noted above, "you" and "your" means Walsh and not Developers. At least some of the allegedly water-damaged portions of Owners' building and individual units thereof were not "property you [Walsh] own, rent, or occupy" or a "particular part of real property on which you [Walsh] or any contractors or subcontractors working ... on your [Walsh's] behalf are performing operations"; thus, the Court determined that exceptions (j)(1) and (j)(5) did not apply. Similarly, insofar as the water intrusion possibly harmed other building components besides those on which, allegedly, "'your [Walsh's] work' was incorrectly performed," exception (j)(6) did not apply.
Selective argued that many cases interpreted these and similar exclusions to bar recovery by plaintiffs for their own or their subcontractor's defective work. However, none of the decisions relied on confronted the contractual language at issue—"you" and "your"—that exempts from coverage damage to the work of only the subcontractor to whom the policy was issued, not all work of the plaintiff additional insured whose other work was damaged.
Having shown allegations of at least one "occurrence" causing "property damage," Developers sufficiently alleged that the complaint in the underlying action, construed liberally, bore a "reasonable possibility" of coverage under the Selective policy. Selective, moreover, failed to demonstrate that the allegations in the underlying action "cast that pleading solely and entirely within the policy exclusions" and "are subject to no other interpretation". Accordingly, the Court denied Selective’s motion to dismiss.
10/10/19 Danaher Corporations v. The Travelers Indemnity Company
District Court, Southern District of New York
Travelers’ Motion for Partial Summary Judgment Granted in Part as Travelers’ was Entitled to Contribution for Defense and Indemnity Cost
Danaher Corporation (“Danaher”) commenced this current action to resolve disputes concerning insurance coverage for silica and asbestos related claims brought against of one Danaher’s former subsidiaries, Chicago Pneumatic Tool Company (“Chicago Pneumatic”).
Prior to this action, Travelers allegedly refused to comply with the terms of a number of primary and excess insurance policies that Travelers has issued to Chicago Pneumatic” in the years prior to Danaher’s 1987 sale of Chicago Pneumatic to the Third-Party Defendant Atlas Copco of North America (“Atlas Copco”).
Danaher alleged claims against Travelers Indemnity Company and the Travelers Casualty and Surety Company (“Travelers”) included state-law contract and declaratory judgment. In addition, Danaher brought a breach of contract and declaratory judgment claims against North River Insurance, one of Chicago Pneumatics’ excess insurers.
Travelers in turn impleaded as Third-Party Defendants, Atlas Copco, the current owner of Chicago Pneumatic, as well as the insurers of various of Atlas Copco’s primary and excess liability insurance policies in the years following Atlas Copco’s acquisitions of Chicago Pneumatic. Travelers sought a declaratory judgment adjudicating the scope of its obligations to Atlas Copco with respect to indemnifying and defending against the underlying asbestos and silica claims brought against Chicago Pneumatic. In addition, Travelers sought an allocation as between itself and the Third-Party Defendants of the costs of defending the underlying claims, as well as an order mandating that the Third-Party Defendants pay contribution to Travelers for any indemnification payments Travelers might make on behalf of Chicago Pneumatic.
Thereafter, Danaher, Travelers, and Atlas Copco all moved for partial summary judgment. The following will discuss Travelers’ motion for partial summary judgment as against Defendant and Third-Party Plaintiff.
The Court begin its analysis as it relates to Travelers’ motion for summary judgment with a brief overview of the allocation of coverage for long-tail claims under New York Law. The Court noted that Courts have generally adopted either of two competing methods of allocation for long-tail claims. Under the “all sums” method “an insured is entitled to collect its tort liability . . . under any policy in effect during the periods that the damage occurred” and is limited in its ability to recover from any single insurer only by that insurer’s specific policy limits.” Under the “pro rata” method, the Court noted that “an insurer’s liability is limited to sums incurred by the insured during the policy period.” In addition, the Court highlighted that the “method of allocation is governed foremost by the particular language of the relevant insurance policy. As such, the Court determined that in a case governed by New York law, different insurance policies may dictate the application of either pro rata or the all sums method of allocation, and the method of allocation to be applied under any given policy is to be determined based on an assessment of the particular policy language agreed upon by the insured and the insurer.
