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Coverage Pointers - Volume XXII, No. 15

Volume XXII, No. 15 (No. 580)
Friday, January 8, 2021

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 and Connecticut appellate courts and Canadian appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers. 

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

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

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

 

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

No matter how much I try to think about other topics about which to write, all I can think about is the attack on the rule of law and our American institutions that took place on January 5.

As a lawyer, as a citizen, we must do all we can to protect and preserve the rule of law.  To encourage, to importune, to celebrate the invasion and to praise with love, those who committed these heinous acts, is an afront to liberty and cannot be countenanced or forgiven.

The only other time in our history when our Capitol under siege was on August 24, 1814, when the British set the building aflame, following the United States’ burning of York (modern day Toronto), then the capital of Canada.  It is, for our nation, a sacred site, and for 206 years, 4 months, 12 days, the Capitol remained as an unmolested symbol of our democracy.

Democrat or Republican, Liberal or Conservative, it makes no difference.  We should be ashamed and aghast of what occurred in Washington, D.C., and be appalled at those who encouraged and participated in that act of domestic terrorism.

We all have a duty to protect the rule of law and must be ever vigilant to stand up against those who seek to make a shameful mockery of the symbols of our nation’s strength and independence.

Enough said.

On to other topics.  The most important:

Go Bills!  Do remember, we are the ONLY New York State team in the NFL.


Happy New Year.  We start out the year with a great addition to our coverage team.

Scott Storm Joins the H&F Coverage Team:

We are pleased to introduce the newest member of our coverage team, Scott Storm, an attorney well-known to many of you.  I’ve asked Scott to introduce himself to those of you who may not know him and to reintroduce himself to his many friends in the insurance community:

Dear Friends:

The year 2021 is going to be a kazillion times better than the great pandemic of 2020.  It has to be, it will be, I promise.  It already is for me.  I am super excited to tell you that as of the 1st of the year I am now a member of Hurwitz & Fine, P.C.  “You are never too old to set another goal or to dream a new dream” ~ C.S. Lewis. 

A career change can be a little scary (ok a lot scary) but it marks an opportunity for re-evaluating life goals and establishing fresh vision, providing new motivation for the next season of life.  As one period of development ends it is time to celebrate as another begins.

Whether you are in a new job, thoughtfully setting a new life goal, renewing a relationship or considering a new fitness routine, new adventures are around the corner.  We all have the opportunity to start fresh -- writing on a blank page in the next chapter and continuing story of our lives.  “Although no one can go back and make a brand new start, anyone can start from now and make a brand new ending” ~ Carl Bard.

If I have not yet worked with you, I look forward to doing so and meeting you in-person or electronically.  I was a named partner at my former firm and have practiced in the areas of insurance coverage and defense work (with a particular affinity for SIU work) for over twenty years.  I will continue in these practice areas at Hurwitz & Fine, P.C. with renewed excitement and the encouragement and support of an exceptional team, all working together towards a common goal of providing you with the best service and legal product achievable.

Together, we will do our best for you.  Please take a moment to get to know me better here or at https://www.hurwitzfine.com/lawyers/profile/scott-storm.

In future editions of “Coverage Pointers”, please be on the lookout for my contribution: “Storm’s SIU Examen”, in which I will provide you with insight into new decisional and statutory law, as well as other developments, in special investigations and the war against insurance fraud, both in New York, Pennsylvania (the other state I am admitted in) and elsewhere throughout the country.    

I hope you have a year full of joy, success, laughter and unforgettable happy memories with family and friends – hopefully, without having to wear a mask!  May your faith, hopes and dreams take flight in the new year.  Here is to making the best of 2021 -- Happy New Year!

Scott
Scott D Storm

[email protected]

716-849-8900

 

Recoupment of Defense Fees:

In 1977, the California Supreme Court, in Buss v. Superior Court, 939 P.2d 766 (Cal. 1997), permitted an insurer that had defended a policyholder in a case, to recoup defense costs from that insured, when it was determined that in face, there was no duty to indemnify it.  The “recoupment” cases started moving east, with some states adopted a Buss approach and others, rejecting.

New York courts, state and federal, have more often allowed recoupment, so long as the insurer reserved its right to do so in its coverage position letter.  However, there has been some resistance to the concept and certainly there has not been unanimity in approach.

Just last month, we reported on a First Department decision that endorsed recoupment, if the right to do so was reserved.  Last week, the Second Department, in a decision only 43 days after the First Department, rejected recoupment, unless the policy specifically allowed it.

We discuss both cases in my column this week.  We have conferred with counsel for the insurer in the more recent case, and no decision has yet been made with respect to a request for leave to appeal to the Court of Appeals, to resolve the departmental conflict.

 

Risk Transfer Training:

So much of my casualty coverage work, these days, focuses on risk transfer – additional insured questions, contractual hold-harmless agreements and how the interrelationship between them impacts on the ultimate resolution of complex cases.  We are conducting, via Microsoft Teams, a regional training program on risk transfer next month for a good client.  If your shop can benefit from that training, let me know and we can arrange a date and time to help train your staff.

We have now scheduled or are in the process of finalizing the scheduling of five private sessions of this program, each one specially modified and crafted to meet the particular needs of the companies who have asked for the training.  If interested, let me know.

 

New York Coverage Protocol Training:

Another very popular program is one designed to remind, refresh or instruct claims professionals who handle New York insureds, claims and policies, on the special nuances (and traps) that are part of the New York coverage experience.  Does your staff need it? Here’s the way to find out.  Ask your staff these questions:

  1. Are you sending out reservation of rights letter in NY claims? 
  2. Do you know the “30-day” rule?
  3. Are you certain you know who gets copies of coverage position letters in New York?
  4. If the insured fails to respond to 10 letters seeking cooperation, can you successfully deny coverage for lack of cooperation?
  5. If the insured gives you notice of an accident, five years after it occurred, in violation of notice obligations in the policy, is that enough to sustain a late notice disclaimer?
     

If the answer to question “1” was “yes” or the answer to any of the remaining questions were “no”, sign up for NY Protocol training.

 

Newsletters:      

We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:

  • Employment & Business Pointers aims to provide our clients and subscribers with timely information and practical, business-oriented solutions to the latest employment and general business law developments.  Contact Joseph S. Brown  [email protected] to subscribe.
     

  • Premises Pointers:  This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!).  Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.
     

  • 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.
     

  • Medical & Nursing Home Liability Pointers.  Hurwitz & Fine, P.C.’s newest legal alerts contain timely news on the impact of COVID-19 on medical and nursing home liability claims.  Contact Chris Potenza at [email protected] to subscribe.

     

Peiper on Property and Potpourri:

We start 2021 heralding the addition of Scott Storm to our team.  As he will tell you below, Scott has a lifetime of claims experience, coverage analysis and investigation oversight.  Over the years, I have worked on cases with him and assumed the defense of lawsuits arising out of investigations he personally quarterbacked.  Invariably, his work has been precise and exceptionally well presented.  He has a steadfast and diligent eye for uncovering the  most obscured fraud and is a creative and passionate defender in litigation.  We’re delighted to have him as part of the team.

The new year, or rather the close of the last year, also brought with it a few interesting coverage decisions which we review in this week’s edition.  Reading every insurance case issued by the Appellate Division leads, at times, to the discovery of results which are seemingly light on legal support.  While we surely appreciate there may be reasons which are not clear from the text of a decision, it is also respectfully posited that courts will occasionally eschew more easily supported positions for the sake of fashioning a more equitable outcome.  As a younger lawyer, I witnessed this when the Appellate Division saved a llama from a very untimely eviction from his urban home.  While no real support for the llama could be found in law, the equities of the situation dictated a reprieve.  Llama cases are found everywhere, including in this week’s issue.

In the State Farm case reviewed below, the carrier denied coverage for the damage to the insured premises.  In so doing, the insurer extinguished additional ALE payments which, presumably, had been extended under an ROR during the pendency of the loss investigation.  The insured, as insureds do, filed an immediate lawsuit asserting State Farm’s denial resulted in a breach of the insuring agreement.  As part of that lawsuit, the insured then also filed a Request for Preliminary Injunction which sought a Court Order compelling State Farm to continue to issue ALE payments even though it had issued a full and complete denial of coverage.  In granting the request, the Court noted that the insured had presented a likelihood of success on the merits and would suffer irreparable harm if ALE payments were not timely made.

While no llamas were harmed in this case (at least to our knowledge), we respectfully struggle to see legal support for this conclusion.  The remedy being sought was money damages due to the carrier’s alleged breach of contract.  If, however, the insurer is effectively precluded from breaching the contract, did they ever breach?  What would be the remedy for the breach then, damages already paid?  And, what if State Farm’s coverage denial is eventually affirmed?  Does the insured have to pay back the money it received from a breach that never occurred?

The essence of this case is whether State Farm breached the policy. If they did, the insured is entitled to money damages arising from the breach.  If the Court was persuaded that State Farm’s position was incorrect, why not simply vacate the coverage denial and declare coverage in favor of the policyholder?  Instead, the Court used an equitable remedy to fashion a monetary payment where there is no conclusion that any such monetary damages were owed.  This is a dangerous and incorrect precedent.

As a final note, also coincidentally about llamas, my daughter turned 14 on December 22nd.  With COVID stopping any of the more common ways to mark the occasion, my wife booked the family to visit a llama farm.  This involved each of the four of us taking a llama on a 45-minute walk through the woods (actually, my son’s llama took him for a walk).  I must report it was a delightful way to spend the afternoon.  Perhaps, just perhaps, the Appellate Division was right all along.

That’s it for this week.  See you in two more.  

Steve
Steven E. Peiper

[email protected]

 

Church Punishes Family Who Charged and Proved Pastor Violated the Mann Act:

The Vicksburg Herald
Vicksburg, Mississippi
08 Jan 1921

 

PASTOR CHARGED WITH VIOLATING MANN ACT HE IS MARRIED AND GIRL SUES  FOR BREACH OF PROMISE

Returns to His Church as Passaic; Girl and Parents Dropped by the Church.

Paterson, N. J., Jan. 7.—A warrant for the arrest of Rev. Cornelius C. Densely, former pastor of the First Netherlands Reformed Church of Passaic on the charge of violating the Mann act, was issued today by United States Commissioner Delaney.

The charge against the pastor resulted from an investigation of his alleged elopement on November 12 with Miss Trina Hannenberg, a member of the congregation of his church.  They were away several weeks during part of which it is alleged they lived together in New York City, Buffalo and other places.

Recently they returned to Passaic, the pastor to his wife and family and Miss Hannenberg to her parents, Mr. and Mrs. Harinus Hannenberg.  Since then the girl has brought an action for $25,000 damages against the Rev. Mr. Densel alleging breach of promise to marry.

The Rev. Mr. Densel and Miss Hannenberg returned to Passaic on the same day and their re-appearance was dramatically announced when the pastor presented himself at a meeting of the church consistory.

Miss Hannenberg and her parents were expelled from the congregation and formal announcement of the action was made at Sunday services shortly after her return.

A movement to return the pastor to his charge was disapproved by church officials.  He has remained in Passaic since, however, and continued his attendance at church services.

Parents of the Hannenberg girl today filed papers here in a supreme court action against the clergyman for $10,000 damages, claiming the pastor caused them the loss of their daughter’s service and by his alleged conduct damaged the character of Mr. and Mrs. Hannenberg.

Editor’s Note: See next article.

 

Wilewicz’ Wide-World of Coverage:

As many of you know, I hold a couple of leadership positions in the Tort Trial and Insurance Practice Section of the American Bar Association. Most recently, I was selected to join the Editorial Board of The Brief, the TIPS’ quarterly magazine. It is one of the last paper-printed periodicals that still lands on the desks of tens of thousands of insurance professionals and lawyers around the world. If you have an article topic or idea about a piece that might be of interest to the readership, drop me a line. We are constantly on the lookout for cutting edge content across the tort, trial, and insurance spectrum. Currently, we are planning the summer and fall editions, so there is plenty of lead time to get something in development.

