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Coverage Pointers - Volume XXII, No. 22

Volume XXII, No. 22 (No. 587)
Friday, April 16, 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.

When the calls come in, I’m usually gazing at Lake Erie (whether from my office in Buffalo or, when the border reopens, from my cottage on the north shore of Lake Erie, about 17 minutes away from my office).  Sometimes, I take a moment to actually look at the computer.

I am glad our readers take that question and answer seriously.  We use it because it’s how most of my calls from claims professionals and lawyers begin.  “I have a situation, and I wonder whether I can bounce some questions off of you.”  We’re happy to help, where we can.  Don’t be afraid to pick up the phone – 716-849-8942 is my direct dial.

So many of you are now vaccinated and starting, I hope, to resume some sense of a more normal life.  My wife and I had the Moderna shots back in January and February and while we still mask up, we have ventured into restaurants.  We advertise in the paper for vaccinated people with whom we can break bread (nah, not really) and we’ve had folks over to the house for dinner.  Nice.  When the border opens with Canada and we can get to our Canadian home, I will be a lot happier.

As always, some interesting cases in this week’s issue.  There is a Second Department case that reminds No Fault carriers to review carefully assignments to medical providers.  In the Murzik Taxi  case, a self-insured taxi company was hit with 10 years’ worth of interest payments (that’s a lot, at two percent per month) where is failed to honor a benefit assignment as was sued by a medical provider. The same court held that an insurance broker was liable for failing to place the right insurer on notice of a loss

Shortly after the insurer became actively involved in the defense, the AG sent a letter to the insurer telling it that the insurer was violating CA Insurance Law and demanding that it stop defending the insured (Commodore Maintenance).  And Amica Insurance received, as my friend Brian Hussey put it, a “lucky bounce” when the court directed an in camera review of its SUM claims file.  The court held that counsel did not provide the court with evidentiary proof that the claim material was privileged, only an attorney affidavit. Courts are reminding us, time and time again, that privilege can only be established by proof provided by the owner of the privilege (the insurer) and that an attorney’s affidavit is insufficient.

Insurance 101 – For those who are registered, our first session is today, Friday, 4/16.  Look forward to seeing you there.

COVID flash: Oral Surgeons, P.C. v. The Cincinnati Insurance Co.  was argued yesterday – the first appellate COVID Business interruption case to be argued.  A favorable reception from the 8th Circuit Court was reported.  Here is a link to the oral argument.

California News flash – Compare and Contrast:  As I was putting this issue to bed, my old college buddy Stuart Rosenthal sent over a Thursday, 4/15/ 21 decision by the Ninth Circuit Court of Appeals, in ADIR International LLC v. Starr Indemnity and Liability Company.  The Court has upheld a ruling that a California retailer has to pay its own legal fees in a consumer protection and false advertising lawsuit filed against it by the state’s AG.

The Circuit Court ruled that under California Insurance Code § 533.5(b), an insurer is prohibited from paying legal fees for any insured sued by the state under its Unfair Competition Law and False Advertising Law.  Further, the insured is required to reimburse the $2 Million already expended by the insurer for its defense of the insured, and the insurer also is prohibited from indemnifying the insured for any penalties.  New York has no such statute.

 

Risk Transfer Training:

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

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

 

New York Coverage Protocol Training:

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

  1. Are you sending out reservation of rights letter in NY claims? 

  2. Do you know the “30-day” rule?

  3. Are you certain you know who gets copies of coverage position letters in New York?

  4. If the insured fails to respond to 10 letters seeking cooperation, can you successfully deny coverage for lack of cooperation?

  5. If the insured gives you notice of an accident, five years after it occurred, in violation of notice obligations in the policy, is that enough to sustain a late notice disclaimer?
     

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

 

Newsletters:      

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

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

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

  • Labor Law Pointers:  Hurwitz & Fine, P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.
     

  • Products Liability Pointers:  Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving.  Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up-to-date with the latest developments and trends, and providing useful practice tips and litigation strategies.  This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework and governmental agencies.  Contact Brian F. Mark at [email protected] to subscribe.
     

  • Medical & Nursing Home Liability Pointers.  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.

     

April 16, 1921 – George Foss Debuts in the Majors – Up for a Drink of Water:

So, it’s baseball season again and regular visitors know that I love baseball stories.  One hundred years ago today, George Foss debuted in his first major league game, as a Washington Senators, coming in as a pinch hitter for the pitcher, Jim “Grunting” Shaw, in the ninth inning of an 8-3 loss to the  Boston.  Shaw, by the way, has played for the Senators for several years, compiling an 84-98 record, and retiring from the majors just three months later.

The Washington Evening Star reported on Foss’ inauspicious start in the newspaper, the following day:

“Deebe Foss horned into his first major league ball game, when he batted for Shaw in the ninth and sent an easy roller to Vitt [the Boston third baseman].”

Foss appeared in three more games in his short-lived major career, with a total of seven at bats, without a hit and never reaching first base safely. Foss had entered the minor leagues in 1915, at the age of 18, played six years before he broke into the majors and then spent nine more years in the minors.

George Foss sustained a leg injury in the minors and then joined the Miami police force, where he served for 28 years. When I did find his obituary in the November 11, 1969, edition of the Tampa Tribune, it didn’t speak of his years as a police officer but focused on this short, but personally important, Major League career:

George D. Foss, Sr., 72 … died yesterday.  A native of Georgia, he was one of the original players for the Tampa Smokers before being sold to the Washington Senators in 1921.  He lived in Brandon for six years.  Survivors include …”

He accomplished something many have thought about growing up. He was a major league baseball player – albeit for four games – and that was his legacy.

 

ruMIRNAtions:

A few weeks ago, I attended a program titled “Undesign the Redline.” It provided the history of redlining and spatial segregation in America and spoke to the fact that although redlining and segregation were governmentally sanctioned and created, after the Civil Rights Act was passed in 1964, the government never went back to dismantle those systems—which were created to enforce the racist premise that white people and BIPoC should never live in the same spaces.

It got me thinking that even if we undesigned the redline and took down the highways and railroad tracks that were intentionally placed to raze neighborhoods of color, so that housing projects could be built on the other side of the tracks/highway and away from the new, pristine suburban (and white) communities, that would not be enough. There would need to be a commission—a body created to study the ways that racial inequity was codified into our every-day lives and to find ways to un-do all that damage. Big businesses would also need to embed equity into their processes.

Imagine my surprise when I googled “racial inequity and insurance” and the use of credit information to set premiums popped up. It appears that not only can insurance companies utilize credit information to determine whether to insure you, depending on where you fall on the credit scale, obtaining coverage could cost you between 40-400% the times what it would cost someone with “good” credit to insure the same risk. Now remember that there is persistent and unabated income inequality in this country that usually falls along color lines. So, who is it who can “afford” to have good credit in order to obtain decent insurance rates?

Without a commission and intentional actions taken to address these types of matters, it may take several lifetimes to dismantle—to un-design—the effects of segregation and redlining. So it was with great joy that I saw that the Department of Financial Services and Superintendent Lacewell had announced the creation of the Statewide Office of Financial Inclusion and Empowerment. The new office will not only study and—hopefully address—these types of issues, but will provide innovative tools to increase household and community wealth in underprivileged communities. For the next Coverage Pointers, I will endeavor to reach out to the Director of the new Office, the Honorable Tremaine Wright, to discuss her plans to move the needle on economic inequality.

In this edition of Coverage Pointers, I discuss what credit information and scores are and how they impact insurance coverage and premium.

Mirna
Mirna M. Santiago

[email protected]

 

Young Man Sentenced to Death, a Century Ago:

The Brattleboro Daily Reformer
Brattleboro, Vermont
16 Apr 1921

FIRST DEGREE MURDER

Lad of 17 Faces Electric Chair for Slaying Professor

BROOKLYN.  April 16 – Peter Nunziata, 17 years old, heard a verdict of murder in the first degree returned against him yesterday in the Queens county court. He was accused of taking part in a fatal assault upon Professor Wilfred P. Kotkey near the Boyd Avenue elevated station in Woodhaven on Feb. 23.  He was the youngest person to be accused of a capital crime in the history of Queens county.

            Here's the rest of the story:

It was a frigid night in February 1921, and Professor Wilfred Phineas Kotkov had just gotten off of the elevated train at the Boyd Avenue (88th Street) Station of the BMT Fulton Street Line on Liberty Avenue in Woodhaven. Keep in mind that Woodhaven stretched much further south in those days, covering the area today known as Ozone Park.

The 36-year-old professor of philosophy at the Jewish Theological Seminary in Manhattan was accustomed to coming home late and often cut across the empty lot at the corner of Benedict (87th Street) and Liberty to get to his home where he lived with his wife, Anna, and two children.

It was in that dark vacant lot, just after the clock struck midnight, that four young men lay in wait with robbery and mayhem in their minds. Cries for help were heard by Patrolman George Burling, of the precinct in Richmond Hill, on patrol several blocks away. When Burling arrived at the scene, he found Kotkov lying face down in the snow, a bloody iron bedpost at his side. Four young men were seen fleeing the scene; Burling pursued the young men and managed to quickly apprehend two of them.

Peter Nunziata and Joseph Alfano of Brooklyn were immediately arrested and, once at the precinct, they confessed and implicated Frank Cassesso, also from Brooklyn, and Alphonso “The Turk” Verona, of Water Street, Woodhaven (now 102nd Road, Ozone Park) in the attack.

According to their confessions, it was Verona who had suggested that they prepare for a “stickup.” An abandoned iron bed frame was found in the vacant lot and the heavy post, with a brass knob, was pried off.  The quartet stood near the Boyd Ave. station, the iron post hidden under Nunziata’s long coat, waiting for someone who appeared prosperous enough to rob.

After the beating, they turned out Professor Kotkov’s pockets, looking for money, but very little was to be found. Instead, the quartet had to settle for Kotkov’s horn-rimmed glasses, his fountain pen and gold watch. Kotkov was taken to Mary Immaculate Hospital in Jamaica, where he died three days later.

There were immediate calls for swift justice, owing to the fact that Kotkov had made no resistance, nor was he even given the opportunity. Newspaper editorials called for the ultimate retribution: the electric chair.

The wheels of justice were indeed swift. Within a week, indictments were handed down and by the first week of April, just over five weeks after the attack, the trial of Peter Nunziata began. The 17-year-old, the youngest of the four attackers, was a cool customer in court, often seen yawning during testimony. At one time during the trial, he was scolded by the judge for trying to light a cigarette in court.

Nunziata’s defense was a vigorous one. His lawyer was Edward J. Reilly, who would later go on to defend Bruno Richard Hauptmann. Reilly had Nunziata take the stand on his own behalf and declare that it was Verona of Woodhaven who was the mastermind, arranging the killing to settle a personal score.

Nunziata also claimed that his confession was beaten out of him by the police with a rubber hose and that he was just in the wrong place at the wrong time.

On April 18, the jury deliberated for less than two hours — and that included an hour for lunch — and came back with a verdict of guilty. Nunziata sat unmoved when the verdict was read. The judge explained to the young man what the verdict meant: that he would soon face death in the electric chair.

A few days later, the judge set the date of execution as June 5, about six weeks away. The attack, the investigation, the indictment, the trial, the deliberation and the sentencing all took place within a 105-day window. The public demanded swift justice, and they received it.

Peter Nunziata was the youngest person ever sentenced to death in New York and he received the sentence coolly, without flinching. He was escorted out of the courtroom to a car waiting to drive him to death row in Sing Sing, where “Old Sparky” was waiting.

Despite numerous appeals, Nunziata went to the chair within two years. Alfano, who was also found guilty using the same defense as Nunziata, followed him to the chair shortly afterwards. The other two young men saw what was in store for them and pleaded guilty and served many years in prison. They were eventually released when they were in their late 50s and died in obscurity.

Ninety-nine years later, hardly anyone remembers the Kotkov murder and the trials that followed. But at the time, this was considered one of the more sensational murder stories of its time.


Peiper on Property and Potpourri:

A relatively quiet few weeks with the courts punctuated a relatively quiet week for me.  Despite logging 40+ flights for the past decade, I had not been on an airplane since March 4, 2020.  It took thirteen months, but on April 4, 2021, we boarded a flight from Buffalo to Boston with our ultimate destination being Florida.

For the first time in 18 months, I had the opportunity to take some time away with the family.  Warm weather, sandy beaches, and about 10,000 throws of the football on the beach with my 11-year-old was a nice change. Although it took nearly two days to get back to the 716, the aggravation was well worth it.

With Summer approaching, here’s hoping that we all get back normal soon.

Steve
Steven E. Peiper

[email protected]

 

Union Man Takes Young Wife:

Times Herald
Olean, New York

16 Apr 1921

SAM GOMPERS TAKES UNTO HIMSELF A WIFE

HE IS 71 AND SHE 38

(By The Associated Press)

            Samuel Gompers, president  of the American Federation of Labor, and Mrs. Gertrude Gleaves Neuscheler, whose engagement was announced last night, were married here today in a hotel.

            The ceremony was performed by Supreme Court Justice Robert F. Wagner.  Only a few personal friends of the bride and bridegroom were in attendance.  These were guests at a bridal breakfast immediately after the ceremony.

            The best man was John Morrison, a New York publisher, and Mrs. Morrison was matron of honor.

 

Wilewicz’ Wide-World of Coverage:

Dear Readers,

Last week, my daughter and I ventured out for the first time in over a year and actually left the Great State of New York. Given that our joint hobbies used to be traveling and going out to dinner, this was a particularly momentous event after such a long time. So, while we had wanted to visit our friends and family in Melville, NY, we instead chose to meet them about halfway, for a long overdue long weekend. We stayed in the tiny town of Jim Thorpe, Pennsylvania, named after the Olympic gold medalist, and often referred to as The Switzerland of America due to the scenic locale. We chose it for its small population (a mere 4,700 by last count), an outdoor mask mandate (just to be extra safe), and boasting fresh Pocono Mountain air and views. It was indeed a refreshing break and the fully restored Victorian house we rented was a time warp that further helped cleanse the spirit and forget about the pandemic for just a little while.

Now, this week, I am attending the ABA TIPS Mid-Year meeting for the Insurance Coverage Litigation Committee. This meeting is otherwise typically held in February in Arizona, but alas Covid put a damper on that travel opportunity as well. Instead, the multi-day meeting this year provides numerous sessions about the hottest of hot topics in the world of insurance. Coming up next, we will be attending the annual TIPS Section Conference, also virtually, at the end of the month. As always, shoot me a line if you would like to learn more about the numerous networking and learning opportunities available to TIPS members.