Applying the relevant case law, the Court agreed with Travelers’ contention that the pro rata method of allocation was required under New York Law in this matter. In support the Court looked to the language of the Travelers’ policies which contain the “occurs during the policy period” language, at least where the policy did not contain a non-cumulation clause or other similar language evidencing the understanding that two or more insurance policies that do not overlap in time might indemnify the insured with respect to the same loss or occurrence. In addition, the Court highlighted that New York Court of Appeals has explained that “policy language restricting an insurer’s liability to all sums incurred and occurrences happening ‘during the policy period’ generally supports a pro rata allocation. Further, the Court noted that its conclusion held regardless of “whether or not Chicago Pneumatic either has or had access to coverage under other insurance policies during any particular period of time.”
While Danaher and Atlas Copco argued that one of the Travelers’ policies did not fit within the above cited language, Danaher and Atlas Copco nevertheless conceded that the remaining Travelers’ policies fit the language cited above. As such, the Court held that “to the extent that Chicago Pneumatic obtained primary coverage from Travelers with occurrence-based policies that lack non-cumulation clauses or other language evidencing the parties’ understanding that any give occurrence could trigger more than one successive policy.” Therefore, Travelers was entitled to be allocated indemnification costs under those policies with respect to the Underlying Claims only to the extent that Travelers was in fact “on the risk: for such costs.
Next, the Court considered Travelers’ motion for contribution awarded compensating Travelers to the extent that it has borne or will bear a disproportioned share of either defense of indemnification costs associated with the Underlying Claims. Travelers argued that it was entitled to contribution. Danaher and Atlas Copco argued objected to Travelers’ attempts to obtain contribution from them for defense.
The Court first noted that New York law provides “[a]n insurer’s right to contribution from other responsible for insuring the same risks as the insurer is rooted not in contract law, but rather flow[s] from equitable principles.” In addition, the Court highlighted that “[t]he right to contribution may be applied in the context of an insurer’s overpayment or both indemnification and defense costs.” Further, the Court explained that it was reaffirming its prior summary judgment holding that Travelers, as the primary insurer of the risks of loss posed by the Underlying Claims for a number of years with respect to which Travelers maintains unexhausted primary policies, has a continuing duty to defend in the Underlying Claims in the first instance. Moreover, the Court recognized New York law provides that a court may order only one insurer to provide for an insured’s defense costs in the first instance with the understanding that the insurer may later obtain contribution from other applicable policies also responsible for the underlying.
Applying the relevant New York law, the Court found that Travelers was entitled to seek contribution from other parties for their share of the defense costs incurred by Travelers in connection with claims for which multiple parties would ultimately bear shared responsibility. Since the Court had assessed how and to what extent other parties to the matter would be allocated such responsibilities, Travelers’ claim for contribution for defense costs became ripe.
Further, the Court rejected the Excess Insurers objections to Travelers’ motion for summary judgment to the extent that Travelers seeks a declaration of its right to contribution from them. In support, the Court noted that at the time of the briefing of the motion papers, the primary Travelers policies covering Chicago Pneumatic from April 1, 1979 to April 1, 1982 had been exhausted. In addition, the Court found that the Excess Insurers policy had been triggered which sat directly above the Travelers policy. Further, the found that based on the plain and unambiguous terms of the Excess Policy, Travelers was entitled to contribution from the Excess Insurer for both defense and indemnity costs paid by Travelers and allocable to those years. Accordingly, the court found that Danaher, Atlas Copco, and the Excess Insurer were responsible for contributing pro rata share of both defense and indemnity costs incurred by Travelers in connection with the Underlying Claims where those costs are allocable to claims involving injuries occurring during periods for which those parties are on the risk.
Next, the court considered what constituted a triggering event in the context of the long-tail claim. Travelers argued that the Court should apply the “injury-in-fact” trigger of coverage for purposes of allocating costs stemming from Underlying Claims. In support, Travelers urged the Court to follow the decision in Continental Casualty Co. v. Employers Insurance Co., of Wausau (“Keasbey”), 871 N.Y.S.2d 48 [N.Y. App. Div. 1st Dept. 2008]).
In contrast, Danaher and Atlas Copco argued that the Court should apply the standard, adopted by the Second Circuit, which holds that “triggering can be shown by competent evidence to result at successive points where identifiable injuries have occurred including at any or all points from exposure to manifestation on the ground that identifiable injuries have been provided to have occurred at each point to a reasonable degree.”