Speaking of the ABA, even though in-person conferences and CLEs remain largely on “pause”, there are still many opportunities for networking and continuing education available. If you’re not already a member, now is a good time to consider joining. I can attest to the fact that the virtual conferences that have been held have been really stellar, informative, and involving. From virtual trivia contests to Zoom happy hours (more fun than they sound), I have had the opportunity to meet and network with arguably more people than I might have at an in-person event. Further, one of the nicest benefits of ABA membership is the availability of free CLE programming. Many of the committees provide complimentary access to members, and there are so many programs that you can get all of your annual requirements met – free.

If you have any questions about the ABA or TIPS, drop me a note. I’d be happy to get you started or connected.

Until then,

Agnes
Agnes A. Wilewicz

[email protected]

 

Pastor Fined for Mann Act Violations:

The Kingston Daily Freeman
Kingston, New York

05 Apr 1922

PASTOR DENSEL FINED $500 IN CRIMINAL ACTION

The Rev. Cornelius Densel, former pastor of the New Netherlands Reformed Church, Passaic, who ran way in November, 1920, with Miss Trina Hannenberg, member of the choir and church sewing circle, but returned a few weeks later to his wife and eight children, was fined $500 Thursday by Judge Charles F. Lynch in federal court at Newark for violation of the Mann act.  The criminal action against the clergyman was an outgrowth of a civil suit begun by the girl and her parents in which the Rev. Densel sold his home to effect a settlement of $10,000.

 

Barnas on Bad Faith:

Hello again:

As we head into 2021, I join my colleagues in welcoming Scott Storm to Hurwitz & Fine.  Scott brings great knowledge and experience to our coverage team, and I am really looking forward to getting to work with him in the future.  I am excited for what he can bring to our team.

Speaking of teams, the Bills will open Wild Card Weekend with a home game at Bills Stadium Saturday at 1:00 p.m. against the Colts.  Perhaps you heard that New York State is finally going to allow fans into games, with 6,772 tickets to be distributed.  We have had season tickets in my family for over 40 years, so we were lucky enough to score a pair of seats to the first home playoff game in Buffalo in 25 years.  As a child, I was crushed when my Dad declined to take me to that game.  I was not going to take no for an answer this time, so as long as I get a clean Covid test, I will be there Saturday.  Fingers crossed.

As you know, we sometimes venture into other types of extra-contractual cases.  This week, I have a case from the Fourth Department where the court dismissed a claim for breach of contract and violation of General Business Law § 349.  The court concluded that the insurance company properly interpreted and paid benefits due under its policy.  Thus, it had not engaged in a deceptive business practice in violation of the statute.  I also have a recent bad faith case from the Supreme Court of Montana where the court held that two insurers did not act in bad faith by not tendering the policy limits where the liability of its insureds was never reasonably clear.

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

Brian
Brian D. Barnas

[email protected]

 

President Harding Tries to Set his Cabinet:

The Chico Enterprise
Chico, California

08 Jan 1921

 

HARDING’S CABINET PLANS ARE UPSET

By United Press

MARION, Ohio, Jan. 8.—Two final decisions have been made by President-elect Harding, it was learned in authoritative quarters here today.

1.         George B. Christian Jr., Marion, will be secretary to the president.

2.         Harry M. Daugherty, Columbus, will be the “Colonel House” of the Harding administration.

These are the only two certainties which stand out from the confusion which shrouds the cabinet situation today.  Harding appears farther from a final decision on his cabinet now than at any time recently.  His slate was virtually settled two weeks ago, all but a few posts.  But influences now bearing down on him with their full strength, financial, economic, racial and geographical, have undone his selections and he now appears uncertain as to what to do.

 

Off the Mark:

Dear Readers,

I hope all of our readers enjoyed the holidays and are off to a good start to the new year.  Despite the lack of family gatherings, Christmas was relaxing and enjoyable.  Although they are getting older, the kids were still up early and very excited.  After the initial frenzy of unwrapping was done, we spent the day eating and working on a puzzle.  New Year’s was very similar as we spent the day eating (we like to eat) and watching the Twilight Zone marathon.  Being home the entire time, we caught many classic episodes we haven’t seen in years.  I have too many favorites to list, but if you have a favorite episode, drop me a line and let me know what it is and why it is your favorite.

As the courts’ end of the year shutdown just ended, there were no newsworthy construction defect decisions to report on.  Stay tuned as I’m sure the courts will be back to rendering decisions in short order.

Until next time …

Brian
Brian F. Mark

[email protected]

 

Race is Consequential in Sentence:

Buffalo Courier
Buffalo, New York

08 Jan 1921

NEGRO SENTENCED TO 18 TO 27 YEARS; ATTACKED WOMEN

Camden, N. J., Jan. 7.—William Flamer, a negro, who the police said confessed to attacking Mrs. Elizabeth Wropson, sixty-six years old, and her daughter, Mrs. Katherine Davis, thirty-five years old, in woods near Fisher station yesterday afternoon, was sentenced today to eighteen to twenty-seven years imprisonment in the state prison at Trenton.  Flamer, who was indicated this morning, is under heavy guard at the Camden county jail here.

 

Boron’s Benchmarks:

We are waiting with eager anticipation for our turn to receive the COVID-19 vaccine. We hope and pray a shot in the arm will protect us from infection, reduce our stress, and ultimately allow us to return to our “normal” lives.  Whatever “normal” means to you and me.

Now, I’ve always assumed the idiom “shot in the arm” probably came into vogue in the 1950’s when the polio vaccine was introduced.  Not so, at least according to a number of internet sites suggested by Google’s response to my inputting of the search terms “shot in the arm origin”.

The advent of intravenous drug use predated the discovery of the polio vaccine by about a hundred years.  Before the 19th century ended, the hypodermic syringe had been perfected to the point it could capably deliver drugs – both prescribed and illicit – including vitamins, morphine, quinine, nicotine, codeine and cocaine directly into the arms of Americans.  One internet site told me it became “common practice” for some Americans to inject themselves with drugs or vitamins by the turn of the century.  Intravenous drug use in America eventually led to the coining of the phrase “shot in the arm” as American slang for an injection.  Usage of the idiom has increased from 1916 forward. Today, of course, the idiom has a consistently positive, hopeful connotation. 

At least that’s what my internet tells me.  Let me know if your internet disagrees.

For this edition of Boron’s Benchmarks, the Coverage Pointers beat monitoring and reporting on insurance coverage decisions of the high courts of the 49 states not named New York, I’ve selected for your consideration an Opinion issued on December 22, 2020, by the Supreme Court of Montana in Farmers Insurance Exchange v. Wessel.  The court analyzed the duty to defend issue, ultimately holding there was no liability coverage under the insureds’ homeowners policy with Farmers given that the allegations set forth against the insureds asserted intentional tortious conduct by the insureds.

Here’s hoping 2021 brings you a shot in the arm sooner rather than later, and Go Bills!

Eric
Eric T. Boron

[email protected]

 

Women Becomes First Legislative Leader, in B.C.:

New-York Tribune
New York, New York

08 Jan 1921

Woman Accepts Speakership When Given Right of ‘Last Word’

Mrs. Mary Ellen Smith, Honored by British Columbia Assembly, Is First of Sex in the World To be Made Head of Any Legislative Body

Special Dispatch to The Tribune

            SEATTLE, Jan. 7.—The position of Speaker of the House in the British Columbia provincial legislative assembly, which was offered yesterday to Mrs. Mary Ellen Smith, of Vancouver, B. C., carrier with it woman’s [privilege of “the last word.”  That was insisted upon to-day by Mrs. Smith, according to Vancouver dispatches.

            Mrs. Smith will be the first woman Speaker of any legislative body in the world.

            “It is the greatest honor the Cabinet of British Columbia can extend to me, and I shall accept it and endeavor to give just and careful rulings, while maintaining the order of the  House,” was Mrs. Smith’s answer when this honor was conferred on her.

            Owing to the remarkable plurality of more than 4,000 votes above her next opponent in the recent provincial elections held in British Columbia, and the fact that she headed the poll of twenty-eight candidates, the members of the Cabinet considered that Mrs. Smith was entitled to some recognition other than that of a mere member on the floor of the House. …

 

Barci’s Basics (On No Fault):

Hello Subscribers!

I hope you are all still staying healthy and safe! Can’t believe we’ve made it to 2021 already. I am going to mess up the dates when signing papers for several more weeks! Last time I asked you what the worst job you’ve ever had was. I have to say, I have worked many jobs so far in my lifetime – everything from fast food, to retail, to restaurants, to being a barista, camp counselor, babysitter, and now lawyer, etc. – and I think the worst was my two-month or so stint at Banana Republic. There was nothing really terrible about the job, it was just so boring. I learned there that I need to have some purpose when working. I hated standing there re-folding clothes when there were no customers or items to put away. It was so tedious, and I was not cut out for the boredom. I told myself I’d rather go back to working at McDonald’s, where there is always something to keep you busy. Luckily, I got my barista job back after Banana Republic and to this day mostly forget that I ever worked there.

For next time consider: What length of time do you consider necessary to have it counted as “living” somewhere?

On the no-fault front, I’ve got one case from the First Department that reiterates that the failure to appear for two properly scheduled EUOs is a condition precedent to coverage.

That’s all folks (Go Bills!),

Marina
Marina A. Barci

[email protected]

 

Women Declared Responsible for Murder:  Not:

Daily News
New York, New York
08 Jan 1921

CONVICTED SLAYER BLAMES WOMEN AS CAUSE OF DOWNFALL

            Buffalo, N. Y., Jan. 7.—Raymond Mulford, convicted of first degree murder for the slaying of Abraham Yellen Thanksgiving Day, today declared women have been the cause of his downfall.

            Mulford said the woman in Hartford, Conn., who claimed to be his wife was not married to him.

            The only wife he ever had, he said, was a girl he married eight years ago in Oneida, N. Y.

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Happy New Year! Cheers to 2021. Allow this year to be one of self-reflection and empowerment. Avoid the temptation to live in the shadows of those that came before, and instead illuminate your own path forward as a leader and motivator, better serving both others and yourself.

Short column today. This edition—the first of 2021—outlines a pre-proposed regulation being considered by DFS involving modifications to the enterprise risk management scheme in New York state. Public comment period is set to expire tomorrow, so read it now, or forever hold your peace.

Until next time,

Ryan
Ryan P. Maxwell

[email protected]

 

Finding an Ideal Wife:

The Buffalo Times
Buffalo, New York

08 Jan 1921

12-YEAR HUNT ENDS IN FIND OF IDEAL WIFE

Wealthy Foreign Bond Broker Routs Justice From Sleep to Perform Wedding.

SHE’S BONIFACE’S DAUGHTER

Alfred R. Rise Returns From a World Search—and Marries Irene Frances Donohue.

            NEW YORK, Jan. 8.—A twelve-year hunt for an ideal wife by Alfred R. Risse, a wealthy dealer in foreign bonds, ended yesterday morning.

            Risse, who sailed from America, twelve years ago on the French liner La Lorraine, in search of his ideal bride, awakened Justice of the Peace Malcolm Merritt, of Port Chester, to marry him to Irene Frances Donohue, daughter of Peter Donohue, an Eighth Avenue hotel manager. The Justice performed the ceremony in pajamas and smoking Jacket.

Wedding a Surprise.

The happy bridal pair could not be found yesterday either at Risse's elaborate bachelor quarters, No. 44 West Tenth street, in Greenwich Village, or at the bride's residence, No. 261 West Twenty-first Street.

Risse was reached by telephone at his office, No. 50 Broadway, Manhattan, to which he paid a brief visit. His housekeeper and his office employees were equally surprised by the news of his early morning wedding. Mrs. Risse returned to her own home before noon and left immediately after. None of her family was home at the time.

The bridegroom said that in most particulars his wife fulfilled the requirements which he had laid down when he sailed away twelve years ago in search of an ideal bride.

 

Describes "Ideal."

Here are his specifications:

"She must be dark, with raven hair. She must have good teeth. She must have a rosy complexion and a willowy figure. She must combine with the English conservatism and love of home, the vivacity of the French, and with these two, the intensity and fervor of the Italian girl. She must know what to take up and what to drop; how to say clever things and when to stop. She must be five, eight inches tall and weigh 140 pounds."

