Coverage Pointers - Volume XXII, No. 20

Volume XXII, No. 20 (No. 585)
Friday, March 19, 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. 

Welcome to another fun- and fact-filled issue of Coverage Pointers.  We are delighted to be with you.  We can taste the spring season, right around the corner.

Hurwitz & Fine is looking to hire two or three insurance coverage associates to work out of our Buffalo or Melville offices or remotely. Interesting work, great team and fabulous opportunities for growth and development. Having coverage experience is an important factor. Contact [email protected] confidentially.

 

Insurance 101 Program:  Sold Out

In our most recent issue, we announced an Insurance 101 program.  Indianapolis coverage guru John Trimble from Lewis Wagner and I offered a 50-seat program in April.  Because of the overwhelming response, with well over 200 seeking enrollment, we offered additional days and opportunities.  We are considering another session or two in the late summer open to the general public.  If your company would like us to set up a session to assist your staff, let me know and we will schedule training times.

 

Growth

Our footprint continues to expand.

We have lawyers resident throughout New York State and Connecticut, with our offices in Buffalo and Melville, Long Island, with lawyers strategically placed in Rochester, Albany, the Mid-Hudson Valley and the New York City metro area as well as in the Nutmeg State.

Announcing:  Scott Kagan joins us in Albany -- Serving the Capital District, the Hudson and Mohawk Valley and the North Country

We are pleased to announce that we have hired on Scott Kagan, who is resident in Albany, New York.  Scott’s practice focuses on general liability and tort defense, including premises liability, trucking and commercial transportation, construction accidents, product liability, and other complex and catastrophic injury litigation.

Prior to joining Hurwitz & Fine, Mr. Kagan’s practice included nationwide representation of corporate clients in a diverse landscape of litigated matters including construction accidents, catastrophic personal injury claims, commercial disputes, insurance coverage disputes and appeals. Mr. Kagan’s practice has also included complex product liability cases primarily in the area of automotive crashworthiness; specifically, handling cases involving medium and heavy trucks, motor vehicle and various product defect and personal injury accidents.

Mr. Kagan received his Juris Doctor degree from Hofstra University School of Law where he was the Notes and Comments Editor of the Labor and Employment Law Journal and a Staff Member of the Moot Court Board.  Mr. Kagan received his undergraduate degree from the University of Massachusetts at Amherst, graduating magna cum laude with a Bachelor of Science in Sports Management from the Isenberg School of Management.  While attending the University of Massachusetts, Mr. Kagan was a Vice President of Sigma Phi Epsilon fraternity. 

 

Disclaimer Danger:

This week’s issue brings you a plethora of interesting decisions.  This week, in the ADD Plumbing opinion, the First Department reminds us of the importance of prompt disclaimer.  For those unfamiliar with New York’s Draconian rules on liability coverage denials, Insurance Law Section 3420(d) requires prompt disclaimers (not reservations of rights letters) where an insurer is denying coverage based on a policy exclusion or breach of policy condition.  In ADD, reported in my column, the court reinforced that requirement.  The insurer was notified of the accident, investigated, knew of the potential for a coverage denial, but did not send out a disclaimer letter until after it received notice of a claim.  “Too late,” holds the court, and the insurer lost the right to rely upon that policy exclusion.

If any of that scares or surprises you, we are pleased to provide a program 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”, let us know and we can provide training.

 

Duty to Defend Additional Insured:

In the Allied World decision, also in my column, you’ll find a case where the insurer failed to defend a party who claimed additional insured status based on the allegations in the underlying pleading.  Even though a court eventually found that, in fact, the insurer had no obligation to indemnify that AI because the facts did not bear out the claim that the purported AI’s liability resulted from the named insured’s conduct, the broader duty to defend still required reimbursement of legal fees.

 

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.  If your shop can benefit from risk transfer training, let me know and we can arrange a date and time to help train your staff.

 

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.  Medical & Nursing Home Liability Pointers provides the latest news, developments, and analysis of recent court decisions impacting the medical and long-term care communities. Contact Chris Potenza at [email protected]  to subscribe.

   

ruMIRNAtions:

When my son was little, my spouse and I quickly realized that the only way he learned anything was through complete immersion. He learned Spanish because I only spoke Spanish to him. He learned his colors by pointing out the colors of his food, his toys, his clothes, etc. It was the same for the alphabet and counting—I still hate the sight of Cheerios after counting so many of them! But when it came to the topic of race, we avoided it altogether. As a biracial child, we didn’t want to make him feel different and, as a black boy, in particular, we didn’t want to sour him on the world prematurely. All of that had to change when—at 4 years old—he was told by some classmates in pre-school that he couldn’t play ball with them because his “skin was different” and it was freaking them out. That day, my spouse and I had to figure out—and quickly—how to explain race and racism to a weepy, sad little four-year-old who only wanted to play ball with the other kids. And what was worse, when we addressed the matter with the school (not to have the other kids punished, but only to point out that it was happening), we were told that there was no racism at the school and that “perhaps” our sad, weepy pre-schooler had made the whole thing up.

That incident made me realize that we don’t need to speak LESS about race, as if it’s taboo or unsavory, we need to speak MORE about race. (We also need to talk more about:  generational differences, including how each one views and approaches work relationships and obligations; capacity—how we talk about disability and changing capacity of people as they have children, age, etc.; gender expression, since more Gen Zers see themselves as gender fluid. We just need to talk MORE about everything.)  We need to normalize those conversations and we need to normalize having ALL of us in the workplace. Diversity, Equity, and Inclusion means us all. Yes, white people, and cis-gender people and men, that means YOU, too. Come on in for the group hug!

For this edition of Coverage Pointers, I provide ways that big companies (hint, hint: insurers) can drive diversity not just in their ranks, but in business and the world in general.

Mirna
Mirna M. Santiago
[email protected]

 

Humorous Mistakes Happen – 100 Years Ago:

The Tribune

Scranton, Pennsylvania

19 Mar 1921

SURE HE HAD NOT MADE SOME MISTAKE ABOUT IT

 

Johnson believed in teaching his children to be independent, sometimes with unexpected results.

His 15-year-old son came to him one morning.

“I say, dad.” He exclaimed, “can you let me have some money?”

“Yes, my boy.” replied the father, “You’ll find a $5 note there also; see that you don’t take that by mistake.”

Later in the day he found that his son had taken the $5 note after all, and felt rather aggrieved.  So he tackled the boy the next time they met.

“I thought I told you not to take that $5 note, John.” he said.

“That’s so, father.” agreed the lad.

“You told me not to take it by mistake.”

“Well, then, my boy, why –”

“I did as you told me:  I didn’t take it by mistake.” – London Answers.

 

Peiper on Property and Potpourri:

Pardon the brevity of this message, but since our last meeting…

1. the snow has melted;

2. the rink has been drained;

3. the UB Bulls fell in their Conference Championship with a chance to go to the NCAA Tournament;

4. St. Bonventure is a 9 seed;

5. Syracuse (absurdly) is an 11 seed; 

6. the Sabres fired their coach; and,

7. the Bills just signed Mitchell Trubisky. 

Sunnier days, hopefully, are ahead.  We’ll have more to say when (**ahem, if**) we get there. 

Until then, stay healthy and well. 

Steve
Steven E. Peiper
[email protected]

 

New York Governor and NYC Mayor at Odds, Even a Century Ago:

The Brooklyn Daily Eagle

Brooklyn, New York

19 Mar 1921

 

THE GOVERNOR AND THE CITY ADMINISTRATION

            Governor Miller has relieved his mind concerning the Hylan administration and his actions have spoken even louder than his words.  When he describes the administration as incompetent and inefficient he is presenting justification for his transit and port improvement policies which effectually remove the authorities as obstacles to improvement.

            Feeling as he does about the city administration and knowing what he does concerning its conduct in office it is curious that the Governor gives only a qualified approval to the proposal for a legislative investigation of city affairs.  He is for an investigation if “there is reasonable ground to think that one is needed,” but he feels that “an investigation without reasonable ground would be foolish.”

 

Wilewicz’ Wide-World of Coverage:

Dear Readers,

I haven’t written about the adventures of our two rescue pets in a while, but since the last few weeks were particularly eventful in that department, it is time for an update.

First, Cleo the dog recently suffered an injury that put her in a cone of shame (or cone of pity, as the vet called it). She was playing a bit too happily, jumping around and doing backflips in an effort to pull at one of her favorite stuffed squirrel toys. Coming down from one flip, she landed very awkwardly and bent one of her front vestigial dewclaws all the way back. She was lucky she didn’t break her leg. I think she often forgets that she hasn’t been a puppy for many years. So, limping around and multiple vet trips later, she sadly endured 10 days in the cone so that she wouldn’t lick her leg. Long story long, the claw managed to regrow a bit and the broken part fell off in time. She’s all better now, but we put the excitement-inducing stuffed squirrel away for the time being.

Second, Lola the scaredy cat also recently had to go to the vet for her three-year shots and annual checkup. The poor thing cried all the way out the door and to the vet. She is very much an indoor cat, so being outside in the cold was very traumatic apparently, despite the fact that she does wear a literal fur coat all the time. While at the vet’s, they were unable to complete the complimentary nail trimming because she fought them so hard, and then boy was she irritable when she returned home. She first hid under the couch for a time and then joined us again, but sat with her back to us for the remainder of the afternoon.

Now, this week in the Wide World of Coverage, we have one from our own Second Circuit. A brief decision, Oldcastle Precast v. Liberty Mutual discusses the standards for vacating an arbitration award in court. Generally, in order to vacate an arbitration award, one has to demonstrate manifest disregard for the law. That is a particularly high burden, one that the objecting party could not sustain in this case. They did win, however, on reducing the prejudgment interest owed. While the federal statutory interest rate is set at 9%, since the parties had previously contracted to a much lower rate (0.5%), that contract between them would be upheld. Win some, lose some.

Until next time,

Agnes
Agnes A. Wilewicz
[email protected]

 

This Criminal Charge, for the Bird(s):

The Buffalo Enquirer

Buffalo, New York

19 Mar 1921

Held on Burglary And Larceny Charges  in Theft of Pigeon

A man giving the name of Zygmunt Pankiswicz, No. 73 Sears Street, charged with the theft of a pigeon, valued at 50 cents taken from a loft at No. 181 Lombart Street, today was held for the grand jury.  He is charged with burglary and larceny.

 

Barnas on Bad Faith:

Hello again:

Since my last note the Sabres have not won a game and are currently on a 12-game losing streak.  Thankfully, March Madness is starting this weekend as a much needed distraction from hockey.  If you would have asked me two weeks ago if my Syracuse Orange would have any shot of getting into the tournament, I certainly would have said no.  However, after a nice run to end the season and some help from losses by other bubble teams, the Orange have made it to the tournament for the 35^th time under Coach Boeheim for a matchup with San Diego State.  St. Bonaventure also made it into the tourney, and UB earned an NIT bid after a disappointing end to the MAC Tournament, so there will be plenty of college basketball to watch over the next couple of weeks.  After the tournament was cancelled by the pandemic last year, I am certainly looking forward to it.

I have a little bit of a different case in my column today.  The lack of interlocutory appeals in federal court are always an issue to consider when deciding whether to start an action in federal court or remove one from state court.  In Carpenter, the district court certified the summary judgment dismissal of a bad faith claim for appellate review, even though the breach of contract claim remained pending.  The Sixth Circuit concluded this was improper and rejected the appeal sua sponte.  In so doing, it noted that allowing for appeal of bad faith claims while the underlying breach of insurance contract dispute was pending had the potential to open up the floodgates for potential appellate review of dismissed bad faith claims.  The court decided it was best that those gates remained shut.

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

Brian
Brian D. Barnas
[email protected]

 

Advice to the Lovelorn, a Century Ago:

The Buffalo Enquirer

Buffalo, New York

19 Mar 1921

 

ADVICE TO THE  LOVELORN

BY BEATRICE FAIRFAX

Her Idea of Love.

Dear Miss Fairfax:

            I am eighteen and engaged to a young man four years my senior.  I like this man because he is good and has a lot of respect for me.  But I know I don’t love him and have told him many times.  He persists in going out with me, although I have begged him to set me free for at least a year.  He tells me he will try to make me love him but I can’t, for I also have been trying for a year to do so.

                                                                                                            JEAN.

Dear Jean

Perhaps your idea of love is a longing for something wild and unknown and thrillingly different from the simple emotions you’ve always known”  Maybe you’re hunting for romance and adventure.  You have a right to dreams, but are you sure you understand yourself and know what you want?  You’re so young that it isn’t easy for you to estimate your true self—you lack the experience to make you sure of yourself.  Don’t marry unless you have a real foundation for happiness in a life together.  Better to break an engagement than to spoil one life—or more likely two.

 

Off the Mark:

Dear Readers,

The weather is starting to change for the better and the days are getting longer.  As the vaccine numbers continue to rise, things are finally beginning to look up.  I am looking forward to the warmer weather and spending more time outside with the kids.  After being trapped indoors for much of the winter, we all could use some fresh air and exercise.