Until next time,

Agnes
Agnes A. Wilewicz

[email protected]

 

One Hundred Years Ago -- Flu Epidemic Rocks Chicago:

Chicago Tribune
Chicago, Illinois

16 Apr 1921

FLU EPIDEMIC HITS CHICAGO ON DATE SCHEDULED

13 Cases Reported in Day; Push Cleanup Week.

            Promptly on April 15, as predicted by health authorities, flu leaped skyward yesterday.  Thirteen cases were reported, as compared to eight in the five previous days.

            If the disease runs true to history, it will hit Chicago in light form during health promotion week, which begins next Sunday, and for which Health Commissioner Robertson has made elaborate plans, including a city-wide cleanup of streets and alleys, which is being engineered by Deputy Commissioner of Public Works Burkhard.

            Influenza, accompanied by an increase in its brother killer, pneumonia, travels in thirty year cycles.  It assumes epidemic form four times on each visit, about sixty weeks elapsing between each attack.  The sixty-six weeks since last winter’s outbreak ended yesterday.  This is the fourth visit of the flu epidemic since 1917.

            “Dress for this rainy, chilly spring weather,” advised Herman G. Spalding, head of the contagious disease bureau.  “Beware of overheated rooms.  Breathe plenty of moist air.  Dress warm but not too warm.”

 

Barnas on Bad Faith:

Hello again:

It is nice to be back after a one issue hiatus.  Since my last column, baseball season is well underway.  My Blue Jays are off to a rather uninspiring start, and the injuries are piling up.  However, we did recently get the good news that they will be returning to Buffalo to play this summer with the Canadian border still closed.  It also sounds like they are going to allow fans this year unlike last year.  I am going to try to get my hands on tickets to as many games as possible.  If you are ever looking for a friend to go to a Jays game with, you know how to contact me.  First round is on me!

I have a somewhat interesting case from Indiana in my column today.  The parties were involved in litigation after a dispute about coverage for an appraisal award.  Before that case was resolved, the insured filed a second action alleging bad faith.  The first action eventually settled and a release was obtained.  The insured tried to argue that the bad faith case should still be allowed to proceed.  The court disagreed, granting the motion for summary judgment based on res judicata filed by the insurer.

I also have an update on the Riconda case that appeared in our October 30, 2020 issue.  In that case, the Second Department affirmed the lower court’s decision to set aside an over $2 million verdict in a bad faith case.  The Court of Appeals recently denied a motion for leave to appeal.

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

Brian
Brian D. Barnas

[email protected]

 

Women Take Control of Government:

The Buffalo Times
Buffalo, New York

16 Apr 1921

ARE WOMEN ALL HEADED THE YONCALLA WAY?

            A few months ago, at Yoncalla, Oregon, a city of three hundred and twenty-three inhabitants, a small revolution occurred.  The women of the city, discontented with their local government, calmly came together, and on election day turned every male out of office, from the Mayor to his meanest assistant, and installed women in their stead.  W.L. George, the famous English feminist, wonders if this is the thin end of the wedge.  He thinks that it certainly shows a political tendency worth watching.  He claims that women have more integrity in politics than men and gives sound reasons for his opinions.  See what he says in his article, “Is the Woman Voter Dangerous?” in Pictorial Review for May.

 

Off the Mark:

Dear Readers,

It’s been a busy two weeks for me since last edition, with quite a few depositions, motions, and an appeal.  Unfortunately, it has not been busy on the construction defect front as I was unable to find any relevant decisions to report on. Hopefully, we have some better luck in the next two weeks.

Until then …

Brian
Brian F. Mark

[email protected]

 

Lawyer’s Duty Considered:

The Wichita Beacon
Wichita, Kansas

16 Apr 1921

WHAT IS DUTY OF A LAWYER?

Does He Owe All to Client or Some to the State.

            Topeka, April 16 – Is a lawyer’s sole duty the protection of the rights of his client or does he also owe something to the state and to society at large?

            Justice John Marshall of the state supreme court thinks he does.

            A definition of the duties of a lawyer and a code of ethics which he should follow is contained in a syllabus prepared by Justice Marshall in explaining the court’s ruling on the original disbarment proceedings against Fred S. Macy, a Hutchinson attorney.

            In sustaining the disbarment, the court held that an attorney should be disbarred for making, in a pleading filed by him, false charges of criminal misconduct against another attorney who is a party to the action, “where the attorney filing a pleading knew or should have known that the charges were false.”

Do No Wrong.

            “It is an attorney’s duty to protect the rights of his clients, but it is likewise an attorney’s duty to refrain from doing intentional wrong to the adverse party,” Justice Marshall declared.

            “In the United States of America the attorney at law occupies a peculiar position.  Because of his integrity, his ability and his learning he is often called upon to administer the executive departments of government, and he fills a large place in our legislative bodies.”

            “He has taken an important part in framing our government and in guiding its growth.  Possibly democratic government cannot long exist without a strong able, honest and patriotic bar.  If a lawyer is not honest, if he is not conscientious, he is not fit to represent others in a court room.”

Agents of Justice.

            “Justice is administered almost wholly by and thru lawyers.  The lawyer not only is an advocate, he is a person authorized and trusted by the state to assist in determining what is right between the parties before the court.”

            “He cannot excuse himself by saying that his client demands to adopt a line of conduct detrimental to the state’s interests.  If lawyers are permitted to resort to unscrupulous practice for the protection of the supposed rights of their clients one of the purposes of the state will be defeated and the foundations will crumble.”

            “The integrity of the courts and of all who assist in their work must be preserved or that practice of law as it is now known, will cease.”

 

Boron’s Benchmarks:

Just hours prior to writing this column, I received my second dose of the Moderna COVID-19 Vaccine.  Woo-hoo!  Here’s hoping I’ll have minimal side effects from the second dose, as was my good fortune with my first dose.

I have two weeks from today circled on my calendar, of course.  I imagine it is obvious why, but if it is not...two weeks from today will without doubt be a very memorable day...because two weeks from today will be the day I get to write my next Boron’s Benchmarks column for Coverage Pointers!

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 April 9, 2021, by the Supreme Court of Texas in Farmer’s Group, Inc. vs. Geter where on a de novo review the trial court was reversed and Farmers was granted summary judgment.  In reaching its decision the Texas Supreme Court recognized and applied a presumptive insurance policy interpretation rule providing that identical words used in different parts of the same insurance policy should generally be given the same meaning.

Have a healthy and happy next two weeks, folks.

Eric
Eric T. Boron

[email protected]

 

Gin Pills for Sale – 100 Years Ago:

Saskatoon Daily Star
Saskatoon, Saskatchewan, Canada

16 Apr 1921

GIN PILLS

The World’s Greatest Remedy for all kidney and bladder troubles

AGAIN

50c. a Box

We are pleased to announce that we are now enabled to discontinue the increased price of 60 cents a box, and throughout Canada Gin Pills can now be obtained at the old price – 50 cents.

NATIONAL DRUG & CHEMICAL CO. of CANADA, LIMITED, TORONTO

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Our youngest is officially 18-months old today (as I write this, at least) and I have no idea where the time went. Although the longest year of the lives of many, my wife and I will hold on tight to our little guys as long as possible. That time will never go slow enough. I guess the time to make long lasting memories is now. Now, and tomorrow, and the day after that, and every day forever forward.

Today’s column will feature two pieces from DFS. The first is a cautionary tale about an insurer settlement involving not one, not two, not three, but four cyber breachers that ran afoul of relatively new Cybersecurity Regulations. The moral of the story…DFS does not like that very much. The second is a proposed amendment to Regulation 10 that might sound familiar. It is being updated to reflect the current state of affairs for public adjuster referral compensation under the New York Insurance Law.

Until next time,

Ryan
Ryan P. Maxwell

[email protected]

 

Overpriced Barber Gets Jail Time:

Deseret News
Salt Lake City, Utah

16 Apr 1921

Barber Sentenced To Jail When Man Rejects $6.15 Bill

(By Associated Press)

            NEW YORK, April 16 – Magistrate Corrigan decreed today that a barber who presented a bill 0f $6.15 to a customer desiring only a shave, should spend five days in the work house.

            Harry Rose, the barber, tried to justify his charge by saying he had given the complainant a haircut, shave, shampoo, message and steams and had liberally anointed him with tonics and aromatic waters.

            “No more fines for you fellows,” broke in the court, “the limit of the law is what you’ll get.”

 

CJ on CVA and USDC(NY):

Hello all,

Spring is in the air and my grass already needs to be cut! We have had a string of absolutely lovely weather here in Western New York that has me itching for summer. To think, only two weeks ago I was snow skiing!

In light of the recent events in the Suez Canal, I hoped to find a case discussing maritime insurance or protection and indemnity clubs; sadly, the coverage gods did not provide. I did, however, find a fun little insurance adjacent opinion that discussed some oilfield equipment damaged at sea and stands for the age-old adage; if the contract is unambiguous, the terms stand.

I also have outlined a decision from the Eastern District. Here, Allstate sought to disclaim coverage for a claim stemming from its insureds being sued related to cyberbullying perpetrated by the insureds’ son. As all causes of action, save a cause of action for Intentional Infliction of Emotional Distress were dismissed in the underlying case, the court held that coverage under the insured’s homeowner’s policy was not triggered and Allstate did not have to provide a defense or indemnity.

See you in two weeks,

CJ
Charles J. Englert, III

[email protected]
       

 

One Wife Too Many:

Daily News
New York, New York

16 Apr 1921

TWO WIVES, BEST OF FRIENDS, SUE THEIR MUTUAL HUSBAND

            An unusual marital triangle was brought before Justice McCook for disposition in the Supreme Court yesterday.  Two wives of the same man were suing their mutual husband; wife number one asked for an absolute divorce and wife number two an annulment.

            The husband, Arthur Stevens, a restaurant proprietor of 600 West Fiftieth Street, was not in court and did not defend either action.  He married his first wife, Mrs. Cidwell J. Stevens, in September 1911, at Darien, Conn.

            She alleges in her suit for divorce that Stevens misconducted himself with an unnamed woman sometime in January, 1920.  They have one child, Roger, five, whose custody she requests.

            Wife number two is Mrs. Sadie E. Stevens, whom Stevens married in this city in 1920, after a courtship lasting more than a year.  Both wives were on friendly terms and testified for each other in their respective suits.  Decision was reserved by Justice McCook.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

Hope everyone is doing well and enjoying the nicer weather that Spring is bringing us. I’m hoping to get out of the house and enjoy the warmer weather as it comes around. After the past year of lockdowns, and the winter, I hope everyone is able to get out and stretch their legs while still being safe.

In the Serious Injury Threshold world, we have a case from the First Department. The case addresses a plaintiff’s expert who failed to address plaintiff’s prior range of motion testing that contrasted with his own range of motion testing and was unable to reconcile the differences.

Be well,

Michael
Michael J. Dischley

[email protected]
 

 

One Hundred Years Ago -- The Mahoney Trunk Murder occurs in Seattle on April 16, 1921:

By Daryl C. McClary

HistoryLink.org Essay 7285

On April 16, 1921, James E. Mahoney, a paroled convict, drugs his wife Kate, stuffs her in steamer trunk, and smashes her skull with a club. He then pours quicklime over her body. After locking the trunk and securing it with rope, he calls a transfer company to move it to a houseboat on Lake Union. There, the trunk is placed in a skiff and Mahoney rows to the middle of Portage Bay just east of University Bridge and throws it overboard. Kate Mahoney's nieces, suspecting foul play, report to police that she has mysteriously disappeared. After authorities search the ship canal for weeks, the trunk finally bobs to the surface on August 8, 1921, and is recovered by the tugboat Audrey. Mahoney, already in custody for forgery, is charged with his wife's murder. A King County Jury, after a 10-day trial, convicts Mahoney of first-degree murder on October 1, 1921 and sentences him to death. He is hanged at the Washington State Penitentiary in Walla Walla on December 1, 1922. Kate Mahoney's murder, which received national media coverage, was pronounced to be one of the most elaborately planned crimes of the decade.

Here is the rest of the story ….

 

Bucci on “B”: 

Hello readers,

This issue I covered a non-coverage case from the New Hampshire Supreme Court holding that a special relationship existed between the insurance agent and insured.  This decision may place extra burdens on insurance agents and it is worth a read.  Also, check out Dan’s column.  He also discusses a case where the burden of notifying the carrier of an accident was on the insurance agent.

Second shot, almost two weeks.  Hmmm.  What will I do first?  Probably the same thing I am doing now, working.  Not that there is any firm I would rather work for; this firm has been very good to me.  I am surrounded by very smart lawyers who really know their stuff.   Really.  And for me, there is always room to learn.

Speaking of learning, shout out to H&F for its diversity efforts in these times.  The diversity team members/leaders, Mirna Santiago and Joseph Brown, have activated my mind.  Mirna presented the 28-day diversity challenge and Joe recently did a program on autism and one on disability & diversity.   No matter how informed you think you are, there are always some issues that you realize you did not even know about.  But also check out Mirna’s write up regarding the fight for equality.  You will learn.

Diane
Diane L. Bucci

[email protected]

 

Be Careful What You Wish:

Buffalo Courier
Buffalo, New York

16 Apr 1921

ARRANGE TRIPLE HANGING WHEN ONE OBJECTS TO DYING ALONE

            Chicago, April 15 – Sam Cardinella, leader of a band of thieves and murderers and Joseph Costanzo and Salvatore Ferarra, convicted of murdering a fellow countryman, were hanged here today.  The triple hanging was a last minute arrangement, decided upon when Cardinella broke down on learning that Antonio Lopez, who was to have been executed with him had been reprieved last night by Governor Small.

 

Lee’s Connecticut Chronicles:

It’s been a couple of days for the record book, the COVID-19 record book that is. Number one child, 21, got the Pfizer shot on Monday. In the opposite part of the state, number two child, 18, got her shot - Johnson & Johnson. Both spent the night complaining of various side-effects. The fun really started when we woke up Tuesday morning to find out that the CDC was suspending the J&J vaccine. Layer on the anxiety. Wednesday was Dad’s turn—Pfizer shot number two. So far, no ill-effects. Hopefully, that remains so.