The Court rejected Travelers’ argument. The Court noted that in the Keasbey decision that court expressly distinguished its injury-in-fact analysis for those operations-liability claims from the analysis applicable to “[r]ecovery under products liability claims[,] [which] is not dependent . . . on the timing of the actual injury nor the particular stage of installation projects at which actual injury may have taken place.” Further, the Court noted that even if the Keasbey’s decision triggering analysis did apply to products liability Underlying Claims, the Court would still have to follow the Second Circuit’s decision. Accordingly, the court held that a triggering injury in fact for the Underlying Claims may be found as early as the time of first exposure to asbestos or silica and may continue progressively through the Claimant’s death or the date of filing the claim, whichever occurred earlier.
10/10/19 T-Mobile USA, Inc. v. Selective Ins. Co. of Am.
Supreme Court of Washington
The Supreme Court of Washington Answers “Yes” to the Following Certified Question of Law Posed by the Ninth Circuit: Whether an Insurance Company is Bound by Its Agent’s Written Representation – Made in a Certificate of Insurance – That a Particular Corporation is an Additional Insured Under a Given Policy
En Banc, the Supreme Court of Washington ruled in a 7-2 majority decision on October 10 that “an insurance company’s agent who makes an authoritative representation binds the insurance company, even when that specific representation is transmitted via a certificate of insurance and accompanied by general disclaimers.” The ruling was made under the State of Washington’s law, and presumably is limited to the specific factual findings established in this case through prior holdings of the Ninth Circuit.
The Washington Supreme Court’s ruling indicated it was premised on the Ninth Circuit’s finding that “the agent acted with apparent authority in issuing the certificate at issue”. Unfortunately for the curious, Supreme Court’s opinion declined to explain the basis for the Ninth Circuit’s holding that the agent acted with apparent authority in issuing the Certificate in question. The agent in question is never named in the opinion. There is no reference in the opinion to an agency agreement. Surely the fact that the agent signed the Certificate as “Authorized Representative” (a pre-printed, boilerplate label within the Certificate’s signature box) cannot be the basis for the Ninth Circuit’s holding that the agent acted with apparent authority, right?
In any event, the Supreme Court of Washington’s opinion issued October 10 is premised on the general rule in Washington that an insurer is bound by the acts or representations of its agent which are within the scope of the agent’s real or apparent authority. An important issue considered and analyzed by the Washington Supreme Court was whether the so-called “general” disclaimers set forth in the ACORD 25 Certificate of Liability Insurance form were effective. Supreme Court determined they were not, finding that preprinted disclaimers in the form were “ineffective because they were general boilerplate”.
In Washington, according to its Supreme Court, the rule of thumb to employ when interpreting insurance Certificates is that “the specific prevails over the general”. According to the Court, the fact that the preprinted disclaimers “purport to disclaim virtually every bit of information provided by the certificate”, means they are “general in nature”. Not sure I would read the ACORD 25’s disclaimers that broadly. How about you?
Supreme Court’s opinion then went on to find that because the Certificate’s disclaimers are general in nature, they are trumped (no pun intended) here by the additional insured statement that the agent wrote into the Certificate at issue. “Giving effect to the disclaimers…would render issuance of the certificate – and the specific representation within it - pointless”, said the Washington Supreme Court.
Wow. A bitter pill for insurers throughout the State of Washington to swallow, I would imagine.
By the way, the Washington Supreme Court’s opinion does not address any of the following questions. Why did the Court consider bolded, capitalized disclaimers set forth in the ACORD 25 Certificate at issue to nonetheless constitute nothing more than non-specific, “general boilerplate”? What was non-specific about the disclaimer language? Why did the Court feel compelled to recite in its opinion that courts must interpret the language of the certificate in a manner understandable to the “average person” in this case being brought by a sophisticated commercial entity, T-Mobile USA, Inc.? What makes the statement written onto the form by the agent, that “T-Mobile USA Inc., its Subsidiaries[,] and Affiliates…is included as an additional insured”, more specific than the preprinted general disclaimers? Who are T-Mobile USA, Inc.’s “subsidiaries and affiliates”? Did the Certificate identify the particular additional insured endorsement issued for the policy? Was a copy of the Certificate in question forwarded to the insurer? Did the party asserting additional insured status, T-Mobile USA, Inc., request a copy of the additional insured endorsement and/or the policy itself from the insurer?