This edition of “Off the Mark” brings you a recent construction defect decision from the United States District Court for the Northern District of Alabama, Southern Division.  In Barton v. Nationwide Mut. Fire Ins. Co., the Court examined a carrier’s obligations relative to an underlying judgment against its insured.  The Court held that the plaintiffs failed to provide sufficient information to determine how much of the damages awarded were attributable to injuries or claims covered by the defendant’s policy.  As such, the Court determined that the carrier was entitled to judgment.

Until next time …

Brian
Brian F. Mark
[email protected]

 

Quick Justice:

Buffalo Courier

Buffalo, New York

19 Mar 1921

JURY INDICTS MAN OF MURDER IN FIVE MINUTES

            New Brunswick, N.J., March 18 –

            In less than five minutes the Middlesex county grand jury today returned an indictment charging first degree murder against George Washington Knight, negro, who is alleged to have confessed the murder of Mrs. Edith Wilson, church organist, at Perth Amboy last Saturday night.  Arrested last Monday, he will be placed on trial next Monday.

Editor’s Note:  He was quickly convicted and had it not been for an appeal taken, he would have been put to death within three weeks of the crime,  Instead, the appeals took a year and then Knight was put to death in the electric chair.

 

Boron’s Benchmarks:

This was a first.  And this was The First.  Of two.

Never before in my life had I gleefully set an appointment to get a shot.  Never before had I counted down the days with eager expectation until I got my shot. 

Today was the big day.  The first big day of two in the next 4 weeks.  I am grateful for receiving my first COVID-19 vaccine shot (Moderna) this morning. Being right-hand dominant, I had the shot put into my left arm just in case I am called upon to throw out a first pitch or to compete in a punt, pass and kick competition later today.

Grateful wasn’t the feeling I was experiencing when Governor Cuomo announced on March 10 the threshold age for vaccine shots in New York was dropping from 65 to 60, but...the earliest appointment I was able to set on the New York scheduling website was for nearly two months out – on May 5 – at a location 90 miles from my house.  However, thankfully, that same day I placed my name onto waiting lists at every local pharmacy.

I received an email just two days ago from one of the local pharmacies saying there was a vaccine appointment slot available for today, at a location that is just two miles away from my house. It is March 17 as I write this personal note to you, and the wind has been at my back all day long!  

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 March 10, 2021, by the Supreme Court of New Hampshire in a declaratory judgment action, Daniel Ho vs. Factory Mutual Insurance Company a/s/o Trustees of Dartmouth College.  The case involved application of the anti-subrogation rule by the New Hampshire Supreme Court.  In a 3-0 ruling the Court held that Factory Mutual, which paid out approximately $4.5 million to Dartmouth College for fire damage suffered by a dormitory hall, cannot seek subrogation recovery against two (now former) students dorming on campus at the time whose negligence caused the fire.  Why, you ask?  Because, in general, no right of subrogation can arise in favor of an insurer against its own insureds, and the Court found the students were “implied co-insureds” under the college’s fire insurance policy. The fact that the students had violated student handbook rules for dorming students, including a prohibition against the use of charcoal grills in the dorms, did not negate the presumption that the students were implied co-insureds under the college’s fire insurance policy. 

Have a healthy and happy next two weeks, folks.

Eric
Eric T. Boron
[email protected]

 

A Lawyer by Any Other Name ….:

The Brooklyn Daily Eagle

Brooklyn, New York

19 Mar 1921

 

What’s in a Name:  Lots,

Says Lawyer—Proves It

            Mineola, L.I., March 19—John J.A. Rogers, of Hempstead, formerly of Ridgewood, is a lawyer.  He says the J.J.A. stands for John James Anthony.  In fact Mr. Rogers, who was his  own counsel in an action to recover $106 from one Richard Altman, of Queens, before Justice Leander B. Faber and a jury in the Nassau County Supreme Court, put just a touch of the brogne into the declaration that that was his name.  The reason so much attention is attracted to this statement is because Frank F. Adel, counsel for the defendant, maintained that he knew Mr. Rogers 15 years and had known him as “John Jacob Astor Rogers.”

            The question of names came up during the summation of both.  Mr. Adel decried the plaintiff’s intimation that he had a better sounding name than Altman’s, who talked with a German accent.

            Mr. Rogers, who is known for his aggressiveness, sued to recover what he said was due him on legal fees.  He said that Altman retained him in Ridgewood two years ago to defend an action and that he charged Altman $200.  He said he received only $100 and now he asked for the balance and interest.  The jury decided in favor of the plaintiff, Rogers.

           

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

One year has gone by

Spent at home and home we stay

Vaccines the home stretch

This week, we have a pair of write-ups on the regulatory front. First, a proposed regulatory change provides a number of administrative changes to various provisions of New York insurance regulations. Second, a warning from DFS regarding recommended patches for zero-day vulnerabilities in Microsoft Exchange email servers.

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

After Conviction, He was Quickly Pardoned by the Governor:

The New York Times

New York, New York

19 Mar 1921

 

FLOOD FOUND GUILTY OF MANSLAUGHTER

Jury, After Hour and a Half,

Brings Second Degree Verdict

Against Policeman.

SENTENCE ON THURSDAY

Defense Will Plead Reasonable Doubt—Second Degree Verdict May Imply Negligence.

            A verdict of guilty of manslaughter in the second degree was returned yesterday against Policeman Cornelius J. Flood, who was indicted for murder in the first degree for the killing of James Cushing, 15 years old, on July 14, 1918.  The jury added to its verdict a strong plea for leniency because of Flood’s newness in the Police Department at the time of the shooting and because of his good record.  Ex-Governor Charles S. Whitman, who obtained the indictment and prosecuted the case, said yesterday that he would concur in the jury’s recommendation for leniency on the same grounds.  Manslaughter in the second degree is punishable by imprisonment not exceeding fifteen years or a fine not exceeding $1,000 or both.  The minimum sentence would be a fine of $1.

 

CJ on CVA and USDC(NY):

Hello Readers,

Another two weeks have passed, and another two fish fries have been tasted. I tried the whiskey battered fish at Steelbound Brewery in Ellicottville, NY (just south of Buffalo). I was pleasantly surprised with how much I enjoyed the whiskey batter, as I am generally a traditionalist when it comes to food. Last week I sampled the offerings of St. Amelia’s Church right down the street from my house, a fish fry that compared to many restaurants I’ve been to!

In other news March Madness is right around the corner, I am once again testing my theory that small schools will prevail. I base this unscientific theory on the fact that basketball is a relatively low-cost sport for a school (as opposed to football) thus allowing a small school without a football team to focus its energy on its basketball team. To that end, I have the Gonzaga Bulldogs coming home with the win in April.

Coverage decisions in the District Courts of New York were sparse in the last two weeks. Instead of rehashing another COVID-19 business interruption decision, I have written up an interesting case out of the Southern District stemming from a trucking accident. The case applies Illinois law, which is similar to New York law although has a stronger presumption that the contract terms should be strictly interpreted. Additionally, the court examined a motor carrier’s obligation under federal law, and discussed that even when an insurance obligation may be picked up by another carrier, obligations under statute are not absolved.

See you in two weeks,

CJ
Charles J. Englert, III
[email protected]       

 

Newspaper Sales Barred Because of Anti-Semitism:

New-York Tribune

New York, New York

19 Mar 1921

 

St. Louis Bars Ford’s Weekly Under Criminal Libel Law

Police Ordered to Arrest All Persons Who Sell Paper,

Beginning To-day, Under Statute Defining

Defamation or for Disturbance of the Peace

 

            Special Dispatch to the Tribune

ST. LOUIS,  March 18.—City Counselor Daues to-day gave a written opinion to Chief of Police O’Brien in which he said the selling of the Dearborn Independent, Henry Ford’s weekly paper, by criers on the streets of St. Louis constitutes a violation of the law, which may be punished under the statute defining defamation and criminal libel or under a city ordinance defining, disturbance of the peace.  The reason for his opinion, he says, is that the publication contains matter “obviously intended to reflect injuriously upon the character and conduct of persons of Jewish extraction.”

            When informed that the city counselor has ruled that persons selling the paper might be prosecuted by the police, President Miller of the Police Board, said:

            “That course will be pursued.”

            Chief of Police O’Brien said to-night that beginning to-morrow morning he would order the arrest of all persons engaged in selling the Fort Dearborn Independent in St. Louis.  Ford’s news-boys to-night made extra efforts to unload their supply of papers.

            Referring to the statute on which his opinion is based, Mr. Daues said:  “The statute defines malicious defamation of a person, and hence includes a class of persons, by “printing, writing, sign, picture, representation or effigy tending to provoke him to wrath or expose him to public hatred, contempt or ridicule, or to deprive him of public confidence and social inter-course.”

 

Dishing Out Serious Injury Threshold:

Dear Readers,

Happy St. Patrick’s Day to all! It’s been about a year since the pandemic started and while the end is in sight, I hope everyone gets a chance to enjoy the day while still being safe. Hopefully by this time next year we will be able to celebrate like normal.

In the Serious Injury Threshold world, we have a few decisions from the First and Second Departments. The first case deals with plaintiff’s submission of unaffirmed medical records, which are inadmissible. Further, plaintiff’s medical expert only examined plaintiff on one occasion eight years after the accident, and his findings were determined to be too remote to establish causation. Similarly, the second decision found that plaintiff’s doctor who examined plaintiff almost four years after the accident was also found to be too remote. Finally, the third decision, pertains to a defense expert conceded that the alleged injuries are causally related to the subject accident, as such plaintiff was able to raise a triable issue of fact that those injuries qualified under the Serious Injury Threshold statute.

Be well,

Michael

Michael J. Dischley

[email protected]  

 

Insurance Company President Mysteriously Killed:

New York Herald

New York, New York

19 Mar 1921

 

INSURANCE PRESIDENT MYSTERIOUSLY KILLED

George J. Kuebler Drops

Ten Floors to Street.

 

Special Dispatch to THE NEW YORK HERALD.

            CHICAGO, MARCH 18.—The police were confronted with an amazing mystery early this evening when the body of George J. Kuebler, president of the International Mutual Fire Insurance Company, dropped from the tenth floor of the National Life Building and fell at the feet of the crowds hurrying homeward in La Salle Street.

            No witnesses could be found to the tragedy in the offices of the insurance company, but a revolver with one chamber freshly discharged was found in the offices.  This led to police speculation whether suicide or murder entered into the tragedy.  No one had been found to-night who saw Kuebler fall.  A messenger boy first saw the body.  His cry of alarm caused a crowd to gather.

            In Mr. Kuebler’s pockets were a memorandum book and a newspaper clipping announcing the engagement of his son, Lieut. George J. Kuebler, Jr., to Miss Florence Williamson.

            Mr. Kuebler was one of the most widely acquainted men in La Salle Street.  In 1915 his wife obtained a divorce.  Since that time he has lived at the Chicago Athletic Club.

 

Bucci on “B”: 

Hello people:

Welcome to this week’s Coverage Pointers.  Well, things are looking up on the  COVID front, with all of the new vaccines.  I got my first dose on Monday.  After I am all dosed up, I plan to go to my favorite restaurants and eat and drink amazing drinks that I could never make at home.  In fact, I know the best little Mexican food restaurant that makes the best margaritas.  They can expect me on Cinco de mayo, because why not?

Next, I am going to go somewhere warm and sunny, with beautiful beaches and good shopping.  That is just what I am in the mood for.  And friends and family.  I will see people I have not been able to see for so long.  So exciting.  I can’t wait.

Diane
Diane L. Bucci
[email protected]

 

Prohibition Rears its Ugly Head:

New-York Tribune

New York, New York

19 Mar 1921

Taste of Liquor Convicts 4

Florida Jury Acts Quickly After Drinking Real Stuff

            TAMPA, Fla., March 18—The jury looked dubious when evidence in a liquor seizure case involving the Cuban schooner Ramplazo was presented for its inspection to-day in the Federal Court.

            “Have a drink, boys, and see for yourselves if it is not the real stuff,” said District Attorney Herbert S. Phillips, handing bottles of whisky, brandy and wine, part of 3,000 quarts seized aboard the vessel, into the jury box.  The jurors did, except one who merely sniffed, and were convinced, promptly voting the captain, mate and two deck hands guilty.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

I am green with envy this St. Patrick’s Day—envious of the lawyers representing Connecticut’s Second Injury Fund who won a DJ action on 11^th Amendment grounds. In the words of a local carpet company’s TV commercial: “Who does that?”  Congrats to the attorneys from the AG’s office.

In other Connecticut news, the vaccine rollout continues—but I’m still too young and healthy to get it. Soon, very soon. I did venture out to the movies over the weekend for the first time in more than a year. Theaters here just opened recently, operating at 40% capacity. Out of 20 screens, maybe 4 or 5 were active, and there couldn’t have been more than 30 or 40 cars in the parking lot. Windchills at close to zero degrees may have played a part in that. I have to say, being in a movie theater felt utterly decadent (even being fully masked).

Continue to be smart and stay safe. We’re almost there.