Soon we’ll have a fully vaccinated household, and no clots, please.

Be smart and stay safe; we’re almost there.

Lee
Lee S. Siegel

[email protected]
       

 

Object Matrimony:

Buffalo Courier
Buffalo, New York

16 Apr 1921

PERSONALS

            GENTLEMEN, Irish-American, age 38, stranger in city, wishes to meet lady about my age or younger who would appreciate a good friend, no objection to poor girl; must be of good character and not weigh over 110; object matrimony; I have never been married; I can furnish the best of references, my religion is Catholic.  Address 38, care Courier.   16t17

 

Rauh’s Ramblings:

Hello Readers,

I was finally able to receive the COVID vaccine last Friday.  I didn’t really have a preference as to which vaccine I received, so I ended up getting the J&J one.  The best part of all was that I didn’t have to travel far to get it – I went to a Rite Aid that is walking distance from my house.  I spent all day Saturday feeling pretty sore and exhausted, but felt completely fine by midday Sunday.  If being sick for a day or two because of the vaccine means that we can return to some type of normalcy, whatever that may look like, then I think it’s a pretty good tradeoff!

Unfortunately, there haven’t been any decisions coming out of the Appellate Courts or Court of Appeals regarding life insurance issues recently.  I will continue to look and hopefully have something to report in two weeks.

Until next time,

Patty
Patricia A. Rauh

[email protected]
       

 

Signals Crossed?

The New York Times
New York, New York

16 Apr 1921

MOTOR DEVICE BILL DEAD

But Senate Passes Measure for Investigation into Accident Prevention

            ALBANY, April 15 – Recommittal of the Lowman bill, intended to require all motor vehicles to be equipped with a safety signaling device, removed the measure from the calendar of the Legislature today.  The introducer said its object was to prevent accidents.  The expense would have ranged between $15 and $25 for each car.

            The resolution of Senator Nathan Straus, Jr. calling for an investigation by a legislative committee of the general questions of bonding automobilists prevention of accidents and installation of safety devices, was adopted by the Senate today.

 

Storm’s SIU Examen:

Hi folks (said in my Mickey Mouse voice impression):

Just back from several days at Disney World.  Yes, the crowds were reduced (30% capacity) and yes, the lines are shorter.  The Disney people did a nice job of social distancing everyone, as best as they are able.  Some shows are closed but it’s still worth it.  If you are considering going, it’s a good time to do so.  “Star Wars: Galaxy’s Edge” is amazing!

This week in the Examen I have included a case regarding a staged accident.  The insurer submitted compelling evidence (including an admission) but it was held to be insufficient for summary judgment prior to the completion of discovery.  We will also examine a case in which GEICO filed a motion for a preliminary injunction which was granted staying defendant PIP medical providers from filing claims and arbitration until the conclusion of this fraud and RICO action against them.  Finally, we will also consider a Pennsylvania decision which provides a nice review of the standards regarding discoverability of claim file materials in first-party property losses, including: attorney-client privileged communications; mental impressions; communications regarding legal fees; and reserving. 

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

This edition’s encouraging word: “If you can dream it, you can do it. Always remember that this whole thing was started with a dream and a mouse.” ~ Walt Disney.  Imagine what we would not have today if Walt Disney gave up after he filed bankruptcy back in the 1920s.

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]

  • In No Fault Dispute, Self-Insured Taxi Company Pummeled to a Pulp by Second Department, but, Perhaps, Justifiably So

  • Insurance Broker in the Soup for Failing to Put Appropriate Carriers on Notice of Suit

  • Despite Inadequate Proof that SUM File Material was Privileged (Attorney’s Affidavit is Simply Not Enough), Court Should Conduct an In Camera Review of File Follow-Form Excess Carrier Not Bound by Prior Adverse Coverage Decision against Underlying Carrier where Law Changed in the Meantime and Excess Carrier has no Role in Determination

  • Follow-Form Excess Carrier Not Bound by Prior Adverse Coverage Decision against Underlying Carrier where Law Changed in the Meantime and Excess Carrier has no Role in Determination

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Where Insured Agreed to Use of Commodity, there was No Fortuitous and Thus No Insurable, Loss
  • Appellate Division Significant Reduces Runaway Verdict for Traumatic Brain Injury

 

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

  • Plaintiff Expert Failed to Address Prior Range of Motion Testing that Contradicted Experts Findings

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz

[email protected]

  • Attending the ABA TIPS Insurance Coverage Litigation Committee Mid-Year

 

BARNAS ON BAD FAITH
Brian D. Barnas

[email protected]

  • Bad Faith Suit Barred by Res Judicata

  • Court of Appeals Denies Leave to Appeal Lower Court’s Decision to Set Aside Verdict in Favor of Plaintiff for Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing Affirmed on Appeal

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

  • Soccer War, Connecticut-Style, Precludes Use of Self-Defense Defense

     

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

  • Special Relationship Found

  • Disparagement Offenses Found  

  • Disparagement of Region?

 

OFF THE MARK
Brian F. Mark
[email protected]

  • No noteworthy construction defect cases to report on this edition.

 

BORON’S BENCHMARKS
Eric T. Boron

[email protected]

  • Homeowners Insurance – Non-Renewal – Reversal of Lower Courts Resulting in Summary Judgment for the Insurer

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]

Regulatory Wrap-Up

  • Cautionary Tale as DFS Investigation Uncovers Failure to Implement Multi-Factor Authentication, Leading to Four Cyber Breaches

  • Proposed Regulation Reflecting Existing Insurance Law Requiring Written Disclosure of Public Adjuster Referral Compensation

 

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

[email protected]

  • When Unambiguous the Terms of a Contract Prevail

  • A Cause of Action Sounding in Intentional Infliction of Emotional Distress Does Not Grant Coverage Under a Homeowner’s Policy

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

  • No cases to report this week.  Check back next time!

 

ruMIRNAtions
Mirna. M. Santiago

[email protected]

  • Does the industry-wide usage of credit scores perpetuate racial inequity in insurance?

 

STORM’S SIU EXAMEN
Scott D. Storm

[email protected]

  • Staged Accident – Compelling Evidence (Including an Admission) Held to be Insufficient for Summary Judgment Prior to Completion of Discovery

  • GEICO’s Motion for a Preliminary Injunction is Granted Staying Defendant PIP Medical Providers from Filing Claims and Arbitration Until the Conclusion of This Fraud and RICO Action Against Them

  • A Review of the Standards Regarding Discoverability of Claim File Materials in 1st-Party Property Losses in Pa., Including: Attorney-Client Privileged Communications; Mental Impressions; Communications Regarding Legal Fees; and Reserving

 

We love hearing from you.

 

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]

04/14/21       Murzik Taxi, Inc. v.  Lutheran Medical Center
Appellate Division, Second Department
In No Fault Dispute, Self-Insured Taxi Company Pummeled to a Pulp by Second Department, but, Perhaps, Justifiably So

Under Insurance Law § 5106(c) where there is more than $5000 involved in a No Fault claim, either party can ask the court for a de novo determination of claims for no-fault insurance benefits.  That is, despite what the arbitrator and Master Arbitrator rules, a party can start the proceeding anew in State Supreme Court.

On March 25, 2011, Thompson, a pedestrian, allegedly was injured when he was struck by a taxi owned by the Murzik Taxi, Inc. (“MTI”) a self-insured taxi corporation. Lutheran Medical Center (“LMC”) as assignee of Thompson, submitted claims to the MTI for no-fault insurance benefits for medical care it provided to Thompson. After the MTI failed to pay the claims, LMC submitted the matter to arbitration. The arbitrator determined that the LMC was entitled to no-fault compensation in the sum of $59,199.85, together with a surcharge, interest, and attorney's fees. MTI appealed the award to a master arbitrator, who affirmed the award.

Thereafter, MTI commenced this action pursuant to Insurance Law § 5106(c) for a de novo determination of LMC’s claims for no-fault insurance benefits.

Here, the LMC made a prima facie showing of its entitlement to the benefits by submitting evidence that the prescribed statutory billing forms had been mailed to and received by the plaintiff, and that after the plaintiff received further verification of these claims, it failed to either pay or deny the claim. In addition, it submitted evidence, including a fax confirmation receipt, showing that an NF-5 form, in which Thompson assigned his no-fault benefits to the defendant, was faxed to, and received by the plaintiff on July 11, 2011.

In opposition, MTI submitted evidence showing that in 2011, Thompson commenced a personal injury action against the MTI, that the case was settled on September 12, 2013, MTI agreed to pay Thompson the sum of $275,000 in damages, of which $65,000 was purportedly allocated for no-fault benefits.

MTI argued that it was not obligated to pay no-fault benefits to the LMC because it did not have notice of the assignment before it issued payment to Thompson.

That would be accurate, but for what the court described as “overwhelming documentary evidence” establishing that, in fact, MTI had been sent notice of the assignment. Indeed, a denial of claim form which was prepared by the MTI’s  claims administrator designated the LMC  as the assignee. In addition, the LMC  submitted an arbitration decision dated January 3, 2012, in which Thompson's arbitration claim against the plaintiff for no-fault benefits was dismissed on the ground that he lacked standing because he assigned the claims for no-fault benefits.

So, it was clear, that MTI had notice of the assignment.

In the alternative, the MTI asserted that, as a self-insurer, its bond or policy was limited to $50,000. However, taxicab owners, such as the MTI, are required to maintain liability coverage through an insurance policy or bond in an amount not less than $200,000 per person for basic economic losses.  No policy or bond was submitted to confirm the $50,000 limit.

So, Murzik Taxi is out of luck and must pay the entire no-fault claim assigned to Lutheran Medical Center together with two percent interest a month, dating back to 2011.  If entire the principal was due in 2011 with interest running at two percent (2%) a month, we’re talking about 232% interest on a $59,199.85 award, or $137,343.65 which, when added to the principal, brings the total no fault payment to $196,543.50.  If MTI really paid $65,000 of the settlement to account for no fault payments, it would mean that MTI would be paying over $261,000 for no fault benefits that should have been $59,199,65

 

04/07/21       Commodore Maintenance Corporation v. Insight Companies
Appellate Division, Second Department
Insurance Broker in the Soup for Failing to Put Appropriate Carriers on Notice of Suit

Commodore Maintenance Corporation (“Commodore”) sued its insurance broker, Insight, asserting causes of action to recover damages for negligence, breach of contract, and breach of fiduciary duty and for declaratory relief. Commodore alleged that the Commodore breached a special duty to notify the appropriate insurance carriers of a December 5, 2012 accident involving the plaintiff's employee, Joseph Pastorino, who allegedly was injured while attempting to board a barge, and a resulting lawsuit commenced by Pastorino on May 14, 2013, entitled Pastorino v City of New York, (“Pastorino action”). Commodore had procured for Commodore a marine protection and indemnity policy from Atlantic Specialty Insurance Company (“Atlantic) insuring three named barges, and a Workers' Compensation and Longshore and Harbor Worker's Compensation Act policy from the New York State Insurance Fund (“NYSIF”). Although the Commodore promptly forwarded all claims and legal documents to Insight, Insight failed to notify Atlantic of the claim or lawsuit until August 28, 2013. Commodore did timely notified NYSIF of the claim, but failed to forward copies of the complaint or the amended complaint in the Pastorino action to it.

The plaintiff's counsel forwarded the amended complaint in the Pastorino action to NYSIF on September 15, 2014. Atlantic and NYSIF each disclaimed coverage, based on late notice of the claim and the failure to promptly forward the pleadings, respectively.

Commodore established its prima facie entitlement to judgment as a matter of law on the issue of liability by demonstrating that it had a special relationship with the defendant whereby the defendant owed it a duty of care to provide timely notice of claims and lawsuits to the appropriate insurance carriers, that the defendant breached that duty, and that the breach was a proximate cause of the plaintiff's losses. Given the references in the initial claim documents to the involvement of a barge in the underlying accident, the Insight should have realized that there was a reasonable possibility of the Atlantic policy's involvement.

Additionally, the defendant offered no excuse for its failure to promptly forward a copy of the complaint in the Pastorino action to NYSIF. The defendant's contention that the insurers' disclaimers were invalid for their failure to comply with Insurance Law § 3420 is without merit, as the requirements of that statute are inapplicable to the subject policies.

 

04/07/21       Wasserman v. Amica Mutual Insurance Company
Appellate Division, Second Department
Despite Inadequate Proof that SUM File Material was Privileged (Attorney’s Affidavit is Simply Not Enough), Court Should Conduct an In Camera Review of File

Helene Wasserman (“Helene”) and Paul Wasserman (“Paul”), commenced this action against Amica to recover damages for breach of an insurance contract and loss of consortium. The complaint alleged that on February 4, 2017, Helene was struck by a motor vehicle owned and operated by Wray. The complaint further alleged that the plaintiffs had a personal automobile policy of insurance with Amica that included supplemental underinsured/uninsured motorist (“SUM”) bodily injury coverage. The complaint alleged that Helene sustained serious ]injuries as a result of her accident, and the plaintiffs made a demand under the SUM provision in the policy, but Amica failed or refused to provide adequate compensation as required under the policy terms. Amica interposed an answer to the complaint.

The plaintiffs moved to strike Amica's answer, or, in the alternative, to compel Amica to produce a copy of the SUM file. Amica opposed the motion and cross-moved, ior a protective order denying the production of the SUM file, or, in the alternative, permitting service of a privilege log or an in camera review of the SUM file by the Supreme Court prior to any disclosure.

By order entered September 11, 2019, the Supreme Court, inter alia, granted that branch of the plaintiffs' motion which was to compel Amica to produce the SUM file, and denied those branches of Amica's cross motion which sought a protective order or providing for an in camera review of the SUM file. The court also denied that branch of Amica's cross motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action for loss of consortium. Amica appeals. By decision and order on motion dated November 15, 2019, this Court, inter alia, stayed so much of the order as directed Amica to produce the SUM file pending hearing and determination of the appeal.

CPLR 3101(a) directs that "[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action." "A party asserting that material sought in disclosure is privileged bears the burden of demonstrating that the material it seeks to withhold is immune from discovery"). Such burden is met "by identifying the particular material with respect to which the privilege is asserted and establishing with specificity that the material was prepared exclusively in anticipation of litigation" An attorney's affirmation containing conclusory assertions that requested materials are conditionally immune from disclosure pursuant to CPLR 3101(d)(2) as material prepared in anticipation of litigation, without more, is insufficient to sustain a party's burden of demonstrating that the materials were prepared exclusively for litigation" Whether a particular document is or is not protected is necessarily a fact-specific determination, most often requiring in camera review" (Spectrum Sys. Intl. Corp. v Chemical Bank, 78 NY2d at 378 [citation omitted]).