Questions abound. But the Supreme Court of Washington has spoken.
BARCI’S BASICS (ON NO FAULT
Marina A. Barci
10/09/19 Bay Needle Care Acupuncture v. Country-Wide Ins. Co.
Appellate Division, Second Department
Original Arbitration Award Upheld After Master Arbitrator Exceeds Power to Vacate
Apparently, Bay Needle and Country-Wide are at the forefront of no-fault cases this month. If you recall from my column two weeks ago, Bay Needle wanted to vacate an arbitration award because it felt that it was awarded attorney’s fees improperly (they were unsuccessful, remember?). This week, Bay Needle wants to vacate an arbitration award essentially for abuse of power.
Here, Bay Needle was assigned no-fault benefits for treatment it rendered to Mr. Edgar as a result of a car accident. Bay Needle made a claim to Country-Wide, which was denied. This prompted Bay Needle to commence an arbitration action against Country-Wide. Country-Wide denied payment in part because it contended that Bay Needle was fraudulently incorporated. As you may recall from extensive coverage of the Carothers case a few months ago, the fraudulent incorporation defense allows an insurer to refuse payment of no fault benefits to a false medical provider if it can be proven that the provider had fraudulent intent or other conduct tantamount to fraud when the business started (see Andrew Carothers v. Progressive).
In this case, the arbitrator could find no reasonable or credible evidence to support the fraudulent intent defense and so found in favor of Bay Needle, thus required Country-Wide to pay the denied bills plus interest and fees, a total of $1,318.91. However, Country-Wide appealed to the master arbitrator, who vacated the original award and remitted the matter for a new hearing with a new arbitrator because the master arbitrator found that evidence of fraudulent incorporation was substantial. A master arbitrator’s job is not to make their own determination on the facts, but rather to determine whether the arbitrator’s decision was made rationally on the facts.
Bay Needle petitioned the lower court to vacate the master arbitrator’s decision. The lower court granted the vacatur and confirmed the original arbitrator’s award. Country-Wide then appealed to where we are now, the Second Department. This Court agreed with the lower court that the master arbitrator exceeded his power to vacate the original award because it was clear that he weighed the evidence and came to a different conclusion as to what the evidence proved than the original arbitrator. Courts may overturn a master arbitrator’s decision only when it is made arbitrarily and capriciously; here it found that standard was met. So, Bay Needle prevailed and the original arbitration award stands.
10/09/19 Acuhealth Acupuncture, P.C. v. Country-Wide Ins. Co.
Appellate Division, Second Department
Insurer’s Failure to Timely Submit Arbitration Papers Gives Claimant Easy Win
Country-Wide is a big fan of the fraudulent incorporation defense this week! In this case, Acuhealth was assigned no-fault benefits from Ms. Olsen and made a claim for payment to Country-Wide. Country-Wide denied the claims and Acuhealth brought an arbitration proceeding. Country-Wide filed its arbitration position submission late and the arbitrator refused to consider its defenses. The arbitrator refused to consider the defenses, including fraudulent incorporation, because Country-Wide had no excuse for its lateness. As such, the arbitrator found in favor of Acuhealth and awarded it $13,864.96.
Country-Wide appealed to the master arbitrator, who vacated the award and issued a new award in favor of Country-Wide on its fraudulent incorporation defense that the arbitrator refused to consider. Acuhealth then petitioned the lower court to vacate the master arbitrator’s award and confirm the original award, which they did. This led Country-Wide to this appeal to the Second Department. An arbitrator is within their discretionary authority to refuse to entertain late submissions. The Court found that the master arbitrator here exceeded his power when he rejected the original arbitrator’s proper exercise of discretionary authority on the late submission and in deciding, de novo, factual questions concerning the validity of Country-Wide’s defenses. Thus, the lower court’s decision was upheld and the original arbitration award was confirmed.