Lee
Lee S. Siegel
[email protected]       

 

Daylight Savings Time Controversial, 100 Years Ago:

The Yonkers Herald

Yonkers, New York

19 Mar 1921

 

TRAHAN DEFENDS VOTE ON DAYLIGHT SAVING

            Assemblyman Trahan has written the following letter to Frederic Holbrook in response to a letter of inquiry as to the Assemblyman’s vote on the bill repealing the Daylight Saving law:

            “Your letter in relation to daylight saving at hand.  My mind is very clear on this subject, and I am sure that I did the right thing.  I will be glad to appear any time or place when I am in Yonkers and explain my vote on this bill to any of my constituents.  I feel positive, if I had such an opportunity, with the knowledge I possess on this legislation, I could convince more than a large majority that I did exactly what they would have done if they had been in my place.”

 

Rauh’s Ramblings:

Dear Readers:
March is flying by and spring is finally near!  Although work has been keeping me extremely busy as of late, I am trying to spend my free time spring cleaning and de-cluttering my house.  It’s amazing how much junk I have accumulated in my basement over the years, so I am anxious to finally get that cleaned out and somewhat organized.

Today’s case is from the First Department and involves a dispute over whether the plaintiff policyholder made a material misrepresentation on the question of earned annual income on his insurance application.     

 Until next time!

Patty
Patricia A. Rauh
[email protected]       

 

Killing Pal for Insurance Proceeds:

The Brooklyn Citizen

Brooklyn, New York

19 Mar 1921

 

ADMITS HE SLEW TO WIN INSURANCE

Youth Tells of Murdering Chum Who Looked Like Him—Put Own Clothes on Body.

            WARSAW, Ind., March 19—Virgil Decker early to-day solved the mystery of the strange murder of his chum, Leroy Lovett, by confessing to slaying the youth in a shack on the Tippecanoe River last Saturday night.

            Decker, an eighteen-year-old farmer boy, told how he killed his friend in order to collect $25,000 accident insurance.  Decker and Lovett had many marks of similarity in appearance.

            After hitting Lovett in the head with a heavy iron, Decker said he changed clothes with his victim, placed the body in a buggy and left the buggy standing on a railroad track so that it might be struck by a train.

            Decker said he thought the body would be badly mutilated by the train.  He planned to disappear and have the body, identified by his family as that of himself.  His brother would collect the accident insurance, according to the scheme, and then he would obtain it from him.

            Decker said he alone planned the murder and that there was no conspiracy with any member of his family or any mysterious character known as “Guy,” mentioned in his earlier stories.

            The confession was obtained by the motherly Mrs. C.B. Moon, wife of the Sheriff of Kosciusko County, after grilling by officials had failed to bring forth the story.

            Mrs. Moon treated the boy kindly and won his confidence.

 

Storm’s SIU Examen:

Hi everyone:

This week in the Examen I have included good news regarding Senate Bill S502 which unanimously passed the Senate on March 8, 2021, and is currently being considered by the Assembly.  Once a law, this legislation will permit an insurer to rescind or retroactively cancel an auto policy in circumstances involving staged accidents. 

We will also refresh our recollection as to the standard for a third-party liability coverage claim denial due to an insured’s lack of cooperation.  In the case we will examine, the court granted the insurer’s motion to be relieved of the duty to defend and indemnify its insured in regard trip a trip-n-fall incident as the insurer satisfied the “Trasher test”, proving that: (1) it acted diligently in seeking to bring about the insured's cooperation; (2) the efforts employed by the carrier were reasonably calculated to obtain the insured's cooperation; and (3) the attitude of the insured, after its cooperation was sought, was one of willful and avowed obstruction. 

Next, we will consider a case involving a claim on a commercial crime insurance policy.  The court provides a good summary of the law pertaining to 2-year contractual suit limitation conditions and also addresses issues involving: the implied covenant of good faith and fair dealing; N.Y. General Business Law § 349; punitive damages; consequential damages; and attorneys’ fees. 

If you and I are not yet friends on LinkedIn, please send me a connection request. 

This edition’s encouraging word: “To reach a port, we must sail - sail, not tie at anchor - sail, not drift.”  ~ Franklin D. Roosevelt

I look forward to speaking with you regarding any challenging coverage issues you are evaluating.  Call me anytime at (716) 220-1478.  Talk to you soon!

Scott

Scott D. Storm

[email protected]

 

Headlines from this week’s issue, attached:

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

• Insurer Has Duty to Disclaim, Based on Policy Exclusions, When it Has Notice of Accident and First Learns of Reason to Disclaim.  Waiting Until Claim Comes In, Before Disclaiming, is an Insufficient Excuse for Disclaimer Delay

• In Pre-Prejudice Case, Additional Insured Loses Coverage on Late Notice, Even though Carrier Had Notice from Named Insured

• “Technical Trap” Doesn’t Trap Carrier on Late Notice

• Conflicting or Confusing Contractual Provisions on Requirement to Provide Additional Insured Coverage Leads to Defense Obligation

• Additional Insured Defense Obligations Before Directed Verdict Were Not Impacted by Subcontractor’s Exoneration by Directed Verdict

 

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

Potpourri

• Excuse for Delay Also Needs a Showing of Merit to Avoid Dismissal

• GOL 5-322.1 Applies to Dump Truck Hauling Millings from a Repaving Project

• Deposition Transcripts Constitute New Evidence Supportive of a Motion to Renew

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley
[email protected]

• Plaintiff’s Expert only Examined Plaintiff Eight Years After the Subject Accident and Was Found to be Too Remote in Time to Opine as to Causation
• Plaintiff’s Expert Only Examined Plaintiff Four Years After the Subject Accident and Was Found to be Too Remote in Time to Opine as to Causation
• Defense Expert Conceded that the Alleged Injuries were Causally Related to the Subject Accident, as such, Plaintiff was able to Raise a Triable Issue of Fact

 

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

• Second Circuit Holds that Arbitration Award Will Not be Vacated Absent Manifest Disregard of the Law, Which Carrier Bears a Heavy Burden

 

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

• Immediate Appeal of Dismissal of Bad Faith Claim was Improvidently Granted

 

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

• 11th Amendment Bars Declaratory Judgment Action

 

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

• No Coverage for Harassment in the Debt Collection Context 

 

OFF THE MARK
Brian F. Mark
[email protected]

• U.S. District Court Grants Judgment in Favor of Carrier where Plaintiffs Failed to Provide Sufficient Information to Determine how much of the Damages Awarded were Attributable to Injuries of Claims Covered by the Defendant’s policy.

 

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

• Fire Insurance – Anti-Subrogation Rule - Implied Co-Insureds

 

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

Regulatory Wrap-Up

• Cybersecurity Alert Issued to Regulated Entities Concerning Zero-day Vulnerabilities in Microsoft Exchange Email Servers

• Cybersecurity Alert Issued to Regulated Entities Concerning Zero-day Vulnerabilities in Microsoft Exchange Email Servers

 

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

• Strict Interpretation of a Carrier’s Policy Language and One Insurer’s Assumption of the Insurance Obligations of Another, will not Relieve that Carrier’s Federal Statutory Obligations

 

RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]

• Although the Term “Earned Annual Income” in the Insurance Application Completed by Decedent Was Unambiguous, There is a Question of Fact as to Whether the Decedent’s Misrepresentation was a Material Misrepresentation Sufficient to Void the Policy

 

ruMIRNAtions
Mirna. M. Santiago
[email protected]

• Five Ways That Companies Can Drive Diversity, Equity, and Inclusion

 

STORM’S SIU EXAMEN
Scott D. Storm
[email protected]

• Staged Accidents

• The Court Granted the Insurer’s Motion in this DJ Action to be Relieved of a  Duty to Defend and Indemnify Its Insured in Regard to a Trip-N-Fall Incident.  The Insurer Satisfied the “Thrasher Test” in Proving that: (1) It Acted Diligently in Seeking to Bring About the Insured's Cooperation; (2) The Efforts Employed by the Carrier were Reasonably Calculated to Obtain the Insured's Cooperation; and (3) The Attitude of the Insured, After its Cooperation was Sought, was One of Willful and Avowed Obstruction

• Commercial Crime Insurance Policy – 2-Year Contractual Suit Limitation Condition; Implied Covenant of Good Faith and Fair Dealing; N.Y. General Business Law § 349; Punitive Damages; Consequential Damages; and Attorneys’ Fees

 

We hope you’re healthy and vaccinated or will be soon.

Happy Spring!

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

Ryan P. Maxwell

Charles J. Englert

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]

 

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”

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

Rauh’s Ramblings

ruMIRNAtions

Storm’s SIU Examen

 

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

03/16/21       ADD Plumbing, Inc. v. The Burlington Insurance Company
Appellate Division, First Department
Insurer Has Duty to Disclaim, Based on Policy Exclusions, When it Has Notice of Accident and First Learns of Reason to Disclaim.  Waiting Until Claim Comes In, Before Disclaiming, is an Insufficient Excuse for Disclaimer Delay

A timely disclaimer pursuant to Insurance Law § 3420(d) is required when a claim falls within the coverage terms but is denied based on a policy exclusion.  Timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage.

While the question as to whether the insurer disclaimed coverage as soon as reasonably possible after it first learns of the ground for disclaimer is necessarily case,  where there is no excuse or mitigating factor, the issue poses a legal question for the court, and courts have found relatively short periods to be unreasonable as a matter of law.

Here, the insurer’s disclaimer, dated December 24, 2014, was untimely as a matter of law.  Burlington argued that it only received plaintiff's claim on December 16, 2014.  However, it was on notice of the underlying accident several months before it disclaimed coverage and commenced an investigation with respect to the alleged accident. Therefore, defendant was sufficiently aware of the facts that would support a disclaimer, but waited almost two months before disclaiming coverage.

 

03/10/21       County of Suffolk v. United States Liability Insurance Co.
Appellate Division, Second Department
In Pre-Prejudice Case, Additional Insured Loses Coverage on Late Notice, Even though Carrier Had Notice from Named Insured
On September 2, 2007, Creutzberger attended a music festival sponsored by the defendant Circle of Chiefs held on property owned by the Suffolk County and occupied by the Long Island Maritime Museum (“Museum”). During the festival, Creutzberger allegedly was injured while riding his bicycle on the grounds. Circle of Chiefs was insured by the defendant United States Liability Insurance Company (“USLIC”) and the County and the Museum were named as additional insureds under the policy. The insurance policy required, inter alia, that USLIC be notified "as soon as practicable of an 'occurrence' or an offense which may result in a claim."

In September 2007, Circle of Chiefs provided notice to USLIC of a "potential claim" against it based upon the subject accident. The notice did not mention the County or the Museum. In January 2008, USLIC was notified of the identity of the allegedly injured party, and commenced an investigation of the incident. In February 2008, USLIC learned of a 90-day notice filed with the County, and a potential General Municipal Law § 50-h hearing "in the near future." On April 3, 2008, USLIC obtained for the first time a copy of a notice of claim dated September 19, 2007, filed against the County, among others. On April 4, 2008, USLIC issued a letter disclaiming coverage to the County and the Museum on the ground that it had not received notice from the County and the Museum of the claims asserted against them.

An insured's failure to satisfy the notice requirement [under an insurance policy] constitutes "a failure to comply with a condition precedent which, as a matter of law, vitiates the contract,  That the insurer received notice from another source, does not excuse an additional insured's failure to provide notice.

This was a pre-prejudice statute case.

 

03/11/21       Houston Casualty Company v. Cavan Corporation of NY, Inc.,
Appellate Division, First Department
“Technical Trap” Doesn’t Trap Carrier on Late Notice

The motion court correctly rejected the Puck defendants' argument that they are entitled to a declaration that plaintiff must defend and indemnify them in the underlying action because plaintiff's notice of disclaimer was untimely pursuant to Insurance Law § 3420(d). The Puck defendants are attempting to use Insurance Law § 3420(d) as a technical trap that would allow [them] to obtain more than the coverage contracted for under the policy.

While the Puck Defendants argue that Houston's denial was untimely because they first tendered on June 15, 2015, when they sought to intervene in the action, and that Houston first denied coverage eight months later. In their answer filed in support of their motion to intervene, the Puck defendants assert that they tendered their claim in April 2014 and that plaintiff "wrongfully rejected" the tender less than 30 days later. Further, plaintiff's May 2014 letter disclaiming coverage as to "Kushner Companies and their affiliates," by its own terms applies to the Puck defendants.

 

03/09/21       Realty Owner LLC, v. Amtrust Intern’l Underwriters Limited
Appellate Division, First Department
Conflicting or Confusing Contractual Provisions on Requirement to Provide Additional Insured Coverage Leads to Defense Obligation
The appellate court found that Amtrust failed to demonstrate that it is possible to reconcile the conflicting provisions of the governing documents, i.e., the rider to the "Task Order," which defendant argues shows that its named insureds were not required to name plaintiffs as additional insureds, and the provisions of other documents that require that plaintiffs be named as additional insureds.

Accordingly, the court found that the allegations in the underlying complaint suggest a reasonable possibility of coverage.

 

03/09/21       Allied World Assur. Co. v. Aspen Specialty Insurance Co.
Appellate Division, First Department
Additional Insured Defense Obligations Before Directed Verdict Were Not Impacted by Subcontractor’s Exoneration by Directed Verdict
Court affirms finding that carriers had an obligation to provide additional insured coverage because there was a reasonable possibility, based on the allegations in the underlying complaint, that the underlying injury was caused, in whole or in part, by the acts or omissions of the subcontractors to which the policies were issued in connection with their ongoing operations and therefore that coverage for M. Cary, the general contractor, was implicated under the policies.  The fact that the allegations against the subcontractors were debatable and later dismissed does not change the obligation to defend.