Here, the Supreme Court properly determined that Amica failed to meet its burden of establishing that the SUM file was immune from discovery. Amica's counsel's conclusory assertions that the SUM file constituted irrelevant information and/or material protected by attorney-client privilege or attorney work product were insufficient to meet Amica's.  However, the court improvidently exercised its discretion in directing the disclosure of the entire SUM file without first requiring its production for an in camera review of the allegedly privileged documents.

 

04/06/21       Aspen Specialty Insurance Company v. RLI Insurance Co. 
Appellate Division, First Department
Follow-Form Excess Carrier Not Bound by Prior Adverse Coverage Decision against Underlying Carrier where Law Changed in the Meantime and Excess Carrier has no Role in Determination

Aspen commenced this action seeking a declaration that the excess insurance policy issued by RLI Insurance Company, Inc. was next in order of coverage for a personal injury action, in which Aspen and RLI's common insured, Alphonse Hotel Corporation, was a defendant. The issue in this case is whether RLI, an excess insurer with a follow form policy, is bound by a prior judicial determination of this Court that the primary policy issued by Ironshore Indemnity Inc., which underlies RLI's excess policy, covers the defendant in the personal injury action, Alphone, as an additional insured. In the prior declaratory judgment action between Aspen and Ironshore, this Court declared that the language in the additional insured endorsement extends coverage broadly to any injury causally linked to the named insured, which was satisfied in this case because the loss involved an employee of the named insured who was injured while performing the named insured's work under the contract with the additional insured. RLI argues that it is not bound by this Court's prior determination because it was not part of the prior declaratory judgment action.

Patalano was an employee of Transel Elevator & Electric, Inc., and commenced a personal injury action against Alphonse, as owner of the Carter Hotel. Patalano, on October 12, 2012, while working within the scope of his employment with Transel, exited the elevator shaft on the 24th floor of the Carter Hotel building and began to descend the interior stairway; a step collapsed, and he fell down the stairway. The complaint alleges that the accident and resulting injuries were caused by Alphonse's negligence in allowing an unsafe condition to exist on the hotel premises.

Transel was not a defendant, and the complaint did not allege negligence against Transel. However, a service agreement between Transel and Alphonse required that Transel obtain general liability insurance and excess liability coverage and name Alphonse as an additional insured. Transel obtained general liability insurance from Ironshore, with a limit of coverage of $1,000,000 per occurrence. The policy included an endorsement providing coverage as an additional insured "[a]s required by written contract," but only for bodily injury "caused, in whole or in part, by '[Transel's] work' at the location."

Transel also obtained excess liability coverage from RLI, which provided, in part, that it would pay the net loss from an occurrence insured by the primary insurance, but only once the primary insurance had been exhausted. Alphonse obtained liability insurance from Aspen. The policy provides that it is primary "except when Paragraph b. below applies." Paragraph b. states that the Aspen policy shall be excess over any other primary insurance available to Alphonse covering liability for damages "arising out of the premises or operations . . . for which you have been added as an additional insured." When the Aspen policy "is excess over other insurance," it pays the loss that exceeds the sum of the total amount that all such "other insurance" would pay in the absence of this insurance.

In July 2013, Alphonse tendered its defense to Transel under the Ironshore policy. Ironshore denied additional insured status to Alphonse on the ground that the allegations in Patalano's action were solely related to the negligence of Alphonse. That was litigated, Ironshore lost and the First Department affirmed’.  This same court found that Alphonse was "entitled to coverage as an additional insured under the Ironshore policy with respect to the claim of injuries sustained by Transel's employee [Patalano] when he lost his footing on the hotel stairway, which resulted from his 'acts or omissions' while performing his work" .

That all happened before Burlington and after Burlington, Ironshore sought to reargue, but the court found the application untimely. That was even though the parties conceded that the result would have been different has Burlington been decided earlier.

In May 2018, Aspen commenced this action against RLI, seeking a declaration that the RLI policy was the next in order of priority for the underlying personal injury action and that RLI must make its policy available. The court finds that  the doctrine of the law of the case does not apply to bind RLI to the prior judicial determination of this Court, that the underlying primary policy covers Alphonse in the personal injury action as an additional insured.

There was a subsequent change in the law, the determination that Alphonse was an additional insured under the Ironshore policy is not the law of the case because it was made in a prior, separate proceeding, not this ongoing action. RLI was not a party to the prior proceeding.

There is no basis for binding RLI to the prior coverage determination. A follow-form policy was never intended to bind an excess carrier to a judicial interpretation of an underlying policy in a related but wholly non-controlling decision.

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

04/13/21       Carlyle Commodity Management, LLC v. Certain Underwriters at Lloyds’ London
Appellate Division, First Department

Where Insured Agreed to Use of Commodity, there was No Fortuitous and Thus No Insurable, Loss

Carlyle was engaged in an agreement with a Moroccan oil refinery wherein Carlyle would issue payment to crude oil suppliers for shipment of oil to the refinery.  The refinery would then purchase the oil from Carlyle prior to beginning the refinement process.  At some point, the Moroccan government froze the refinery’s bank accountants and it, in turn, defaulted on its obligations to Carlyle. 

Although the refinery acknowledged that the purchased oil remained the property of Carlyle, it appears the refinery process began on at least some of the commodity before it was ever purchased by the refinery.  Having lost the commodity, and having received no payment for it, Carlyle presented a claim under its policy with Underwriters.  Underwriters denied on the basis that the crude oil was not a fortuitous, and thus covered, loss.

In affirming the trial court, the Appellate Division noted that Carlyle new the refinery would use oil prior to paying Carlyle, and that Carlyle “acquiesced” to this activity.  Thus, given that the oil was lost in the ordinary course of the arrangement between Carlyle and the refinery, it could not be said that the loss of oil was due to a theft perpetrated by the refinery.  However, because a question of fact existed as to whether Carlyle withdrew its acquiescence after the refinery’s bank accounts were frozen, and whether the refinery converted oil after Carlyle communicated any change in their approval, summary judgment was inappropriate to all parties.

 

04/13/21       Perez v. Live Nation Worldwide, Inc.
Appellate Division, First Department
Appellate Division Significant Reduces Runaway Verdict for Traumatic Brain Injury

Plaintiff suffered a traumatic brain injury which left him with debilitating injuries including episodic epilepsy, headaches, dizziness, chronic pain and permanent cognitive defects.  At the conclusion of trial, plaintiff was awarded in excess of $10,000,000 in past pain and suffering, $72,250,000 in future pain and suffering.  In addition, the jury also more than $5,000,000 in future wage loss and more than $10,000,000 in future medical expenses. 

The trial court threatened to overturn the verdict unless plaintiff agreed to reduce the future pain and suffering award to $30,100,000, and the lost wages to $1,920,000.  On appeal, the Appellate Division modified the trial court’s decision, and further advised that the matter would be remanded for a new trial unless the plaintiff agreed to accept $5,000,000 for past pain and suffering and $15,000,000 for future pain and suffering.  The Appellate Division, however, held that the economic damages were supported by the evidence adduced at trial, and, accordingly, deleted those particular modifications noted by the trial court. 

The bottom line was the Appellate Division felt the appropriately supportable range for this type of injury was much closer to $20,000,000 than the $83,000,000 awarded by the jury. 

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

[email protected]

04/06/21       Rafaela Blumenberg v. Ruben Lora, et al
Appellate Division, First Department
Plaintiff Expert Failed to Address Prior Range of Motion Testing that Contradicted Experts Findings

In an action to recover damages for personal injuries, the plaintiff appeals from an Order of the Supreme Court, Bronx County (John R. Higgitt, J.), entered February 28, 2020, which, dismissed the complaint alleging serious injury under Insurance Law § 5102(d).

The Appellate Court found that, defendants established prima facie that plaintiff did not sustain a serious injury under Insurance Law § 5102(d) by submitting a report by their radiologist, who reviewed the MRI of plaintiff's left shoulder and found that it showed preexisting degenerative conditions, not caused by recent trauma, and no rotator cuff tear. Defendants also met their burden by submitting a report by their orthopedist, who found that plaintiff's left shoulder and uninjured right shoulder had the same limitations in range of motion and that the left shoulder functioned normally. Defendants also relied on plaintiff's own medical records, which showed that she had normal range of motion four months after the accident, and their orthopedist reviewed the medical records and noted that the operative report prepared by plaintiff's orthopedic surgeon included a diagnosis of arthritis in the acromioclavicular joint.

In opposition, the Appellate Court found that, plaintiff failed to raise an issue of fact. Although the doctor who examined her recently found limitations in range of motion, he failed to reconcile his findings with an earlier finding of full range of motion made by another treating physician. Furthermore, his opinion that the claimed shoulder injury was caused by the accident was conclusory and based on the assumption that plaintiff had no preexisting conditions, which was contradicted by hospital records submitted by plaintiff that noted a history of arthritis. Plaintiff's expert did not address the history of arthritis noted in plaintiff's own medical records or explain why her current symptoms were not related to the preexisting condition. Plaintiff did not submit any medical records to rebut defendants' radiologist's opinion that the MRI films showed no rotator cuff tear.

Based on the foregoing, the Appellate Court found that defendants are entitled to dismissal of the 90/180-day claim, given the absence of a causal connection between plaintiff's left shoulder condition and the subject accident. Furthermore, plaintiff's testimony shows that she was confined to bed for only three days and to home for only four days after the accident.

As such, the decision of the lower court was unanimously affirmed.

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]

Attending the ABA TIPS Insurance Coverage Litigation Committee Mid-Year.

 

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

04/07/21       HERCO, LLC v. Auto-Owners Insurance Company
Court of Appeals of Indiana
Bad Faith Suit Barred by Res Judicata

An apartment building owned by HERCO in Gary, Indiana was damaged on April 27, 2012, when an unknown person threw a Molotov cocktail into an apartment and it caught fire.  HERCO reported the loss to Auto-Owners.  Shortly thereafter, the building was vandalized, and HERCO reported the vandalism to Auto-Owners on July 10, 2012.  Auto-Owners paid a portion of the losses, but the parties disagreed on the value.

An insurance appraisal was completed.  The umpire awarded ACV of $435,000 and $36,000 in business interruption for the first loss and ACV of $109,739 and $10,000 in business interruption for the second loss.  Auto-Owners paid the policy limit for the fire claim to HERCO, but it continued to contest coverage for the theft and vandalism.  HERCO eventually decided to pay the balance of the appraisal award on the theft and vandalism claim during the course of litigation.  Auto-Owners did not admit coverage or liability in the notice of intent to pay the balance it filed. The bench trial scheduled on the coverage issue was vacated.

HERCO then filed a second lawsuit alleging that Auto-Owners breached the contract by not paying the appraisal award in 30 days.  It also alleged that payment was delayed in bad faith.  After the second suit was filed, but before Auto-Owners was aware of it, the parties jointly filed a release and satisfaction of appraisal award in the first lawsuit.  The release stated that the disputed amount had been paid in full and that all appraisal issues in the matter were concluded and resolved.

Auto-Owners moved for summary judgment in the second suit, arguing that it was barred by res judicata.  The court agreed and dismissed the second lawsuit.  The court noted that the parties to both lawsuits were the same, and the release and satisfaction filed in the first suit was a judgment on the merits for res judicata purposes.  The court rejected HERCO’s argument that the issues in the two cases were different.  To prevail on its claims in the second suit, HERCO had to prove that the policy fully covered the appraisal award and Auto-Owners continued litigation of the first suit after entry of the appraisal award was unfounded.  HERCO therefore would have had to rely on evidence from the first suit in the second suit to prove it was entitled to the appraisal award.

The court also rejected HERCO’s argument that it could not have brought the second suit until after Auto-Owners agreed to pay the full appraisal award.  The court noted that bad faith and breach of contract claims are frequently brought as part of the same lawsuit.  HERCO could have pursued its claims for bad faith in the first suit, but it chose not to do so.

 

03/30/21       Riconda v. Liberty Insurance Underwriters, Inc.
New York Court of Appeals
Court of Appeals Denies Leave to Appeal Lower Court’s Decision to Set Aside Verdict in Favor of Plaintiff for Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing Affirmed on Appeal

On October 21, 2020 the Second Department issued a decision setting aside a jury verdict of $2,282,000 in a bad faith case.  The Court of Appeals declined the motion for leave to appeal the decision.

 

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

4/13/21         Konferowicz v. Vermont Mutual Insurance Co.
United States District Court, District of Connecticut
Soccer War, Connecticut-Style, Precludes Use of Self-Defense Defense

New Britain is the heart of the Polish American community in Connecticut, one of the larger Polish communities outside of Chicago. Belvedere Bar & Restaurant is one of our top locations, which transforms into a hot spot at night. In June 2016, the restaurant hosted a European soccer viewing party. Unfortunately, we don’t know from the record who was playing. Nevertheless, Mariusz Lempicki was unhappy with the match results. Lepicki started a fight inside the bar. As Lempicki was leaving, Konferowicz and her husband were having lunch on the patio. Konferowicz tried to stop Lempicki; but Lempicki punched Konferowicz, breaking her nose and causing other injuries.

Konferowicz sued, and a state court jury found that Lempicki acted recklessly and negligently, awarding Konferowicz more than $116,000 in damages. Lempicki’s parents’  homeowners insurer, Vermont Mutual, refused to defend the suit and declined to pay the judgment. Under Connecticut’s direct action statute, Konferowicz commenced this action against Vermont to enforce that judgment. The court’s ruling will surprise you.

Vermont moved to amend its answer to add collateral estoppel and judicial estoppel as affirmative defenses to prevent Konferowicz from relitigating facts necessarily determined in the tort action. Importantly, Vermont wanted to prevent Konferowicz from arguing that Lempicki was acting in self-defense in order to avoid the assault and battery exclusion to the HO policy. The court denied Vermont’s motion, finding that the jury's verdict did not necessarily determine that Lempicki was not subjectively acting in self-defense, as is relevant for the insurance policy at issue. As a result, the court denies the motion because the affirmative defenses would be futile.