Mr. Risse, who is tall and well built, declined to state where he met his ideal bride. He himself was born in Mexico and educated in Germany. At the time he started on his international wife hunt, he said he was the brother-in-law of Fred Stalworth, a millionaire.

 

CJ on CVA and USDC(NY):

Happy New Year Readers,

It seems like just yesterday I was climbing on my roof and putting up lights and decorations. Sadly, the holiday season has come to an end, and our home seems a little less festive. However, there are still many things to look forward to. Notably, the ski resorts south of Buffalo are operating, and while we have had some unpredictable weather, the snow is sticking to the slopes. I have found that skiing is the perfect activity these days as masking up is not out of the ordinary at all. In other Buffalo news, the Bills have a home playoff game this weekend! I am sure my colleague, Brain Barnas, will discuss this at length in his cover note this week, but I could not let this momentous occasion pass by without saying “Go Bills!”

The courts were predictably quiet over the past two weeks. I decided to go into the archives from last year and discuss another COVID-19 business interruption claim. As many of you know, Ryan Maxwell and Lee Seigel are the go-to COVID-19 insurance litigation guys here at H&F, but I wanted to take this opportunity to do a deeper dive into some of these cases in the District Courts of New York. The case I present in this week’s column is also notable as Judge Cronan includes a quick survey of nationwide business interruption litigation in his opinion (found on pages 16-17). If you want to have a quick view of where things stand in various districts around the country, this may be a great place to look.

See you in two weeks,

CJ
Charles J. Englert, III

[email protected]
       

 

The Babe Coming to Western New York:

Times Herald
Olean, New York

08 Jan 1921

In the Theatres

BABE RUTH IN “HEADIN’ HOME” AT PALACE SUNDAY

            “Babe” Ruth, the “miracle man” of the 1920 baseball season, the idol of every true sport-loving American from six to sixty, will be in the city Sunday at the Palace theatre.

            The most discussed man in America will make his debut as star of the screen here in a sensationally dramatic, super-feature, six-part production, “Headin’ Home.”  Characterized by the most fastidious critics on metropolitan newspapers as the “treat of a miracle screen season,” Ruth has scored another triumph that has endeared him to thousands of people who had only read or heard of his diamond exploits via the sporting columns of the press.

            For one full week “Babe” Ruth in “Headin’ Home” attracted thousands of people to the spacious Madison Square Garden in New York City as no other event ever held in that historic auditorium attracted them.


Dishing Out Serious Injury Threshold:

Dear Readers,

Happy New Year!!! Hope everyone has a happy, healthy, and prosperous New Year. I was lucky to be able to spend time with family on New Year’s after celebrating Christmas separately. Cheers to looking forward.

In the Serious Injury Threshold world, we have two cases this issue. The first deals with the remoteness in treatment pertaining to plaintiff’s medical treatment providers with regard to establishing causation. The second deals with a plaintiff’s expert report being sufficient, as to limited range of motion, to establish a question of fact.

Stay safe,

Michael
Michael J. Dischley

[email protected]
  

 

Booze Returned:

The Vicksburg Herald
Vicksburg, Mississippi
08 Jan 1921

 

STOLEN BOOZE TO BE RETURNED TO OWNERS

            New Orleans, La., Jan. 7.—A large quantity of whiskey, wines and cordials captured by the policy when they raided the home of a man alleged to have been implicated in numerous burglaries here during the past two months, will be turned over to the owners without question and there will be no further act proceedings, District Attorney Henry Mooney announced today.

            The liquor, it was explained all had been stolen from private residences.  Shortly after the announcement of the district attorney it was identified by numerous citizens.

            Nearly a hundred persons, victims of the recent “burglary wave,” spent the day identifying articles token from them.  Three men, the oldest 26 years, are being held by the police.  One was said to have confessed.
 

Bucci on “B”: 

Hello subscribers,

I do not usually address politics in a professional setting but gosh, I was riveted to the TV watching the storming of the Capitol Building on Wednesday.  The year 2020 had to be the most history making year in history, and not in a good way, and 2021 will not magically erase America’s problems.  Still, despite the insanity, it looks like there is light ahead…and I am just waiting to embrace it.  On that note, HAPPY NEW YEAR TO ALL!

There were a couple of cases addressing Coverage B this week, but the disputes involved general issues such as an insurers obligation to defend is based on the allegations in the complaint…nothing earth shattering.  Still, I present them to you…because that is how I roll.

Speaking of rolls, how long do I have to lose the rolls I put on during the pandemic before there is no pandemic and I am out of excuses?  Or maybe I could just accept them, get used to them, and maybe then appreciate them?  Probably not!

See you next time.

Diane
Diane L. Bucci

[email protected]

 

Immigration an Issue, 100 Years Ago:

New York Herald
New York, New York

08 Jan 1921


STUBBORN FIGHT IS INDICATED NOW ON IMMIGRATION BILL

Measure to Bar Aliens Entirely for One Year Has Friends and Foes.

ALL WANT TO BE HEARD

Lists Will Include Witnesses As to Permanent Legislation.

SIEGEL CHIEF OPPONENT

Says law Would Shut Out Men Who Fought in War in U.S. Armies.

Special Dispatch to The New York Herald.

New York Herald Bureau

Washington, D. C., Jan. 7.

            Prolongation of the hearings on the drastic one-year immigration restriction bill for an indefinite period has been decided on by the Senate Committee on Immigration.  Evidences of opposition to the measure are accumulating in the record of testimony taken thus far, this being increased notably to-day by the statement of Representative Siegel (N. Y.), author of the minority report on the Johnson bill.

Additional witnesses will be heard next week for three specified days up to January 12. After that the question of further hearings will be determined by the nature and number of requests for hearing, and also by the disposition of the committee as to the question of taking further testimony.

Many Await Hearings.

The formal notice given out to-day by Senator Colt (R. I.), chairman of the committee or the hearing programme, shows that a large number of organizations yet remain to be heard, including Major J. L. Clarkson of the National Competitive Industries; William S. Bennett, Chicago, formerly a member of the Immigration Commission; representatives of transportation concerns, including C. T. McCoy, Western railroads' representative, and F. C. Hurley of New York, secretary of the National Immigration Council; Sidney E. Morse, New York, secretary of the Transatlantic Passenger Conference; Lawson Sandford, New York, and representatives of the Cunard steamship line.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Happy New Year! Here’s to a return to normalcy in 2021. What are you looking     forward to? For me, professionally, I’d really like to find myself in a court room    again. Personally, I can’t wait to go to a concert—any live music!

Here’s to a better 2021.

Lee
Lee S. Siegel

[email protected]
       

 

Auto Thefts Raise Insurance Rates:

Fall River Daily Evening News
Fall River, Massachusetts

08 Jan 1921

AUTO THEFTS LIKELY TO RAISE INSURANCE

So Many Cars Stolen That Radical Revision of Rates Will Be Made

So many automobiles were stolen during 1920 and so many destroyed by fire that there will be radical changes in the basis on which motor car insurance rates are figured, says the Insurance Press.

Insurance companies and the rating bureaus have been consulting on raising the rates on automobile risks for some time, but the new rates will not be made public for several weeks.  Separate rates will be established against theft and fire, it is understood.  In a word, there will be no blanket insurance.

“The liability coverage plan will likewise be revised and rates are expected to be higher on the new basis,” the Insurance Press adds.

“Property damage and collision losses, which have cost some of the companies much money during the past year, are also receiving attention at the hands of the conference committee, but just how these will be worked out has not yet been announced.”

 

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

Dear Subscribers,

Happy New Year! I hope your holidays were enjoyable even if different this year. Although I could not see my family this year, I already plan to make next year a memorable one in our new home! As I write this, Jim and I are t-minus 3 weeks from moving into our house. And even though a lot will still need to be finished, even after we move in, I can’t wait to spend the first night admiring all that has been done. However, as of now, I am very excited for a shiny new coat of paint that the 100-year-old clawfoot tub will be getting soon. Although I can be creative at times (remember my Bob’s Burgers Bathroom series creations?), I admitted defeat and brought in outside help from a local Buffalo company. The next major project we plan on tackling in the next 3 weeks is refinishing the hardwood floors. Under the orange toned carpet, there is lovely original hardwood floors. It may end up being more than I anticipated, but after speaking with CJ on CVA (who has done it before), I am a little more confident about at least attempting it ourselves first. So, wish me luck! I’ll let you know how it turns out next time.

Cara
Cara A. Cox

[email protected]

 

Heather
Heather Sanderson

Sanderson Law (Alberta, Canada)
[email protected]

 

History of Insurance:

The Evening Herald
Fall River, Massachusetts

08 Jan 1921

 

INSURANCE HAS GROWN RAPIDLY

From Modest Beginning It Has Developed Until Now It Touches Every Line of Human Endeavor.

(by CHARLES McL. HADLEY.)

            Insurance is today recognized as the bulwark of modern civilization.  From feeble and modest beginnings, it has expanded until it is probably the greatest single factor in the life of any modern community.  Its activities are so varied that they touch every field of human endeavor and enable mankind to look forward with confidence to whatever the future may have in store.

            Probably insurance is the earliest welfare work which man undertook after he began to engage in commercial undertakings.  While we have no records, we may assume beyond doubt that the ancient Phoenicians, those hardy mariners who first spread their sails to search out unknown seas, had some sort of combined guarantee to protect from total destruction the business structure which they had been years in erecting.

            Up to the beginning of the eighteenth century, all of these organizations, whether for marine insurance, fire insurance, or life insurance, were probably voluntary organizations or companies of individuals, who had a common interest to protect.  In the early seventeen hundreds, the first fire insurance charter was granted an English company shortly following the disastrous conflagration which swept the city of London.

            The beginnings of life insurance probably originated in the desire of the owners of a vessel to furnish some assurance to the captain that his wife and children would not be left dependent upon charity in event of his death through  the hazards of the sea.  From these beginnings and from the protection against the obvious hazards of the elements and time, insurance has developed until it is now possible to buy protection against practically every hazard of our modern complicated social structure.

 

Rauh’s Ramblings:

Dear Readers:

2021 is finally here and I am very hopeful that it will be much better than 2020!  For starters, the Buffalo Bills are the AFC East Champions for the first time since 1995 and we have waited a very very long time for that title!  In fact, for most of my life, being a Bills fan has been difficult and typically heartbreaking.  To think that the Bills actually have a shot at the Super Bowl this year is so exciting since I was just a baby the last time we went to the Superbowl (and lost three times in a row).  The team can only go up from here and it finally feels good to be a Bills fan!

Today, I bring you a case from the NYS Fourth Department Appellate Division in which the Plaintiff sued Defendant for breach of contract and violation of General Business Law § 349 alleging that she was entitled to more money than what the defendant paid to her under an accident insurance policy.  The Court dismissed the plaintiff’s claim stating that the elements required to sustain a claim under GBL § 349 were not met.

Until next time….and GO BILLS!!

Patty
Patricia A. Rauh

[email protected]
       

 

Headlines from this week’s issue, attached:

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

  • Employment Discrimination Claim Falls Outside of Claim Made Policy Term

  • Carrier Proves Insured Was Not Resident of the Household

  • Two Departments Separated by Common Law.  Second Department Denies Carrier Recoupment of Defense Costs, 43 Days After First Department Allows Recoupment

  • Snow Removal Contractors Remain in the Lawsuit Because They May Have Created the Condition that Caused the Fall.  One Carrier Procured the Proper Insurance but the Other Did Not.

  • Counsel’s Failure to Make Motion to Change Venue and File Opposition to a Petition to Stay Uninsured Motorists Arbitration Leads to Permanent Stay of Arbitration

  • Second Department Ignores Mt. Vernon and Assault and Battery Exclusion; Thousands Flee

  • Second Department Confuses “Insured Contract” with AI Endorsement.  Thousands Flee (Again)

     

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Unclear Question in Insurance Application Precludes Rescission Argument
  • Triable Issues Surrounding Cooperation of Insured During Investigation Results in Denial of Motion
  • Insured’s ALE Rights are Preserved via Injunction Where the Sufficiency of Coverage Denial Remains in Dispute

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

[email protected]

  • Plaintiff’s Expert Examination of Lumbar Spine Found to be Too Remote to Establish Causation
  • Plaintiff Was Able to Raise Triable Issue of Fact as to Causation and Significant Limitation of Use Based on Expert Affidavit Sufficient to Preclude Summary Judgment

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz

[email protected]

  • Second Circuit still on holidays from coverage matters.