 

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

Potpourri

03/11/21       Fawn Second Avenue, LLC v. First Am. Title Ins. Co.
Appellate Division, First Department
Excuse for Delay Also Needs a Showing of Merit to Avoid Dismissal

Plaintiff appears to have failed to timely serve its Complaint.  Upon receipt, defendant moved to dismiss it as stale under CPLR 3212(b).  Plaintiff, it appears, cross-moved for an extension of time to serve.

Because the first motion was the motion to dismiss, the trial court was instructed to employ that standard of review.  Although the delay was excusable as law office failure, the plaintiff did not proffer any showing of merit.  Here, only an attorney affirmation with Complaint was attached to the plaintiff’s motion papers.  That was insufficient as a matter of law, and the Complaint dismissed accordingly. 

 

03/10/21       Barrios v. Inter County Paving Associates, LLC
Appellate Division, Second Department
GOL 5-322.1 Applies to Dump Truck Hauling Millings from a Repaving Project

Plaintiff was employed as a dump truck driver for third-party defendant, Sweet Hollow.  While in the course of unloading milling materials he obtained at a project overseen by Inter County, his truck overturned causing injury.  Inter County sought contractual indemnification from Sweet Hollow pursuant to the subcontractor agreement. 

The Court noted that as a construction contract Inter County was not permitted to be indemnified for its own negligence.  Thus, where Inter County supervised, directed and/or controlled the manner in which plaintiff’s truck was loaded, and where the plaintiff’s theory of negligence was that the truck was improperly loaded, it followed that Inter County did not meet its burden.   

 

03/04/21       Han v. Brighthouse Life Ins. Co. of NY
Appellate Division, First Department
Deposition Transcripts Constitute New Evidence Supportive of a Motion to Renew

Decedent’s application for life insurance indicated that his “earned annual income” was $50,000.  At the time of the statement, however, the applicant was making nowhere near that amount.  When he died during the contestability period of the policy, Brighthouse rescinded the agreement.

When decedent’s Estate commenced the instant action, Brighthouse moved for summary judgment during the middle of discovery.  While motions were pending, the depositions of Brighthouse employees were taken. When the motion was granted in favor of Brighthouse, the Estate filed a motion to renew on the basis of newly discovered information in the form of the deposition transcripts.

In overturning the trial court, the Appellate Division ruled that the motion to renew should have been granted.  Moreover, the evidence adduced in the motion to renew raised questions over whether the alleged misrepresentation was, in fact, material to Brighthouse’s underwriting department.

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley
[email protected]

03/09/21       Natalie Cortez v.  Donald R. Bray
Appellate Division, First Department
Plaintiff’s Expert only Examined Plaintiff Eight Years After the Subject Accident and Was Found to be Too Remote in Time to Opine as to Causation

In an action to recover damages for personal injuries, the plaintiff appeals from an Order of the Supreme Court, Bronx County (Mary Ann Brigantti, J.), entered March 3, 2020, which, granted defendants’ motion for summary judgment.

Plaintiff alleges that she sustained serious injuries, including lumbar strain, as the result of a car accident that occurred in 2011. The Appellate Court found that defendant met his prima facie burden of showing that plaintiff did not sustain a serious injury, through the report of his medical expert who found that plaintiff had no limitations in range of motion or other positive findings upon examination, and noted that plaintiff's medical records included "unremarkable" reports of X-ray and MRI tests performed shortly after the accident. Through plaintiff's deposition testimony, defendant also showed that plaintiff ceased treatment within four months of the accident.

In opposition, the Appellate Court found that plaintiff failed to raise a triable issue of fact as to whether she sustained a serious injury to her lumbar spine. Plaintiff submitted unaffirmed medical records which are inadmissible, with the exception of the MRI and X-ray reports as their results were relied upon by defendant's medical expert. Those records support defendant's position that there is no objective evidence of a lumbar. Plaintiff's medical expert examined her on one occasion eight years after the accident, so his findings, unsupported by any other evidence of injury causally related to the accident, are too remote to establish causation. Nor did plaintiff provide an adequate explanation for her cessation of treatment four months after her accident.

Based on the foregoing, the Appellate Court unanimously affirmed the lower Court decision, without costs.

 

03/09/21       Elder Omidio Reyes v. The City of New York, et al.
Appellate Division, First Department
Plaintiff’s Expert Only Examined Plaintiff Four Years After the Subject Accident and Was Found to be Too Remote in Time to Opine as to Causation

In an action to recover damages for personal injuries, the plaintiff appeals from an Order of the Supreme Court, Bronx County (Ruben Franco, J.), entered June 21, 2019, which, granted defendants’ motion for summary judgment.

The Appellate Court found that defendants established prima facie that plaintiff did not suffer a serious injury to his cervical or lumbar spine by submitting an orthopedist's affirmed report finding that plaintiff had normal range of motion and that his alleged injuries had resolved. The orthopedist also opined that plaintiff's own reports of MRIs of his cervical spine, lumbar spine, and left shoulder showed degenerative conditions not causally related to the accident. In addition, defendant Antigua submitted plaintiff's own emergency room records, which showed that plaintiff was diagnosed only with a knee contusion and that there were no findings in the hospital of injury to his neck, back, or shoulders.

In opposition, the Appellate Court found that plaintiff failed to raise an issue of fact by submitting an affirmed report of a doctor who examined him almost four years after the accident, which is too remote to raise an inference that the limitations were causally related to the accident, and no evidence of contemporaneous treatment or limitations. Moreover, the medical expert did not address the findings in plaintiff's MRI reports of degenerative conditions.

The Appellate Court found that Defendants are entitled to the dismissal of the 90/180-day claim in the absence of evidence of a causal connection between plaintiff's conditions and the accident. Moreover, plaintiff's bill of particulars and deposition testimony indicate that he was confined to home for only approximately three days after the accident.

Based on the foregoing, the Appellate Court unanimously affirmed the lower Court decision, without costs.

 

03/10/21       Guerline Maitre v. Empire Paratransit Corp., et al.
Appellate Division, Second Department
Defense Expert Conceded that the Alleged Injuries were Causally Related to the Subject Accident, as such, Plaintiff was able to Raise a Triable Issue of Fact

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Lisa S. Ottley, J.), dated June 3, 2019. 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.

The plaintiff commenced this action to recover damages for personal injuries that she allegedly sustained in a motor vehicle accident that occurred on April 1, 2015. The defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The Supreme Court granted the defendants' motion, and the plaintiff appeals.

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 and lumbar regions of the plaintiff's spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).

In opposition, however, the Appellate Court found that the plaintiff raised a triable issue of fact as to whether she sustained serious injuries to the cervical and lumbar regions of her spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).

Since the defendants' expert conceded that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine were caused by the accident, the Appellate Court found that the burden never shifted to the plaintiff to raise a triable issue of fact regarding causation, or to explain any gap in treatment.

Accordingly, the Appellate Court found that the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint. As such, the Appellate Court reversed the Order, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.

 

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

03/09/21       Oldcastle Precast, Inc. v. Liberty Mutual Insurance Company
United States Court of Appeals, Second Circuit
Second Circuit Holds that Arbitration Award Will Not be Vacated Absent Manifest Disregard of the Law, Which Carrier Bears a Heavy Burden

Liberty Mutual and Metra Industries, Inc. (collectively, “Metra”) appeal from judgement that had granted Oldcastle Precast, Inc.’s (“Oldcastle”) motion to confirm an arbitration award. That award had granted Oldcastle damages in the amount of $311,518.96, pre-judgment interest at the rate of 9 percent per annum from May 1, 2017 through March 13, 2019 (the entry of the original judgment), plus post-judgment interest at the federal statutory rate. Further facts about the underlying incident were not given in the decision.

“A litigant seeking to vacate an arbitration award based on alleged manifest disregard of the law bears a heavy burden, as awards are vacated on grounds of manifest disregard only in those exceedingly rare instances where some egregious impropriety on the part of the arbitrator is apparent. […] That impropriety has been interpreted clearly to mean more than error or misunderstanding with respect to the law.” The award should be enforced if there is even a barely colorable justification for the outcome reached.

Here, with respect to damages associated with Metra’s counterclaim the arbitrator stated: “Below is a list of each component of Metra’s counterclaim, offset with a dollar amount awarded for each. Although the principal defense asserted by Oldcastle to these charges was based upon entitlement rather than costs, where entitlement was found to exist, certain adjustment were made to the amounts sought by Metra. For instance, unless supplied by third parties, I did not award sums for equipment or equipment operation as requested by Metra. I find that there was insufficient proof to establish actual damages sustained or the amounts requested for these items, and in any event, I find the damage calculations proffered by Metra’s employee for use, operation and/or downtime of Metra’s own equipment which, for the most part, was on the site anyway, to be unreliable.”

Metra primarily argued that in the arbitrator’s statement there was insufficient proof of “actual damages.” They also argued that the arbitrator manifestly disregarded the law in requiring it prove actual damages, rather than prove its damages to a “reasonable certainty.” Metra argued that the arbitrator was required to accept Metra’s damages calculation in full. However, what the arbitrator required was either a showing of actual damages or other sufficient proof of the damages incurred by Metra. In connection with this finding, the arbitrator noted that he found the evidence of damages provided in testimony from Metra’s witnesses to provide an unreliable basis for an award. The arbitrator was entitled to weigh the evidence in making his factual findings, and it is well-settled that “[a] federal court may not conduct a reassessment of the evidentiary record.”

Metra also argued that the arbitrator so egregiously weighed the evidence that it rose to the level of “misconduct” or “any other misbehavior”. However, arbitration determinations will not be opened up to evidentiary review until there is some fundamental fairness that has been violated. While they claimed that findings were ignored before the record was closed and that it was unfair to award all of the damages it sought for each work order, the arbitrator found it justified given that Oldcastle did not challenge Metra’s damages calculations. The Court wrote that “this ignores that the arbitrator found that Metra’s evidence on the question of damages provided an unreliable basis for the requested damages award. Even assuming the testimony and evidence in question were unrebutted, that does not obligate the arbitrator to find them an adequate and reliable basis for an award. If a statement is unrebutted it may be more likely to be accepted as true and as providing a sound basis for a finding, but the law does not deem unrebutted statements true or conclusive on a matter of fact. There is simply no basis to overturn the arbitrator’s decision.”

Metra also challenged the court’s grant of prejudgment interest. This on appeal is reviewed on an abuse of discretion standard. Metra claimed that the statutory rate of 9% was improper when the parties had agreed to a lower rate. On that point, they were correct. The parties can agree in contract to whatever they want. “It is well established that when a contract provides for interest to be paid at a specified rate until the principal is paid, the contract rate of interest, rather than the statutory rate set forth in C.P.L.R. 5004, governs until the payment of the principal or until the contract is merged into a judgment.”

 

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

03/15/21       Carpenter v. Liberty Insurance Corporation
United States Court of Appeals, Sixth Circuit
Immediate Appeal of Dismissal of Bad Faith Claim was Improvidently Granted

Plaintiffs home was damaged by a fire in 2016.  Liberty insured Plaintiffs’ home for fire damage.  Liberty denied the claim based on suspected arson.  Plaintiffs commenced this action asserting claims for breach of contract and bad faith.  Plaintiffs sought damages for severe emotional distress, inconvenience, and punitive damages.

Liberty moved for summary judgment seeking to limit Plaintiffs’ recovery on their breach of contract claim to the insurance policy and to prohibit recovery for emotional distress damages.  The lower court granted the motion, but it noted that damages for emotional distress, attorneys’ fees, and punitive damages could be recoverable under the bad faith claim.  Liberty later moved for summary judgment to dismiss the bad faith claim, which was granted.  The court also eliminated all other damages from the claim other than the amount of the policy.  After granting the bad faith motion, the lower court certified the damages and bad faith insurance denial claim rulings for immediate appeal.

The Sixth Circuit concluded that the district court improperly certified the issues for immediate appeal.  The courts of appeals have jurisdictions from all final decisions of the district courts of the United States.  The court concluded both rulings were not final decisions certifiable for appeal.

The grant of summary judgment on the bad faith claim resolved both liability and damages with respect to that claim.  However, this denial did not resolve the breach of contract claim, which remained pending. 

The court considered whether the immediate appeal of the bad faith claim was proper under Rule 54(b).  Among the factors that the court determined weighed against an immediate appeal were (1) the relationship between the adjudicated and unadjudicated claims; (2) the possibility that the need for review might or might not be mooted by future developments in the district court; (3) the possibility that the reviewing court might be obliged to consider the same issue a second time.  In so doing, the court noted that the bad faith and breach of contract claims were based on similar facts, a dismissal of the breach of contract claim would functionally moot the bad faith claim, and the appellate court may have to consider the bad faith claim again if it reinstated it.  All of these factors weighted against allowing the appeal.