Vermont argued that the jury's verdict that Lempicki acted recklessly meant that it necessarily rejected Lempicki's special defense (i.e. affirmative defense) of self-defense. Vermont argued that if Lempicki did not act in self-defense, then the incident would not be an “occurrence” and, therefore, the grant of coverage would not be triggered. In addition, the HO policy contained the typical expected or intended injury exclusion. But the court found Vermont’s arguments to be flawed. The jury in the tort action was instructed to apply a reasonable man standard – an objective standard – in evaluating Lempicki’s self-defense defense. But, for insurance purposes a subjective inquiry is used.

For example, in Vermont Mut. Ins. Co. v. Walukiewicz, 290 Conn. 582 (2009), the Connecticut Supreme Court analyzed an identical HO policy. There, the injured party argued that “subjective intent was relevant for purposes of determining both whether the incident at issue was an accident, and, therefore, an occurrence for which coverage was afforded, and whether Walukiewicz expected or intended bodily injury to Brown, such that the intentional injury exclusion would apply to preclude coverage.” Id. at 589. Vermont, in that case, argued that the trial court properly applied an objective standard in determining whether the insurance policy covered the incident. But the Supreme Court disagreed.

In doing so, the Supreme Court explained that an “occurrence” or “accident” “encompasses actions taken by an insured in legitimate self-defense,” which “are unplanned and unintentional.” Therefore, the “relevant inquiry in determining whether an accident has occurred is whether the injuries at issue were caused by the intentional design of the insured, or rather, by a sudden, unforeseen event.” Id. at 594. The Supreme Court then explained that “the intentional injury exclusion does not preclude coverage for injuries resulting from legitimate acts of self-defense because those injuries were not expected or intended by the insured.” Walukiewicz, 290 Conn. at 599.

Thus, the Supreme Court rejected, for insurance purposes, the objective rule of intent used in tort and criminal law. Therefore, the district court ruled that it is clear under Connecticut law that the proper inquiry for determining whether insurance coverage is available under the Vermont HO policy—for both whether an “occurrence” took place and whether the intentional injury exclusion applies—focuses on the insured's subjective intent and expectation; i.e. did the insured subjectively believe he acted in self-defense. Since the jury's verdict did not determine whether the insured acted in subjective self-defense, Vermont’s affirmative defense was futile. As a result, the self-defense issues presented in this insurance dispute are not identical to those in the underlying tort action, and the jury's finding of recklessness did not necessarily determine that Lempicki did not act in self-defense from his subjective perspective. Accordingly, collateral estoppel and judicial estoppel cannot, as a matter of law, preclude Konferowicz from arguing in this action that Lempicki acted in self-defense.

 

BUCCI on “B”
Diane L. Bucci

[email protected]

03/19/21       101 Ocean Blvd., LLC v. Foy Insurance Group, Inc.
New Hampshire Supreme Court
Special Relationship Found

Foy Insurance Group. acted as the insurance agent for Albert Bellemore, owner of the plaintiff, 101 Ocean Blvd., LLC.  Bellemore had worked with Foy since the early 2000s, Foy handled insurance for Bellemore for several properties. In 2006, Ocean bought Ocean Blvd., a hotel in Hampton.  He purchased through Foy a $1.3 million replacement cost policy for the structure. By 2015, Bellemore “had 14 or 15 different [insurance] policies in force with Foy.” His annual premiums “were just shy of fifty thousand dollars.”

Beginning in 2011, concerns were raised to Bellmore about the hotel policy’s coverage and in 2013, Bellemore took the advice of Heidi SanSouci, an agent, and purchased the additional coverage at the relevant times with AIX Specialty.  

In 2015, a fire occurred that caused significant losses but despite the additional insurance recommended by SanSouci, the AIX policy only provided $10,000 in law and ordinance coverage, which applies to bring a damage building up to code and compliant with building laws.  Bellemore sued.

The case went to trial and the jury found a “special relationship” existed between Ocean/Bellemore and Foy (or SanSouci), presumably based on the above continuing relationship between the parties.  On appeal, Foy argued that the “special relationship” jury instruction was error regarding the because the jury had to find at least one of the factors set forth in Sintros v. Hamon, 148 N.H. 478, 483, 810 A.2d 553, 557 (2002) for a special relationship to exist.

According to the court, the Sintros “factors” were in fact examples of special relationships but not requisite scenarios that must be established.  

In Ocean, the allegedly offending jury instruction advised: 

The general duty of care does not include an affirmative obligation to give advice regardless of the availability or sufficiency of coverage.

However, the existence of a “special relationship” between the insurance agent and the client may impose upon an insurance agent an affirmative duty to provide advice regardless of the availability or sufficiency of insurance coverage. An insured . . . can demonstrate . . . a “special relationship” by showing that there exists something more than the standard insurer-insured relationship between the parties. This depends upon the particular relationship between the parties and is determined on a case-by-case basis. Examples include an express agreement between the insured agent and client, a long-established relationship or entrustment in which the agent clearly appreciates the duty of giving advice, the paying [of] an additional compensation apart from the premium payment, and the agent holding himself or herself out as a highly-skilled expert coupled with reliance by the insured. Also, a “special relationship” between the parties may exist when the insured relies upon the agent’s offered expert [advice] regarding the question of coverage, or when there is a course of dealings over time putting the agent on notice that his or her advice is being sought and relied upon. If a “special relationship” exists between the parties, the Plaintiff must demonstrate not only the existence of the relationship, but also that he or she was justified in relying upon the relationship.

Apparently, the jury found the facts recited above sufficient to establish a special relationship, and the Supreme Court agreed, concluding that the evidence was sufficient for a rational trier of fact to find a special relationship.  The court noted that Foy should have advised Bellemore that additional law and ordinance coverage was generally available in the marketplace and was specifically available to Ocean.  It should have advised that there would have been little difference between what Ocean paid in premiums under its then-current coverage and what it would pay in premiums if replacement coverage were reduced and law and ordinance coverage were increased.  This will likely place a burden on any insurance agent with longstanding clients, or with clients that it would advise the client about certain limits in its policy. 

 

04/06/21       Sprint Lumber, Inc. v. Union Ins. Co.
Court of Appeals of Missouri, Western District
Disparagement Offenses Found  

Porters Building Centers, Inc. and Sprint Lumber, Inc. were competitors in the building and lumber supply industry.  Porter’s former employees joined Sprint but even when they were still with Porters, they allegedly  conspired with Sprint to misappropriate, and then delete Porters' proprietary information, trade secrets, customer contact information, and lists. It further alleged that employees affirmatively undercut Porters’ business as they worked to solicit Porters' customers for Sprint Lumber.  Suit was brough against Sprint and Union denied coverage.

Subsequently, Porters amended its petition to add an antitrust claim under the Sherman Act and a trespass claim. The antitrust claim alleged that Sprint intended to put Porters out of business and to monopolize the industry in the surrounding region. In its first amended petition, Porters alleged that intended to put Porters out of business and to monopolize the industry in St. Joseph and the surrounding region. Porters amended its petition once again to withdraw its breach of restrictive covenant claim. The second amended petition added that the conspiracy culminated in the employees diverting Porters customer relationships to Sprint, harming Porters’ good will and reputation—all before, during, and after their orchestrated transition from employment at Porters to employment at Sprint.  Under its claim for injunctive relief, Porter accused Sprint of conveying false information regarding the circumstances of the employees’ departure in a way that casts negatively on Porters to its customers.

The remaining claims included antitrust under the Sherman Act, claims for injunctive relief for violation of the Computer Fraud and Abuse Act, violation of the Missouri computer tampering statutes, violation of the Missouri Uniform Trade Secrets Act, breach of duty of loyalty, tortious interference with business expectancy, trespass,  and civil conspiracy.

Union denied coverage for each petition arguing that none of the claims asserted met the definition of “personal and advertising” injury, and even if they did, exclusions precluded coverage for Porters’ claims.  At some point, Sprint submitted documents that apparently led Union to believe it had a duty to defend, because it offered a defense under a reservation of rights, which was refused by Sprint, who demanded indemnity coverage.  

In the suit that followed, Sprint  alleged that its “personal and advertising” coverage applied.  The trial court on summary judgment agreed.  While it held for Union in connection with the breach of duty of loyalty claim and limited some penalties, it also held that Union had a duty to defend Sprint.  The court then ordered a trial on the issue of indemnity coverage for the settlement sum Sprint paid to settle the underlying case.  After a bench trial, the trial court found that Union had a duty to indemnify Sprint and pay the settlement sum.  Both parties appealed, Sprint to increase and include penalties on the defense cost sums.

Union argued that the claims in the Porter lawsuit were based on allegations of knowingly misappropriating confidential information, trade secrets, and customer contacts, and that none of the alleged facts triggered coverage under subparts d, e, or f of the definition of “personal and advertising” injury, which follows:

d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

e. Oral or written publication, in any manner, of material that violates a person's right to privacy;

f. The use of another's advertising idea in your “advertisement[.]”

Sprint argued that Porter claimed it was stealing customers by disparaging Porter’s goods, products, or services.  The court relied on McCormack Baron Management Services, Inc. v. American Guarantee & Liability Insurance, Co., 989 S.W.2d 168 (Mo. banc 1999) to hold that “disparage” in this context, was “to lower in esteem or reputation,” “to diminish the respect for,” “to lower in rank by actions or words,” or “to speak slightingly of.” Id. at 171. In McCormack, the court held that under Coverage B, disparagement of goods, products or services does not turn on whether a specific cause of action such as defamation, libel, slander, or injurious falsehood is asserted against the insured. This court held that offense d., above, could include a claim for tortious interference with a contractual relationship.

Despite this, Union argued that there was no coverage because disparagement was not pled.  Agreeing with the trial court, the court held that allegations of harm to Porters' good will and reputation bolstered the possibility that Sprint used statements that criticized and disparaged Porters’ service.  It held that because the possibility of coverage existed, Union wrongfully denied the defense. 

Union, moving on to the exclusions, argued that both of the following exclusions applied:

Infringement Of Copyright, Patent, Trademark Or Trade Secret

“Personal and advertising injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in your “advertisement”.

Access Or Disclosure Of Confidential Or Personal Information

“Personal and advertising injury” arising out of any access to or disclosure of any person's or organization's confidential or personal information, including patents, trade secrets, processing methods, customers lists, financial information, credit card information, health information or any other type of nonpublic information.

This exclusion applies even if damages are claimed for notification costs, credit monitoring expenses, forensic expenses, public relations expenses or any other loss, cost or expense incurred by you or others arising out of any access to or disclosure of any person's or organization's confidential or personal information.

According to the court, the exclusions did not eliminate the possibility of coverage.  It disagreed with Union's argument that all of the allegations against Sprint centered on the wrongful and unlawful misappropriation and disclosure of confidential information and trade secrets, repeating that the suit also had a separate claim involving the wrongful solicitation of Porters’ customers by disparagement. In fact, the court held that Union had a duty to indemnify for the same reasons that it had a duty to defend.

 

04/07/21       Travelers Ind. Co. v. Luna Gourmet Coffee & Tea Co., LLC
United States District Court, Colorado
Disparagement of Region?

In 2019 two putative class action complaints were filed against coffee distributors, wholesalers, and retailers, including Travelers’ insured, Boyer's and Luna Gourmet Coffee & Tea Company LLC (“Luna”) as Named Insureds (referred to herein as the “insured” and collectively, the “Insureds”). Luna owns or controls Boyer's.

The two class actions sought relief from the court in connection with Boyer’s use of the word “Kona” on its coffee packaging labels.  In the first action, Kona farmers sought recovery under the Lanham Act (15 U.S.C. § 1125(a)) for: (1) false designation of origin, (2) false advertising, and (3) unfair competition based on the use  of the word Kona on its coffee because Kona coffee comes from a specific region in Hawaii, and the product being sold did not have any coffee from that area.

Consumers also sued alleging that the Defendants wrongfully profited by falsely labeling and advertising its own coffee as originating from “Kona” and took advantage of the goodwill and reputation associated with the Kona region.  It sought to recover under theories of: (1) breach of express warranty under the Uniform Commercial Code §§ 2-313, 2-714 & 2-607; (2) breach of implied warranty under the Uniform Commercial Code §§ 2-314, 2-714 & 2-607; (3) common law fraud, fraudulent concealment, intentional misrepresentation; and (4) quasi-contract/unjust enrichment/restitution.

As against the Insured, the consumers alleged that Boyer's:

[F]alsely designate[d] the geographic origin of its ‘Kona’ coffee products with the prominent placement of KONA on the packaging” or “misrepresent[ed] the geographic origin, quality and contents of its ‘Kona’ coffee products with the prominent placement of KONA on the front of the packaging. Boyer's designs its packaging for its coffee products with the intent to deceive consumers as to the product's origin, quality and contents.”

***

That the Boyer's packaging is intended to mislead the consumer into believing that the product contains a significant amount of Kona coffee beans when the product actually contains little to no Kona coffee.

The offenses addressed by the court were: 

a. [ ] injury, other than “personal injury”, caused by one or more of the following offenses:

(1) Oral or written publication, including publication by electronic means, of material in your “advertisement” that slanders or libels a person or organization or disparages a person's or organization's goods, products or services, provided that the claim is made or the “suit” is brought by a person or organization that claims to have been slandered or libeled, or that claims to have had its goods, products or services disparaged;…

***

a. [ ] injury, other than “advertising injury”, caused by one or more of the following offenses:

(4) Oral or written publication, including publication by electronic means, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services, provided that the claim is made or the “suit” is brought by a person or organization that claims to have been slandered or libeled, or that claims to have had its goods, products or services disparaged;…

***

a. [ ] injury, other than “personal injury”, caused by one or more of the following offenses:

***

(3) Infringement of copyright, “title” or “slogan” in your “advertisement”, provided that the claim is made or the “suit” is brought by a person or organization that claims ownership of such copyright, “title” or “slogan”.

***

Setting forth the factors that Boyer’s would have to establish to fall within one of the disparagement offenses, including (1) Boyer's published material in its “advertisement” (2) that disparages the Kona plaintiffs’ goods or products. To fall within “personal injury,” Kona plaintiffs must allege an offense where (1) Boyer's published material (2) that disparages the Kona plaintiffs’ goods or products.

The Court found that the allegations of false packaging, marketing, and selling the products, coupled with the requested relief, could arguably fall within the definition of “advertisement” but the plaintiffs were not disparaged.