 

BARNAS ON BAD FAITH
Brian D. Barnas

[email protected]

  • General Business Law § 349 Claim Dismissed
  • Bad Faith Claims Dismissed Where the Liability of the Insureds Was Never Reasonably Clear

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

  • Liability Additional Insured Has No First Party Rights

 

BUCCI ON “B”
Diane L. Bucci
[email protected]

  • The Duty to Defend Still Based on Allegations in Complaint  
  • No Coverage Unless Relief Sought Includes a Demand for Money Damages 

 

OFF THE MARK
Brian F. Mark
[email protected]

  • No notable decisions to report in this edition as the courts are just getting back underway following the end of the year shutdowns.

 

BORON’S BENCHMARKS
Eric T. Boron

[email protected]

  • Homeowners Insurance – No Liability Coverage for Alleged Acts of Insureds Because They Were Assertions of Intentional Conduct and Therefore Not An “Occurrence”

 

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

[email protected]

  • Failure to Appear for Duly Scheduled EUOs Results in No Coverage

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]

Regulatory Wrap-Up

  • Pre-Proposed Outreach Proposes Changes Which Would Include Enterprise Risk Management Function Assessment of Cybersecurity, Climate Change, Epidemic, and Pandemic Risks

 

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

[email protected]

  • Without Physical Loss, Business Interruption Claims are Denied. Likewise, if a Property is Accessible, Civil Authority Coverage Does Not Provide an Avenue of Recovery

 

CARA’S CANADIAN AND CROSS-BORDER CONNECTIONS (WITH HEATHER SANDERSON)
Cara A. Cox

[email protected]

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

  • Look Before You Leap: Delving into the Cannabis Business

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

  • Defendant Did Not Violate General Business Law § 349 as the Terms of the Policy Were Not Deceptive or Misleading and the Plaintiff Did Not Suffer Any Injury

 

We wish you peace, health and success in the New Year.  Oh yea, one last thing:  GO BILLS.

Dan

 

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

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


NEWSLETTER EDITOR
Dan D. Kohane

[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz

[email protected]

ASSISTANT EDITOR
Patricia A. Rauh

[email protected]

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

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

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Diane L. Bucci

Mirna Martinez Santiago

Scott D. Storm

Brian D. Barnas

Eric T. Boron

Marina A. Barci

Ryan P. Maxwell

Charles J. Englert

Cara A. Cox

Patricia A. Rauh

Diane F. Bosse

Joel R. Appelbaum

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

Michael F. Perley

Scott D. Storm

Eric T. Boron

Brian D. Barnas

NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[email protected]

Marina A. Barci
 

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

Mirna Martinez Santiago

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri

Dishing out Serious Injury Threshold

Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Off the Mark

Boron’s Benchmarks

Bucci on “B”

Barci’s Basics (on No Fault)

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

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

Rauh’s Ramblings

 

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

01/07/21       Hyperion Medical P.C. v. Trinet HR III, Inc.
Appellate Division, First Department
Employment Discrimination Claim Falls Outside of Claim Made Policy Term

Hyperion sought coverage for employment discrimination claims with respect to a lawsuit commenced by a former employee during the policy period, two years after plaintiff received notice that the employee had made a discrimination claim with the Equal Employment Opportunity Commission (EEOC) and the New York State Division of Human Rights. The Steadfast policy provides that claims are deemed to be first made when the insured received notice of the claim, that more than one claim involving the same wrongful act or interrelated wrongful acts are deemed to constitute a single claim, and that claims dating from before the inception date of the policy would be excluded.

The claims asserted by the employee in her complaint and in her administrative claim were substantially the same, and therefore are deemed to be a single claim arising before the policy period. Likewise, the office manager, the subject of plaintiff's harassment allegations, was not entitled to defense and indemnification because he was not an employee under the client services agreement with defendant TriNet HR III, Inc. at the time the employee's claim was first made.

Insurance Law § 3420(d) did not apply because the statute applies only in cases involving death and bodily injury claims arising out of a New York accident and brought under a New York liability policy.

Furthermore, Steadfast did not waive its claim that the EEOC charge and the lawsuit were interrelated and therefore, that the claim was a single claim dating from 2016, by failing to mention that defense in the disclaimer letter. An insurer can never waive a defense that the claim is not within the scope of coverage, because an "extension of coverage cannot be attained by waiver, which is a voluntary and intentional relinquishment of a known right" (Albert J. Schiff Assoc. v Flack, 51 NY2d 692, 698 [1980]). The term "claim" is understood as defined by the policy, which puts all defined terms in boldface.

Editor’s Note:  If there were a claim for emotional distress, the claim could have been considered on for “bodily injury”.

 

01/05/21       Tower Insurance Company of New York v. Ginin
Appellate Division, First Department
Carrier Proves Insured Was Not Resident of the Household

Tower made a prima facie showing that it is entitled to judgment as a matter of law based on the affidavit of its claims adjuster stating that he spoke with the policyholder, Ginin, who admitted, in a signed written statement, that he did not reside at the premises when the incident occurred, as required by the policy.  Moreover, Ginin had admitted the allegations in the complaint that he did not reside in the premises when the incident occurred in light of his default in appearing in this action

The Tower policy did not provide coverage for Ginin's spouse who only qualified as an insured if the named insured was a member of the same household. The conclusory affirmation of defendant Crespo's counsel contained no evidence that at the time of Crespo's alleged incident, Ginin actually resided at the insured location where Crespo was a tenant in one of the two units and was insufficient to raise issues of material fact or to warrant further discovery.

 

12/30/20       American Western Home Ins. Co. v Gjonaj Realty Mgt. Co.
Appellate Division, Second Department
Two Departments Separated by Common Law.  Second Department Denies Carrier Recoupment of Defense Costs, 43 Days After First Department Allows Recoupment

In our November 27th issue, we reported on a First Department case that sanctioned a liability carrier’s ability to recoup defense costs, if properly reserved and if a court determined that the insurer had no duty to indemnify:

11/17/20         Certain Underwriters at Lloyd's v. Advance Transit Co.
Appellate Division, First Department
Important Decision: As Legislative History and Language of New York Notice-Prejudice Statute Clearly Indicates, Claims Made Policies Can Require Timely Reporting and Absence of Prejudice is Irrelevant to Policy Terms. Moreover, First Department Upheld Right to Recoup Defense Costs, if Reserved in Coverage Position Letter.
 

Claims Made policies are not subject to “prejudice” requirements for notice. A claims-made policy can set a definite time frame for reporting claims, irrespective of prejudice, which can include "the policy period, any renewal thereof, or any extended reporting period." The insured reported the claim to Underwriters outside the policy period and the extended reporting period and therefore, the claim was untimely.

New York law further permits insurers to provide their insureds with a defense subject to "a reservation of rights to, among other things, later recoup their defense costs upon a determination of non-coverage. In its reservation of rights letter, plaintiff reserved the right to recover payments made by Underwriters including payments for defense costs and expenses, attorneys' fees, and costs of suit.”

Now, the Second Department has rejected that approach and decided the opposite, that an insurer does not have that right.

American Western commenced a Declaratory Judgment Action seeking an order that it had no obligation to defend or indemnify its insured.  In the underlying case, in January 2011, Gecaj commenced a personal injury action against the insureds to recover damages for injuries he allegedly sustained in May 2010 when he fell from a ladder at the premises owned by Webb and managed by Gjonaj Realty. The insureds were insured under a policy of liability insurance issued by American Western and under the terms of the policy, upon timely notice to the insurance company of Gecaj's claim, the insureds would be entitled to be defended and insured by the insurance company.

The insureds failed to notify the insurance company about Gecaj's accident until October 2014—more than four years after the incident, and after an inquest on damages had occurred and judgment in the sum of $900,000 had been entered against the insureds.

Approximately one week after the insurance company received notification of Gecaj's accident, it advised the insureds that it was refusing to defend or indemnify them and was denying coverage based on their failure to comply with the terms of the policy requiring them to provide timely notice of Gecaj's accident.

The insurance company also informed the insureds that if the judgment, which had been entered on default, was set aside, the insurance company would reconsider its denial of coverage. Thereafter, in December 2015, upon receipt of notice that the Supreme Court in the underlying action had vacated the default judgment, the insurance company advised the insureds that it would defend them in the underlying action and provide indemnity coverage to them. However, at that time, the insurance company also notified them that it was reserving its rights under the terms of the policy to deny any coverage as it was not then aware whether it had been prejudiced in its investigation or ability to defend the action.

Approximately two months later, in February 2016, the insurance company notified the insureds that, since it had been notified that Gecaj had appealed the vacatur of the default judgment, it was reserving its rights to refuse to defend or provide indemnity coverage to the insureds in the underlying action upon any reinstatement of the default judgment (by an appellate reversal of the vacatur of the default judgment).

The Appellate Division, First Department, reversed the vacatur of the default judgment and reinstated the default against the insureds. At that point, the insurer advised the insureds and Gecaj, by letter dated May 2, 2017, that it was denying coverage and reserving its right to recover any fees and costs incurred in defending the insureds in the underlying action.

Thereafter, the insurance company commenced this action, inter alia, for declaratory relief, and moved for summary judgment declaring that it (1) has no obligation to defend and provide insurance coverage to the insureds in the underlying action, (2) has no obligation to pay any judgment in favor of Gecaj against Gjonaj Realty and Webb arising out of that underlying action, and (3) is entitled to recover the defense fees and costs incurred on behalf of the insureds in the underlying action from May 2, 2017, to date.

The Second Department agreed that the insurer was prejudiced and had no duty to indemnify the insureds in the underlying action.

The lower court had ordered that the insurer could recoup the defense costs it incurred when it defended the insured after the vacatur of the default and through the appeal.

The Second Department disagreed with that portion of the order.  It held that allowing the insurance company to recover the costs it incurred in defending the underlying action risks eroding this well-established doctrine and effectively would make the duty to defend merely coextensive with the duty to indemnify.

It recognized that there was a trend allowing insurance companies to recoup defense costs in actions where no duty to indemnify has been found began in state courts in the United States in 1997, after the California Supreme Court, in Buss v. Superior Court (16 Cal 4th 35, 49-51, 939 P2d 766, 776-777), held that a liability insurer has a right of recoupment against its insured for the costs of defending an underlying action where most or all of the claims are later found to be outside of the policy coverage. It also acknowledged other, more recent cases, where some courts have rejected the Buss doctrine.

The Second Department then acknowledged that a number of New York courts had permitted recoupment, so long as it was reserved by the insurer, including the First Department case, mentioned above.  It then nodded favorably to recent federal District Court cases where the courts found that an insurance company's recoupment of defense costs was inappropriate where the policy at issue provided a duty to defend, but had no express contractual provision allowing for recoupment of defense costs

The court agreed with that view, holding that if the insurance company had wanted to include language that allowed it to recover the costs of defending claims that are later determined not covered, it could have done so. It did not.

Finally, the court rejected the argument that a unilateral reservation of rights for recoupment made a difference.  If it was not in the policy, the carrier could not do so.

Editor’s Note:  A clear split between the Departments and primed for Court of Appeals consideration.

 

12/30/20       Georges v. Resorts World Casino New York City
Appellate Division, Second Department
Snow Removal Contractors Remain in the Lawsuit Because They May Have Created the Condition that Caused the Fall.  One Carrier Procured the Proper Insurance but the Other Did Not.

On March 6, 2015, Georges allegedly was injured when she slipped and fell on snow and ice in a parking lot owned and operated by Resorts World and Genting. In October 2013, Resorts World and Elite Parking entered into an agreement whereby Elite Parking would perform certain snow removal services at the subject premises and would procure insurance naming, among others, Genting as an additional insured. In November 2014, Elite Parking entered into a Subcontractor Agreement with Elite Snow, whereby Elite Snow agreed to perform Elite Parking's snow removal services at the premises and to procure the required insurance.