The court also observed that allowing the immediate appeal of the dismissal of the bad faith claim where the breach of contract claim remains pending could open the floodgates for future claims.  The court noted that it is far easier to obtain summary judgment dismissal of a bad faith claim than a breach of contract claim.  Allowing immediate appeal of the bad faith claim while breach of contract claims remain pending would inundate the appellate court with partial appeals of bad faith claims.

While the court concluded that the immediate appeal of the damages and bad faith claims was improper, it dismissed the appeal without prejudice for an appeal of a final decision in the case below.

 

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

03/09/21       Nautilus Ins. Co. v. Selective Service, LLC, et al.
United States District Court, District of Connecticut
11th Amendment Bars Declaratory Judgment Action

Have you ever seen a DJ lost on the basis of the 11^th Amendment? Well, they say there’s a first time for everything and this is one of those times. Nautilus filed a declaratory judgment action to determine whether it has a duty under its commercial liability policy and/or its excess insurance policy to indemnify its insured, Selective Service, in an employee's Connecticut state tort action. Connecticut intervened in the state action since Connecticut's Second Injury Fund, a state-operated workers’ compensation insurance fund, may be obligated to pay workers compensation benefits to the employee because his employer did not maintain workers’ compensation insurance. The Second Injury Fund moved to dismiss the DJ action for lack of subject matter jurisdiction under the doctrine of sovereign immunity. Nautilus opposed, arguing that the Second Injury Fund does not have sovereign immunity.

The district court disagreed with Nautilus, finding that the 11^th Amendment barred the coverage action. As a refresher, the Eleventh Amendment provides that “[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State.” Judge Arterton noted that the Supreme Court has construed the Amendment as barring suits against unconsenting states in the federal courts. An exception is where a state officer is sued in their official capacity for violations of federal law. Since Nautilus failed to name a state official in its declaratory relief, Eleventh Amendment immunity bars the action against the Second Injury Fund.

 

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

03/12/21       Zurich Am. Ins. Co. v. Ocwen Fin. Corp.
Seventh Circuit Court of Appeals
No Coverage for Harassment in the Debt Collection Context 

Zurich’s insured, Ocwen Financial Corp., was in the debt collection business. A disgruntled consumer, claimant Tracy A. Beecroft (“Beecroft”), brought suit against Ocwen for Defamation, Invasion of Privacy, and violations of the Fair Debt Collections Practices Act (“FDCPA”) and the Telephone Consumer Protection Act (“TCPA”).  She alleged that she sustained damages as a result of Ocwen’s attempts to collect on a mortgage loan that had been discharged in bankruptcy. 

Beecroft alleged that Ocwen frequently attempted to contact her including through “letters, billing statements and repeated robocalls (approximately 58 or more calls) to her cellular and home phones using an automated telephone dialing system (“ATDS”). The complaint described each of those 58 calls with specificity, including the date, time, and the caller ID. Beecroft alleged that twice, she picked up the phone and begged Ocwen to stop calling.  In her second amended complaint, she alleged that some or all of the calls to her cellular phone were made using: (a) Premier Global Dialer; (b) an IAT Predictive Dialer; (c) a Davox Dialer; (d) Aspect Dialer; or (e) similar dialing system that has the requisite capacity to be actionable pursuant to the TCPA.

In each version of the complaint, Beecroft alleged that Ocwen's actions “were done unfairly, unlawfully, intentionally, deceptively, and absent bona fide error, lawful right, legal defense, legal justification or legal excuse.”

Zurich did not argue that the claims asserted did not fall within the policy’s personal and advertising injury coverage.  Instead, it argued that two exclusions precluded coverage for Beecroft’s claims.   The exclusion for “Recording and Distribution of Material or Information in Violation of Law,” applied to injury directly or indirectly arising out of or based upon any action or omission that violates or is alleged to violate:

(1)      The [TCPA] ...

(2)      The CAN-SPAM Act of 2003 [Pub. L. No. 108-187] [and amendments] ...

(3)      The Fair Credit Reporting Act [FCRA] ... including the Fair and Accurate Credit Transaction Act; or

(4)      Any federal, state statute, ordinance, or regulation other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions, or any other legal liability, at common law or otherwise, that addresses, prohibits or limits the printing, dissemination, disposal, monitoring, collecting, recording, use of, sending, transmitting, communicating or distribution of material or information.

The TCPA prohibits calls to landlines only if those calls used artificial or prerecorded voices. There is no protection for a manual call from an actual person. 

The second exclusion, “Violation of Communication or Information Law,” precluded  coverage for injury resulting from or arising out of any actual or alleged violation of:

(A)      the [TCPA], [Driver's Privacy Protection Act, or DPPA], or [CAN-SPAM Act]; or

(B)      any other federal, state, or local statute, regulation or ordinance that imposes liability for the:

(1)      Unlawful use of telephone, electronic mail, internet, computer, facsimile machine or other communication or transmission device; or

(2)      Unlawful use, collection, dissemination, disclosure, or re-disclosure of personal information of any manner by any insured or on behalf of any insured.

The FDCPA does not protect against calls made negligently, rather than with intent to annoy harass or the like.  

The district court held that both exclusions applied, even to the common law claims of invasion of privacy and defamation, because they all resulted from the excluded conduct. 

On appeal, Ocwen argued that the exclusions did not apply to the duty to defend the common law invasion of privacy claim because the allegations in the complaint indicated the possibility that not all calls were made with intent to harass/annoy, and not all of the calls were made using an ATDC.    

The Seventh Circuit found the exclusions squarely precluded coverage for the telephone related claims, but had to analyze whether the catch-all clause “arising out of” included the Invasion of Privacy claim.   

According to the court, the “arising out of” language presented a “but for inquiry,” whereby if the “plaintiff would not have been injured but for the conduct that violated an enumerated law, then the exclusion applies to all claims flowing from that underlying conduct regardless of the legal theory used. Id. at *4 (citing G.M. Sign, Inc. v. State Farm Fire and Cas. Co., 385 Ill.Dec. 70, 78, 18 N.E.3d 70, 77 (Ill. App. Ct. 2014)) (Because all three counts in the complaint referred only to the factual allegations of faxes that were also alleged to have violated the TCPA, the common-law claim fell within the policy exclusion).

According to Ocwen, because Beecroft alleged that “some or all” of the calls were made an ATDS, there was room for the court to conclude that some calls were not made by ATDS. Ocwen supported this argument based on Beecroft’s allegations that twice she picked up the phone and begged Ocwen to stop calling her.  Ocwen argued that because there was a real person  on the line when Beecroft answered, the calls may not have originated from an ATDS.  The court saw no allegation that because Beecroft spoke to a person, the call did not originate with an ATDS. 

The court also held that although “some or all” language was used, had the claimant intended to limit the calls that were allegedly made using an ATDS, she would have pled that “some but not all” of the calls were made using ATDS.  

Further, according to the court, even if the TCPA Exclusion did not apply, coverage  would still be defeated under the FDCPA Exclusion because the conduct was allegedly repeated…or continuous… with the intent to annoy, abuse, or harass any person at that called number,” it violated the FDCPA. 15 U.S.C. § 1692d(5).   Ocwen argued that because Beecroft alleged negligence, some the conduct may not have involved the intention necessary for a violation of FDCPA. 

The district court found intent to annoy because Beecroft alleged that she begged Ocwen to stop calling her twice. This, according to the district court, clearly showed the requisite intent to harass Beecroft by continuing to call her.  

The Circuit Court turned to Illinois’ rules of pleading for its analysis.  According to the court, Illinois has harmonized the principles of fact-pleading with those guiding the duty-to-defend inquiry. When reviewing a complaint to determine whether it alleges covered liability, Illinois courts “give little weight to the legal label that characterizes the underlying allegations.” Consequently, held the court, despite the label “negligence,” Beecroft’s factual allegations all spoke to intentionally harassing conduct. 

 

OFF the MARK
Brian F. Mark
[email protected]

 

03/04/21       Barton v. Nationwide Mut. Fire Ins. Co.
United States District Court, Northern District of Alabama, Southern Division
U.S. District Court Grants Judgment in Favor of Carrier where Plaintiffs Failed to Provide Sufficient Information to Determine how much of the Damages Awarded were Attributable to Injuries of Claims Covered by the Defendant’s policy.

This declaratory-judgment action arises out of an underlying construction defect action related to the construction of a custom home.  Robert Barton and his wife Mindy contracted with Stacy Alliston Design and Building Inc. ("SADB") to build the home.  SADB acted as general contractor in the construction of the house, but subcontractors performed the work on the home.  It is undisputed that at least some of the subcontractors engaged in faulty workmanship and defective construction, including failing to close toeboard holes in the roof and failing to properly install dormers and windows.

Within the first year of living in the house, the Bartons noticed problems with the house, notably water intrusion from the roof, dormer windows, and a large window in the foyer.  As a result of the water coming in, the Bartons noticed staining of drywall, some molding pulling away, and cracking in eaves.  They also noticed holes and rotted places in the roof from the water.

A drywall inspector conducted a thorough inspection and identified multiple deficient areas of construction, including in the roof and around the windows.  He also found that there was water in some electrical outlets, which created a fire hazard.  The discovery of water in the outlets distressed Ms. Barton because she worried about the fire hazard and her children’s safety.

The Bartons hired a residential homebuilder to look at the damage to the home and provide an estimate for repair.  He estimated that it would cost roughly $288,000 to repair the damage and found that SADB had not properly installed window flashing and house wrap at the windows, which allowed water to come in and caused the plywood sheathing and studwork of the house to rot, damaging the structural integrity of the house.  Because of the water intrusion, mold and rot were found on the house's framework.

The Bartons filed a lawsuit against SADB alleging: (1) negligence/wantonness: construction; (2) negligence/wantonness: repair; (3) negligence/wantonness: hiring/supervision/training; (4) negligence/wantonness; (5) fraudulent misrepresentation and/or innocent misrepresentation; (6) suppression; (7) breach of warranties; (8) third-party beneficiary; (9) nuisance; (10) breach of contract; (11) deceptive trade practices; and (12) deceit.  In the complaint, the Bartons alleged that SADB had caused "numerous construction defects and violations of the applicable building code and residential construction industry standards which have resulted in damage to Plaintiffs' home."  The Bartons also asserted claims for physical injury, mental anguish, and emotional distress.

The Bartons moved for summary judgment on their claims for negligent and wanton construction, negligent and wanton repair, and negligent and wanton hiring, supervision, and training.  In support of their motion, Mr. Barton submitted an affidavit stating that the Bartons had suffered $450,000 in property damage and $450,000 in emotional distress damages because of SADB's actions.  He stated that all $900,000 of damages were "due to the acts" of SADB, but he did not delineate or explain the specific breakdown of the damages.

SADB did not oppose the Bartons' motion and the Bartons were awarded $900,000 in damages, consisting of $450,000 in property damage and $450,000 in emotional distress damages.

SABD was insured by Nationwide Mutual Fire Insurance Company (“Nationwide”) under a number of policies.  The policies covered only bodily injury or property damage caused by an "occurrence" during the policy period.  The policies define "occurrence" to mean "an accident, including continuous or repeated exposure to substantially the same generally harmful conditions."

The policies contain multiple exclusions that limit coverage, including an exclusion for property damage "expected or intended" by the insured and an endorsement stating that they do not cover damage from fungi or bacteria.  Additionally, the policies include a "your work" exclusion that states that insurance coverage does not apply to "'property damage' to 'your work' arising out of it or any part of it and included in the 'products-completed operations hazard.'" 

The evidence in this case shows that the Bartons obtained a judgment against SADB for negligence and wantonness causing multiple injuries, including property damage and emotional distress caused by multiple types of defective construction and the results stemming from the defective construction. Under Alabama law, "[w]hen an insured causes multiple injuries, coverage is determined on an injury-by-injury basis, and the insurer is obligated only to indemnify for damages arising out of the covered injuries."

As the state court’s judgment did not indicate the specific injuries or damages underlying the judgment, the District Court looked to the complaint and noted that it sought damages for both construction defects and damage resulting from such defects.  The alleged damages included improper flashing and house wrap, problems with the roof, damage to the wall interior, improper door installation, a crack in the rear arch of the house, poor workmanship with the woodwork, cracks in the driveway, and problems with a retaining wall.  Based on the injuries for which the Bartons sought recovery and the evidence produced at trial, the Court found that the Bartons failed to meet their burden of showing what, if any, of the damages that they recovered on summary judgment were covered by the applicable Nationwide policy in this case.

The Court looked to Alabama law and noted that in the context of claims for faulty construction, "faulty workmanship itself is not an occurrence" covered under CGL policies, but can "lead to an occurrence if it subjects personal property or other parts of the structure to 'continuous or repeated exposure' to some other 'general harmful condition' [...] and, as a result of that exposure, personal property or other parts of the structure are damaged."  Thus, an insurance company is not required to indemnify an insured for a judgment against it "insofar as the damages represented the costs of repairing or replacing the faulty work," but the insurer may be required to indemnify damages that are the result of faulty workmanship.

Between testimony from Mr. Barton and the residential homebuilder, the Bartons provided compelling evidence that, by the time of trial, they had experienced water damage to their home that could qualify as a covered occurrence under the Nationwide policy.  Accordingly, under Alabama law, the Bartons showed that they had experienced an "occurrence" covered by the Nationwide policy.