The court held that the Policy required the disparagement to be directed at claimants’ goods or products, not its own.  Consequently, held the court, Boyer's publication of “Kona” coffee did not disparage Kona farmers even though it was alleged that the Insured impugned the Kona District.  The court held that the possibility that Boyer’s actions would impugn Kona farmers’ products or goods because they are made from Kona coffee was too remote to constitute disparagement within the meaning of the Policy.  

Travelers contended that the Kona consumers do not sell “Kona” coffee; therefore, they were not disparaged nor were any of their goods, products, or services disparaged by Boyer's alleged conduct.  The court agreed that the disparagement offenses did not apply with respect to the class actions because the cases were not brought by a person or entity that claims to have been slandered or libeled, or that claims to have had its goods, products or services disparaged.”

With respect to the Infringement exclusion, the Insureds argued that the class action plaintiffs alleged that Boyer’s was using “Kona” as a slogan in its advertisement.  Travelers argued that Boyer’s naming its products “Kona” nor “Kona Coffee” or “Kona Café” did not convert the word to a “slogan” and were not “used to attract attention” in advertising.  The court agreed that a brand name was not a slogan and that Boyer’s actions did not involve an advertisement. Instead, Kona farmers were seeking to protect the use of “Kona” as the source identifier of their coffee.

 

OFF the MARK
Brian F. Mark
[email protected]

Unfortunately, there were no noteworthy construction defect cases to report on this edition.

 

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

04/09/21        Farmers Group, Inc. vs. Geter
Supreme Court of Texas
Homeowners Insurance – Non-Renewal – Reversal of Lower Courts Resulting in Summary Judgment for the Insurer

The Supreme Court of Texas ruled last week on this latest appeal in a long-running class-action suit. The primary issue is before Texas’ highest court was how to interpret a homeowners insurance policy that has been out of use for nearly twenty years. Supreme Court’s analysis of the policy interpretation issues gives rise to its conclusion that Farmers Group, Inc. (“Farmers”) correctly interprets the policy and was therefore entitled to summary judgment on both individual and class claims asserted against Farmers.

The pertinent background for the coverage issue is as follows.  Beginning in 2000, the Texas homeowners insurance market experienced a large increase in mold claims. At the time, Farmers, like other insurers, offered a broad “all risk” policy known as the HO-B policy, a policy approved by the Texas Department of Insurance (TDI) under its statutory authority to approve insurance forms. In November 2001, Farmers and other insurers decided to stop offering HO-B policies. Farmers decided to offer instead a less comprehensive “named peril” policy known as the HO-A policy. Notably, a letter from Farmers executive John Hageman to the TDI indicated the decision to discontinue the HO-B policy and offer the HO-A policy was “motivated primarily by the dramatic increases that we have experienced for water, mold and foundation claims, and the resultant underwriting losses.”  The TDI approved Farmers' decision and mandated that all insurers remove the HO-B policy from the market by the end of 2002.  The TDI approved an enhanced HO-A policy, one including coverage for some water claims, which Farmers intended to offer as a substitute for the HO-B policy.  Under Texas insurance law, an insurer may choose not to renew a policy so long as it provides the insured a written notice no later than 30 days before the policy expires.   Accordingly, in 2002 Farmers sent a notice of non-renewal to its HO-B policyholders, including Sandra Geter (“Geter”). The notice stated that the policyholders' existing policies would not be renewed and that Farmers would no longer offer the HO-B policy “[b]ecause of substantial losses which we have incurred for the homeowners and dwellings lines of insurance in Texas.” The notice informed policyholders that Farmers would continue to offer coverage under its HO-A policy.

Geter commenced suit against Farmers after receiving Farmers' non-renewal notice.  She sought a declaratory judgment that Farmers’ non-renewal was ineffective and that she and other class members were entitled to renew their HO-B policies. Cross-motions for summary judgment were filed.  Farmers relied principally on its statutory right to non-renew policies with 30-days' notice. Geter relied principally on contract language in the HO-B policy. Specifically, Geter relied on paragraph 6 of the “Section I and II – Conditions” section of the policy, which states:

6. Refusal to Renew.

a. We may not refuse to renew this policy because of claims for losses resulting from natural causes.

...

d. If we refuse to renew this policy, we must deliver to you, or mail to you at your mailing address shown on the declarations page and any mortgagee named in the declarations page, written notice of our refusal to renew not later than the 30th day before the date in which this policy expires. Proof of mailing will be sufficient proof of notice. If we fail to give you proper notice of our decision not to renew, you may require us to renew the policy.

Geter argued the mold claims that prompted Farmers to non-renew the HO-B policy were “claims for losses resulting from natural causes” under paragraph 6(a). If that is correct, then paragraph 6(a) prohibited Farmers from refusing to renew the HO-B policy. Additionally, Geter argued that paragraph 6(d) entitled policyholders to renew their policies because Farmers' notice of its “decision not to renew” was not “proper notice,” as it was based on a prohibited reason for non-renewal.

The trial court granted summary judgment to Geter and the class on Geter's declaratory judgment claim, holding that Farmers breached the insurance contract by not renewing the policies. The court held that each class member was entitled to renew his HO-B policy. The court later ordered Farmers to issue HO-B policies to class members wishing to renew them at a premium set by the trial court.  That order was later superseded while this non-renewal issue was appealed (good thing, too, with all the years that passed).  Farmers has not offered any HO-B policies since 2001.

In 2019, the Texas court of appeals affirmed the trial court's judgment insofar as the trial court held that Farmers breached the insurance contract when it refused to renew the HO-B policies, reasoning “[A]ccording to the notice of non-renewal, Farmers made the decision not to renew “[b]ecause of substantial losses which we have incurred for the homeowners and dwelling lines of insurance in Texas....” and because of the “substantial losses” which Farmers suffered, which, according to the court of appeals,  were “underwriting losses” that resulted from the “dramatic increases that we have experienced for water, mold and foundation claims....” Thus, the court of appeals held that the notice and letter, taken together, establish that (1) the decision to non-renew was made “because of claims,” and (2) those claims were “for losses resulting from natural causes”—i.e., “water, mold and foundation claims”, declaring that “Farmers retains its right to refuse to renew for any reason, or for no reason at all, as long as it provides “proper notice,” and as long as the reason is not one of the ones prohibited under the policy. Unfortunately for Farmers, said the court of appeals, “the evidence establishes that the reason for its non-renewal in this case was one of the reasons specifically prohibited under the policy. Accordingly, the trial court did not err in ruling that Geter was entitled to renewal under the terms of the policy.”

The Texas Supreme Court reviewed the trial court’s grant of summary judgment de novo.  Supreme Court noted Texas insurance law provided Farmers the right to discontinue its HO-B policy so long as it provided 30-days' notice that the policy would not be renewed   Importantly, with the case turning on a question of insurance contract interpretation, the Texas Supreme Court was guided by the rule of contract interpretation that favors consistent use of a term that is used more than once. “Words used in one sense in one part of a contract are, as a general rule, deemed to have been used in the same sense in another part of the instrument, where there is nothing in the context to indicate otherwise.”  Noting that while this rule is not rigidly applied, the Texas Supreme Court has recognized a presumption that identical words used in different parts of the same insurance policy should generally be given the same meaning (citing RSUI Indemnity Company vs, The Lynd Company, 466 S.W.3d 113,126 (2015).

Applying this rule, the Texas Supreme Court agreed with Farmers that the use of “claims” and “losses” in paragraph 6(a) refers to claims and losses of the individual policyholder. The phrasing of the disputed sentence - “We may not refuse to renew this policy because of claims for losses resulting from natural causes” (emphasis added) deals with “this policy” and whether it specifically — not all policies statewide — can be non-renewed. Supreme Court acknowledged that Geter asserted a grammatically permissible reading of the sentence that included expansive connotations of the policy terms “losses” and “claims.” But considered in their context, Supreme Court found no reason to doubt that those words as used in the disputed sentence of the policy refer to “losses” and “claims” under “this policy,” that is, the policy subject to the no-refusal-to-renew guarantee, because an insurance policy should be read and interpreted “in context, giving effect to all contractual provisions”.

Supreme Court went on to observe that Geter's position asserting Farmers bound itself by contract to perpetually renew all its HO-B policies regardless of its statewide financial results and regardless of whether TDI approved statewide changes to its policy forms would require the court to be blind to the commercial realities of the context in which the parties were operating.   Supreme Court found it highly implausible that the disputed provision, at the time of its approval by the TDI, would have been viewed by the TDI, Farmers, or the general public as a perpetual prohibition on any statewide amendment to the HO-B form. Such a reading of the policy would undermine the TDI's regulatory authority to react to changing circumstances in the insurance industry, and further, bind Farmers to suffer statewide underwriting losses in perpetuity. The Supreme Court also noted that apart from Geter’s proffered reading of the contractual text—a reading that the court acknowledged to be grammatically valid but not compelled by the text—Geter offered no reason to believe the policy language required such unusual results. Supreme Court’s analysis concluded by holding that in any event, apart from practical considerations, the best reading of the policy’s disputed text, within its context, firmly supported Farmers' position.

 

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

Regulatory Wrap-Up

04/14/21       Cybersecurity Settlement Reached with Licensed Insurer
Department of Financial Services
Cautionary Tale as DFS Investigation Uncovers Failure to Implement Multi-Factor Authentication, Leading to Four Cyber Breaches

On Wednesday, DFS announced that National Securities Corporation, the subject of an investigation pursuant to DFS’s Cybersecurity Regulations, will pay $3 million in penalties to New York State following four cyber breaches that exposed substantial amounts of sensitive, non-public, personal data.

As with all licensed insurance companies, National Securities collects private data in the course of daily operations in conjunction with its life, accident and health, and variable life/annuities insurance business. Between 2018 and 2020,these four breaches occurred, including two which went unreported to DFS as required by its Cybersecurity Regulations.

The breaches themselves involved unauthorized access to employee and independent contractor email accounts, with access to customer sensitive personal data. Among other things, National Securities failed to implement multi-factor authentication (“MFA”) without implementing reasonably equivalent or more secure access controls with written consent. In doing so, National Securities was also charged with falsely certifying compliance with Cybersecurity Regulation for 2018, without full implementation of MFA.

In addition to the monetary penalty, National Securities agreed to commence further improvements to its cybersecurity program, ensuring compliance with the Cybersecurity Regulation.

 

04/07/21       Public Adjuster Referral Compensation
Department of Financial Services
Proposed Regulation Reflecting Existing Insurance Law Requiring Written Disclosure of Public Adjuster Referral Compensation

Last week, a proposed regulation was published in the State Register that would update 11 NYCRR 25 (Insurance Regulation 10) to reflect 2013 amendments to the insurance law with respect to public adjuster compensation from referrals.

Under Ins. Law § 2108(p) and Regulation 10, a public adjuster cannot collect compensation paid by an insured for services rendered unless it comports with a written compensation agreement signed by charged party.  Regulation 10 further prohibits a public adjuster from charging a fee in excess of 12.5 percent of the recovery for services rendered.  DFS, through its predecessor agencies, has advised that compensation from a contractor to a public adjuster for a referral is a fee for services rendered by the public adjuster. OGC Opinion No. 07-06-25 (June 26, 2007).  Although the referral fee is paid indirectly, compensation for a referral is included within a public adjuster’s maximum 12.5 percent fee under Regulation 10 and must be disclosed in the written compensation agreement. DFS contends that because an agent has a duty of undivided loyalty to her principal, a public adjuster owes a duty of undivided loyalty to the insured that hired the adjuster. OGC Opinion No. 97-9 (NILS) (Jan. 28, 1997).

In 2013, DFS’s position was legislatively codified by amending Ins. Law § 2108 and 2110(a). Specifically, the Insurance Law requires that every public adjuster to affirmatively act on behalf and in the best interests of the insured and prohibits a public adjuster from receiving any compensation for referring an insured written disclosure of such compensation, as well as any financial, ownership, or familial relationship interest to the person. This proposed amendment to Regulation 10 merely conforms the Insurance Regulations under Title 10 to existing laws of this state. The amendment also prohibits a public adjuster from receiving any compensation, either directly or indirectly, for a referral to an individual or entity when the public adjuster has a financial or ownership interest, directly or indirectly, in the individual or entity and the individual or entity performs services, work, or repairs, or when the public adjuster is the spouse of the individual having such an interest. Additionally, under this amendment, a public adjuster would be permitted to charge a fee of up to 20 percent on a supplemental claim so long as the aggregate fee charged is less than or equal to 12.5 percent of the full claim payment.

Finally, since Regulation 10 has not been amended since 1986, the amendments would additionally make clarifying changes in the language and statutory/regulatory references utilized to account for the current legal and regulatory landscape encountered in 2021.

 

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

04/12/21       Indemnity Insurance Co. v. Expeditors International
United States District Court, Southern District of New York
When Unambiguous the Terms of a Contract Prevail

Indemnity Insurance Company of North America (“Indemnity”) brought this action in admiralty against Defendant to recover damages to shipment in international ocean transit. Expeditors International moved the court for partial summary judgment seeking a judicial deceleration enforcing contractual limitation-of-liability clauses.

Expeditors was carrying a shipment of oilfield equipment for Baker Hughes from between Brazil and the United Arab Emirates. Indemnity insured the shipment of equipment and is suing on behalf of Baker Hughes to recover for damages related to adverse weather during transit. Expeditors issued Baker Hughes a bill of lading for the shipment which incorporates by reference certain terms and conditions, including that Expeditors’ liability is limited to “US$500 per Shipping Unit.” Baker Hughes, as the shipper, was able to opt out of this limitation has it declared the value of the cargo on the bill of lading, which it did not. Indemnity then brought this action seeking recovery of the total value of the equipment ($604,713.00), basing its claim on a master service contract (“Master Service Contract”) between Expeditors and General Electric Company, which was purportedly Baker Hughes’ parent company at all relevant times. However, like the Bill of Lading, the Master Service Contract limits Expeditors’ liability to “$500 USD per package or customary shipping unit.” Expeditors’ motion seeks an order declaring that: (i) Expeditors’ liability to Indemnity, if any, is limited by contract to $500.00 per package of damaged cargo; (ii) at most 3 three packages of cargo were damaged during the Shipment; and (iii) accordingly, Expeditors’ liability to Indemnity, if any, is limited to $1,500.00.