The moral of the story: get your arbitration submissions in on time! If you cannot, thoroughly explain why in your late submission so that you have the best possible chance of the arbitrator accepting your papers/evidence when it comes time for the hearing. You can even put a note in the case on the AAA website if you know ahead of the deadline that a timely submission is not possible. That way, when it comes time for the arbitrator to review the file they are fully informed up front about the reason for your untimeliness. Bonus: It helps to explain why the claimant will not be prejudiced by your late submission.
10/09/19 V.S. Care Acupuncture, P.C. v. Country-Wide Ins. Co.
Appellate Division, Second Department
Master Arbitrator Acted in Excess of Power to Vacate Arbitration Award
Country-Wide denied V.S. Care’s claims for no-fault benefits on several grounds: 1) that the assignee failed to appear at scheduled IME’s and 2) that the assignee failed to appear at scheduled EUO’s. As you’ll recall, assignees are required to appear for both scheduled IME’s and EUO’s at the request of the insurer as a policy condition. Additionally, Country-Wide also contends that V.S. Care’s was fraudulently incorporated and therefore not entitled to payment.
The arbitrator found that the assignee did fail to appear at IME’s, but rejected the contention that he failed to appear at scheduled EUO’s. The arbitrator also rejected Country-Wide’s fraudulent incorporation defense on the grounds that it had not met the burden of proof. Therefore, the arbitrator awarded only a portion of the claims that she found Country-Wide improperly denied. Country-Wide appealed to the master arbitrator, who decided that the original arbitrator’s award rejecting the fraudulent incorporation defense was irrational, arbitrary, capricious, and incorrect as a matter of law. V.S. Care’s petitioned the lower court to vacate the master arbitrator’s award, which it did, confirming the original award. Of course, Country-Wide appealed to the Second Department.
As a reminder, a master arbitrator may not review the facts of the case by weighing evidence, assessing credibility of witnesses, or making independent findings of fact. However, the master arbitrator’s power does include the power to review the facts in order to determine whether or not the evidence is sufficient, as a matter of law, to support the determination of the arbitrator. It is a delicate balance, and it helps the master arbitrator’s case when they don’t come out right and say they disagree factually with the arbitrator’s findings. Based on this standard, the Appellate Court confirmed the lower court’s decision and the original arbitration award.
10/11/19 Plain Language Law Expands Scope of Applicable “Consumer Contracts”
New York General Obligations Law § 5-702 Increases Scope of Applicable “Consumer Contracts” to Cover Amounts Up to $250,000
On October 11, 2019, Governor Cuomo signed assembly bill number A02653A into law, paving the way for an increased application of New York’s “plain English” statute to consumer contracts. Chapter 363 of the Laws of 2019 expands the monetary exclusion on the requirement of plain language in consumer contracts from $100,000 to $250,000.
In 1977, New York became the first state to pass legislation requiring plain language in consumer transactions. (See Rosemary Moukad, New York's Plain English Law, 8 Fordham Urb. L.J. 451 (1980)). The statute itself was modelled after Citibank’s simplification of its consumer credit contracts in January 1975. Citibank had modelled the language of such contracts after commercial contracts that understandably sought to preemptively account for every possible contingency. However, that resulted in impenetrable language to the average consumer. Removal of rarely utilized protective clauses and clarifying legalese beneficial only to sophisticated, transactional attorneys, reduced obscurity. Citibank found that consumer contracts could be drafted to explain a consumer’s obligations, rather than protect the creditor, while remaining valid and enforceable, and the New York Legislature found these aims simultaneously desirable and attainable.
The statute itself requires “plain language” in qualifying written agreements with consumers, and where the subject money, property or services are primarily used for personal, family, or household purposes. Plaint language “does not imply that only simple or monosyllabic language can be used in such clauses. Rather, what the law demands is that such provisions be clear and coherent.” Gross v. Sweet, 49 N.Y.2d 102,108 (1979) (applying plain language requirement to a release of liability signed by consumer of parachute company prior to sustaining injuries upon his landing).
In 1977, a dollar threshold capped these qualifying "consumer contracts" at $50,000. However, in 2018, Chapter 484 of the Laws of 2018 increased this threshold to $100,000 as a compromise to be re-assessed in the future. The future is now. The increase to $250,000 was not without its critics. On March 27, 2019, Assemblyman Andy Goodell went on record to voice his concerns:
When you're getting into the contracts of $250,000 and you impose a language requirement, what that does is it forces the attorneys and everyone else that deals with that to take well-defined legal terms and redefine them into plain language. And when it does, it creates ambiguity because well-defined legal terms that would otherwise apply are now replaced with other words and phrases that are not well-defined and where there is no case law.