Further, exclusions to the policy would not preclude coverage, at least not entirely. The residential homebuilder testified that at least some of the damage that he observed to the frame of the house was caused by rot, not mold; therefore, Nationwide failed to show that coverage would be entirely precluded by the mold exclusion.

Coverage also would not be precluded by the "your work" exclusion because the water intrusion was caused by the work of subcontractors and occurred when the subcontractor exception to the "your work" exclusion still applied.

However, the Bartons failed to prove what portion, if any, of the state court's grant of damages was attributable to injuries covered by the Nationwide policy.  The affidavit, and the underlying informal oral estimates, simply do not provide the court with any details about what injuries caused what damages or how those damages were calculated.

Further, the Court recognized that both the Bartons' summary judgment motion and the evidence presented at the bench trial showed that some of the injuries underlying the $900,000 damages awarded by the state court were not covered by the Nationwide policy.  First, the Bartons included damages caused by defective workmanship like improper door installation, a crack in the rear arch of the house, poor workmanship with the woodwork, cracks in the driveway, and problems with a retaining wall.  At no point did the Bartons allege that those instances of faulty workmanship caused other damages; the claims are purely for the defective construction itself.  Accordingly, parts of the damage award from the state court were for defective construction, which is not an occurrence covered by the Nationwide policy.

The Bartons were unable to show that all of their emotional distress damages would be covered by the Nationwide policy and did not provide the court with any means of determining what amount of damages were covered under the policy.  As with their estimate for property damages, the Bartons provided no basis for the $450,000 emotional distress damages awarded by the state court.  Also, like the property damage, some of the damages for which they provided evidence would not be covered under the Nationwide policy.

The Bartons' wantonness claims did not qualify as accidents or covered occurrences under the Nationwide policy.  Rather, their wantonness claims hinged on their allegations that SADB knew that they were not following applicable building codes and knew that injury would likely result.  Thus, unlike claims for negligence that can support insurance coverage for accidental occurrences, the Bartons' claims of wantonness alleged conscious acts with an expectation of causing injury.  Therefore, any damages caused by the Bartons' wantonness claims against SADB are not covered by the Nationwide policy because they were not an accident, and, thus, were not an occurrence under the language of the policy.

In addition to failing to show the specific amount of the state court damages attributable to injuries covered under the Nationwide policy, the Bartons also failed to show the amount of damages attributable to claims covered by the policy.  The judgment from the state court simply grants general summary judgment and grants $450,000 in damages for property damage and $450,000 for emotional distress damages; it does not break down the damage award into damages caused by negligence and damages caused by wantonness.  Because of the general nature of the judgment, the Court was unable to determine what portion of the damages granted by the state court are covered under the Nationwide policy.

The Bartons obtained a general judgment from the state court on two types of claims for relief, negligence and wantonness, but the damages for the wantonness claims are not covered by the Nationwide insurance policy at issue.  The Court's examination of the record revealed no indication of "the amount of damages being awarded under each theory," such that it is impossible for the court to now determine the extent of coverage under the Nationwide policy for the damages granted by the state court.

As the Bartons failed to provide sufficient information to determine how much of the damages awarded by the state court were attributable to injuries or claims covered by the Nationwide policy, Nationwide was entitled to judgment.

 

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

03/10/21       Daniel Ro vs. Factory Mutual Ins. Co. Trustees
Supreme Court of New Hampshire
Fire Insurance – Anti-Subrogation Rule - Implied Co-Insureds

This case concerns application of the anti-subrogation rule.  This common law doctrine limits the right of an insurer to subrogate.  An insurer has no right to subrogate against its own insured for a claim arising from a risk for which the insured was covered under the policy. 

You may ask, what about a scenario where the insurer pays a fire loss caused by the negligence of the named insured’s tenants?  Does the anti-subrogation rule apply then?  The answer likely depends on multiple factors, including, notably, which state the fire occurred in.  The Morton Hall dormitory where the October 2016 four-alarm fire at issue occurred, causing $4.5 million dollars of damage, is located on the campus of Dartmouth College, in Hanover, New Hampshire.  Students residing in the dorms caused the fire by their negligent use of a hibachi-style grill on a flat section of roof outside a dorm window during the October 1-2, 2016 overnight period. 

The New Hampshire Supreme Court’s analysis and holding in this case reflects New Hampshire’s application since at least 2004 of the so-called “Sutton Rule”.  The Sutton Rule arises from a 1975 Oklahoma Court of Appeals decision in Sutton v. Jondahl, 532 P.2d 478, holding that a tenant is generally considered to be a “coinsured” of a landlord with respect to fire damage to leased residential premises.  The Supreme Court of New Hampshire’s opinion asserts “the majority of jurisdictions” have adopted the Sutton Rule and its reasoning that “basic equity and fundamental justice upon which the equitable doctrine of subrogation is established requires that when fire insurance is provided for a dwelling it protects the insurable interests of all joint owners including the possessory interests of a tenant absent an express agreement by the latter to the contrary” (quoting Sutton, 532 P.2d at 482).

So, what exactly is the “possessory interest” of college students in their on-campus dormitory room?  Isn’t a dorming student more like a licensee, such as is a hotel guest, with a very limited “possessory interest”?  Factory Mutual argued this was a mere license to occupy the campus, “a transient or impermanent interest”. Compare the possessory interest of a dorming college student to, for example, an apartment tenant who signs a lease that gives the tenant a clear and complete possessory interest in the apartment space?  

The New Hampshire Supreme Court agreed with the analysis of the court below.  Because the students “could inhabit and reside in their dormitories, store their personal property inside, invite guests, make use of utilities, and decorate to their liking”, and because the students had swipe cards to access their dorm rooms, could exclude other students from their rooms, and the college's right of entry was limited, the students “had a right to control their dormitories in substantially the same way a tenant has a right to control leased premises”, according to the Court.

Factory Mutual’s argument that students did not have a right to control their dorm rooms in “substantially the same way a tenant has a right to control leased premises” when the students had no ability to block the college from placing others in their dorm room and the dorming students could be shifted by the college from one dorm room to another without the students’ consent, was not persuasive to the Court, which declined to agree that such facts made the students’ occupancy fundamentally different from that of a residential tenant. Other arguments of Factory Mutual, including that various college policies set forth in the student handbook - some of which were violated by the students whose negligence caused the fire - constitute express agreements about the occupancy and use of the dorm room negating anti-subrogation under the Sutton Rule, were likewise rejected by the Court. 

New York claims folk and coverage attorneys will note with interest that Factory Mutual also argued for the New Hampshire Supreme Court to consider and adopt a principles of equity analysis, which Supreme Court’s Opinion referenced as the “contrary view” expressed in Phoenix Insurance Co. v. Stamell, 21 A.D.3d 118, 796 N.Y.S.2d 772 (4^th Dept. 2005), a New York case addressing, as an issue of first impression in New York, “whether a college's fire insurer may recover damages from a student for his or her negligent acts that led to a fire causing property damage to the college.” The New Hampshire Supreme Court not only declined to follow Stamell’s balancing of the equities, but further, noting that the Stamell Court had declined to adopt the Sutton Rule, found Stamell to therefore be “of little value” in the analysis. 

What do you think? Would the result of this case have turned out different if Dartmouth College was in New York State making it the New York Court of Appeals dealing with these issues rather than the New Hampshire Supreme Court?

 

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

Regulatory Wrap-Up

03/03/21       Proposed Administrative Changes to Various Insurance Regulations
Department of Financial Services
Cybersecurity Alert Issued to Regulated Entities Concerning Zero-day Vulnerabilities in Microsoft Exchange Email Servers

Recently, on March 3, 2021, several proposed administrative amendments were published in the State Register.

• 11 NYCRR § 55.1(d) would be amended to correct a typographical error, incorrectly referencing Ins. Law § 4225 instead of Ins. Law § 4235.

• 11 NYCRR § 62-4.1(c) would be amended to comport with Ins. Law § 3403(g)(2), to apply Subpart 62-4 to cities with a population of one million or more.

• 11 NYCRR § 62-4.2(c) would be amended to replace the Anti-Arson Application (NYFA-1) Part 1 with a new one that replaces references to Ins. Law § 168-j, Insurance Department Regulation 96, and Insurance Department, with references to Ins. Law § 3403, Insurance Regulation 96, and the Department of Financial Services.

• 11 NYCRR § 65-3 would be amended to replace the Form NF 1- of Appendix 13 with a new one that removes reference to “Financial Frauds and Consumer Protection Division” from the Department of Financial Services address and updates the address of the Buffalo office.

• 11 NYCRR § 89.17(b)(1) would be amended to remove a comma.

• 11 NYCRR § 136-2.2, 2.4, and 2.5 would be amended to conform to Retirement and Social Security Law § 424-a, by:

  • Replacing “selection of money managers” with “selection of investment managers”

  • Revising the definition of “placement agent or intermediary” to match Retirement and Social Security Law § 424-a(2)(a).

  • Deleting § 136-2.5(g)(4) and renumbering paragraphs (5) & (6) to (4) & (5).

• 11 NYCRR § 216.6(h) and § 216.7(d)(3) would be amended by removing “Financial Frauds and Consumer Protection Division” from the Department’s address and updating the address of the Buffalo office.

• 11 NYCRR § 218.5(a) would be amended by removing “Financial Frauds and Consumer Protection Division” from the Department’s address, correcting the name of the department, updating the address of the Buffalo office, and making one grammatical change.

 

03/09/21       Microsoft Exchange Email Server Vulnerabilities
Department of Financial Services
Cybersecurity Alert Issued to Regulated Entities Concerning Zero-day Vulnerabilities in Microsoft Exchange Email Servers

Thousands of organizations recently have been compromised via zero-day vulnerabilities in Microsoft Exchange Servers. Microsoft made patches available on March 2, 2021, however many organizations were compromised prior to either the availability or implementation of these patches. The Department of Financial Services (“DFS”) urges all regulated entities, including insurers, to implement these patches or disconnect vulnerable servers immediately. Moreover, these entities are urged to use Microsoft’s tools to identify and remediate any exploitation of these zero-day vulnerabilities.

On the day Microsoft unveiled its patches, it reported that four vulnerabilities were discovered in the Microsoft Exchange servers from 2013 and later (including 2016, 2019). These vulnerabilities appear tied to Web versions of Microsoft Outlook on their own machines instead of cloud providers.  It also appears that widespread exploitation of the vulnerabilities is ongoing.

The patches released by Microsoft sought to restrict untrusted connections or by setting up a VPN to separate the Exchange server from external access. A division of the U.S. Department of Homeland Security known as the Cybersecurity & Infrastructure Security Agency (“CISA”) recommended via its CISA Emergency Directive 21-02: Mitigate Microsoft Exchange On-Premises Product Vulnerabilities recommends immediate patching and preserving cyber forensic information. In accordance with the steps proposed by CISA to combat these vulnerabilities, DFS recommend careful consideration of taking those steps and a review of several resources, including:

• Microsoft Advisory: Multiple Security Updates Released for Exchange Server
• Microsoft Blog: HAFNIUM targeting Exchange Servers with 0-day exploits
• Microsoft GitHub Repository: CSS-Exchange
• CISA Alert (AA21-062A): Mitigate Microsoft Exchange Server Vulnerabilities
   

DFS also advised that “[r]egulated entities [such as insurers] should immediately assess the risk to their systems and consumers, and take steps necessary to address vulnerabilities and customer impact.  The assessment should identify internal use of vulnerable Microsoft Exchange products and any use of these products by critical third parties.  Regulated entities should also continue to track developments in this compromise and respond quickly to new information.” Further, DFS reminds regulated entities of their obligation to report Cybersecurity Events within 72-hours pursuant to 23 NYCRR §500.17(a).

 

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

03/05/21       Carolina Casualty Insurance Co. v. Capital Trucking, Inc.
United States District Court, Southern District of New York
Strict Interpretation of a Carrier’s Policy Language and One Insurer’s Assumption of the Insurance Obligations of Another, will not Relieve that Carrier’s Federal Statutory Obligations

Plaintiff Carolina Casualty Insurance Company (“Carolina”) commenced this action for declaratory relief against Defendants Robert and Diane Anderson. The Andersons commenced a third-party action against third-party Defendant Imperium Insurance Company, f/k/a Delos Insurance Company (“Imperium”) and asserted counterclaims against Carolina. This case arose from a collision between a passenger vehicle driven by Defendant Robert Anderson and a tractor-trailer driven by Constantin Bagiu on November 1, 2010. The tractor was owned by Marius Pander and leased to Capital Trucking, Inc., an Illinois corporation insured by Carolina. The trailer was owned by Adrian Goia and leased to Trucker's Association of Chicago, LLC, an Illinois corporation insured by Imperium. The underlying liability action was brought in state court, where it determined that Bagiu was 100% at fault for the accident and that Bagiu was a statutory employee of both Trucker's Association of Chicago and Capital Trucking, and that each could be held liable for Bagiu's negligence under 49 C.F.R. § 390.5. The Andersons made a demand of $1 million to Imperium and $750,000 to Carolina. In response, Imperium offered $993,434.32, the remaining limit of Imperium's $1 million insurance liability coverage for the collision. Carolina rejected the demand, maintaining that the insurance policy it issued to Capital Trucking did not apply to the tractor involved in the collision, and that Capital Trucking's liability should be covered under Imperium's insurance policy pursuant to the tender of defense. Carolina further maintained that the MCS-90 endorsement, which was attached to Carolina's insurance policy to Capital Trucking as mandated by the Motor Carrier Act of 1980, did not require Carolina to provide coverage to Capital Trucking for the collision.