After discussing the standard for summary judgment, the court moved to a discussion surrounding choice of law. Relying on various maritime cases the court held that the choice of law provision in the contract between Baker Hughes and Expeditors should eb upheld as “agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting.” While the court noted that there are two potential governing contracts at issue, the bill of lading and the Master Service Contract, both contracts provide that U.S. law governs and that Expeditors liability is limited to $500.00 per package therefore no decision on which contract governs is necessary.

The court concluded that the limitation-of-liability clauses in both the bill of lading and Master Services contract at issue are enforceable. Noting that there is no evidence that the terms of either contract were grossly unreasonable or unconscionable, and that both parties were sophisticated parties participating in international commerce, the terms of the contract must prevail. Accordingly, the court concluded that Expeditors’ liability must be limited to $500.00 per package, and as Indemnity conceded that only three packages were damaged Expeditors’ is, at most, $1,500.00.

 

04/12/21       Allstate Vehicle and Property Ins. Co. v. Kryzystof Mars, et al.
United States District Court, Eastern District of New York
A Cause of Action Sounding in Intentional Infliction of Emotional Distress Does Not Grant Coverage Under a Homeowner’s Policy

Plaintiff Allstate Vehicle and Property Insurance Company (“Allstate”) brought this action against the Defendants for a declaratory judgment that it is not obligated to defend or indemnify M.M., the minor son of its insureds, Defendants Krysztof and Dorota Mars (the “Mars”), in an underlying action brought against him by Defendants Willie and Ursula Moore on behalf of their minor children D.W.M. and D.D.M. (the “Moores,” and together with the Mars, “Defendants”).

In the Underlying Action, which named the Mars as defendants individually and as parents of infant M.M., the Moores allege M.M. cyber-bullied his classmates D.W.M. and D.D.M. with racist and threatening photographs, creating a situation which their school subsequently failed to remedy. The Underlying Action Complaint asserted causes of action based on 42 U.S.C. §§ 1981, 1983, 1985, 1986, 2000a, 2000d, as well as New York state common law negligence, intentional infliction of emotional distress (“IIED”), negligent infliction of emotional distress, prima facie tort, and breach of contract. Pursuant to a House and Home insurance policy (Form AVP117) (the “Policy”), Allstate has been defending the Mars in the Underlying Action subject to a partial denial and disclaimer letter sent June 25, 2018. The Policy provides coverage for “damages which an insured person becomes legally obligated to pay because of bodily injury or property damages arising from an occurrence to which this policy applies,” which does not include “bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of, any insured person.” “Bodily injury” means, in relevant part, “physical harm to the body, including sickness or disease, and resulting death.” “Occurrence” means “an accident, including continuous or repeated exposure to substantially the same general harmful conditions during the policy period, resulting in bodily injury or property damage.” In the June 25, 2018 letter, Allstate advised the Mars that the Policy provided “no coverage” for all but two of the Underlying Action’s causes of action. Allstate nevertheless agreed to defend the Mars because at least one cause of action triggered coverage, making clear that the Policy obligated payment only for damages from physical harm caused by negligence. On August 21, 2019, the Court in the Underlying Action dismissed all causes of action against the Mars individually and all causes of action, save one, against them as the parents of their son, M.M., leaving only the IIED cause of action against M.M. intact. Allstate sent a second letter on February 26, 2020 denying coverage contending that the Moores’ IIED claim “does not allege bodily injury” as defined by the Policy, does not reflect “accidental conduct,” and trips the Policy’s “intentional acts exclusion.” Which Allstate’s insureds argue is untimely.  Allstate then initiated this Declaratory Judgment Action and moved for judgment on the pleadings.

The court concluded that the coverage inquiry was threefold and asks: (a) whether IIED inflicted Policy-defined “bodily injury,” (b) whether the IIED constituted a Policy-defined “occurrence,” and (c) whether the Policy nevertheless excludes coverage for IIED.

With respect to whether or not a cause of action for IIED pleads a policy defined bodily injury the court opined that New York law recognizes that IIED may also result in physical injury. Citing a multitude of New York State Court cases, the court determined that so long as the pleading asserts that the IIED inflicted “physical harm” upon the injured party, an IIED constitutes a “bodily injury.”

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

No cases to report this week.  Check back next time!

 

ruMIRNAtions
Mirna M. Santiago

[email protected]

Does the industry-wide usage of credit scores perpetuate racial inequity in insurance?

What is a credit score and what is the purpose? A credit score is a number generated by a computer program and is based on information from one’s credit history as compiled by a credit bureau (i.e. Experian, Equifax and Transunion). The credit bureaus amalgamate your credit experiences, including bill paying history, the type and number of accounts you may have, whether any debts/bills had been sent to collections, the age of all accounts, etc. This history purportedly shows how “creditworthy” a person is. https://www.nclc.org/images/pdf/pr-reports/report-insurance-scoring-2007.pdf

The problem is that it has been well-established by multiple empirical studies that there is a wealth and earnings gap in the United States and that the gap falls along racial lines. African Americans earn 62 cents for every dollar earned by whites and Latinx only earn 70 cents for each dollar earned by whites. Further, African American households own less than seven cents for every dollar in wealth earned by white families. This inequality was mostly created by government sanctioned practices like segregation and redlining. Therefore, utilization of credit information for purchases that black and brown families need in their everyday lives, like insurance—thereby driving up the cost if they have no or poor history—perpetuates the income inequality.

Carriers can take multiple factors into account when establishing your insurance premium.  While someone’s age, driving record and accident history seem like logical data for an insurance company to collect, they may also collect and consider other things, like your credit score. 92% of insurers use credit scores when deciding whether to insure someone and to set premiums. Yes, there are certain safeguards in place if an insurer is going to use credit information to price a policy. For instance, the carrier must send you a notice disclosing the use of credit information and include the name of the credit reporting agency. If your premium is now higher because of your credit score, the insurer must explain what the credit-related factors are and how they affected your premium. In addition, the insurer must review your credit information at least once every three years, but may review credit information more frequently. The insurer must also review credit information upon request of the policyholder; if the credit information has improved, the policyholder may be entitled to a lower premium and the insurer must make any necessary adjustments at that time. An insurance company may not terminate the policy or increase the premium upon renewal solely based solely on credit information. https://www.dfs.ny.gov/consumers/auto_insurance/applying_for_auto_insurance#:~:text=Under%20New%20York%20law%2C%20insurers,of%20the%20credit%20reporting%20agency.

The fact that insurance companies have “rules” that apply to use of credit information is small comfort for someone who “may be charged anywhere from 40% to several hundred percent more in premiums for automobile insurance” based on their credit history. https://www.nclc.org/images/pdf/pr-reports/report-insurance-scoring-2007.pdf

Insurers argue that there is a link between credit scoring and loss history—that a person who is “reckless” with their credit is likely also to be reckless with driving or maintaining a home (in the case of utilizing credit for determining homeowner policy premiums). Id. However, this argument doesn’t take into account that people may wind up in financial crises due to job loss, divorce, illness or simply because the system has been designed to keep certain types of people in financial crisis mode.

In addition, the way insurance companies use and score the credit information is questionable, at best. Having too many credit cards is considered a negative (makes sense), but having too few cards is also negative (huh?). Having cards with too high a balance is a no-no (okay), but so is having credit cards with NO balance (what?). Id. at 10.

At the end of the day, the use of credit information and scoring results in increased profitability to the insurers, but it comes at a cost to the consumer—and specifically those consumers who are in the lower socio-economic levels, which for generations, has been synonymous with BIPoC in America. The work of embedding racial equity in our society needs to happen across the board. Removing inequitable practices in big business would be just the start.

New York’s Department of Financial Services and Superintendent Lacewell recently announced the creation of the Statewide Office of Financial Inclusion and Empowerment. The new office will not only study and—hopefully address—these types of issues, but will provide innovative tools to increase household and community wealth in underprivileged communities.

 

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

03/09/21       Repwest Ins. Co. and U-Haul v. Hanif, et al.
New York Supreme Court, Kings County
Staged Accident – Compelling Evidence (Including an Admission) Held to be Insufficient for Summary Judgment Prior to Completion of Discovery

Plaintiffs Repwest Ins. Co., as the claims administrator on behalf of U-Haul, and U-Haul moved for summary judgment against passenger defendants Anglero, De La Cruz and Garcia for a declaration that Repwest had no duty to provide insurance coverage to them for any of their alleged injuries arising out of an auto collision that occurred on 10/9/13 involving a livery vehicle insured by Hereford Ins. Co. and a vehicle rented by defendant Hanif from U-Haul.

The livery vehicle, an SUV owned and operated by Ortega, was struck in the rear by a Ford E250 cargo van, owned by U-Haul and rented to Hanif. A Repwest adjuster audio taped his interview with Hanif regarding the collision. In it Hanif stated that he was merely a passenger in the van, while an unknown individual driving it hit the rear end of the SUV causing the collision, and promptly escaped from the van before the police arrived. However, the police MVA report indicated that Hanif was the driver of the van.  Contemporaneous with the interview, Hanif executed an “Affidavit” characterizing the collision as a staged accident. Additionally, Hanif executed a Claims Withdrawal Form, albeit without stating any reasons therefor. Repwest then sent a letter to Hanif disclaiming coverage based on his admission that the accident was staged.

The passenger defendants commenced a separate underlying action against Hanif and U-Haul to recover damages for personal injuries they allegedly sustained as a result of the accident.  U-Haul moved to dismiss the underlying action against it under CPLR § 3211(a)(1) and (7), based upon its contention that the collision was staged. U-Haul’s motion was denied on the ground that all the documents tendered by it to establish the collision was staged (i.e., the Hanif Interview, Hanif Statement, and Claims Withdrawal Form, as well as the affidavit of the interviewing adjuster) were inadmissible.  Subsequently in preparation for U-Haul’s motion for leave to renew, Hanif executed, before a notary public, an affidavit, in which he stated that: (1) “the collision was intentionally caused and was in no way accidental in nature;” and (2) he had “personal knowledge that the collision was intentionally caused because he participated in it with the expectation that he would profit monetarily as a result”. U-Haul’s motion for leave to renew was then denied because it failed to proffer reasonable justification for its belated submission of the Hanif Affidavit. On appeal, the denials of U-Haul’s initial motion and subsequent motion for leave to renew were affirmed.

Thereafter, the underlying action was stayed pending resolution of the instant action.  After losing its appeal in the underlying action, U-Haul and Repwest commenced this action against Hanif, the passenger defendants and Hereford for a declaration that plaintiffs were not required to defend and indemnify Hanif with respect to the underlying action, and that they had no duty to afford coverage to the passenger defendants for any claims arising out of the collision. Hereford answered the complaint but Hanif defaulted.  U-Haul and Repwest then moved by pre-note of issue motion for summary judgment for a declaration of no coverage to the passenger defendants for the alleged injuries they sustained in the collision.

Preliminarily, the Court said that “A deliberate collision caused in furtherance of an insurance fraud scheme is not a covered accident”. Even where the individual claiming benefits had no involvement in causing the collision but was merely an innocent injured party, coverage is denied because the collision was not a covered accident.  The burden of proof is on an insurer seeking to disclaim coverage by a preponderance of the evidence; the insurer is not required to establish that the subject collision was the product of fraud, which would require proof of all of the elements of fraud, including scienter (knowledge), by clear and convincing evidence.

The Court then said that here, the only admissible evidence proffered by plaintiffs is the Hanif Affidavit which he executed, at Repwest's request, following the court's denial of U-Haul’s initial motion to dismiss the underlying action. Significantly, Hanif was not deposed in this action or in the underlying action and, therefore, had not been subjected to a thorough cross-examination. Inasmuch as summary judgment is the procedural equivalent of a trial, granting plaintiffs relief at this time was said to be premature. More fundamentally, the Court held that the plaintiffs may not circumvent the appellate order in the underlying action by moving in this action, before Hanif's deposition is taken and discovery is completed, for the same relief prayed for in the motion to dismiss that was filed at the preliminary stage of the underlying action.

The Court was cognizant that, in Lopez v Baptiste, Index No. 6854/14 (Sup Ct, Kings County), a driver's affidavit and unsigned transcript together with the affidavit of an investigator who lacked personal knowledge were held sufficient to establish that the collision was staged. However, that decision was said to be neither persuasive nor binding on this court.  Further, contrary to plaintiffs' contention, a prior default judgment against Hanif in this action does not collaterally estop the passenger defendants and Hereford from contesting lack of coverage.

Accordingly, plaintiffs' motion was denied with leave to renew upon completion of discovery, including (unless expressly waived by the passenger defendants and Hereford) Hanif's pretrial deposition, and the filing of a note of issue.

 

03/25/21       GEICO v. Diana Beynin, D.C.
United States District Court, Eastern District of New York
GEICO’s Motion for a Preliminary Injunction is Granted Staying Defendant PIP Medical Providers From Filing Claims and Arbitration Until the Conclusion of This Fraud and RICO Action Against Them

GEICO sued Defendants (3 chiropractic professional corporations and 4 chiropractors) alleging they submitted thousands of fraudulent and non-reimbursable insurance claims over several years.  It asserted 15 causes of action, including for declaratory judgment, common law fraud, aiding and abetting fraud, unjust enrichment, violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962, and a violation of the New Jersey Insurance Fraud Prevention Act, N.J. Stat. Ann. § 17:33A-1. Defendants answered and discovery is ongoing.  GEICO seeks to recover more than $234,000 in previously paid claims and to obtain a declaration that it is not obligated to pay over $6,670,000 in pending claims. 

GEICO brought this motion to stay and enjoin: hundreds of no-fault insurance and collections proceedings pending between the parties (at least 591 separate arbitrations); Defendants from filing additional claims until this action is resolved; and AAA from accepting the filing of any arbitration demands by Defendants seeking payment from or issuing any award involving GEICO. GEICO’s motion was mostly granted in part and somewhat denied in part.

GEICO alleges that Defendants submitted thousands of fraudulent, non-reimbursable insurance claims from at least 2012 through the filing of GEICO's complaint in that chiropractic services allegedly provided to N.Y. automobile accident victims (i.e. initial examinations, chiropractic manipulation under anesthesia, and diagnostic testing) were:

  • not medically necessary;

  • provided pursuant to predetermined fraudulent protocols;

  • in some cases, not provided at all;

  • billed under improper billing codes;

  • provided pursuant to illegal kickback and self-referral arrangements;

  • provided by entities without proper licensure;

  • provided by entities that failed to comply with all pertinent laws and regulations governing healthcare practice in New Jersey; and

  • in certain cases, provided by independent contractors.
     