Georges sued Resorts World, Genting, and Elite Parking. Resorts World and Genting commenced a third-party action against Elite Snow, and Elite Snow was subsequently added as a defendant in the main action.

Thereafter, Elite Snow moved for summary judgment dismissing the amended complaint, and various cross-motions followed.

Under Espinal v. Melville Snow Contrs., 98 NY2d 136, 138, there are "three situations in which a party who enters into a contract to render services may be said to have assumed a duty of care—and thus be potentially liable in tort—to third persons: (1) where the contracting party, in failing to exercise reasonable care in the performance of his [or her] duties, launche[s] a force or instrument of harm; (2) where the plaintiff detrimentally relies on the continued performance of the contracting party's duties and (3) where the contracting party has entirely displaced the other party's duty to maintain the premises safely".

Here, Elite Snow and Elite Parking each failed to make a prima facie showing that, among other things, the snow-removal efforts undertaken did not create or exacerbate the allegedly dangerous condition on the premises so the claims against them remain.

On the claim that Elite Snow failed to procure proper insurance, Elite Snow established it procured the requisite insurance, and no triable issue of fact was raised in opposition.  However, Elite Parking failed to secure the insurance it was to procure as its insurance policy expressly excluded snow removal or plowing operations.

 

12/29/20       American Reliable Insurance Company v. Delmonte
Appellate Division, First Department
Counsel’s Failure to Make Motion to Change Venue and File Opposition to a Petition to Stay Uninsured Motorists Arbitration Leads to Permanent Stay of Arbitration

Delmonte filed an uninsured motorist claim under his motorcycle insurance policy, issued by American Reliable (“insurer”). The insurer denied coverage, and Delmonte served a demand for arbitration. Insurer then filed a petition to stay arbitration, which Delmonte failed to oppose, and the petition was granted on default.

A party seeking to vacate an order entered upon default must demonstrate both a reasonable excuse for the default and a potentially meritorious claim or defense, as relevant.

Delmonte’s proffered excuse of law office failure was not supported by the record. Counsel properly served a demand for change of venue on petitioner pursuant to CPLR 511. However, counsel then failed to make a motion to change venue, as required by CPLR 510 and 511, and also failed to file any opposition to the petition.

Counsel claims that he was under the impression that the court would first resolve his demand for a change of venue and cites his unfamiliarity with local rules in Supreme Court, New York County, as a basis for this nonfeasance. However, the court found that the rules relating to change of venue were not local, but part of the statewide statute. Since he never moved for a change of venue, as required under the statute, there was nothing for the court to resolve.

The court noted defense against the stay of arbitration was potentially meritorious. One of the stated reasons for denial of coverage was that, on the date of the accident, respondent did not possess a valid license. However, he apparently did.  However, the failure of counsel to comply with statutory requirements of which he was plainly aware cannot be deemed a reasonable excuse for his failure to answer the petition.

 

12/23/20       Union Mutual v. Johnson
Appellate Division, Second Department
Second Department Ignores Mt. Vernon and Assault and Battery Exclusion; Thousands Flee

This one is just wrong.

On June 22, 2014, Briggs was injured at the premises owned by the defendant Johnson, when he sustained several gunshot wounds to his abdomen. Briggs commenced an action against Johnson to recover damages for the injuries he sustained as a result of the shooting. Johnson was insured by Union Mutual  covering the premises.

After Union Mutual received notice that Johnson sought coverage under the subject policy for the underlying action, it sent Johnson a declination based on an assault and/or battery exclusion, and that the policy was void because of application misrepresentations.

The duty to defend is triggered whenever the allegations of a complaint, liberally construed, suggest a reasonable possibility of coverage, or the insurer has actual knowledge of facts establishing a reasonable possibility of coverage.

The court held that in the underlying action, Briggs alleged in relevant part that: he "sustained injuries while lawfully at the [subject] premises, including severe injuries to his abdomen"; and that Johnson was "negligent in failing to properly monitor, secure, supervise and/or intervene to prevent an individual from entering the residence with a firearm"; the "incident occurred as a result of [Johnson's] negligence".  Further, the assault and/or battery exclusion in the subject policy carves out an exception to the exclusion for "bodily injury resulting from use of reasonable force to protect persons or property." The record is silent as to the identity or motive of the shooter, and the court held that Union Mutual failed to establish that allegations in the complaint in the underlying action cast that complaint solely and entirely within the assault and/or battery exclusion.

Why was the court wrong?

In the Mt. Vernon case, the Court of Appeals considered an assault and battery exclusion where an individual was assaulted by an unknown individual in an apartment house.  The claim against the premises owner was “negligent security”.  The Court of Appeals found, that despite the negligence claims, the “operative act” that caused the injury was the assault and battery:

Similarly, though Hunter's claim sounds in negligence, the theory she asserts has little to do with whether the injury sought to be compensated was based on an assault excluded under the policy. Instead, the language of the policy controls this question and while the theory pleaded may be the insured's negligent failure to maintain safe premises, the operative act giving rise to any recovery is the assault. While the insured's negligence may have been a proximate cause of plaintiff's injuries, that only resolves its liability; it does not resolve the insured's right to coverage based on the language of the contract between him and the insurer. Merely because the insured might be found liable under some theory of negligence does not overcome the policy's exclusion for injury resulting from assault (see, New Hampshire Ins. Co. v. Jefferson Ins. Co., 213 A.D.2d 325, 624 N.Y.S.2d 392; Ruggerio v. Aetna Life & Cas. Co., 107 A.D.2d 744, 484 N.Y.S.2d 106).

Mount Vernon Fire Ins. Co. v. Creative Hous. Ltd., 88 N.Y.2d 347, 352, 668 N.E.2d 404, 406 (1996)

 

12/23/20       Bodlovic v. Giannoutsos
Second Department Confuses “Insured Contract” with AI Endorsement.  Thousands Flee (Again)
Appellate Division, Second Department

In the 20+ years I’ve written this column, I don’t recall ever having two “Thousands Flee” cases in the same issue.  For those who haven’t followed this subject closely, the tag “Thousands Flee” is attached to a summary when the court simply misconstrues the law.  This is such a case.

Bodlovic allegedly was injured while working for Gigi Salon & Spa when a motorized rollup gate malfunctioned and struck him. Gigi Salon leased the subject premises from the Giannoutsos. Bodlovic and his wife commenced this action against the defendants alleging, inter alia, that the defendants had actual or constructive notice of the dangerous condition of the gate.

At the time of the accident, Gigi Salon was covered by a commercial general liability policy issued by United States Liability Insurance Company (“USLIC”), which named the Giannoutsos as an additional insured. Giannoutsos commenced a third-party action against Gigi Salon seeking indemnification and contribution, and a second third-party action against USLIC seeking a declaration that USLIC was obligated to defend and indemnify them in the main action, as they were entitled to coverage under Gigi Salon's policy.

USLIC moved for summary judgment declaring that it is not obligated to defend or indemnify the Giannoutsos in the main action, arguing that its policy excludes coverage pursuant to a bodily injury exclusion contained in an endorsement to the policy.  In opposition, the Giannoutsos argued, inter alia, that they were entitled to coverage pursuant to an exception to the exclusion for liability assumed by Gigi Salon under an "insured contract," which in this case was the parties' lease.

The endorsement to the policy upon which USLIC relies, BP 500 NY (08-12), excludes coverage for bodily injury to, among others, an employee performing duties related to the conduct of the insured's business. This exclusion is intended to avoid duplication of coverage for injuries to an insured's employee that would be covered by a Workers' Compensation policy. However, the foregoing endorsement contains an exception to the exclusion, which provides: "[T]his exclusion does not apply to liability assumed by the insured under an 'insured contract.'" The policy defines "insured contract" to include, among other types of contracts, "[a] contract for a lease of premises."

The court held that the subject lease required Gigi Salon to procure general liability insurance in favor of the defendants and to defend and indemnify them for bodily injury claims. Accordingly, the subject lease was an "insured contract" within the meaning of the policy, USLIC failed to establish, prima facie, that the defendants are not entitled to coverage.

Editor’s Note:  What is wrong with this decision?  Plenty.

There by Giannoutsos for additional insured status was denied because the employee exclusion removed coverage for injuries to an employee of ANY insured.

So what was he claiming?

Giannoutsos was claiming that he is entitled to trade contract indemnity because of the lease.  That’s a fair claim.

However, the “insured contract” exception to the cited exclusion does not create additional insured coverage for Giannoutsos. It provides coverage for the named insured, Gigi Salon, for the claim for contractual indemnity.

Attention K-Mart Shoppers:  let me say it once again here (and I’ve said it in other summaries over the years).  There is a very important difference between being an additional insured and a contractual indemnitee.  Giannoutsos may well be a contractual indemnitee and Gigi Salon may have coverage for that contractual claim, but that does not create AI coverage for the contractual indemnitee.

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

01/05/21       Starr Indemn. & Liab. Co. v Monte Carlo, LLC
Appellate Division, First Department

Unclear Question in Insurance Application Precludes Rescission Argument

Despite making landfall on October 29, 2012, Hurricane Sandy cases are still winding their way through the courts.  This particular dispute involves an attempted rescission by Starr due to material misrepresentations in the underwriting/application process.  The central dispute was whether the insured’s denial of the question “Any uncorrected code violations?” was accurate. 

The Court, at the outset, noted the general rule that a carrier may void a policy if there is a material misrepresentation made in the process of issuing it.  The misrepresentation need not be intentional, but merely inaccurate.  With regard to materiality, the insurer must only prove that it would not have issued the policy or would have calculated its premium at a higher rate.  Nevertheless, given the draconian penalty of rescission, an insured will not lose coverage where the question at issue is ambiguous.

In this case, the Court was presented with evidence that five different witnesses provided five different explanations of what the question was asking the applicant.  Further, the Court also looked directly at the language of the application question which asked if there were any uncorrected violations, as opposed to any notices of violations. The term “violation” has been previously interpreted to mean the issuance of a citation by the relevant inspecting authority. 

Where, as here, the question is not even transcribed as a complete sentence, the Court found sufficient reason to determine it was not clear.  Given the ambiguity in the application, the insured’s inaccurate answer was insufficient to support Starr’s attempted rescission.

 

12/30/20        Jahangir v Tri-State Consumer Ins. Co.
Appellate Division, Second Department

Triable Issues Surrounding Cooperation of Insured During Investigation Results in Denial of Motion

This case has its origins in a February 26, 2016 fire loss.  During the investigation, however, it appears the insured failed to respond to requests of the insurer for proof related to the personal property portion of the loss.  At some point, this culminated in the Tri-State issuing a denial based upon the insured’s failure to cooperate. 

The court noted that to prove a failure to cooperate under a first party policy the insurer must demonstrate that “the insured engaged in an unreasonable and willful pattern of refusing to answer material and relevant questions or to supply material and relevant documents.”  While we don’t know what happened in this case, we note that the Appellate Division was unconvinced that Tri-State met its burden.   

 

12/30/20        Jones v. State Farm Fire & Cas. Co.
Appellate Division, Second Department

Insured’s ALE Rights are Preserved via Injunction Where the Sufficiency of Coverage Denial Remains in Dispute

Plaintiff’s home was undeniably damaged in June of 2018.  There is likewise no real argument that the damage which ultimately rendered the home uninhabitable was caused due to construction activities on a neighboring premises.  It appears that State Farm initially accepted coverage for the loss (likely under a ROR) and extended additional living expense coverage to the insured for temporary housing immediately after the loss. 

Approximately two months later, however, State Farm issued a denial of coverage based upon the earth movement exclusion in the policy.  That exclusion applies whether the loss is occasioned by earth movement on the premises or on a neighboring premises.  It appears as though State Farm’s decision to deny coverage was based upon an expert report prepared and issued after the initial coverage decision on ALE was made to the insured. 

The insured responded to the denial by the commencement of the instant lawsuit, and therein proffered an alternative expert opinion which suggested the damage was caused by vibrations stemming from a backhoe that was operated on the neighboring premises.  State Farm conceded that if the backhoe caused the damage, or even contributed to it, coverage under the policy would attach. 