If a consumer is engaging in a transaction that involves a quarter million dollars, they ought to be very careful and they ought to make sure they understand the contract, and they ought to seek counsel if they're engaging in a quarter million dollar transaction. And so, I would recommend that we keep our contract language threshold at $100,000, make sure our contracts that are in a higher amount are well-understood by everyone else and that consumers seek appropriate guidance when needed. . . .
The new $250,000 threshold takes effect in April 2020.
From the Filings Cabinet
10/07/19 Acting Superintendent Notes Requirements for a Dual Purpose Application Form That Appear to Serve as a Declarations Page
Form Filings for Applications that Appear to Bind Coverage and Provide Rating Information Must Abide by Form Requirements of Insurance Law § 3404(b)(2)
In a recent filing disapproval, a carrier sought approval of a new Homeowners Insurance Application that it had branded with the Homeowners Program insignia, rather than the carrier’s logo and name. The “application,” which the carrier noted was intended to be attached to the policy, bound coverage in and of itself, and included other rating information.
The carrier advised that the new application included additional items such as underwriting questions, acknowledgment, fraud statements and signatures that were not yet included in its application. Additionally, the carrier noted that while third party data was currently being used to pre-fill and verify property characteristics, the current application did not include data to verify responses to underwriting questions. Thus, operating on the assumption that applicants have responded to the best of their knowledge and acknowledged same by way of signature, the new application was intended to be included as part of the policy since the policy was issued on the basis of the information provided. Despite this, the carrier contended that the form was intended to be solely an application.
DFS advised that given the above, it appeared that the form was intended to be more than an application, as evidenced by the inclusion of the binding of the coverage and effectively rendering it a Declarations page. Such a form is acceptable, so long as it complies with New York Insurance Law, including the provisions of § 3404 (b)(2) that provides:
There shall be printed or typewritten at the head of such policy the name and home ofﬁce address of the insurer or insurers issuing the policy and a statement whether such insurer or insurers are stock or mutual corporations or are reciprocal insurers or Lloyds underwriters. In lieu of such statement a corporation organized under a special act of the legislature of any state may so indicate upon its policy. The head of the policy may also have such devices as the insurer or insurers issuing it desire.
Since this particular form omitted the carrier’s name and address of its home office at the head of the page, and was branded by logos other than that of the carrier—effectively drawing attention away from the carrier—the form failed to meet the requirements above. Additionally, the form omitted other rating information that would be required for such a form, including territory, protection class and others.
10/04/19 Smith v. State Farm Mut. Auto. Ins. Co.
Appellate Division, Fourth Department
Conclusory Statements by Plaintiff’s Doctor Does Not Raise a Triable Issue of Fact
Plaintiff was involved in two motor vehicle accidents which occurred approximately one month apart. After the first accident she made a claim against her own SUM policy issued by State Farm, and after the second she brought an action against the defendant driver and vehicle owner (the Pughs). The Pughs moved and State Farm cross-moved for summary judgment to dismiss the claims against them on the grounds that plaintiff’s injuries do not constitute a “serious injury” as defined in Insurance Law § 5102(d). The Supreme Court denied the motion and cross motion in part with respect to the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories. The Fourth Department overturned the order of the Supreme Court with respect to the permanent consequential limitation of use category in State Farm’s cross motion based on plaintiff’s failure to provided objective medical evidence in support of her position. Plaintiff provided an affidavit of her spine surgeon in which the surgeon asserted plaintiff sustained a 25% permanent consequential limitation of use but failed to provide any objective medical evidence supporting that conclusion. The appellate court also overturned the Supreme Court’s denial of the Pughs’ motion, holding that the Pughs presented persuasive evidence that the plaintiff’s injuries were related to preexisting conditions (i.e. the first accident) and the plaintiff’s responding papers failed to adequately respond the Pughs’ arguments.