In its pleadings GEICO also detailed: the steps involved in the alleged improper fee-sharing; deficiencies undergirding Defendants' upcoding practices; and patient, location, and date specific representative examples of fraudulent or non-reimbursable conduct.  The pleadings also include detailed allegations that Albis and Axis Chiropractic's: V-NCT test reports were identical; provided false diagnoses; range of motion tests were unnecessary and duplicative; and that they did not meaningfully interpret these tests and fraudulently unbundled them. The pleadings also contained detailed allegations regarding shortcomings in other tests; and that the Defendants employed independent contractors.

GEICO alleges that Defendants systemically concealed their fraud and that each step in the Defendants' fraudulent treatment protocol was designed to falsely reinforce the rationale for the previous step and provide a false justification for the subsequent step, and thereby permit the Defendants to generate and falsely justify the maximum amount of no-fault billing for each Insured. GEICO also alleges that Defendants systematically failed and/or refused to respond to repeated requests for verification of the charges once GEICO began to suspect that Defendants were engaged in fraudulent conduct. 

The Court said that for a preliminary injunction to issue, the party seeking injunctive relief must show:

(a) irreparable harm; and

(b) either:

(1) likelihood of success on the merits; or

(2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.

To establish irreparable harm, a party seeking preliminary injunctive relief must show that there is a continuing harm which cannot be adequately redressed by final relief on the merits' and for which money damages cannot provide adequate compensation. The irreparable harm must be shown to be actual and imminent, not remote or speculative.

The Court concluded that preliminary injunctive relief is warranted as GEICO had demonstrated irreparable harm.  GEICO claimed that the likely inconsistencies amongst the prospective arbitral rulings themselves, as well as with this Court's ultimate disposition of the DJ and fraud-based claims threaten GEICO with irreparable harm.  Defendants argue for the denial of a preliminary injunction on the grounds that GEICO could be made whole by money damages.

The Court decided that allowing a large number of proceedings to be heard by a mix of arbitrators, each of whom will likely come to their own independent and potentially contradictory conclusions, will result in harm to GEICO from which it cannot recover.  Irreparable harm occurs where an insurer is required to waste time defending numerous no-fault actions when those same proceedings could be resolved globally in a single, pending declaratory judgment action.

Because any finding by an arbitrator that Defendants' claims are valid necessarily entails a finding that the underlying treatment was medically necessary, any determination by this Court that Plaintiffs' claims are meritorious would give rise to inconsistent judgments. There was, therefore, said to be identity of issues between the action before this Court and the arbitral proceedings.

GEICO also claims it cannot meaningfully prosecute the claims it is asserting here in N.Y. no-fault arbitration proceedings.  Although Defendants disagree, they focus on discovery with respect to individual claims without addressing the limits of the arbitral forum when it comes to allegations of systemic fraud.  When analyzing N.Y.’s arbitration process for no-fault coverage, the process provides for an expedited, simplified affair in which discovery is limited or non-existent. The process is meant to work as quickly and efficiently as possible, and, complex fraud and RICO claims, maturing years after the initial claimants were fully reimbursed, cannot be shoehorned into this system.  It is only through this tapestry of facts that the alleged fraud comes into focus.  The insurer may not have a fair opportunity to present its claims unless it is permitted to direct the trier of fact to all of the claims at issue.  

The Court concluded that GEICO had also demonstrated a serious question going to the merits.  The district court may grant a preliminary injunction in situations where it cannot determine with certainty that the moving party is more likely than not to prevail on the merits of the underlying claims, but where the costs outweigh the benefits of not granting the injunction.  GEICO’s pleadings detailed a complicated scheme of alleged fraudulent activity giving rise to an inference that the treatments were either not being provided on the basis of medical necessity, were not provided at all, or were not provided in compliance with applicable state laws and regulations.  GEICO alleged patient, date, and location-specific representative examples of fraudulent conduct, including instances of Defendants:

  • issuing substantially identical diagnoses, on the same date, to more than one individual involved in a single accident, and recommending a substantially identical course of medically unnecessary treatment to the individuals;

  • submitting PIP benefits in N.Y. even though it was ineligible to do so;

  • providing a substantially identical course of medically unnecessary treatment to two or more individuals involved in the same minor accident; and

  • billing for treatment related to injuries the treated individuals allegedly did not have.

Additionally, GEICO attached to the pleadings 3 charts alleging thousands of fraudulent claims that the Defendants submitted to GEICO; those charts included claim numbers, approximate billing dates, CPT codes, charges, and the name of the provider. These allegations, among others, raise a serious question going to the merits of whether defendants were providing medically necessary treatments, were providing treatments in compliance with applicable rules and regulations, and/or were billing for treatments that never occurred.

GEICO had carried its evidentiary burden of demonstrating the existence of a serious question going to the merits.  A complaint alone can be sufficient to grant an injunction, and this is particularly true where the complaint comprehensively details regulatory violations, unnecessary medical services, and unlawful referrals. 

Defendants’ responses did not negate the serious questions raised by the pleadings because they largely spoke in generalities and did not dispute the patient-by-patient examples.  For example, GEICO alleged that in virtually every case in which Beynin, Albis, Jacobson, Spine Care of NJ, and Advanced Spinal purported to subject an individual to MUA, the treatment notes from other healthcare providers who treated the individuals indicated that the individuals' conditions were improving through more conservative treatments (noting that many of the individuals were involved in minor accidents). Defendants respond to this assertion by claiming that their treatments were proper because patients are generally referred to Defendants due to the specialized nature of their practices and that the typical patient recommended to Defendants had already undergone lengthy conservative treatment for a minimum of four weeks, and in many cases, much longer, with little or no success.  However, this essentially ignored GEICO’s claim. The Court said that it may be that Defendants' typical patient necessitates specialized treatment after more conservative approaches fail, but Defendants' response does not address why patients whose conditions were improving were nonetheless subjected to specialized treatment. Defendants' responses left a great number of Plaintiffs' specific assertions unrebutted.

The Court said that GEICO had also demonstrated that the balance of hardships tips decidedly in its favor because it will suffer irreparable harm and Defendants will suffer no appreciable hardship. GEICO argued that Defendants will in fact obtain a high rate of statutory interest (at a rate of two percent every month) on their no-fault claims if they prevail and will benefit from the efficiency of having the question of their entitlement to no-fault insurance benefits resolved in a single action. 

The Court agreed that consolidation promotes efficiency in cases like this. Notwithstanding Defendants' claim that they will suffer financially, they did not specify the extent of that hardship i.e., how much of their income the outstanding and pending claims constitute. In any event, if GEICO fails to prove its claims, Defendants' recovery of the no-fault benefits to which they are entitled will, at worst, be delayed. 

The Court found the scope of the requested injunction to be overbroad to the extent it would cover no-fault claims for procedures other than those identified in the pleading as fraudulently performed or non-reimbursable. Accordingly, the Court limited the injunction to cover no-fault insurance claims initiated by or on behalf of Defendants arising out of the CPT codes noted in exhibits to the complaint.  Claims arising out of CPT codes identified in the exhibits but not supported by allegations in the complaint and claims arising out of CPT codes not otherwise detailed in either the complaint or its exhibits were not stayed. 

The Court dispensed with the usual bond requirement, recognizing it has wide discretion to do so when there has been no proof of likelihood of harm.  An exception to the bond requirement has been crafted for cases involving the enforcement of public interests arising out of comprehensive federal health and welfare statutes.  N.Y.’s no-fault insurance scheme falls within the public interest exception and that preventing fraud of the sort alleged is in the public interest.  Moreover, Defendants' proof of harm is wanting. 

For a similar case see,

03/25/21       GEICO v. YAKOV ZILBERMAN, D.C., YAN Z CHIROPRACTIC, P.C., MAZ CHIROPRACTIC, P.C., SANFORD CHIROPRACTIC, P.C., DOS MANOS CHIROPRACTIC, P.C., JOHN DOES 1-10
United States District Court, Eastern District of New York

03/05/21       Mazer v. Frederick Mutual Insurance Company
United States District Court, M.D. Pennsylvania
A Review of the Standards Regarding Discoverability of Claim File Materials in 1st-Party Property Losses in Pa., Including: Attorney-Client Privileged Communications; Mental Impressions; Communications Regarding Legal Fees; and Reserving

Plaintiffs had a total loss fire to their real estate in Harrisburg, Pa. and sued Frederick Mutual Ins. Co. alleging breach of contract and bad faith.  The plaintiffs sought to compel production of the defendant's unredacted claim file and for an in-camera review.  The defendant prepared a privilege log describing the redacted documents and containing four general categories of information:

(1) communications regarding expenses incurred and paid by the defendant;

(2) communications with counsel;

(3) mental impressions; and

(4) reserve information and proprietary insurance premium/financial information.

The Court ordered an in-camera review of the documents described in the privilege log.

Legal Standard

The federal courts have broad discretion to manage discovery and the federal rules have long permitted broad and liberal discovery. Pursuant to Rule 26(b)(1), parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.  Information within this scope of discovery need not be admissible in evidence to be discoverable. Further, the federal rules' relevancy requirement is to be construed broadly, and material is relevant if it bears on, or reasonably could bear on, an issue that is or maybe involved in the litigation. Moreover, discovery need not be confined to items of admissible evidence but may encompass that which appears reasonably calculated to lead to the discovery of admissible evidence. 

When the Court is presented with a motion to compel discovery, the burden is on the objecting party to demonstrate in specific terms why a discovery request is improper, including that the requested materials do not fall within the broad scope of relevance or else are of such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure.

Decision:

Communications regarding approval of legal fees and expenses incurred and paid for by the defendant.

Discoverable.  They were held to be administrative in that they reference authorization of payments and the amounts approved for payment. Some of the entries predated the filing of the complaint and some came after the filing of the complaint. In general, the mere facts of legal consultation or employment, client identities, attorney's fees and the scope and nature of employment are not privileged.  Attorney billing records may be privileged if they reveal the nature of the services rendered. However, there were no entries that revealed the nature of the work performed or referencing attorney-client communications, which are privileged.

Communications with counsel.

In this instance the communications were discoverable.  The communications consisted mostly of email to and from the defendant's counsel and had been objected to on the basis that they are protected by attorney-client privilege.

This is a diversity case. Therefore, Pennsylvania state law governed whether attorney-client privilege applies to the documents at issue.  State statute provides that "In a civil matter counsel shall not be competent or permitted to testify to confidential communications made to him by his client, nor shall the client be compelled to disclose the same, unless in either case this privilege is waived upon the trial by the client" (42 Pa. Cons. Stat. Ann. § 5928).

Because the attorney-client privilege obstructs the truth-finding process, it is construed narrowly.  For the attorney-client privilege to attach to a communication, it must be:

(1) a communication;

(2) made between privileged persons;

(3) in confidence; and

(4) for the purpose of obtaining or providing legal assistance for the client.

Privileged persons' include the client, the attorneys and any of their agents that help facilitate attorney-client communications or the legal representation.  A communication is only privileged if it is made in confidence.  If persons other than the client, its attorney, or their agents are present, the communication is not made in confidence, and the privilege does not attach.  However, as a general matter, the privilege is not destroyed when a person other than the lawyer is present at a conversation between an attorney and his or her client if that person is needed to make the conference possible or to assist the attorney in providing legal services, because this type of disclosure is sometimes necessary for the client to obtain informed legal advice.

The documents at issue consisted mostly of email messages and attachments. As a general rule, each version of an email string (i.e. a forward or reply of a previous email message) must be considered as a separate, unique document. Thus, each message of the string which is privileged must be separately logged in order to claim privilege in that particular document. 

Here the emails did not reference any privileged communications and included:

  • references to a conference and reserve information;

  • direction to check with counsel;

  • advising that a representative spoke with counsel and provided documents to him;

  • the name of counsel as either the sender or a recipient of an email, or that counsel was contacted; and

  • a report from Crawford & Company which referenced the placing of a call to counsel and a proposed course of action to follow-up with him.

Mental impressions.

The defendant redacted portions of the claims file which included the claims representatives' impressions, conclusions, and opinions. Mental impressions and opinions of a party and its agents are not generally protected by the work product doctrine unless they are prepared in anticipation of litigation.  To that end, work product prepared in the ordinary course of business is not immune from discovery.  The gravamen of a claim of work product protection necessarily requires an assessment of when litigation was anticipated, which is a determination not subject to a bright-line rule, the court adopting a case-by-case approach.  Prudent parties anticipate litigation and begin preparation prior to the time suit is formally commenced.  Thus, whether litigation was reasonably anticipated is a fact-dependent inquiry.

The court concluded that certain portions of the claims record were prepared in anticipation of litigation and should be protected.  The Court identified certain emails by company representatives as containing mental impressions, prepared in anticipation of litigation which were held to remain redacted.

Certain email from the defendant's company representative to a property adjuster for Crawford & Company were said not to contain any protected work product and were directed to be unredacted and disclosed.

The last two pages of a long internal report documenting the underlying property claim had been redacted. The redacted material was said not to reflect the author’s mental impressions prepared in anticipation of this litigation. Rather, it concerned his analysis and recommendations with respect to the insurer's general business practices—the investigation and evaluation of future, notional property claims involving suspicious circumstances. This was directed to be disclosed.

Notations on the Homeowner Application were subject to disclosure and not made in anticipation of litigation.

Other financial information (reserves and proprietary insurance premium/financial information).

The Court observed that courts in this circuit are split on the question of whether reserves are discoverable in bad faith cases.  The prevailing view indicates that reserves may be discoverable in a bad faith action when the claim relates to an insurer's failure to settle or where there is a discrepancy regarding the value of the claim.  But when the bad faith claim is based on a denial of coverage and does not involve the value of the claim or the plaintiff’s estimation of liability, the reserve information requested is neither relevant nor reasonably calculated to lead to the discovery of admissible evidence.

Here, the complaint and the answer reflected that the parties have a difference of opinion regarding the value of the claim and, therefore, the Court said that the requested information on reserves should be disclosed to the plaintiffs.

Finally, the defendant objected to disclosure of a “page” (no further description provided by the Court) that relates to the agent who sold the policy to the plaintiffs (I presume it related to the policy premium).  The Court found it to be discoverable. 

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