Where, as here, there is a question as to the application of coverage, and where, as here, the insured would suffer immediate and irreparable harm, the Court reasoned that a preliminary injunction to preclude State Farm from extinguishing ALE benefits was appropriate.  The Court reasoned that if coverage were owed, State Farm would not be prejudiced by continuing to provide ALE benefits.  If, however, its denial was upheld, State Farm could still recoup its ALE payments from those engaged in the neighboring construction activities through subrogation efforts.

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

[email protected]

12/22/20       Jung Ung Moon v. Kumbee Ree P Some
Appellate Division, First Department
Plaintiff’s Expert Examination of Lumbar Spine Found to be Too Remote to Establish Causation

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Bronx County (John R. Higgitt, J.), entered August 1, 2019. The order granted defendant's motion for summary judgment dismissing plaintiff Soo Hyun Go's claims on the grounds that she did not sustain a serious injury under Insurance Law § 5102(d),

On appeal, the Appellate Court found that defendant met his prima facie burden with respect to plaintiff's claim of serious injury to her lumbar spine by submitting the affirmed reports of an orthopedist, who noted normal range of motion in her lumbar spine, and a radiologist, who concluded that the positive findings in plaintiff's lumbar spine MRI were preexisting, degenerative, and not causally related to the accident. Defendant also met his prima facie burden with respect to plaintiff's right shoulder, as his medical expert found that plaintiff's claimed injuries had resolved, and she had only a 10-degree decrease in range of motion in one plane and normal to greater-than-normal range of motion in every other plane.

In their opposition the Appellate Court found that plaintiff raised a triable issue of fact as to her right shoulder injury through the report of a physician who found she had significant limitations in range of motion upon recent examination and that her MRI films showed that she had sustained tears. Although defendant did not dispute that plaintiff's shoulder injury was causally related to the accident, plaintiff's physician also opined that the injuries were causally related and not degenerative. The physician also reviewed plaintiff's post-accident medical records, prepared by his former partner, which showed that plaintiff had significant limitations in range of motion shortly after the accident. Though this evidence may be inadmissible at trial as hearsay, it may be considered in opposition to summary judgment, since it is not the only evidence submitted, especially since an explanation has been provided.

However, the Appellate Court found that, with respect to plaintiff's lumbar spine, her submissions fail to show objective evidence of limitations stemming from her injuries or treatment contemporaneous with the accident. Plaintiff's physician did not examine her until a year and a half after the accident and thus, his findings are too remote to establish causation. Moreover, the limitations found by the physician were minor, and not sufficiently significant to support a serious injury claim.

As for plaintiff's 90/180-day claim, defendant met his burden by submitting plaintiff's testimony, in which she stated that she was confined to her home for only a few days after the accident. Plaintiff failed to raise a triable issue of fact, as the only evidence substantiating her claim that she was unable to perform activities of daily living is her testimony.

As such, the Appellate Court unanimously modified the Supreme Court decision.

 

12/30/20       Jason E. Ramirez v. L-T. & L. Enterprise, Inc.
Appellate Division, Second Department
Plaintiff Was Able to Raise Triable Issue of Fact as to Causation and Significant Limitation of Use Based on Expert Affidavit Sufficient to Preclude Summary Judgment

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Paul Wooten, J.), dated October 10, 2017. The order granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

On October 10, 2012, the plaintiff, Jason E. Ramirez, and the defendant Joseph V. Losinno were involved in a motor vehicle collision at 14th Street and 3rd Avenue in Manhattan. Losinno's vehicle was owned by the defendant L-T & L. Enterprise, Inc. In his bill of particulars, the plaintiff alleged, inter alia, injuries to the cervical region of his spine, and to his left shoulder.

Eventually, defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury pursuant to Insurance Law § 5102(d) as a result of the accident. In support, they submitted the affirmed report of an orthopedic surgeon who examined the plaintiff almost three years after the accident. The orthopedic surgeon measured the range of motion of the cervical region of the plaintiff's spine and the plaintiff's left shoulder, compared her results to what would be considered normal range of motion, and found the plaintiff's range of motion to be normal.

The defendants further submitted the affirmed reports of a radiologist, who reviewed post-accident MRI films of the cervical region of the plaintiff's spine and the plaintiff's left shoulder and concluded that the plaintiff's injuries were caused by degeneration, and that there was no evidence of traumatic injury.

The plaintiff opposed the motion with the affirmed report of a physician who examined the plaintiff about 14 months after the accident. The plaintiff's physician measured the plaintiff's range of motion and compared his results to what would be considered normal range of motion. He found restrictions of up to 33 percent in the cervical region of the plaintiff's spine, and of up to 27 percent in the plaintiff's left shoulder.

The plaintiff further submitted the report of a physician who examined the plaintiff on November 21, 2013, and again on March 10, 2016, and who reviewed the plaintiff's MRI films. The physician concluded that the injuries to the cervical region of the plaintiff's spine and the plaintiff's left shoulder were directly related to the accident.

In an order dated October 10, 2017, the Supreme Court granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury as a result of the accident.

On appeal, the Appellate Court found that defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical region of the plaintiff's spine and to the plaintiff's left shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). The defendants also established, prima facie, that any injury to the cervical region of the plaintiff's spine or to his left shoulder was not caused by the accident at issue.

However, in opposition, the Appellate Court found that the plaintiff raised triable issues of fact as to whether he sustained serious injuries to the cervical region of his spine or to his left shoulder under the significant limitation of use category of Insurance Law § 5102(d). The plaintiff also raised triable issues of fact as to whether those injuries were caused by the accident at issue.

Thus, the Appellate Court found that the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint.

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]

Second Circuit still on holidays from coverage matters.

 

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

12/23/20       Green v. National Income Life Insurance Company
Appellate Division, Fourth Department
General Business Law § 349 Claim Dismissed

Plaintiff is the beneficiary of an accident insurance policy issued by defendant to her late husband.  Plaintiff's husband died in May 2017 after spending 33 days in the hospital. Plaintiff sought $40,000 under the policy's accidental death provision and $18,800 under the hospital and intensive care provisions. Defendant paid $40,000 under the accidental death provision, but it refused to pay anything under the hospital and intensive care provisions. Defendant relied on the indemnity reduction clause within the accidental death provision, stating that "[t]he benefit payable under this provision is in lieu of or will be reduced by any other benefits paid under this policy." Plaintiff commenced this action asserting in an amended complaint two causes of action, one for breach of contract and another for violation of General Business Law § 349.

The entire complaint was dismissed.  The policy conclusively established that Plaintiff had no cause of action under the General Business Law or for breach of contract.  The court reasoned that the only reasonable way to interpret the indemnity reduction clause was to determine that Plaintiff's recovery was limited to $40,000.  The clause was not ambiguous; it was clearly written, understandable, and compliant with the Insurance Law.  In addition, Defendant established that its policy and related promotional materials were not deceptive, and Plaintiff was not injured because the correct amount was paid under the policy.

 

12/22/20       Shepard v. Farmers Insurance Exchange
Supreme Court of Montana
Bad Faith Claims Dismissed Where the Liability of the Insureds Was Never Reasonably Clear

On July 2, 2011, Trevor Olson was driving northbound in a 2005 Hyundai Tiburon on Highway 93 in Lake County, Montana, with his cousin, Tanner Olson, as a passenger.  The Olson vehicle crossed over into the southbound lane and collided with an oncoming 2002 Pontiac Grand Am driven by Vincent Shepard. Vincent's wife, Stephanie Parker, and their children, Vinney Shepard, Jr., and Leeland Shepard, were passengers in the Shepard car.  Stephanie, Trevor, and Tanner died as a result of the collision.  Vincent and the Shepard children were seriously injured.

Trevor's parents owned the Hyundai and insured the vehicle with State Farm. The policy provided liability coverage of up to $100,000 per person, up to $300,000 per accident for bodily injury, and up to $100,000 for property damage.  Tanner's father had a policy with Farmers that provided $60,000 in underinsured motorist (UIM) coverage. Tanner's mother had a Farmers’ policy that provided $500,000 in UIM coverage.

On October 24, 2011, Vincent Shepard filed a personal injury action against Trevor's and Tanner's estates. State Farm defended both estates through separate counsel. Trevor's and Tanner's estates then filed personal injury and wrongful death actions against Hyundai alleging that the accident was caused by a mechanical defect with the Olsons’ Hyundai Tiburon and joining Hyundai as third-party defendants to the litigation.

State Farm filed a Complaint for Interpleader and Declaratory Relief. State Farm initiated the interpleader action because of the Shepards’ demand that State Farm tender the $300,000 limits of the bodily injury policy and their assertions that State Farm's failure to do so constituted improper claims handling. Prior to filing the interpleader action, State Farm tendered a $25,000 general advance payment to the Shepards and offered to pay the remaining $275,000 in exchange for a release of all claims against insured parties. Notwithstanding this offer, State Farm maintained that it was not obligated to make an advance because the accident investigation was still ongoing, and its insureds’ liability had not been determined to be reasonably clear. The Shepards continued to demand payment of the bodily injury policy limits without a release and continued to maintain that State Farm was handling the claim improperly.

The Shepards moved the district court to release the interplead funds.  The motion was denied because reasonably clear liability on the part of State Farm’s insureds had not yet been established.  Thereafter, the Shepards settled their claims against Trevor’s and Tanner’s estates, and Hyundai was found liable for the collision in a jury trial.

The Shepards then filed a lawsuit against State Farm and Farmers alleging bad faith and violation of the Unfair Trade Practices Act.  The insurers moved to dismiss.

In Montana, insurers are obligated to pay an injured third party’s medical expenses prior to final settlement when liability for such expenses is reasonably clear.  The interpleader action had found that liability was not reasonably clear.  In addition, the Shepards failed to demonstrate any factual basis supporting their claims that the insurers acted without a reasonable basis or that liability of the insureds was reasonably clear.  In fact, the court concluded that the Shepards failed to establish that the liability of Tanner and Trevor was ever reasonably clear.  Since the liability of State Farm and Farmer’s insureds was not reasonably clear, the Shepherds’ bad faith claims necessarily failed.

 

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

12/22/20 Stepney, LLC v. Nautilus Ins. Co.
United States District Court, District of Connecticut
Liability Additional Insured Has No First Party Rights

A landlord, as an additional insured on its tenant’s general liability policy, has no standing to seek first party property damage coverage under the same policy.

This is an easy one folks and Judge Thompson quickly dispensed with a case in which the plaintiff established a lack of understanding of how insurance works. Here’s the basics. Stepney owned a building in Florida that it leased to its restaurant-tenant, The Tubby Pig. The tenant obtained property and liability coverage from Nautilus, naming the landlord as an additional insured. Hurricane Irma damaged the building’s exterior and interiors, including the roof. The tenant hired a contractor to repair the roof damage; however, the roofer’s protective tarp loosened causing subsequent rainwater intrusion-related damage. The tenant failed to re-secure the tarp or alert the contractor that the tarp had loosened. Nautilus adjusted and paid the tenant’s first party property claim.

Stepney made a claim to Nautilus, seeking first party coverage for damage to the building and for what was essentially a claim of liability against the tenant for failing to address the loosening of the tarp. Nautilus, unsurprisingly, denied the claims. Pointing out the obvious, the court wrote, “The certificate confirming Stepney's rights as an additional insured is entitled “Certificate of Liability Insurance.” It states that the type of insurance is “Commercial General Liability” and further states that “Stepney LLC[ ]is listed as an additional insured in regards to the general liability policy….General liability coverage does not insure policyholders for their own losses, but rather for their liability to third parties for injury or damage caused by the policyholder.”

With no liability claim having been made against Stepney, there was nothing for the Nautilus policy to respond.