The court entered into a discussion as to whether Illinois or New York law should apply to this dispute. Applying New York’s “center of gravity” test which provides that “if the policy covers risks in multiple states, however, then the state of the insured's domicile ... is the ‘controlling factor’ in determining the applicable law.“ Standard Gen. L.P. v. Travelers Indem. Co. of Connecticut, 261 F. Supp. 3d 502, 506 (S.D.N.Y. 2017). The court then note that while New York and Illinois law apply relatively similar approaches to interpreting an insurance contract, “Illinois law adds a presumption of strict contract interpretation and will ‘presume that the provisions are purposefully inserted, and that language was not employed idly.’” Frendreis v. Blue Cross Blue Shield of Michigan, 873 F. Supp. 1153, 1155 (N.D. Ill. 1995).

The Carolina policy makes numerous references to the terms “auto” and “autos”, quotation marks included. It defines “auto,” in relevant part, as “a land vehicle, ‘trailer’ or semitrailer designed for travel on public roads. The parties do not contest that the subject 2005 Freightliner trailer would constitute an “auto” under this definition. Under “Coverage,” the Carolina policy states that Carolina will pay for “damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto’.”  The term “covered auto” is not expressly defined. However, under the “Schedule of Coverages and Covered Autos,” the policy lists “67” as the “covered auto symbol.” Id. at 5, Item 2. The policy uses numerical codes to categorize certain types of tractors and trailers. The symbol “67” is defined as “Specifically Described ‘Autos’,” which are, “Only those ‘autos’ described in Item three of the Declarations....”  Item 3 of the declaration, the “Schedule of Covered Autos You Own,” contains a list of 23 vehicles defined by type and VIN. The plain language of these sections appears to state that the Carolina policy only covers the vehicles that are expressly listed in Item 3. As the trailer at issue in this matter is not listed in “item 3” the trailer is not a covered auto based on the plain reading of the insurance policy.

The Andersons then argued that the Carolina policy’s Section II(A)(1)(d), “Who is An Insured” to argue that the driver (Bagiu) qualifies as an insured and therefore the vehicle he was operating coverage is extended to vehicle. The section at issue reads:

The following are “insureds”: (d) The lessor of a covered “auto” that is not a “trailer” or any “employee”, agent or driver of the lessor while the “auto” is leased to you under a written agreement...

The Andersons argued that because the second reference to “auto” leaves out the word “covered,” this clause extended coverage to the agents or drivers of any lessor of any automobile leased to Capital Trucking. This interpretation is against the plain language of the contract. The sentence clearly refers to the lessor of a covered vehicle.

The Andersons then pointed to Section II(A)(1)(e), which states, “Anyone liable for the conduct of an “insured” as described above but only to the extent of that liability.”  The Andersons explain that Capital Trucking was found by the state court to be a statutory employer of Bagiu and, therefore, vicariously liable for Bagiu's negligence, and that Capital Trucking is an insured under the policy. Capital Trucking is the insured. Bagiu is not liable for the conduct of Capital Trucking; Capital is liable for the conduct of Bagiu. Therefore, this section does not mandate that Bagiu is an insured. Even if Bagiu was an insured, the state court's finding would merely convey that Capital Trucking would be an insured, which has already been established. The Andersons’ argument is thus circular: the subject tractor should be covered by the Carolina policy because it was insured under the policy. The argument also fails.

The court also determined that the Andersons’ interpretation of Sections (d) and (e) of the Carolina policy, allowing for any and all vehicles to be covered under the policy, would render obsolete the entirety of the Declarations, as well as each and every reference to “covered” vehicles in the contract. Bearing in mind the presumption that contract language is “purposefully inserted” and “not employed idly,” Carolina would insert such extension language into its contract defining which vehicles are covered and which are excluded, only to allow for each and every vehicle to be included.

Carolina's second cause of action seeks a declaration that the MCS-90 endorsement accompanying the Carolina insurance policy issued to Capital Trucking does not require Carolina to cover the collision. Specifically, it argues that the MCS-90 endorsement does not create a suretyship obligation to Capital Trucking for the collision because the Imperium policy provides liability coverage to Capital Trucking and, therefore, satisfies Capital Trucking's minimum financial obligations. The MCS-90 endorsement, mandated by Section 29 of the Motor Carrier Act of 1980, 49 U.S.C. § 10927 (“MCA”), requires an insurer to pay “any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance, or use of motor vehicles.” The MCS-90 endorsement is interpreted under federal, and not state, law. Green v. Royal Indem. Co., Case No. 93 Civ 4335 (MBM), 1994 WL 267749, at *5 (S.D.N.Y. June 15, 1994). The obligations under the MCS-90 endorsement apply to vehicles that are owned by the insured, as well as vehicles they lease.  However, an insurer's obligation under the MCS-90 endorsement only triggers when a member of the public obtains a final judgment against the insured motor carrier for negligence, at which time the insured can compel the insurer for payment of the judgment up to the limit of the endorsement.  The MCS-90 obligation would also apply where the insured motor carrier is held liable vicariously for the negligence of another. 

The court found that the federally mandated insurance obligations of one carrier cannot be satisfied simply by virtue of the fact that an injured party recovers an award greater than the federal minimum from another party. The fact that the Andersons may recover just short of $1 million from Imperium does not automatically satisfy Capital Trucking's obligations. Capital Trucking's obligation to maintain adequate insurance coverage when it engages in interstate commerce cannot be satisfied simply because another covered motor carrier was involved and is willing to pay the Andersons. Here Capital Trucking was not an additional insured on Imperium's policy at the time of the accident and was not treated as such until years after the collision, when Imperium agreed to accept the defense obligations of Carolina. Capital Trucking and Trucker's Association of Chicago are two independent motor carriers with no privity between them, and each of them have been held liable as separate statutory employers and liable for the same injury. In fact, Capital Trucking had no insurance whatsoever for the subject tractor at the time it was operated. Capital Trucking, therefore, operated the tractor through Bagui in contravention of the regulations by failing to have adequate insurance, the exact scenario that the regulations address: uninsured tractor-trailers operating in interstate commerce. Capital Trucking and Carolina seek to evade their federally mandated requirements by attaching Capital Trucking to Imperium's policy after the fact. This interpretation of the regulations would completely undermine the regulatory scheme. Under Carolina's interpretation, multiple carriers involved in a single accident could avoid any obligation under the federal regulations so long as one of the carriers had insurance, simply by designation as an additional insured after the fact. This interpretation of the regulations would undercut the protections afforded by the MCA.

The court held that Because Capital Trucking failed to meet its federally mandated minimum coverage requirement at the time of the accident, and because Capital Trucking cannot look to its underlying insurance policy or other sources to satisfy a potential judgment, the MCS-90 will obligate Carolina to act as a surety to Capital Trucking in the event that a monetary judgment is entered against it. Accordingly, summary judgment for Carolina's second cause of action is denied, and summary judgment for the Andersons’ third cause of action is granted.

 

RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]

03/04/21       Han v. Brighthouse Life Ins. Co. of NY
Appellate Division, First Department
Although the Term “Earned Annual Income” in the Insurance Application Completed by Decedent Was Unambiguous, There is a Question of Fact as to Whether the Decedent’s Misrepresentation was a Material Misrepresentation Sufficient to Void the Policy

Plaintiff brought this action on behalf of the decedent plaintiff’s estate.  In 2011, the decedent applied for a MetLife term life insurance policy and represented on the insurance application that his “Earned Annual Income” was $50,000.  At the time, the decedent was working as a probationary trainee nail artist at a nail salon in Manhattan.  However, before the probationary period ended, the decedent left his employment at the nail salon and subsequently died while his policy was still contestable (see Insurance Law § 3203(a)(3)).

Following the death of the decedent, MetLife rescinded the policy on the ground that the decedent had made a material misrepresentation as to his earned annual income on his insurance application.  Plaintiffs sued Defendant for breach of contract.  Following depositions of an underwriting control representative, a senior technical advisor, and the insurance agent who sold the policy to the decedent, the court granted Defendant’s motion for summary judgment and later denied plaintiffs’ motion for leave to renew defendant’s motion based on the subsequently held depositions.

The appellate court held that the lower court should have granted plaintiffs leave to renew in order to submit the deposition transcripts.  The appellate court ruled that although the term “earned annual income” in the insurance application was unambiguous and meant actual earned income (i.e., salary, wages, and tips) and not potential income, the deposition transcripts raised a factual issue as to whether the decedent’s response to this question amounted to a material misrepresentation sufficient to void the policy.

 

ruMIRNAtions
Mirna M. Santiago
[email protected]

Five Ways That Companies Can Drive Diversity, Equity, and Inclusion

As the demographics continue to change at a rapid pace in the United States, diversity in the workplace becomes less of an aspirational goal and more of a necessity. And it is not just the BIPoC population that is increasing and driving the change in demographics—baby boomers are aging out of the work force; Gen Zers are increasingly identifying as gender fluid; more children are being diagnosed as being on the Autism spectrum; more and more veterans are reentering society with physical and mental disabilities; and so much more. But getting diversity in the door is not enough; in order to be successful, companies need to retain and engage that diverse work force. In other words, it is not enough to be “diverse” (have people from many different experiential groups), companies must also be equitable (provide each group with the tools they need to succeed and thrive), provide a sense of belonging (where each member of the group feels like there are others who share their lived experience), foster cultural competence (where the leadership understands who comprises the work force and actively finds ways to engage the population of workers), all while leveraging that diversity to obtain more business and drive profitability. That is quite a balancing act!

Here are 5 ways that the most profitable companies have increased their diversity and created equity, inclusion and a sense of belonging for their workers:

1.  Identify what diversity looks like for your company

I mentioned above that demographics are changing in multiple ways in this country. What demographic is missing from YOUR company? Many companies focus on BIPoC, but have no strategy for providing opportunities for applicants with disabilities, for instance. Or companies may tout their gender diversity in leadership, but fail to notice that there is very little BIPoC representation. Companies need to create a diversity plan that addresses their specific need, not what the industry says needs to be addressed.

2.  The Noah’s Ark approach to diversity works

One of the things I always hear from law firms is, “We always hire for diversity, but they come and then leave within a year or two to go into non-profit or government work. We don’t know what we can do to retain diverse attorneys.” Do you know WHY your diverse attorneys are leaving to go work for the government or non-profits? Because there are other diverse attorneys there. Representation matters. If you were the only person who looks like you everywhere you went, it would get old really quickly. And yet, that is the experience for most BIPoC (or for people with disabilities or for people who are nonbinary in their gender identity, etc.) every single day.

3.  If you build it, they will come

Even if you do not have a single person who checks the “diversity” box at your company, you can still create a culture of racial equity and inclusion. No one lives in a vacuum—we live in a diverse society. Holding training sessions (on interrupting bias, being anti-racist, etc.), hosting a speaker series and/or doing monthly events dedicated to recognizing diversity (Black History Month, Hispanic Heritage Month, Women’s History Month, Lunar New Year Celebration; Italian Heritage Month, etc.), creating employee resource/affinity groups (e.g. women’s group, parents’ group, caregiving group, etc.) will still be educational to your workforce as they navigate life outside of your walls. And it could drive recruitment if you can honestly tell diverse candidates about all these things that you are doing to educate your work force and making it a more welcoming place for diversity to bloom.

4.  Diversity drives innovation, which in turn drives profit

Studies have shown that when gender diversity is infused into a company’s leadership, profits go up by 15%. When racial/ethnic diversity is infused, in addition to gender diversity, profits go up by 30%. If that is not reason enough to strive for diversity, I don’t know what is!

5.  There is no one-size-fits-all to diversity, equity, belonging, etc.

If at first you don’t succeed, try and try again. What works for one firm/company may not work for others. Leadership has to be prepared to try a multi-faceted approach to creating and infusing diversity, whether that is expanding your recruiting mechanism and network, joining affinity organizations, targeted lateral hiring (so you have diversity in the leadership ranks, even if you don’t have homegrown diversity), etc.

If you’re struggling with the whole diversity, equity and inclusion concept, I hope this has helped.

https://www.aperianglobal.com/leaders-diversity-inclusion-5-lessons-top-global-companies/

https://grow360.com/blog/5-ways-companies-are-driving-diversity-and-inclusion

https://www.cio.com/article/3262704/diversity-and-inclusion-8-best-practices-for-changing-your-culture.html

https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity

 

STORM’S SIU EXAMEN
Scott D. Storm
[email protected]

03/08/21       Senate Bill S502
Staged Accidents

The N.Y. Senate unanimously passed Bill S502 and it has been delivered to the Assembly, where it has been referred to the insurance committee.  Once a law, this legislation will permit an insurer to rescind or retroactively cancel an auto policy in circumstances involving an accident staged to defraud it.