The various defendants in this action moved and cross-moved for summary judgment dismissing the plaintiff’s complaint against them on the grounds that plaintiff did not sustain a qualifying serious injury as defined in Insurance Law § 5102(d). The lower court granted the motion and plaintiff appealed, specifically with regard to the dismissal of her 90/180-day claim. The appellate court upheld the lower court on the grounds that plaintiff failed to raise a triable issue of fact in opposition to the defendant’s motion.
Editor’s Note: As the opinion was sparse on why the court ruled the way it did, I pulled the motion papers from the trial court and will opine on why this observer believes the court upheld the decision of the trial court. The original motion papers outline a vast array of activities that the plaintiff engaged in within the first 180 days after the subject accident. These include, the standard household and self-care chores, but more interestingly plaintiff participated in the “newbie program” with the CNY Roller Derby. The papers go on to describe the very physical nature of the sport of roller derby and that a local paper published photographs of plaintiff participating in the sport within the first 180 days after the accident. In response the plaintiff did not address any of the arguments relating to her ability to perform certain tasks or activities.
10/09/19 Washington v. County of Nassau
Appellate Division, Second Department
Conclusory Statements by Plaintiff’s Physician Does Not Raise an Issue of Fact
Defendants moved and cross-moved for summary judgment alleging that the plaintiff did not sustain a serious injury as a result of the subject accident. In support of their motion and cross-motion defendants collectively relied on the same expert medical evidence. The defendants’ expert, basing his opinion on objective medical evidence, concluded that plaintiff did not sustain a serious injury as a result of the subject accident, specifically referencing plaintiff’s normal ranges of motion. The plaintiff responded to defendants with an affidavit of her treating physician. The trial court order notes that, while the plaintiff’s doctor opined that plaintiff suffered from a decreased range of motion, he did not explain as to how that determination was made. The appellate court held that because there was no objective medical evidence presented by plaintiff in opposition to defendants’ motion plaintiff did not raise a triable issue of fact.
08/09/19 Boring v. State Farm Fire and Casualty Company
Although it May be “Boring” You Need to Read and Follow the Policy
The policyholder sued State Farm for failing to pay for what he alleged to be the full estimate of water damage resulting from a pipe leak in his house. The District Court granted State Farm’s motion to dismiss Mr. Boring’s third attempt to plead a claim, but granted him one last leave to attempt to plead ambiguity in the policy endorsement. The policy endorsement with respect to water leakage would pay the reasonable cost to tear out and replace only that particular part of the building necessary to gain access to the specific point of the appliance from which the water escaped. For example, the policy would not cover the cost of repairing or replacing the system or appliance itself. On September 10, 2018, Mr. Boring suffered water damage to his home and placed a claim with State Farm for approximately 35-40 ft. of slab replacement. State Farm paid Mr. Boring about half the amount to replace 20-25 ft. of slab repair, but refused to pay for the remainder of the repair cost citing the endorsement.
The District Court essentially concluded that the claim asserted was that “but for” the endorsement the policy would have covered the loss. The policyholder first argued that the endorsement was unconscionable, but the Court indicated that is a defense to a claim and not an affirmative cause of action. The policyholder argued that the endorsement violated the “reasonable expectation doctrine”, but the Court noted that the endorsement was received with the policy. The policyholder asserted a bad faith claim for being denied benefits under the policy because of the endorsement, but the Court essentially ruled that the endorsement was part of the policy. In fact, the policyholder essentially failed to plead any evidence of delay or unreasonable treatment of his claim other than the disagreement whether the endorsement should govern the extent of his recovery. Although the Court granted leave to attempt to replead ambiguity in the endorsement, the Court was not inclined to accept an argument down the road that the language in the endorsement was ambiguous.
Therefore, the motion to dismiss the Second Amended Complaint was dismissed, but the Court granted one more time for the insured to attempt to plead a claim challenging the terms of the endorsement as ambiguous, but the Court clearly indicated its negative opinion with respect to any such claim.
This case represents an example of where a policyholder challenges a decision under a number of unclear theories, and fails to focus a court on the one or two best arguments in opposition.
Although the Court granted leave to serve yet another amended complaint seeking to argue “ambiguity” in the endorsement, the Court already indicated its clear reluctance to accept any such theory or argument.
State Farm’s consistent position and prompt payment to the insured under the terms of the endorsement may well have helped its cause in seeking to have the Court honor the endorsement by showing consistent treatment of the insured and its willingness to abide by the terms of the policy.
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