 

BUCCI on “B”
Diane L. Bucci

[email protected]

12/22/20       Outdoor Venture Corp. v. Philadelphia Indem. Ins. Co.,
United States Court of Appeals, Sixth Circuit (applying KY law)

The Duty to Defend Still Based on Allegations in Complaint  

The question before the court was whether the insureds, OVC, Kentucky Highlands and two officers/principals, Egnew and Moncrief (collectively “Insureds”), were entitled to recover from insurers Grange, Scottsdale, and Auto-Owners, the defense costs they incurred to defend against claims asserted by LEEP (and its principal Blanken).  Grange refused to defend the insureds.  Owners offered to defend the insureds under a “reservation of rights” and appointed counsel.  Scottsdale did the same, except with regard to Moncrief, who Scottsdale refused to defend.  This, according to the insureds, gave them the right to retain independent counsel paid for by the insurers.    

LEEP and/or Blanken brought three lawsuits against OVC and Kentucky Highlands after its negotiations with OVC for a joint venture ceased.  LEEP had entered into a financing agreement with Fortress Credit Corporation and ended up owing $7,000,000…the specifics of the debt were not addressed.

Kentucky Highlands, whose officer was the director of OVC, then purchased LEEP’s debt from Fortress.  Kentucky Highlands then allegedly repossessed LEEP’S assets and sold them to plaintiff Stearns Manufacturing, which was a subsidiary of OVC.  OVC ended up owning Sterns’ assets and liabilities, including the LEEP assets.

LEEP brought suit against the Insureds alleging that they devised a scheme to obtain LEEP’S confidential information and contacted its customers, all allegedly in an effort to destroy LEEP and to take over LEEP's business through unlawful means.

Blanken sued Kentucky Highlands and OVC alleging that he—not LEEP—owned a major piece of equipment repossessed by Kentucky Highlands and, thus, Kentucky Highlands had wrongfully repossessed and sold it to OVC.

Blanken brought another lawsuit against Kennedy Highlands and OVC in Pennsylvania (transferred to the Eastern District of Kentucky) again asserting that they wrongfully repossessed certain other inventory that belonged to him, not to LEEP.

The insurers argued that they had no duty to reimburse the Insureds because they had no duty to defend them in the first instance.  According to the insurers, the complaints against the Insureds were based on intended actions with expected consequences, which could not constitute an occurrence under Coverage A.  The factors the court considered for determining whether there was an occurrence (accident) was (1) whether the insured intended the event to occur; and (2) whether the event was a “ ‘chance event’ beyond the control of the insured.” If the insured did not intend the event or result to occur, and the event or result that occurred was a chance event beyond the control of the insured, then coverage would apply.

The court held that the circumstances did not involve an occurrence but instead involved the Insureds’ scheme to take control of LEEP, its assets, and its business.  The court held that the decision to seize of the assets of LEEP and Blanken, as well as the method of doing so, was completely within the plaintiffs’ control and not accidental.

The Insureds then argued that coverage was available under the Coverage B offenses of  the “wrongful entry into ... premises that a person occupies” and/or “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services.” Without addressing the whether the complaint sufficiently alleged these offenses, the court held that even if Coverage B applied, coverage was excluded by Coverage B exclusions for: (1) injury “caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury’ ”; and/or (2) injury “arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity.”

On appeal, the Insureds argued that the trial court was in error examining their intent and knowledge at the pleading stage of the litigations based solely on how LEEP chose to plead its claims.  According to the Insureds, the exchange of discovery was necessary to evaluate their state of mind and consequently, the insurers had at least an initial duty to defend.  The Sixth Circuit disagreed, holding that the duty to defend is determined by a comparison of the policy to the allegations in the complaint.  According to the Sixth Circuit, the complaints alleged that the Insureds acted intentionally and excepted the exact injury that occurred.  The allegations fell squarely within the knowledge exclusion, as well, although this was not addressed in the decision, which affirmed the trial court’s holding for the insurers. 

 

12/16/20   Prince George Par. of Prince George Winyah v. GuideOne Mutual
United States Court of Appeals, Fourth Circuit (S.C.)
No Coverage Unless Relief Sought Includes a Demand for Money Damages  

GuideOne Mutual Insurance Company, insurer of Plaintiff Prince George Parish of Prince George Winyah (“Parish”), denied coverage for claims asserted by the Episcopal Church (“TEC”) and the Episcopal Church in South Carolina (“TECSC”) (collectively, “the Churches”).  The Churches alleged that the Parish was infringing upon and diluting their trademarks and engaging in false advertising.  They sought injunctive relief, the cancellation of state registered marks, declaratory relief, attorneys’ fees and costs, and such other relief as the court deemed appropriate.

GuideOne contended that it was only obligated to defend the insured against any “suit” seeking damages for personal and advertising injury, and the Churches’ suits were not suits seeking damages, which was defined in part as “tort damages allowed by law.” 

The trial court agreed, holding that the Churches alleged personal and advertising injury, but their lawsuits did not seek tort damages but instead injunctive and equitable relief.   Relying on the South Carolina Supreme Court’s discussion in Helena Chem. Co. v. Allianz Underwriters Ins. Co., 357 S.C. 631, 637, 594 S.E.2d 455, 458 (2004), the trial held that the plain, ordinary meaning of damages in the insurance context is “monies paid on an insured's loss.”

The Parish argued that the Churches could be seeking money damages because they sought any “other relief that the court deemed appropriate.” Relying on Ellett Bros. v. U.S. Fid. & Guar. Co., 275 F.3d 384, 387 (4th Cir. 2001) the court held that the “any other relief” language was not enough to trigger an insurer’s duty to defend and a demand for equitable relief did not involve “damages.”  The trial court granted GuideOne’s motion to dismiss.  

On appeal, the Parish argued that the allegations in the trademark action could have supported an award of tort damages, thus bringing the action within the scope of the policy.  The Fourth Circuit admitted that there were times when a court might award money damages when they were not specifically sought, but held that the possibility was “far too remote to constitute a reasonable possibility that the Parish would be held liable for damages.  It affirmed the trial court’s decision relieving the insurer from any coverage obligation. 
 

OFF the MARK
Brian F. Mark
[email protected]

No notable decisions to report in this edition as the courts are just getting back underway following the end of the year shutdowns.

 

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

12/22/20       Farmers Insurance Exchange vs. Wessel
Supreme Court of Montana
Homeowners Insurance – No Liability Coverage for Alleged Acts of Insureds Because They Were Assertions of Intentional Conduct and Therefore Not An “Occurrence”

The insureds were sued by plaintiffs who alleged assault, trespass, intentional infliction of emotional distress, and civil conspiracy, asserting the insureds acted intentionally, purposefully, and with malice.  Farmers took the position that the claims made against the insureds did not constitute an “occurrence” which would trigger liability coverage under the terms of the insureds’ homeowners policy with Farmers.

On appeal from the District Court’s grant of summary judgment to Farmers, the Supreme Court of Montana’s Opinion issued December 22, 2020 set forth familiar coverage analysis guidelines on the duty to defend issue.  Supreme Court’s Opinion recited that an insurer has a duty to defend when a complaint against an insured alleges facts which, if proved, would result in coverage, and whether a duty to defend exists is determined by looking to the allegations within the complaint.  The Opinion further noted that under well-established Montana caselaw, “the complaint and the policy constitute the universe with regard to the insurers’ duty to defend,” and if there is no coverage under the terms of the policy based on the facts asserted in the complaint, there is no duty to defend.

Supreme Court’s Opinion further noted under Montana precedent the insured bears the initial burden “to establish that the claim falls within the basic scope of coverage”, and if the insured shows that the claim falls within the basic scope of coverage, then the burden shifts to the insurer to show that the claim is unequivocally excluded under an exception within the coverage.  Taking the pertinent policy provisions of the Farmers homeowners policy into consideration, the Montana Supreme Court stated the insureds had to must demonstrate that the claims alleged against them fell within the scope of coverage, showing either “bodily injury” or “property damage” resulting from an “occurrence,” further finding that under the policy at issue that the policy  term  “occurrence” means accident.

To analyze whether the conduct was accidental rather than intentional, the District Court had utilized a two-prong objective standard, which first considered whether the alleged acts themselves were intentional and, if so, then considered whether the consequence or resulting harm stemming from the alleged acts was intended or expected from the actor's standpoint.  The second prong involved making an objective inquiry to determine what could reasonably be expected to result from the intentional acts.  Applying this standard, District Court found the allegations against the insureds to reflect intentional conduct of the insureds that was not accidental, and that it was further alleged that the insureds had also intended the ensuing consequences of harm to the claimants.

On this appeal, Supreme Court concurred with District Court in holding that the allegations made against the insureds concerned conduct that was both intentional and purposeful.  The insureds intended to cause the “very type of damages” that the claimants allege they suffered, found the Court.  Supreme Court rejected the insureds’ argument that denials set forth in their answers to the allegations made in the complaints against them created factual disputes precluding summary judgment on the duty to defend issue.  Montana case law makes clear that the threshold question on the duty to defend issue is whether the claim against the insured alleges facts that would trigger coverage.  The insureds cannot create coverage where it does not exist simply by denying the claims when the claims themselves do not trigger coverage.  Accordingly, Supreme Court held that the District Court did not err in granting summary judgment to Farmers on the issue of Farmers’ duty to defend.  Because the insureds’ conduct as alleged was intentional and not accidental, there was no “occurrence” under the Farmers homeowners policy at issue which would trigger coverage.

 

BARCI’S BASICS (on No Fault)
Marina A. Barci
[email protected]

12/22/20       PV Holding Corp. v. AB Quality Health Supply Corp., et al.
Appellate Division, First Department
Failure to Appear for Duly Scheduled EUOs Results in No Coverage

Plaintiff moved for default judgment against defendants Atlas Radiology, P.C. (Atlas), Hank Ross Medical, P.C. (Hank Ross), Quality Custom Medical Supply, Inc. (Quality Custom), and Kenneth Cole (together, the defaulting defendants) for their failures to appear for properly noticed examinations under oath (EUO). As always, the failure of a person eligible to receive no-fault benefits to appear for a properly noticed EUO on two separate occasions constitutes a breach of a condition precedent and will vitiate coverage. This coverage defense applies to any claims and is not determined on a bill-by-bill basis. The record here supported that the EUOs were properly noticed to the defaulting defendants and that they were scheduled prior to the receipt of a claim form. As the defaulting defendants failed to appear in the lawsuit as well, and oppose the motion for default, the default judgment was awarded to the plaintiff.

 

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

Regulatory Wrap-Up

12/23/20       Enterprise Risk Management Pre-Proposed Outreach
Department of Financial Services
Pre-Proposed Outreach Proposes Changes Which Would Include Enterprise Risk Management Function Assessment of Cybersecurity, Climate Change, Epidemic, and Pandemic Risks

A couple weeks ago, DFS posted a pre-proposed draft regulation currently being considered, which would impact multiple provisions under the current 11 NYCRR Part 82 concerning Enterprise Risk Management and Own Risk and Solvency Assessment; Group-Wide Supervision. Notably, the comment period is set to close tomorrow, January 8, 2021. Comments are to be submitted to Joana Lucashuk via email at [email protected].

Specifically, the pre-proposed outreach would be the Second Amendment to 11 NYCRR 82 (Insurance Regulation 203). It would recodify current subdivisions (c) through (k) of 11 NYCRR 82.1 to subdivisions (d) through (l), adding a new subdivision (c) that would define “domestic insurer” to mean “an insurer domiciled in this State, including a United States branch of an alien insurer entered through this State.”

Moreover, 11 NYCRR 82.2 entitled Enterprise Risk Management would amend subdivisions (a)(9) and (b)(2) by way of the underlined portions below as follows:

“(a) [A]n entity shall adopt a formal enterprise risk management function that identifies, assesses, monitors, and manages enterprise risk. . . . The enterprise risk management function shall be appropriate for the nature, scale, and complexity of the risk and shall adhere to the following, as relevant:”

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“(9) address all reasonably foreseeable and relevant material risks including, as applicable, insurance, cybersecurity, climate change, epidemic, pandemic, underwriting, asset-liability matching, credit, market, operational, reputational, liquidity, and any other significant risks;”

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“(b)(2) The report required to be filed by paragraph (1) of this subdivision shall describe the entity’s or domestic insurer’s enterprise risk management function, including its risk culture and governance; risk identification and prioritization; risk appetite, tolerances, and limits; risk management and controls; and risk reporting and communication.  The report also shall provide information regarding the following areas that could produce enterprise risk, provided that the information has not already been disclosed in a registration statement filed pursuant to Insurance Law sections 1503(a), 1604(a), or 1717(a) during the prior 12 months:”

Furthermore, 11 NYCRR 82.5(e) governing Exemption from Disclosure currently requires an entity to make a physical filing when the superintendent denies a request for exemption. This pre-proposed regulation would modify the provisions to instead correctly read that:

“If the superintendent approves an entity or a domestic insurer’s request for an exemption from the electronic filing or submission requirement, then the entity or domestic insurer shall make a physical filing in a form acceptable to the superintendent.”