According to its stated purpose, “This bill removes the incentive for staged automobile accidents, by allowing for retroactive cancellation of newly issued private passenger automobile insurance policies”.

The Bill's "Justification" states:

Automobile no-fault states have higher average premiums than tort states. One of the reasons for this is that fraud tends to be more prevalent in no-fault systems, as the rules under which they are implemented make it relatively easy for bad actors to submit fraudulent claims. Additionally, an accident can create a multiplicity of lawsuits, since providers and collection attorneys may initiate a lawsuit for each and every bill. New York's generous no-fault benefits, with minimal oversight, provide huge incentives for unbundling of services and supplies.

Staged accidents are one type of fraudulent claim that is becoming more and more prevalent in New York. Staged accidents begin with bad actors procuring an automobile insurance policy with the intent of submitting a fraudulent claim. In many cases, they procure a policy by submitting a bad payment (either using a nonexistent bank account or stolen credit card information). Most states allow the retroactive cancellation of a policy in the case of a reversed payment to prevent this type of activity. New York, however, does not permit retroactive cancellations; rather cancellations are currently only prospective in nature. That turns into a gold mine where no-fault is involved. The time between the policy is "purchased" to the time it is cancelled provides ample opportunity for no-fault fraud.

This bill allows for retroactive cancellation in New York of newly issued automobile insurance policies to prevent this type of fraud. This would bring New York in line with the other large no-fault states. In fact, only seven other states (AZ, CO, KS, ME, MD, NC and SD) do not allow for retroactive cancellation. Innocent victims of uninsured drivers (i.e. mandatory uninsured motorist coverage), would be covered under their own policy or the Motor Vehicle Accident Indemnification Corporation.

The proposal would allow retroactive cancellation of the automobile policy, in the first thirty days, where the payment is made with insufficient funds or the identity used to procure the policy turns out to be fraudulent. The automobile insurer would be allowed to cancel a policy retroactively in these cases.

By permitting retroactive cancellations, New York would join the great majority of other states, and would remove many of the incentives for staged accidents.

 

03/01/21       Union Ins. Co. v. Jagdamba III d/b/a Golden Corral of Queensbury, et al
United States District Court, Northern District of New York
The Court Granted the Insurer’s Motion in this DJ Action to be Relieved of a  Duty to Defend and Indemnify Its Insured in Regard to a Trip-N-Fall Incident.  The Insurer Satisfied the “Trasher Test” in Proving that: (1) It Acted Diligently in Seeking to Bring About the Insured's Cooperation; (2) The Efforts Employed by the Carrier were Reasonably Calculated to Obtain the Insured's Cooperation; and (3) The Attitude of the Insured, After its Cooperation was Sought, was One of Willful and Avowed Obstruction

Union Ins., a general liability insurer, commenced a declaratory judgment action against its insured, Jagdamba III, alleging that it failed to cooperate in the investigation of a personal injury claim that occurred due to a trip-n-fall incident in its parking lot, seeking to be relieved of its duty to defend and indemnify.  Union moves for default judgment against the Defendant.

The policy's cooperation clause requires the insured to cooperate in the investigation, settlement, and defense of any suit.  Specifically, section IV.2.c of the policy provides that in the event of an occurrence, offense, claim or suit:

c. You and any other involved insured must (1) Immediately send [Union] copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit"; (2) Authorize [Union] to obtain records and other information; (3) Cooperate with [Union] in the investigation or settlement of the claim or defense against the "suit"; and (4) Assist [Union], upon [Union's] request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.

After receiving the notice of claim, Union attempted to secure the insured’s cooperation by: sending at least 6 emails, 4 letters, 1 text message and calling 5 times. The insured failed to provide even the basic information necessary to investigate the claim. The letters reminded the insured of its obligation to cooperate under the policy and warned that Union would commence a D.J. action if the insured refused to cooperate.

After securing a certificate of default due to the insured’s failure to answer the complaint, Union moved for a default judgment requesting the Court issue declarations that: (1) the insured breached its duty to cooperate under the policy; and (2) Union has no legal or contractual obligation to defend or indemnify the insured with respect to the claim or any resulting lawsuit.

After determining that Union had met the procedural requirements for default, the Court then determined it should enter a default judgment. By failing to appear in the action the insured admitted to the factual allegations in the complaint with respect to liability.  However, the ultimate decision as to whether to grant default judgment is left to the sound discretion of the court --  whether the allegations establish the defendant's liability as a matter of law.

Under New York law, the deliberate failure of the insured to cooperate with the insurer is a breach of a condition precedent of the policy which bars the insured's recovery under the policy, as well as the insurer's duty to defend. To disclaim coverage based on the insured's lack of cooperation in a 3^rd-party liability claim, the insurer must demonstrate (what has become known as the “Thrasher standard”):

(1) it acted diligently in seeking to bring about the insured's cooperation;

(2) the efforts employed by the carrier were reasonably calculated to obtain the insured's cooperation; and

(3) the attitude of the insured, after his cooperation was sought, was one of willful and avowed obstruction. 

The court said that the first two prongs of the Thrasher test are satisfied when an insurer sends numerous correspondences to the insured regarding its obligations under the policy and specifically informs it that the failure to cooperate will result in a material breach of the policy.  The court said that Union satisfied all three prongs of the test. Union made at least 15 attempts through phone calls, emails, text messages, and letters over the course of a year in an attempt to bring about the insured’s cooperation. The four letters informed the insured that its continued failure to cooperate would result in a material breach of the policy, and Union submitted proof of delivery for 2 of these letters.

The defendant representative’s initial promise to cooperate, but then falling silent, did not equate to meaningful cooperation. An initial expression of a willingness to cooperate but later being unresponsive constitutes an obstruction to Union’s efforts in investigating the claim. Thus, Union satisfies the Thrasher test and had no further duty to defend or indemnify. 

Union had also named the claimant as a defendant in the action, who also defaulted.  The court held that the claimant was not a party to the agreement and was under no obligation to cooperate with Union. For this reason, it dismissed the claimant as a defendant from the action, closing the case.

03/01/21       Sportsinsurance.com, Inc. v. The Hanover Ins. Co.
United States District Court, Northern District of New York
Commercial Crime Insurance Policy – 2-Year Contractual Suit Limitation Condition; Implied Covenant of Good Faith and Fair Dealing; N.Y. General Business Law § 349; Punitive Damages; Consequential Damages; and Attorneys’ Fees

Plaintiff sued its insurer alleging: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; and (3) violation of New York General Business Law ("GBL") § 349.  It also sought declaratory judgment.  Hanover moved under Fed. R. Civ. P. 12(b)(6) to dismiss the complaint for failure to state a claim upon which relief can be granted.

Plaintiff operated an internet-based brokerage business specializing in the sale of sports insurance products. Hanover issued a commercial crime insurance policy to Plaintiff. Plaintiff’s CFO embezzled $250,036.30.  On 4/12/16, Plaintiff notified Hanover of a potential loss related to the CFO.  On 1/24/17 the claim was denied.  On 10/25/19 Plaintiff submitted a second claim which was also denied.

Breach of Contract Claim:

The policy contained a two-year suit limitation condition ("may not bring any legal action against [Defendant] involving loss…[u]nless brought within 2 years from the date [Plaintiff] ‘discovered' the loss"). Because the complaint alleged that the CFO’s thefts were discovered in January 2016, Hanover argued that the suit is time-barred as it was not commenced until March 2020. 

It is well-settled that the parties to a contract may provide for a shorter limitation to actions thereon than that fixed by the general law.  CPLR § 201 states that "An action. . . must be commenced within the time specified in this article unless a different time is prescribed by law or a shorter time is prescribed by written agreement."  

Plaintiff alleged that Hanover "insisted upon further information to be provided and required the insured to submit to Examinations Under Oath."  Because "terms of the policy" required plaintiff to cooperate and submit to such examinations, plaintiff argued it was not permitted to sue under the agreement before completing Hanover’s investigative process. However, the court pointed out that the claim was denied 1/24/17 and at that point, based on the January 2016 theft discovery, plaintiff still had a year in which to bring suit.

Plaintiff next argued that the language setting the contractual limitations period should be interpreted to start the clock not at the time of the theft itself but only once “the right to bring an action exists”' (once all conditions precedent have been met).  However, the court found the language used in the policy's limitation clause to be specific, not generic, tying the limitations period to discovery of the loss.  The language was said to be "exceptionally clear”. 

The court said that the plaintiff could have "protected itself by either beginning an action before expiration of the limitation period or obtaining from the carrier a waiver or extension of its provision. Because Plaintiff did not initiate suit until 2020, more than four years after loss discovery, its breach of contract claim is barred by the agreed-upon two-year limitations period.

Plaintiff could demonstrate neither waiver nor estoppel. In order to establish a waiver of the condition, the plaintiff must offer evidence from which the defendant's intent to relinquish the protection of the contractual limitations period can be reasonably inferred.  Waiver should not be lightly presumed. Mere investigation of a claim is an insufficient predicate upon which to permit an inference of waiver of a contractual limitations period. 

To invoke estoppel, a plaintiff must demonstrate that he/she was misled or lulled by the defendant into failing to file a claim in a timely manner.  Plaintiff here has not alleged any conduct by Hanover "that would mislead a reasonable insured, which was represented at the relevant time by counsel, about the need to bring an action within the contractual period to protect its rights”.  Though Hanover allegedly "claimed that it remained available to consider any additional information should new information come to light," plaintiff does not allege that Hanover "said or did anything to indicate that it would not assert the limitations defense."  It was therefore incumbent on plaintiff to take timely action to protect its rights.

Breach of Implied Covenant of Good Faith and Fair Dealing:

Plaintiff alleges that Hanover violated the implied covenant of good faith and fair dealing by "deliberately, carelessly and wrongfully": (1) mishandling Plaintiff's claim; (2) delaying payment of the claim; and (3) claiming baselessly that Plaintiff intentionally misrepresented and concealed material facts.  Hanover argued that this claim must be dismissed as duplicative of the claim for breach of contract.

Under New York law, there is a covenant of good faith and fair dealing implied in all contracts. But New York law does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled.   But where the breach of the implied covenant of good faith and fair dealing claim rests on a different set of supporting facts from the express breach of contract claim, it should be allowed to survive at the Rule 12(b)(6) stage.

Plaintiff's claim for breach of the implied covenant was said by the court not to base upon the same facts as its claim for breach of contract. Because the two claims rely upon different facts, Plaintiff's breach of implied covenant claim is not duplicative of its breach of contract claim. It therefore survives dismissal. The breach of contract claim was based on Hanover’s alleged failure to pay Plaintiff's claim related to the theft.  The facts relevant to that claim, were it not time-barred, would be whether Plaintiff suffered a compensable loss under the policy and whether Hanover failed to meet its obligations. Plaintiff's breach of implied covenant cause of action, on the other hand, is based on Hanover’s alleged mishandling and delayed payment of Plaintiff's claim, as well as Hanover’s assertion that Plaintiff made misrepresentations. Facts relevant to whether Hanover breached the implied covenant include what Hanover did, and what Plaintiff said, during Hanover’s investigation of Plaintiff's claim. By allegedly asserting baselessly that Plaintiff made misrepresentations, Hanover engaged in different conduct than that relevant to whether it breached the policy by failing to cover Plaintiff's loss.

Violation of GBL § 349:

The court agreed with Hanover that the plaintiff failed to state a claim for relief under GBL § 349, dismissing that claim.

To successfully assert a claim under General Business Law § 349(h), a plaintiff must allege that a defendant has engaged in: (1) consumer-oriented conduct that is; (2) materially misleading; and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice.  Plaintiff's claim failed on the first element.

Private contract disputes do not fall within the ambit of the statute.  A plaintiff must show that the impact of the alleged deceptive practices extends beyond the parties involved and must demonstrate that the acts or practices have a broader impact on consumers at large.

Plaintiff alleged that the relationship between it and Hanover is consumer-oriented in that Hanover sold plaintiff a policy of insurance.  But this suggests nothing more than a private contract dispute, which the New York Court of Appeals has indicated falls outside of § 349's purview.

Plaintiff also argued that Hanover has a standard or routine practice of failing to have reasonable standards to effectuate prompt, fair and equitable settlement of its policyholder's claims as demonstrated by its failure to promptly, fairly and equitably investigate and resolve plaintiff’s claim.   However, the court said that a non-moving party cannot overcome a motion to dismiss simply by asserting new facts or theories for the first time in its opposition. 

Punitive Damages:

The court dismissed the claim for punitive damages on the breach of implied covenant claim.  Because the plaintiff had not alleged an independent claim for fraud or another tort, punitive damages were not available under New York law. The complaint did not specifically allege a claim for fraud or another independent tort. Use of familiar tort language, such as allegations that the defendant acted unreasonably, maliciously, recklessly, or intentionally, is insufficient to plead an independent tort claim.

Consequential Damages: 

Plaintiff also sought consequential damages and attorneys’ fees.  Hanover argued the complaint does not contain a basis for these damages.  The court said that a plaintiff may be entitled to consequential damages if he prevails on his breach of the covenant of good faith and fair dealing claim.  As such, it declined to dismiss plaintiff's request for consequential damages at this early stage.  It said that under certain circumstances, attorneys' fees may be a component of consequential damages.

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