 

CJ on CVA and USDC(NY)
Charles J. Englert III
[email protected]

12/11/20       Michael Cetta d/b/a Sparks Steak House v. Admiral Indemnity
United States District Court, Southern District of New York
Without Physical Loss, Business Interruption Claims are Denied. Likewise, if a Property is Accessible, Civil Authority Coverage Does Not Provide an Avenue of Recovery

Plaintiff brought this action alleging that defendant breached its obligations to provide coverage for losses resulting from governmental orders to close restaurants as a result of the COVID-19 outbreak. Defendant, predictably, made a motion to dismiss the complaint, and argued that the circumstances giving rise to plaintiff’s alleged loss do not allow for recovery under the policy at issue.

Defendant issued an all-risk commercial property insurance policy to plaintiff effective from June 26, 2019 to June 26, 2020. The policy included, among other coverages, business income coverage, extra expense coverage, and civil authority coverage. The policy’s business income coverage provision provides:

[Defendant] will pay for the actual loss of Business Income [the insured] sustain[s] due to the necessary “suspension” of [the insured’s] “operations” during the “period of restoration”. The “suspension” must be caused by direct physical loss of or damage to property at the premises which are described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations. The loss or damage must be caused by or result from a Covered Cause of Loss.

Putting this into plain English, the Court wrote that business income coverage provided that, “if plaintiff had to shutter its doors because of a reason covered by the Policy, defendant would pay for its operating expenses as well as the net income that the restaurant would have earned had it continued operating normally.” The policy’s extra expense coverage is a “tagalong” coverage, only applying if business income coverage applies. “Extra expense” is defined as “necessary expenses [the insured] incur[s] during the “period of restoration” that [the insured] would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss.” Finally, the civil authority coverage provided by the policy states:

When a Covered Cause of Loss causes damage to property other than property at the described premises, [Admiral] will pay for the actual loss of Business Income [the insured] sustain[s] and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply:

(1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; and

(2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

The Court notes that the civil authority coverage anticipates a situation in which damage to an area surrounding an insured’s property prevents entrance into or use of the insured’s property.

Plaintiff argued that, as a result of various closure orders implemented by New York State, it was unable to operate and thus incurred losses which can be recouped under the policy’s business income coverage. Defendant, and the Court, disagree. The crux of the Court’s decision is that the policy requires that the suspension of the insured’s (plaintiff’s) operations be as a result of “direct physical loss or damage to property.” Plaintiff argued that the phrase loss of property must be interpreted to include the loss of use of property. The Court disagrees. After determining that the policy provisions are unambiguous by working through dictionary definitions of each term, the Court offers multiple hypothetical scenarios showing that “loss of use” and “physical loss” are not the same. The Court explains the difference between these two concepts this way: if a teenager breaks her curfew and has the keys to her car taken away, she has lost the use of the car, however the car is not physically altered; while the angsty teen can no longer use her property, the property has not changed. This hypothetical illustrates the policy requirement for direct physical loss. The Court opines that the property must be physically altered to prove physical damage, a loss of, or change in, use of the property is not physical.

The Court also pointed to the fact that business income coverage runs for the “period of restoration.” While plaintiff argued that “period of restoration” simply means that the losses run until business is resumed, the court looked to the policy language. The policy defines period or restoration as: ending on the earlier of: “(1) [t]he date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or (2) [t]he date when business is resumed at a new permanent location.” The Court discussed that these definitions clearly suggest the occurrence of material harm which requires a physical fix, which cut into plaintiff’s argument that no physical loss or damage is required to trigger coverage.

Plaintiff further attempted to argue that the policy’s commercial general liability section’s definition of property damage (“[l]oss of use of tangible property that is not physically injured”) should be applied. The Court quickly rejected that argument by noting that the commercial general liability section and the commercial property section, where the business income coverage resides, insured different interests and therefore the definitions of each section control.

The Court then agreed with defendant that the provision providing extra expense coverage does not apply. First, the Court concluded that extra expense coverage only applies when business income coverage is granted, and second, extra expense coverage requires “physical loss or damage to property” which was not found in this matter.

Turning to plaintiff’s civil authority claim, the Court similarly rejected plaintiff’s argument that because surrounding businesses were forced to close, access to plaintiff’s property was prohibited. The Court rejected this argument for two reasons. First, a claim for civil authority coverage must specifically allege that a neighboring property suffered “damage to property.” Second, plaintiff failed to allege that access to its property was denied.

Accordingly, the Court agreed with defendant and granted its motion to dismiss this complaint.

 

CARA’S CANADIAN and CROSS-BORDER CONNECTIONS (with HEATHER SANDERSON)
Cara A. Cox
[email protected]

Heather Sanderson
Sanderson Law (Alberta, Canada)

[email protected]

12/17/20       Hotchkiss v. Budding Gardens Inc.
Court of the Queen’s Bench of Alberta
Look Before You Leap: Delving into the Cannabis Business

Hotchkiss is not a per se coverage case, but it does highlight coverage issues which are of interest. Specifically, the issues that arise between a landlord and its cannabis growing tenant. Both parties started out optimistically about their respective new ventures: the landlord was looking to rent out his farm, including a grow house, as he reached retirement and the tenant was looking to start a cannabis growing business. However, less than a year into a 3-year lease term, problems arose.

One of the main issues of concern for the parties was the effect of the landlord being unable to procure coverage for his property, despite the countrywide legalization of recreational cannabis in 2018, once it was revealed a cannabis cultivator would be the first tenant. The lease provided that the landlord was responsible for the costs of utilities for the premises, maintenance costs for the property, and maintenance costs for the buildings and mechanical equipment at the premises, which included costs associated with regular maintenance of water, electric, and boiler heating systems.

The lease also required the landlord to maintain fire and extended coverage for the premises and carry boiler and machinery insurance, but the insurance was to provide liability protection against personal injury arising from accidents with the boiler or machinery.

As for the tenant’s responsibilities, per the lease, the tenant was responsible for obtaining and paying for a comprehensive general liability policy. The lease further required the tenant to assume all liability for loss, accidental or otherwise, related to the occupation of the premises, including any liability arising from or connected to any mechanical failures in the mechanical or boiler rooms. The crux of the landlord’s concerns was the unanticipated costs associated with maintaining the property, including grow house machines.

Per the lease, the tenant was to pay approximately $7,000 a month for the first year. However, in years two and three, the landlord and tenant were to determine a monthly rent prior to the beginning of the second and third years of the lease. Specifically, the lease provided the following:

For the second and third years of this Lease, the Lessee will pay the Lessor an adjusted monthly rent amount, to be negotiated one month prior to the anniversary date of this Lease, and agreed to by both parties, based on a review of actual costs associated with utilities and upkeep of the Demises Premises. As with the first year of this Lease, the amount is to be per month…”

With reliance on the above provision of the lease, the landlord calculated the second-year rent to be $17,500 a month. It was learned that the monthly rent was arbitrarily calculated by the landlord, and the landlord did not have experience with the tenant’s cannabis operations. However, negotiations failed due to the difference with what was an appropriate change in rent. The landlord argued the utilities were much higher than expected and the presence of the cultivator tenant prevented him from being able to obtain commercial property insurance. Negotiations failed and litigation eventually followed.

The issue was whether the lease is enforceable after the end of the first year of its term, which involved an in-depth analysis of contract law. However, I was more interested in the tangential insurance issues. Given the large deficits in many states, some point to legalizing recreational marijuana to help fill budget gaps.[1] Most recently, Cuomo announced his plan to legalize recreational marijuana in New York State because, in part, “this is a year where we do need the funding…”[2] However, parties seeking to enter new endeavors should look at Hotchkiss as a warning to look before you leap. The landlord in Hotchkiss argued the lease was void after year one, but the tenant wanted to enforce the lease but provided no solution as to how to calculate monthly rent for years two and three. In the end, the court held the lease was uncertain and therefore, could not be enforced for years two and three. There are a lot of risks unique to cannabis-related businesses, and as such, parties entering the business should be ready to analyze all in detail. This is especially true in the U.S. where it can be difficult to find coverage for cannabis businesses because “carriers are spooked [about cannabis businesses], and for good reason, because they don’t know how to underwrite these businesses.”[3] It may be easier for a business that does not rely on other parties to operate its business, where if such a business is unable to find coverage, then they could self-insure. However, parties should not avoid discussing the nitty gritty, especially when it comes to liability. As the Hotchkiss court warns:

Some uncertainty may be so bad as to amount to no agreement whatever. An agreement to agree later on some term is a device which seems to spring very naturally to the minds of businessman, but unfortunately it is void and will most probably render void the entire contract in which it is contained. This rule is undoubtedly one of the most dangerous traps which the law of contracts sets for laymen and one finds an example in a rental 'to be reviewed and adjusted' periodically. But one cannot regard this rule as a mere technicality which should be dispensed with. An agreement to agree is void because it is not really an agreement on anything at all, but merely a pious hope that an agreement may later be reached.

In Hotchkiss, there were no injuries or even an insurance claim. However, I would consider the parties in Hotchkiss luckier than others who may have to learn the same lesson and where the costs could be higher than an unenforceable lease.

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

 

12/23/20       Green v. National Income Life Ins. Co.
Appellate Division, Fourth Department
Defendant Did Not Violate General Business Law § 349 as the Terms of the Policy Were Not Deceptive or Misleading and the Plaintiff Did Not Suffer Any Injury

Plaintiff was the beneficiary of an accident insurance policy issued by defendant to her late husband.  Plaintiff sought $40,000 under the policy’s accidental death and dismemberment benefit provision and $18,000 under the hospital confinement benefit and intensive care confinement benefit.  Defendant paid the $40,000 under the accidental death provision, but refused to pay anything under the hospital and intensive care provisions.  In denying to pay under those provisions, the defendant relied on the indemnity reduction clause within the accidental death provision that states “[t]he benefit payable under this provision is in lieu of or will be reduced by any other benefits paid under this policy.”

Plaintiff commenced this action asserting two causes of action, one for breach of contract and another for violation of General Business Law § 349.  A plaintiff who makes a claim under this statute must prove three elements: (1) that the challenged act or practice was consumer-oriented; (2) that it was misleading in a material way; and (3) that the plaintiff suffered injury as a result of the deceptive act.  The Monroe County Supreme Court granted defendant’s motion to dismiss and the Fourth Department Appellate Division affirmed.

The Court held that dismissal of the cause of action for violation of General Business Law § 349 was proper because the language of the policy itself “conclusively refutes plaintiff’s allegations that defendant committed a deceptive act…”  The Court further reasoned that the only reasonable way to interpret the indemnity reduction clause is to determine that plaintiff’s recovery is limited to $40,000.  The clause is clearly written, not ambiguous, and compliant with Insurance Law.  The Court stated that defendant’s policy and related promotional materials were not deceptive and the cause of action for violation of the General Business Law was properly dismissed because the policy conclusively established that plaintiff had not suffered an injury.  Inasmuch as the indemnity reduction clause is enforceable, the plaintiff has received all of the benefits to which she is entitled.

 

[1] https://www.wshu.org/post/new-york-legislators-expect-recreational-marijuana-deal-2021#stream/0

[2] https://www.governor.ny.gov/news/video-audio-photos-rush-transcript-governor-cuomo-announces-proposals-enable-online-sports

[3] https://www.propertycasualty360.com/2021/01/06/is-cannabis-the-next-insurance-opportunity/?slreturn=20210006182042

 

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